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Iran Back in the Game?

Bottom Line: The UK is close to making a thaw between Iran and the West a tangible reality by considering allowing BP to resume work with Iran, and Europe is eyeing this potential Iranian natural gas hungrily. Things are about to change for global energy.  

Analysis: Crude oil for November delivery fell on Monday by more than $1 over the previous week, continuing the reduction in anxiety over a potential US strike on Syria, and the overwhelming sense of calm that has come with US and European flirtations with the new Iranian president, which in turn has removed anxiety over perceived threats to the Strait of Hormuz from Iran.

For the UK, sanctions that have suspended operations at the Rhum natural gas field in the North Sea since 2010 have kept the country from at least 5% of its natural gas output, and a thaw with Iran would be a blessing. This joint venture with the National Iranian Oil Co. could now be revived.

Most importantly, US and European sanctions on Iran run contradictory to their shared goal of reducing Europe’s dependence on Russian gas. For this reason, there have been a number of exemptions to sanctions for Iranian-backed energy projects—most notably BP’s giant Shah Deniz gas field in Azerbaijan (10% owned by Iran). This was a strategic move to give Europe some alternative to Russian gas, and there should be more soon.  

Also of note in this atmosphere of thaw is an incident in Iran in which the clerical…

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