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OPEC will probably reject Iran’s request to put the U.S. sanctions against Tehran up for discussion at the cartel’s official meeting later this month, a source familiar with the issue told Reuters on Friday.
Iran is seeking support from fellow OPEC members against the returning U.S. sanctions and wants the issue on the agenda at the Vienna meeting in June, Iranian Oil Minister Bijan Zangeneh wrote last week in a letter to Suhail Al Mazrouei, the energy minister of the United Arab Emirates (UAE) who holds the OPEC presidency this year and will be chairing the meeting.
In his letter, Bijan Zangeneh also suggested that his country does not agree with “recent remarks by certain OPEC members, noting that the Organization adopted decisions by consensus and no single member spoke for the body.”
Iran’s OPEC governor Hossein Kazempour Ardebili asked OPEC’s board chairman to include a debate on the sanctions in the June 22 talks, in a letter seen by Reuters and addressed to the UAE’s OPEC governor Ahmed al-Kaabi. The UAE governor consulted with a legal counsel who responded negatively to Iran’s request, because the agenda for the ministerial meeting had been finalized and couldn’t be amended, according to Reuters’ source.
In comments to Reuters on Friday, Iran’s Kazempour also harshly criticized a reported U.S. request to Saudi Arabia to help stabilize oil prices in case the sanctions against Iran push up prices.
“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela,” Kazempour said.
Venezuela, like Iran, has also sought support from OPEC against U.S. sanctions.
The two OPEC members under U.S. sanctions are currently the two key oil supply concerns globally that supported the oil price rally in recent weeks, before Saudi Arabia—Iran’s archrival—and Russia hinted at discussions that they were considering reversing some of the cuts to offset production losses and “ease market and consumer anxiety.”
If the partners in the production cut deal decide to raise production at the June meeting and if this move depresses oil prices, Iran and Venezuela have a lot to lose from lower oil revenues, because they can’t raise their respective production levels, also because of the U.S. sanctions. Due to disagreements over supply policy, the OPEC meeting later this month could be one of the worst and most contentious meetings in recent years, according to oil market analysts.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Iran should not expect support from an OPEC dominated by Saudi Arabia and its allies against the returning US sanctions. Saudi Arabia is part and parcel of the efforts by the US-Israeli- Saudi axis aiming to undermine Iran’s economy and its oil industry through intrusive sanctions and escalation of tensions.
Still, Iran will not lose a single barrel of its oil exports as a result of US forthcoming sanctions for two reasons. One is that the European Union (EU) has already indicated that it will stay in the Iran nuclear deal and will not comply with US sanctions and will, therefore, continue to import Iranian oil. The second reason is that Iran will be using the petro-yuan for its oil exports to China, the euro for its exports to the EU and barter trade with Turkey, Russia and India virtually neutralizing US sanctions. If, however, the EU which is the biggest economic bloc in the world accounting for 23% of the global economy, succumbs to US sanctions on Iran, then it will lose its credibility and influence worldwide.
President Trump’s asking Saudi Arabia to see to it that OPEC increases its oil production by 1 million barrels a day (mbd) to replace any shortfall in Iran’s oil exports as a result of the sanctions gives the lie to claims by the EIA that US oil production has hit 10.8 mbd. If this is the case, then why does he need OPEC to replace any shortfall of Iran’s oil exports. Why doesn't he use US oil production? The truth of the matter is that President Trump’s request has more to do with reducing US oil import bill and far less to do with stabilizing prices because he knows that his sanctions on Iran will not affect Iran’s oil exports.
If Saudi Arabia accedes to President Trump’s request, it will be the third time that it has obliged the United States thus causing huge damage to its own economy.
The first time was in the early 1980s when Saudi Arabia at the request of the United States flooded the global oil market with oil in order to undermine the USSR’s economy at the time of the Afghanistan invasion. The oil price went down to less than $10 a barrel causing the Saudi economy to virtually go bankrupt.
The second time was in 2014 when Saudi Arabia and its allies flooded the global oil market with oil against the wish of OPEC in order to undermine Iran’s economy. As a result the oil price collapsed to $26 a barrel inflicting the heaviest damage on the Saudi economy.
This time, Saudi Arabia risks unravel the OPEC/non-OPEC production cut agreement that has brought an end to the glut in the global oil market and pushed on prices to $80 and also inflict huge damage again on its own economy which is already bleeding blood and money in the war in Yemen.
Despite all this manoeuvring, oil prices will go beyond $80 this year buoyed by growing global economy and fast-rising global oil demand.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London