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President Trump’s decision to pull out of the nuclear deal with Iran and six world powers has nothing to do with oil, a Saudi investment company executive and former Aramco vice president told CNBC.
"This is about security in the region. This is about confronting a problem that's been with us for many years," Sadad al-Hosseini said. The problem, of course, is Iran, which, according to the Saudi official political line, is behind every conflict in the region.
Whether or not the withdrawal was motivated by oil price or oil inventory concerns, it will certainly affect Iranian exports negatively while benefiting Saudi Arabia. Already, a Saudi energy ministry official made a clear hint that OPEC’s largest producer might start pumping more to offset any possible shortages due to the reimposition of U.S. sanctions on Tehran.
While Riyadh—as well as Tel-Aviv, of course—is behind Trump on this decision, the United States’ partners in the deal, including the UK, Germany, and France, have made a point of distancing themselves from it, stating their continued commitment to the deal.
There is also internal opposition to the decision. Former CIA director John O. Brennon, for example, tweeted “Today, Donald Trump simultaneously lied about the Iranian nuclear deal, undermined global confidence in US commitments, alienated our closest allies, strengthened Iranian hawks, & gave North Korea more reason to keep its nukes. This madness is a danger to our national security.”
Related: Why Oil Prices Are Likely To Go Higher
A lot of people seem to share Brennon’s opinion, with some specifically concerned about Iran’s new motivation to revive its nuclear program, which will do nothing for the stability of the Middle East.
For oil prices, the effect of the sanctions when they are reimposed, won’t begin to be felt immediately, and some believe they will not affect exports to a crippling level. China and India, for one, are unlikely to suspend all shipments from Iran to avoid Washington’s ire.
Yet Reuters reports that some Asian refiners are already looking for alternative suppliers of crude. Analysts estimate Iran’s exports will fall by between 300,000 bpd and 1 million bpd when the sanctions kick in, depending on how many countries decide to stop importing oil from the country to stay on good terms with the United States.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.