After nuclear deal, Iran angles for return to oil market
An accord on Iran’s nuclear program opens the door for the Islamic Republic’s return to prominence in the global oil market. Iranian officials are already on the hunt for regional partners and western investors to help rebuild an energy industry decimated by international sanctions.
Tough international sanctions on Iran’s vast oil and gas wealth aren’t going to disappear overnight, but last week’s interim nuclear accord opens the door for Iran’s return to oil influence.
Iranian officials are already putting out feelers to western oil majors and leaders of other OPEC nations, hoping to stake out room on the international market for the Islamic Republic’s oil.
It could be a welcome addition, as supply disruptions in Libya, Nigeria, and elsewhere continue to rattle investors. Still, production in the US and Saudi Arabia is booming, and neither country is likely to slow down anytime soon.
Iraq has gobbled up much of Iran’s OPEC market share in the past year, and isn’t in any rush to give it back. What’s more, it will be months, at least, before Iranians see any real relief from sanctions imposed by the US.
“Iran’s position has been strengthened after the Geneva deal, but there is still a long way to go,” energy consultant Mehdi Varzi, formerly of state National Iranian Oil Company, told Reuters. “The bottom line is the Iranians don’t want to rock the boat and put $100 oil under threat, so they need the cooperation of the Saudis.”
It’s why Iranian Foreign Minister Javad Zarif, on a tour of Gulf Arab states this weekend, expressed interest in working more closely with Saudi Arabia, one of America’s strongest allies in the Middle East. No official visit is planned yet, but Mr. Zarif was asked about relations with Iran’s Sunni rival.
“We look at Saudi Arabia as an important and influential regional country and we are working to strengthen cooperation with it for the benefit of the region,” Zarif said Sunday, as reported by Reuters.
Iran is also looking at Western oil majors for potential investment in its energy sector. Bijan Zanganeh, Iran’s oil minister, told the Financial Times last week that he had met with European companies and “indirectly” with US companies in an effort to woo them back to Iran.
Oil majors like Total, Royal Dutch Shell, Eni, and Statoil invested heavily in Iranian oil in the 1990s, but have pulled out in recent years due to stricter sanctions.
Iranian oil exports have plummeted as a result, from more than 2 million barrels per day in early 2012 to an average of 1.1 million barrels per day in the first nine months of 2013, according to the International Energy Agency.
The US will halt attempts to further reduce Iranian oil sales over the next six months, as part of the Geneva agreement, in exchange for limits to Iran’s uranium enrichment. But existing sanctions remain in place, and will continue to constrict Iran’s oil and gas industry, until a more comprehensive deal is reached.
“The effectiveness of the international sanctions regime has proven essential in bringing Iran to the table to negotiate and agree to the Joint Action Plan that, for the first time in nearly a decade, halts the progress of the Iranian nuclear program and rolls it back in key areas,” Secretary of State John Kerry said in a statement released Friday.