A Nuclear Deal With Iran Will Cause Chaos With Oil (Rev 6:6)

A Nuclear Deal with Iran: The Impact on Oil and Natural Gas Trends

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January 27, 2015

In last week’s State of the Union Address, President Obama threatened to veto new legislation affecting five issues, four of them in the domestic policy arena and just one covering foreign policy. The foreign policy issue in question involved the prospect of new sanctions legislation targeting Iran. Correspondingly, the administration has recently ramped up efforts to conclude a nuclear deal with Iran.

Should the United States and its partners in the P5+1 — Britain, China, France, Russia, and Germany — strike a deal with Iran, the global oil and gas markets would no doubt be affected. Indeed, several leading oil and gas companies are already preparing for a return to business in Iran in the event sanctions are lifted. Such jockeying would only intensify once the Iranian oil and gas sector became fully available to international markets.

Oil

In mid-2012, sanctions were imposed against Iran’s oil exports, precipitating a drop from 2.5 million exported barrels a day to close to 1.4 million a day. If sanctions were lifted now, Iran might need a full year to bring its production to pre-sanctions levels. Moreover, given current market conditions, only limited international investment will likely be available to help restart its production. For one thing, Iran has not offered particularly attractive terms to investors, and at today’s oil prices, investors are cutting back everywhere. Such realities cast major doubt on Iranian oil minister Bijan Zanganeh’s recent claim that if sanctions were to end, “Iran will double its oil exports within two months.”

However, the announcement alone of an agreement with Iran that removes international sanctions would accelerate the current steady downward trend of the global oil price. Thus, the oil price would be affected even before increased physical supplies of Iranian oil reached the market. And more oil would gradually return to the market, helping keep global oil prices low and perhaps depressing them even further. Burdened by sanctions, Tehran has offered discounts to regular buyers such as China, India, Japan, South Korea, and Turkey. The end of sanctions would most likely mean that such consumers would pay a price more in line with global prices. Accordingly, this could create an opportunity for Saudi Arabia and other Gulf producers to increase their market share.

Natural Gas

Since the Russia-Ukraine crisis erupted last year, Tehran has tried to position itself as a reliable alternative to Russia as a gas supplier to Europe. Indeed, Iran is the only state close to Europe’s borders that possesses enough natural gas to rival Russia’s dominance in most European gas markets. Iranian president Hassan Rouhani even stated recently that “Iran can be a secure energy center for Europe.” And Iran’s deputy oil minister, Ali Majedi, boasted in official Iranian media that “Iranian natural gas is Russia’s only competitor for Europe.” He continued that European countries could import Iran’s gas through three separate routes: Turkey, Iraq, or a pipeline running through Armenia and Georgia, and then under the Black Sea.

The notion of Iran as a future alternative gas supplier for Europe is acknowledged by European officials as part of their recent drive to lessen dependence on Russian imports. In April, the EU’s foreign policy arm — the Directorate-General for External Policies — published a study of the EU’s natural gas import options in light of the Ukraine crisis and concluded that “Iran is a credible alternative to Russia.”

However credible an option Iran might be for supplying Europe, two main obstacles would slow Iran’s entry into Europe’s gas markets: one, the need to produce more gas and, two, the need to build infrastructure to get it to Europe. To be sure, Iran is a significant natural gas producer, generating 160 billion cubic meters a year, third globally behind just Russia and the United States. Its output constitutes about 35 percent of annual EU gas consumption. Iran also has vast reserves. Yet interestingly, Iran is a net gas importer, with the country consuming a larger proportion of natural gas than any other country in the world. Iran’s high natural gas consumption rate is due in part to its very low domestic gas prices and thus low energy efficiency. Iran imports gas from Turkmenistan and Azerbaijan, while it exports a bit less to Turkey and Armenia.

In Turkey, energy industry sources have reported that Ankara is preparing its pipeline infrastructure to enable transit of Iranian gas to Europe once sanctions are removed. However, natural gas production requires much larger investments than oil production, and concluding a supply contract generally takes a number of years. In addition, either long-distance pipelines or liquefied natural gas (LNG) facilities cost billions of dollars, with these costs recovered only over many years. Such investments are therefore not undertaken lightly. Accordingly, after sanctions are removed, it will probably take at least five years, and possibly much longer, until meaningful volumes of Iranian gas hit European markets. Europe will also compete with Asia for Iran’s gas exports, since LNG exports into lucrative Asian markets may be more attractive to Tehran than European markets. If Iran seeks to sell LNG to Asia, U.S. LNG exports to the region could find themselves challenged by a new competitor. However, this would take close to a decade to play out.

Geopolitical Impact

A lifting of sanctions on the Iranian oil and gas industry would have a number of geopolitical ramifications. Regarding the export of oil in particular, the strongest effect would undoubtedly be heightened tensions with Saudi Arabia, including on OPEC policy. Recently, Iranian president Rouhani explicitly criticized Saudi Arabia for what he views as Riyadh’s intentional policy to keep oil prices low and threatened that “[the Saudis] will suffer.”

On gas, Russia would take steps to block Tehran’s entry into European markets, as it has done in the past. In 2007, when Tehran inaugurated gas supplies to neighboring Armenia, Russia’s Gazprom immediately bought up the pipeline project within Armenia and built it with a small circumference to preempt its future use for transiting gas to European markets.

Moscow and Tehran could also find themselves competing for gas market share in neighboring Turkey. Already Russia’s second largest gas export market, Turkey’s role in Russia’s gas export strategy has recently grown with Russia’s proposed route change of the South Stream export pipeline from Bulgaria to Turkey.

Overall, cooperation between Russia and Iran rests on a rocky basis, and once Iran is released from sanctions and its conflict with the West, many issues of strategic competition between Tehran and Moscow will resurface, including in the sphere of gas markets.

Another potential conflict that may emerge once sanctions are removed and Iran’s natural gas industry revives is with Qatar over the delimitation of their shared South Pars/North Dome field. This natural gas field is one of the world’s largest and the main source of Qatar’s massive LNG exports as well as the main area where Iran has been investing in new gas and oil capacity. Conflict between Doha and Tehran over delimitation has been forestalled somewhat by sanctions and the corresponding lack of investment in Iranian production in the contested field.

Conclusion

If the United States and its partners can reach a deal with Iran, all players must understand the potential consequences of Iran’s reentry into the global oil and regional gas market. Most immediately, tensions could surge with other energy producers, such as Russia, Saudi Arabia, and Qatar. The downward spiral of global oil prices would also be reinforced. Tehran, it must be noted, could face serious difficulties finding markets for expanded output and attracting the needed investment in production and gas transit facilities. But in the long term, expanded Iranian output could create more supply options for European and Asian gas markets.

Brenda Shaffer, a specialist on international energy issues, is currently a visiting researcher at Georgetown University’s Center for Eurasian, Russian and East European Studies (CERES), on sabbatical from the University of Haifa, where she is a professor in the School of Political Science. She authored the Washington Institute study Partners in Need: The Strategic Relationship of Russia and Iran.

The Australian and Kazakhstan Nuclear Horns (Daniel 8:8)

Australia and Kazakhstan report uranium production

27 January 2015
Last year saw Australia’s uranium production reach its lowest point since 1998 while Kazakhstan maintained its position as the world’s largest uranium producer.

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Olympic Dam produced two-thirds of Australia’s uranium output in 2014 (Image: BHP Billiton)

Australian production of 5897 tonnes U3O8 (5000 tU) was down from 2013 production of 7488 tonnes U3O8 (6350 tU) despite the start of operations at the Four Mile in situ leach uranium project in South Australia, and was the lowest for the country in 16 years.

The figures reflect the loss of production at Energy Resources of Australia’s (ERA) Ranger mine, out of action until June 2014 following the rupture of a leach tank in December 2013. The mine had ramped up to full throughput by the end of September and by year end, Ranger had produced 988 tU.

Four Mile also started operations in June and by the end of the year a total of 640 tU had been produced. Uranium from Four Mile is processed at the Beverley plant. Beverley’s own wellfields contributed 21 tU to the annual total, although production has been suspended since early in the year.
The lion’s share of Australia’s 2014 production – 3351 tU – came from BHP Billiton’s Olympic Dam, where uranium is produced as a by-product of copper.

Kazakhstan tops table

Meanwhile, Kazakhstan remains the world’s largest uranium producer with 2014 total production of 22,829 tU, according to state nuclear company KazAtomProm. The company’s own share of production accounted for 13,156 tU of the total. The figure is slightly up from the 22,548 tU recorded for 2013, and Kazatomprom says it is in line with its expectations for the year.

Researched and written
by World Nuclear News

Pakistan Left Out In The Nuclear Cold (Daniel 8:8)

Pakistan Criticizes India’s Inclusion in Nuclear Suppliers Group

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By SALMAN MASOOD | New York Times
JANUARY 27, 2015

ISLAMABAD, Pakistan — In an unusually critical statement, a senior Pakistani official said that Pakistan remained opposed to India’s inclusion in the Nuclear Suppliers Group and feared that the country’s growing nuclear cooperation with the United States could harm deterrence efforts in South Asia.

The statement by Sartaj Aziz, the Pakistani national security adviser, came after President Obama wound up his visit to India, during which the United States and India announced an array of trade and strategic agreements.

Pakistan and India have had an antagonistic relationship since the end of British rule and their partition in 1947. In recent years, Pakistan has viewed growing United States-India cooperation with apprehension.

In addition to Mr. Aziz’s criticism, the Pakistani Army chief, Gen. Raheel Sharif, went to China on Sunday for a two-day visit with political and military leaders. The trip directly coincided with Mr. Obama’s visit in India, and Pakistani news organizations covered the parallel trips prominently — particularly statements by Chinese officials that “Pakistan’s concern is China’s concern.”

“Pakistan is opposed to yet another country-specific exemption from N.S.G. rules to grant membership to India, as this would further compound the already fragile strategic stability environment in South Asia,” Mr. Aziz said Tuesday in the statement. The Nuclear Suppliers Group is a 48-nation body established 40 years ago to ensure that civilian trade in nuclear materials is not diverted for military purposes.

In addition to opposing India’s membership in the group, Mr. Aziz also criticized American support for granting a seat to India on the United Nations Security Council.

“A country, in violation of United Nations Security Council resolutions on matters of international peace and security, such as the Jammu and Kashmir dispute, by no means qualifies for a special status in the Security Council,” the statement read, referring to the Himalayan region of Kashmir, over which Pakistan and India have fought three wars.

Islam Is A GEOPOLITICAL Ideology (Daniel 8:8)

Al-Qaeda Has “Grown Fourfold in the Last Five Years
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January 27, 2015
PJ Tattler

The former vice chief of staff of the Army warned the Senate Armed Services Committee today that al-Qaeda has “grown fourfold in the last five years.”

“AQ and its affiliates exceeds Iran in beginning to dominate multiple countries,” retired four-star Gen. Jack Keane testified.

Using a term that the Obama administration now eschews, Keane called radical Islam “the major security challenge of our generation.”

“Radical Islam, as I’m defining it for today’s discussion, consists of three distinct movements who share a radical fundamentalist ideology, use jihad or terror to achieve objectives that compete with each other for influence and power,” he said.

“In 1980, Iran declared the United States as a strategic enemy and its goal is to drive the United States out of the region, achieve regional hegemony, and destroy the state of Israel. It uses proxies, primarily as the world’s number one state sponsoring terrorism. Thirty plus years Iran has used these proxies to attack the United States. To date, the result is U.S. troops left Lebanon, Saudi Arabia, and Iraq, while Iran has direct influence and some control over Beirut, Lebanon, Gaza, Damascus, Syria, Baghdad, Iraq, and now Sana’a, Yemen,” the general continued.

“Is there any doubt that Iran is on the march and is systematically moving toward their regional hegemonic objective? Iran has been on a 20-year journey to acquire nuclear weapons, simply because they know it guarantees preservation of the regime and makes them, along with their partners, the dominant power in the region, thereby capable of expanding their control and influence. Add to this their ballistic missile delivery system and Iran is not only a threat to the region, but to Europe, as well. And as they increase missile range, eventually a threat to the United States. And as we know, a nuclear arms race, because of their nuclear ambition, is on the horizon for the Middle East.”

Keane detailed the growth of al-Qaeda in its quest to “eventually achieve world domination.”
“Third, the Islamic State of Iraq and al-Sham, ISIS, is an outgrowth from Al-Qaeda in Iraq, which was defeated in Iraq by 2009. After U.S. troops pulled out of Iraq in 2011, ISIS reemerged as a terrorist organization in Iraq, moved into Syria in 2012, and began seizing towns and villages from the Syria-Iraq border all the way to the western Syria from Aleppo to Damascus,” he reminded the committee.

That leads to an “unmistakable” conclusion that “our policies have failed,” Keane added.

“And the unequivocal explanation is U.S. policy has focused on disengaging from the Middle East, while our stated policy is pivoting to the east,” he said. “U.S. policymakers choose to ignore the very harsh realities of the rise of radical Islam. In my view, we became paralyzed by the fear of adverse consequences in the Middle East after fighting two wars. Moreover, as we sit here this morning, in the face of radical Islam, U.S. policymakers refuse to accurately name the movement as radical Islam. We further choose not to define it, nor explain its ideology, and most critical, we have no comprehensive strategy to stop it or defeat it.”

Bridget Johnson is a veteran journalist whose news articles and opinion columns have run in dozens of news outlets across the globe. Bridget first came to Washington to be online editor at The Hill, where she wrote The World from The Hill column on foreign policy. Previously she was an opinion writer and editorial board member at the Rocky Mountain News and nation/world news columnist at the Los Angeles Daily News. She is an NPR contributor and has contributed to USA Today, The Wall Street Journal, National Review Online, Politico and more, and has myriad television and radio credits as a commentator. Bridget is Washington Editor for PJ Media.