- Published: Tuesday, 06 June 2017
- Written by Edward Carney
Last week the Iranian Oil Ministry made a number of boastful statements regarding its prospects for increased production and exports. EA Worldview reported, for instance, that Oil Minister Bijan Zanganeh had promoted plans for an increase of petroleum output from current estimated levels of 3.8 million barrels per day to 4.7 million barrels.
Between April 2010 and the January 2016 implementation of the nuclear agreement between Iran and six world powers, the country’s oil output was stuck under three million barrels per day as a result of punishing economic sanctions. In the wake of the agreement that eased those sanctions, Iran was exempted from a deal brokered by OPEC and Russia to limit global oil supplies in a bid to stabilize prices. Since that latter agreement went into effect, the Islamic Republic has been striving to claim larger shares of the export market, in a move that had clear potential to further exacerbate sanctions between it and its regional rival and fellow OPEC member, Saudi Arabia.
Those tensions have already been amplified by political conflicts and proxy wars, with Saudi Arabia having organized a coalition in 2015 to resist Iran’s pursuit of influence in the region, particularly through its support of the Houthi rebels who are fighting to take control of Yemen, on the Arabian Peninsula.
It is perhaps because of sensitivity to these worsening relations that Zanganeh’s comments about the Iranian oil industry were somewhat measured in places where they referred to last year’s OPEC agreement. Although the oil minister reiterated that Iran would not participate in the output cuts that have been implemented by other OPEC countries and Russia, he also allowed that Iran would keep its own output frozen at current levels for the duration of the agreement, which Zanganeh estimated might last for another three, six, or nine months.
On the other hand, it is difficult to confirm that Iran’s self-reported output figures are accurate. After boasting a rapid increase in the immediate aftermath of the nuclear deal’s implementation, the pace of that increase seemed to slow precipitously as the OPEC deal was being negotiated and implemented, during which time Iran said it would not participate in the agreement until such time as it reestablished what it deemed to be its pre-sanctions output level.
Given the Islamic Republic’s long history of disseminating propaganda via state media, it is easy to imagine that the oil production figures could have been manipulated at the earlier stage as a way of attracting investor interest or at the later stage to stave off expectations of cooperation with Saudi Arabia and others. Either move would be of concern to rivals who are concerned about Iran’s market share or its efforts to expand both political and economic influence through newfound trade relations with foreign powers.
The EA Worldview report noted that the oil ministry did not clarify how it would accomplish the proposed output growth, although Zanganeh personally insisted that had had seen only positive signals from would-be foreign investors, including those based in Europe. Such claims are highly questionable, considering that international reports regarding the post-nuclear deal environment have overwhelmingly emphasized that foreign companies are remaining wary of investment in the Islamic Republic, out of fear that sanctions could return to full force if Iran is found to be cheating or if the US changes its approach to dealing with the country.
The notion of a changing strategy became a more prominent issue after the election of President Donald Trump, who has gradually rolled out more assertive policies toward the Islamic Republic. The New York Times reported last week upon the appointment of Michael D’Andrea as the head of Iran operations for the CIA, and it described this as the first sign of Trump “invoking a hard line.” The report went on to note that Trump has filled his National Security Council with “hawks” who are “eager to contain Iran and push regime change.” Thus, more signs of an assertive policy adjustment are likely to emerge in time to come.
Any aggressive or non-cooperative moves that Iran makes toward Saudi Arabia and its partners would likely provide further impetus for this shift, considering that President Trump has sought to strengthen relations between the US and its traditional Arab allies, often specifically tethering these moves to a mutual interest in containing Iran and pushing it back from influence over the broader Middle East. This connection was certainly on display in May at the Arab Islamic-American Summit, which Trump attended as part of his first official oversees trip, and which yielded a concluding statement that directly called out the Islamic Republic.
Following that summit, the US has bolstered its combat power in Syria and, according to Reuters, it has done so specifically with an eye toward containing Iran-backed militant groups that have long been playing a leading role in propping up the embattled government of Bashar al-Assad. As of Thursday, the US military was reportedly working to drive lingering groups of these fighters out of a “deconfliction zone” established by the US and Russia, Iran’s ally in the defense of Assad.
Already, American and US-backed forces in Syria and Iraq have compelled Iran to re-draw its planned route linking Tehran to Damascus. And depending on how the control of territory proceeds from this point forward, Iran could still be compelled to give up on such a route altogether.
This would be a boon for the Gulf Arab states that are worried about the growth of Iran’s sphere of influence, which has been driven by direct intervention in Syria and Yemen as well as by the effort to expand oil market share and trade relations with the world at large. Furthermore, this latter factor may be affected by the mere appearance of competition between Iran and the US in the region, insofar as it would give already wary Western businesses further reasons to expect that Iran may come under renewed sanctions or otherwise be made even more unstable an investment opportunity.
Meanwhile, the escalating tensions also appear to be prompting countries who are otherwise caught between Iran and its adversaries to either take a side or struggle to maintain their position in the middle. For instance, last week an advisor to the Pakistani Prime Minister said that Pakistan wants to maintain political and economic relations with the Islamic Republic and avoid making Tehran happy, even though Pakistan sent representatives to the Arab summit and signed onto the Saudi-led coalition that is widely viewed as a bulwark against Iranian regional activities.
Voice of America news notes that some Pakistani lawmakers have accused the government of breaking a 2015 neutrality agreement by joining the alliance. Sartaj Aziz, the PM’s advisor, responded to this criticism by claiming that the nature of the alliance and Pakistan’s role in it are distinct from the anti-Iranian statements that emerged from the summit and from other such gatherings or member states.
But other countries appear to be quietly taking steps to distance themselves from Iran, even if without commenting on them directly. Turkey is among those nations that have had inconsistent relations with Iran, operating as a trading partner even when sanctions were in full force and accepting Iranian support in the wake of last year’s coup attempt, but also being subject to disputes over border security and sectarian issues, with Turkey supporting moderate rebels in Syria while Iran backs the Assad dictatorship.
Last week, the Associated Press reported that Turkey had announced a plan to build walls along its borders with Iraq and Syria, ostensibly as an obstacle to either ISIL-affiliated terrorists or Kurdish separatists. But the plan also includes walls along “appropriate places” on the border with Iran, suggesting worsening distrust over Iran’s role in the nearby conflicts and the region as a whole.
These various developments could negatively impact Iran’s plans for expanded oil exportation and general economic development. Despite the Oil Ministry’s claims about positive signals from the West, Iran may be turning its attention to the East in order to prepare for the possible loss of established and prospective partnerships. As an example of this trend, the New York Times reported on Friday that Iran had entered into talks with the Russian-led Eurasian Economic Union, in order to establish a free trade pact and move toward Iranian membership in the organization.
This reflects the fact that Iranian-Russian relations have remained strong and appear to be getting stronger in the midst of increasing tensions among Iran, the US, and the Gulf States. Trade between Iran and Russia approximately doubled in value between January 2016 and January 2017, and Russian continues to back Iranian interests in Syria. These factors will surely pose a challenge to the American shift toward an assertive Iran policy, especially in light of President Trump’s previously declared interest in improving relations between the US and Russia.
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