News : Economy
- Published: Monday, 24 September 2018
By INU Staff
INU - Iran Regime’s oil minister Bijan Namdar Zanganeh has threatened that Iran will veto any decision made by the Organization of the Petroleum Exporting Countries (OPEC) which hurts the Islamic Republic, but this will likely have no impact on oil supply as the veto will be ignored by producers who are able to boost their oil production, just like in 2011.
Zanganeh is correct in saying that the Joint Ministerial Monitoring Committee, which met in Algeria on Sunday, doesn’t have the authority to make any decision on a new production agreement.
Its role is purely to supervise the implementation of an existing deal; a deal struck in 2016 with a group of non-OPEC countries to reduce excess stockpiles of oil by cutting global supply by around 1.8 million barrels per day.
However, by June 2018, the agreement had worked better than intended and global output was reduced too much. Thus, when oil ministers met in Vienna, they agreed to increase their collective production to meet the level agreed upon in 2016, which meant increasing worldwide oil supplies by roughly 1 million barrels per day.
The Iranian Regime determined that this meant that each country should up production to its own individual target, but Saudi Arabia and Russia say that this is not what it means. They believe that the countries with spare capacity should be making up the shortfall, which would reduce pressure on those who are at capacity.
Saudi oil minister Khalid Al-Falih, speaking at the press conference that followed the June meeting, said: "The delivery of this 1 million will be left to the JMMC to co-ordinate amongst countries that have the capacity to produce."
That seems like a pretty clear decision made by the countries involved, but Iran is challenging this. Why? Because they think that it won’t end up in their favour, because Iran isn’t a member of the JMMC.
In theory, any single OPEC member can block a group’s decision, but, in practice, the individual members can act how they please as OPEC cannot police the states or apply sanctions.
In fact, in 2011, a group of countries led by Iran blocked a Saudi request to boost OPEC’s output target, but the Kingdom did so anyway.
Julian Lee, an oil strategist who writes for Bloomberg, wrote: “Iran has no good options. It can’t prevent the JMMC from reallocating supply among those with spare capacity for the next three months.
It can’t stop Saudi Arabia and Russia from raising output. It could theoretically block any OPEC agreement when ministers meet in December, but that would simply take the group back to its previous pump at will policy, which is the opposite of what Iran wants to see.”
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