By Mahmoud Hakamian
On Wednesday, Market Watch reported that collective oil production by the Organization of Petroleum Exporting Countries had risen by 40,000 barrels per day, to an average of 33.08 million in the month of November. Such developments help global oil markets to avoid the sharp price increases that some people expected to result from US withdrawal from the 2015 Iran nuclear deal.
That withdrawal was completed last month with the re-imposition of US sanctions on Iran’s oil exports, as well as its banking sector. But limited sanctions had already returned in August, three months after President Donald Trump’s statement declaring the Islamic Republic to be in violation of the spirit of the Joint Comprehensive Plan of Action.
The withdrawal announcement apparently led to a steady stream of global businesses exiting the Iranian market and cutting their imports of Iranian oil. Although the Trump administration ultimately granted some waivers to countries that are highly dependent on this energy source, the White House has made it clear that its long-term goal is to bring Iran’s oil exports as close to zero as is possible. In the interest of highlighting the viability of these plans, administration officials have boasted that those exports have already fallen by as much as a third.
Market Watch roughly corroborated these findings on Wednesday, noting that Iran’s petroleum output had fallen to less than three million barrels per day, effectively wiping out the former benefits of the JCPOA, which had alleviated multilateral sanctions and allowed Iran to greatly boost its production. Under these condition, the essential reason why global oil prices did not jump in November is because two leading OPEC member states and key US allies – Saudi Arabia and the United Arab Emirates – raised their production levels by 350,000 and 130,000 barrels per day, respectively.
These moves closely coincided with public statements by President Trump, urging the Saudis to make up for the loss in global production caused by Iran’s loss of access to export markets. The US seemingly kept this pressure in place this week, as Bloomberg reports that Brian Hook, the administration’s special representative for Iran, had met one-on-one with the Saudi Energy Minister on Wednesday in Vienna, the capital of Austria and the location of OPEC’s headquarters.
The meeting took place just ahead of a meeting of representatives from OPEC member states, leading to an irate reaction from Iranian officials. According to Reuters, Oil Minister Bijan Zanganeh described the US as having “adopted an unprofessional, naive and meddlesome approach” whereby it was trying to make OPEC operate as if “part of the US Department of Energy.”
For its part, Saudi Arabia denied that the meeting between Hook and Energy Minister Khalid al-Falih even took place. But Bloomberg indicated that eye-witness reports of the meeting were credible and illustrative of “the extent to which the White House’s Iran policy has inserted the US into the [OPEC] decision-making process.
This conclusion may have been further supported earlier in the week by comments that Hook made to the press, which seemed to imply advance knowledge of what that process would yield.
“In 2019 we expect a much better-supplied oil market, and that will put us in a better position to accelerate the path to zero [Iranian oil exports]” he said. Yet Hook and others have indicated that they do not view recent communications with Middle Eastern allies as examples of the US imposing its will on foreign governments. Instead, American pressure on Saudi Arabia and the UAE is an expression of shared interests relating to oil markets and the threat of expansion in Iran’s economic, political, and military influence.
The White House has been hard at work building a coalition of nations that are opposed to this expansion, and Reuters reported that the president viewed Saudi oil production increases as payback for the actions the US has taken to defend Riyadh against its main regional adversary.
But the Islamic Republic’s immediate neighbors are only one aspect of the sought-after anti-Iran alliance. Ideally, the coalition would also include the nations of Europe, under American guidance. And this aim is supported by the ongoing effort to prevent a rise in oil prices, which might encourage US trading partners to avoid defying sanctions in order to continue importing Iranian oil.
On the other hand, there is also an ideological component to this prospective European defiance, insofar as the European Union has been standing against the renewed sanctions and has even teased a “special purpose vehicle” to facilitate illicit transactions with Iranian businesses.
However, the escalating tensions between Iran and its foremost enemies may pose a challenge to the EU’s defiance. As those tensions escalate, Iranian officials appear to be growing more belligerent, thus highlighting the longstanding and widely-recognized threats posed by the Islamic Republic. For example, Iran’s supposedly moderate President Hassan Rouhani once again threatened on Tuesday to close off international access to the Strait of Hormuz, through which approximately one-third of the world’s oil passes.
“If someday, the United States decides to block Iran's oil, no oil will be exported from the Persian Gulf,” he said via Iranian state media, winning praise from his hardline adversaries in the ruling hierarchy. This rhetoric comes just days after the Islamic Republic claimed to launch a new and more advanced naval destroyer, one of several new pieces of military hardware that have been presented as fulfilling Supreme Leader Ali Khamenei’s injunction to increase the nation’s military power as much as possible.
Despite ongoing support for the JCPOA among EU member states, its three signatories to the deal – the UK, France, and Germany – have taken leading roles in expressing concern about Iran’s military buildup, particularly where it is related to ballistic missiles. On Tuesday, the United Nations Security Council held a closed-door meeting on this issue, at the request of the UK and France, two of the council’s permanent members.
There is some expectation that this signals greater international support for US sanctions. And that support may be further boosted by the perceived threat of Iranian terror plots stemming from the regime’s failure to contain unrest within its own territory. In June, European authorities disrupted a plot to bomb a rally organized near Paris by the National Council of Resistance of Iran.
And in October, an assassination plot by an Iranian operative was foiled in Denmark. The latter incident led to prominent calls for collective action by the EU, and it was recently reported that the body was considering broad-based adoption of the unilateral sanctions that France put into place in the wake of the Paris plot.