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Among Signs of Growing Iranian Influence, Little Hope for Oil Output Deal

But these sorts of joint projects cannot be expected to do much for the recovery of global oil prices, which are still struggling to recover from historic lows seen last year as a result of a supply glut and OPEC’s refusal to cut production. While that OPEC policy was widely reported as being a reaction to strong competition from US markets that had been bolstered by hydraulic fracturing, there was also some speculation that Saudi Arabia was deliberately trying to prevent its regional rival Iran from recovering market share in the wake of the July 14 Iran nuclear agreement.

Regardless the accuracy of the latter claim, it is now clear that Iran and Saudi Arabia are at odds over the future of Iran’s oil production, and are even engaged in what might be described as economic warfare, with Iran offering discounts to entice some buyers to take more of its oil in lieu of that of other OPEC producers.

In this context, joint development projects with Iran’s immediate neighbors go hand-in-hand with stories of Iran’s resumption of exports to Western Europe, in order to encourage a response from the kingdom of Saudi Arabia. With Iran promising to produce oil at its highest possible levels in order to restore pre-sanctions export levels of approximately four million barrels per day, there is little hope that the two rivals will reconcile their contrasting policies.

Global oil markets are responding in kind, according to BSC Comment, which pointed out on Thursday that prices had declined slightly on the expectation that there would be no notable progress from talks that are set to take place among oil producing countries on Sunday, in Doha, Qatar.

The long-anticipated meeting was meant to expand upon a smaller-scale production freeze that was principal agreed between Saudi Arabia and Russia. But both countries initially insisted that the planned expansion would be contingent upon the participation of all OPEC countries as well as all the non-OPEC oil producers in attendance. Iran pointedly rejected that ultimatum, opting to pursue greater market share even at the expense of prices and short-term profits.

Russia has apparently reversed its position since then, with Rudaw reporting on Thursday that Russian Energy Minister Alexander Novak had said that an agreement to freeze oil production could still go ahead without Iran’s participation and that “no one will force” those who do not want to sign on. The government of Kuwait has publically taken the same position, but the Saudis remain unmoved and may still derail the agreement as a whole if they judge that it would give Iran too great a share of power over the market.

The Iranians and Saudis back different factions in the Syrian Civil War, where Iran has reportedly continued to deploy Revolutionary Guards and militant proxies in defense of President Bashar al-Assad, even in the wake of a purported ceasefire among all parties other than the Islamic State and the Al Nusra Front. In Yemen, the Saudis are directly opposing the Iran-backed Houthi rebellion against President Abed Rabu Mansour Hadi.

This situation has made the Saudis and their allies rather sharply critical of the Iran nuclear deal and general expansions in Western relations with the Islamic Republic, for fear that economic recovery on Iran’s part will contribute to the continue expansion of its political and military influence in the broader Middle East.