The Journal notes that this is a faster timeframe than most independent analysts are expecting, although many of them are indeed anticipating a massive increase in output over a longer period of time. Business Insider reports that that output had already increased to 2.87 million bpd day during the month of July, and could go as high as 3.8 million after the lifting of sanctions under the nuclear deal.
But it remains unclear exactly when that lifting or suspension of sanctions will take place. Iran is expected to fulfill at least its basic obligations under the agreement before the US and its international partners formally take that step. However, this is not to say that Iran will not be receiving economic benefits well ahead of such implementation. As long as the West expects the agreement to go forward as planned, it is unlikely to vigorously enforce sanctions that will ostensibly be lifted in a matter of months.
Thus, there has already been a surge of foreign interest in Iranian investment and trade opportunities, with Asian countries in particular already ending former agreements to keep their Iranian oil imports below a certain threshold. This, according to the Wall Street Journal, has contributed to Iran’s ability to increase its output even before sanctions are formally suspended. Business Insider adds that Iran has similar opportunities beyond Asia, including in South Africa, the largest economy on the continent.
This is to say nothing of the surge in European and North American investor interest, which many critics of the deal worry will make it difficult to hold back implementation or deliver on the promise of “snap back” of sanctions in the event of Iranian cheating. Countries like China, India, and South Africa have less of a personal interest in sanctions enforcement than the Western powers, and yet even those Western powers appear generally eager to pursue expanded economic relations as quickly as possible.
This is evidenced by an ongoing series of European trade delegations making trips to Tehran to discuss prospects for after the lifting of sanctions. In some cases deals are already being formalized and put into action, as in the case of two hotels that are scheduled to open in Iran in mid-October under the control of a French firm. Reflecting this same eagerness to start doing business there, France sent its latest trade delegation to Iran during the preceding week.
This has apparently helped to motivate the British government to make a similarly preemptive push into the not-yet-opened market. British Finance Minister George Osborne recently signaled his interest in sending the UK’s largest trade delegation to date into Iran for more details talks. He explained the move in an interview with the Financial Times, saying, “We can either sit on the sidelines, watch the world move ahead and gradually decline — plenty of other countries are taking that path — or we can get out there and plant our flag in the ground.”
In other words, as long as the Asian powers or any other economically significant countries are jumping the gun on re-investment in Iran, there is incentive for each Western nation to try to keep up. And this applies regardless of existing concerns, which extend beyond questions about whether Iran will fulfill its requirements for implementation.
The Wall Street Journal emphasized contract concerns that have been widely reported since the finalization of the nuclear deal. It is unclear what terms the Iranian government will impose on oil contracts and investment deals originating in Western countries. Many firms have expressed the desire for an improvement over contracts governing those deals that were in effect prior to the imposition of sanctions.
But Tehran has responded only vaguely when it has responded at all, thus leaving open the possibility that it will impose terms that keep foreign profits lower than trade delegates are currently expecting. Adding to the likelihood of this scenario, Iranian President Hassan Rouhani has insisted that foreign companies will be expected to “share the wealth” with Iranian partners and Iran as a whole.
Providing still further grounds for nervousness among Western investors, Trade Arabia reported this week that Iran had once again rescheduled an anticipated oil conference set to take place in London and to specifically court Western investors. With its move from December to February, this is the fourth postponement for the conference in which Iran says it will reveal the template for new Western contracts.
These postponements prolong the situation in which Western firms and governments are forced to choose between, on the one hand, waiting for a clearer understanding of the details of potential trade agreements, and on the other hand, pursuing those agreements blindly in order to stay ahead of the competition.
In absence of a concrete explanation for these postponements, it remains possible that this is a deliberate tactic on Tehran’s part, aimed at driving up investor demand to the greatest possible extent so that it can make its agreements more costly for Western partners after the fact.