Home News Economy Iran Claims Further Increases in Oil Market Share, but Obstacles Remain

Iran Claims Further Increases in Oil Market Share, but Obstacles Remain

Javadi pointed out that the supposed 65,000 bpd order would approximately double the current quantities of oil that Iran delivers to Italy. He went on to claim that this figure might substantially increase again, as Iranian officials were supposedly in talks with Italian energy company Eni to conclude a deal that would add another 35,000 bpd in oil exports.

These claims underscore the perception that European companies and entrepreneurs are eager to gain access to the Iranian market now that it is widely viewed as being open for business. However, this perception is not without its detractors. In fact, such figures as Iranian Supreme Leader Ali Khamenei have been among the most active voices reminding the world community that some US sanctions and banking restrictions remain in place on Iran, constituting a source of anxiety for Western businesses that may later find themselves open to fines and penalties.

This same limiting factor was highlighted by EconoTimes on Monday. Although that article acknowledged the eagerness that does indeed exist among many Western figures, it also emphasized that those individuals and firms would find it difficult to overtake Iran’s economic relationships with Russia and China. The political affinity among these countries is one factor keeping them economically close together, but those effects are strengthened by the roadblocks that continue to exist between Iran and the EU.

However, while Khamenei and his colleagues have insisted that these roadblocks are indicative of Western “aggression” and that they are evidence that the US is abiding by the July 14 nuclear agreement only “on paper,” EconoTimes notes that at least some of those measures are necessary consequences of Iran’s ongoing behavior and the structure of its economy. For instance, organizations like the Iranian Revolutionary Guard Corps, which are still subject to legitimate Western sanctions on human rights violations and support for terrorism, control a great many of the companies that Europe could be expected to do business with upon reentry into Iran.

Last week, Iran News Update pointed out that the banking restrictions currently standing in the way of Iran’s re-integration into the system of global transactions are imposed upon all nations equally. Iran has reportedly taken few, if any, steps to meet the criteria specified by those restrictions. Consequently, even officials with the Central Bank of Iran have acknowledge that the Islamic Republic itself is at fault for some of the major obstacles to economic re-engagement with the West.

Nevertheless, reports continue to accumulate which substantiate the notion that Western companies are eager to overcome these obstacles. On Monday, Reuters reported that Germany’s Robert Bosch had become the last automaker to announce that it would be doing business in Iran, in this case by opening a local office in Tehran and hiring a staff of about 50 by the end of the year. In doing so, Bosch presumably seeks to compete for the market share already tentatively claimed by Renault, Daimler, Peugeot-Citroen, and Suzuki, all of which have already announced plans to reenter the Iranian import market.

Of course, consumer imports and exports are less significant to Iran’s economic relations with the world than is its oil economy. And Rokneddin Javadi’s claims about expanded oil exports to Italy are only part of broader Iranian claims regarding the rapid post-sanctions recovery that the nation has enjoyed over the past four months.

A Bloomberg report on Monday once again reiterated that the Iranian Oil Ministry and the government as a whole believe themselves to be on track to recovering their pre-sanctions export figures within the next month or two. Speaking in Tehran on Sunday, Oil Minister Bijan Zanganeh said that the country would soon be export 2 million barrels per day of crude oil, thereby doubling the output that was being sent to foreign markets before sanctions were lifted in January with the implementation of the Joint Comprehensive Plan of Action.

However, last week, Ship and Bunker noted that some market analysts doubt these officials Iranian figures. This is not to say that they specifically dispute the current export figures; rather, they believe that those figures may not be sustainable over the long term, because they may not reflect a corresponding increase in crude oil production. Iran was known to have about 25 million barrels in onshore storage and about 20 million floating in tankers that could not find foreign markets to receive them.

That being the case, it is possible that Iran is simply depleting this storage while using the result export figures to drum up interest among foreign investors, even though that investment may not turn out to be as secure as it appears at first glance.

The security of those investments may be further undermined by the efforts of Iran’s major political and economic rivals in the region. While Supreme Leader Khamenei and others have been keen to put that onus on the United States, it is perhaps more likely that Saudi Arabia and its nearby allies will take deliberately punitive action against Iran in order to prevent it from regaining full access to foreign oil export markets.

The mutual aggression between these oil exporting companies has played out in recent weeks in disputes over a now-scuttled agreement to freeze output among OPEC and several non-OPEC countries. Iran refused to participate in talks over the prospective freeze until such time as it had recovered its pre-sanctions levels. Now that Tehran claims to be on the verge of doing so, it may also be on the verge of opening itself up to cooperative policies that would help to bolster long-depressed global oil prices.

Bloomberg took up this line of thinking on Monday but also pointed out those prices have risen significantly in recent days: up 65 percent over the 12-year lows that were recorded in January. Thus, while Iran’s reclamation of market share may have increased its incentive to talk with OPEC, the relatively higher prices have simultaneously decreased Saudi Arabia’s incentive, as the head of OPEC, to bring Iran back into the fold.

Continued animosity between the two rivals could prevent Iran from keeping hold over major shares of the market, thereby further endangering the recovery that Iranian officials claim to have already overseen.

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