By INU Staff
INU – On Friday, Bloomberg reported that Iran had announced its intention to sell at least two grades of Iranian oil at a significant discount for the third month in a row. The move represents the latest skirmish in what has been described as an economic war between Iran and its main regional rival Saudi Arabia, as the former strives to reclaim market share following relief from economic sanctions.
That effort conflicts with Saudi attempts to lead the way in reining in global oil output in order to stabilize prices that have still not fully recovered from their historic lows in January – the lowest such prices since 2003. The Saudis plan to meet with their partners in the Organization of Petroleum Exporting Countries, plus non-OPEC countries including Russia on April 17 to discuss plans for a mutual production freeze.
Iran is expected to be in attendance at that meeting in Doha, Qatar, but is not currently expected to concede to the freeze. OPEC member Kuwait has indicated that Iranian non-participation may not be a deal breaker for the rest of the attendees, but Saudi Arabia has insisted that all other parties including Iran must agree to the plan before Riyadh follows through.
The Qatari location of the meeting is made more fortuitous by the fact that, according to a separate Bloomberg report, the production increase that Iran is seeking for itself is equivalent to the total oil output of the small Arabian nation. Iranian Oil Minister Bijan Zanganeh has repeatedly insisted that he plans to oversee total production of approximately four million barrels per day before the end of 2017, thereby matching the country’s peak production prior to the implementation of US-led sanctions related to the Iranian nuclear program.
Since those sanctions were removed in January with the implementation of the Joint Comprehensive Plan of Action, the Iranians have made slow but steady gains in oil output and other macroeconomic indicators. This has been helped along by the eagerness of some foreign markets, including Western European markets, to regain access to Iranian crude oil and demand for foreign imports.
Nevertheless, many of the Iranian officials’ statements about the country’s short-term prospects have been contradicted and described as unrealistic by foreign analysts. For instance, Bloomberg notes that the International Energy Agency does not foresee the four million barrel per day mark as being attainable until at least the beginning of the next decade. And even this depends upon sustained access to foreign markets and the long-term retention of sanctions relief in an environment that is fraught with tensions between Iran, the US, and US allies in the Middle East.
With Iran rebuffing output freezes and dropping its prices, it is probable that Saudi Arabia and some of its closest partners will take retaliatory measures. And it is all but certain that Western critics of recent policies regarding the Middle East region will see Iran’s “economic warfare” as contributing to excessive growth of Iran’s foreign influence. US congressmen have long opposed the Obama administration’s concessions to the Iranian regime, and some have recently expressed their intent to block the White House from changing Treasury Department rules in a way that some believe will give Iran access to the US financial system.
Still, the conflict over this issue illustrates the fact that Iran can hope to receive support for its economic development projects, even as some adversaries push back against them. In addition to purveyors of more conciliatory Western policies, the Iranians can still expect to count on longstanding allies like Russia. Indeed, the Iranian and Russian foreign ministers recently had extensive talks in Azerbaijan, wherein they discussed some highly ambitions potential plans including, according to RT, a canal between the Persian Gulf and the Caspian Sea, as well as an overland transport route that would more than cut in half the time for shipping between India and Russia.
Naturally, some such projects are even more unlikely than Iran’s oil projections, but if Iran and its partners implement a major portion of their recent plans it could create additional difficulties for the Saudis and other adversaries who are currently feeling threatened by the growth of Iran’s economic and political influence.