Oil policy analysts generally described this as a reaction to high levels of competition from multiple sources, including American shale oil, which posed a threat to OPEC market share. But many of the same analysts accepted that Saudi-Iranian animosity may have been an additional motivating factor. Now, with Iran having made its first shipments in five years to European markets, and with global oil prices still depressed, the Saudis and other OPEC members are reportedly prepared to take measures to prevent a further decline.
But in the wake of Iranian criticism of former Saudi policies, it is now Tehran that is taking measures that might be described as economic warfare. Building upon previous declarations that the Iranian oil industry would export at its highest possible level, Iranian Oil Minister Bijan Zanganeh now says that “Iran won’t relinquish its share” of the oil market, according to Agence-France Presse.
This comes after Reuters reported that Iran’s traditional Saudi rivals had met with Iranian partner Russia to agree upon a plan to freeze oil output at January’s levels. But the plan was described as being contingent upon compliance from all OPEC member states, of which Iran is one. This has led CNBC to describe Iran as having single-handedly dashed the industry’s hopes for some level of stabilization, although the same source also notes that it was unlikely that all parties would have fully complied with the limits anyway.
Whether Iran continues to defy the Saudi-Russian plan or whether it eventually accedes, the Islamic Republic seems to be utilizing its new, post-sanctions economic position to extract leverage from its regional and global rivals. Reuters notes that the possibility exists for Iran to be offered special terms by the other players to entice it to adopt the proposed deal.
While it is conceivable that Iran’s calculations are merely a prudent effort to re-secure market share, it is also possible that they are efforts to retaliate against entities that it perceives as having caused economic harm in the past. But this is more recognizably the case in Iran’s dealings with the US, which have lately included efforts to obstruct the return of American businesses and to carry out other foreign transactions in Euros instead of dollars.
Iran began to insist upon this point last week. Initial reports indicated that it would be difficult for Iran’s Western trading partners to move away from the dollar, but also that successful implementation of the plan would simultaneously shield Iran from re-imposed US sanctions and challenge the dominance of the dollar over international transactions.
Despite skepticism about the viability of Iran’s efforts, the Fiscal Times reported on Tuesday that Brazil was taking measures to accept payment in Euros from Iran for a range of commodities including much needed aircraft and motor vehicles.