There was some hope that those prices would begin to recover after a meeting of oil producing countries earlier this month, but the inability of Iran and Saudi Arabia to reconcile led to the failure of the would-be Doha agreement. The Saudis said that they would not agree to a freeze of oil output unless all relevant parties including Iran agreed to it; but Iran, which is focused on restoring its own oil output to pre-sanction levels, refused to do so and ultimately declined to even attend the Doha meeting.
The Saudi ultimatum can be interpreted as part of an effort to limit or at least delay Iran’s recovery, but the Bloomberg article suggests that if that is the intent, it may not be successful. To the frustration of all those who are concerned about the dangerous ways in which additional Iranian oil revenue could be spent, the country’s output has apparently increased at rates that are significantly greater than many independent analysts had projected.
Specifically, Bloomberg notes that experts did not expect the Islamic Republic to be able to restore pre-sanctions levels until approximately a year after the implementation of last summer’s nuclear deal. But about three months after implementation day, Iran’s estimated production has already nearly reached that point, currently standing at about 3.5 million barrels per day.
Although the pre-sanctions peak was only internationally recognized as being around 3.7 million, Iranian authorities have reportedly pegged it as approximately an even four million, and are aiming for that level before they agree to any sort of globally mediated freeze. But Iranian oil may be well on its way to that benchmark by the time of the next OPEC meeting in June, and Bloomberg speculates that this could present a serious challenge for Saudi Arabia.
That is to say, if the Saudis want to continue to try to box out Iranian competition by maintaining high levels of low-price foreign exports, it will be rather difficult for them to justify such a move, provided that Iran reports that it is willing to participate in a coordinated freeze.
For the time being, Iran’s adversaries including the Saudis and most of the US Congress have apparently had marginal success in holding back the prospective rush to invest in the Islamic Republic. That is, they have helped to maintain a set of circumstances in which Iran is viewed as still being an unsafe investment, on the basis of lingering sanctions threats and low prices for its main commodity.
These factors may have affected the decision-making of international partners such as India, which, on the one hand, has increased its Iranian oil imports but on the other hand has held back from some would-be investment opportunities. Chief among these is a planned oil pipeline connecting India, Iran, and Pakistan. Whereas Iran has completed its portion of the project and Pakistan is under pressure to do so, India has not participated since 2007, according to DNA India, and this has been explained partly in terms of India’s close relationship with the US.
The Iranian ambassador to India recently declared that the pipeline should be written off over the short term, because the US would never allow it to go forward. But this is certainly debatable in light of the efforts that the White House has put forth to preserve the nuclear deal, even going so far as to purchase 8.6 million dollars’ worth of surplus Iranian nuclear material.
Meanwhile, there are other entities that are making a much stronger push to limit foreign investment in the Islamic Republic. Saudi Arabia is certainly one of them, and Israel is another. And what’s more, a Guardian article on the complex relations among Iran, Israel, and Russia indicates that the Jewish state and its Arab neighbors have actually become increasingly cooperative on the basis of their mutual fear of an ascendant Iran.
That fear is founded in large part upon the influence that Iran encourages among Shiite militias and other terrorist groups, including Hezbollah and in a number of cases Hamas.
Saudi Arabia and its partners are making efforts in multiple domains – certainly not only economics – to constrain the growth of Iranian influence. And as part of their political and diplomatic efforts, the nations of the Gulf Cooperation Council announced in early March that they had each formally listed Hezbollah as a terrorist organization.