Iranian President-elect Ebrahim Raisi will attend a press conference in Tehran, Iran on June 21, 2021.
Majid Asgaripour | WANA News Agency | Reuters
DUBAI, United Arab Emirates – Iranian President-elect Ebrahim Raisi gave his first press conference since the country’s election and said on Monday that his government’s priorities would be to improve relations with regional neighbors and revive the 2015 nuclear deal – while clearly governing meeting with US President Joe Biden.
“We support the negotiations that guarantee our national interests … America should return to the deal immediately and fulfill its obligations under the deal,” said Raisi, the hard-line cleric who is himself under US sanctions, according to a Reuters translation.
The 2015 Iranian nuclear deal, officially known as the Joint Comprehensive Plan of Action and led by the Obama administration and several other world powers, lifted sanctions against Iran to curtail its nuclear program. Former President Donald Trump withdrew from the deal in 2018 and again imposed harsh sanctions on Iran, paralyzing its economy.
Tehran has since ramped up its nuclear activities well beyond the limits of the deal, in allegedly protest against the sanctions – sanctions Washington says it won’t lift until stepped up nuclear development activities, such as dramatically increased uranium enrichment and supplies to be reversed.
And despite the ongoing negotiations between the JCPOA signatories in Vienna and the talk of “progress”, the two opponents seem to have stalled on important sticking points such as Iranian transparency vis-à-vis the nuclear inspectors.
The oil markets are now watching the talks and Raisi’s messages to find out what this could mean for the world’s supply of the commodity.
Iranian oil exports have been reduced to a fraction of what they once were by Trump’s sanctions; A revival of the deal and the lifting of levies could bring 3.8 million barrels of oil per day to market over time, up from 2.1 million barrels a day today, oil ministry officials say. However, this could be a long process due to underinvestment in oil fields and reduced production in recent years.
Pressure on the oil price?
The deal “would give a significant boost if the Iranian economy revived – it could grow 8-10% a year in 2021-23,” wrote Jason Tuvey, senior emerging markets economist at London-based consultancy Capital Economics, in a note of choice. However, he added that higher crude oil production would put pressure on other dynamics in the region.
“More Iranian oil production would weigh on global oil prices and could lead governments in the Gulf States to tighten fiscal policies, which is hurting their recovery,” said Tuvey.
If Iran can get its barrels back on the world market, there won’t be a shortage of demand, according to Herman Wang, Senior Oil Writer at Platts.
“Many of Iran’s former oil customers, particularly in Asia, have said they are eager to resume buying once they have received the all-clear for the sanctions,” said Wang. He added that many of Asia’s refineries are well suited for Iranian crude oils, “which would increase competition for neighboring Saudi Arabia, Iraq, Oman and other heavy, acidic-grade producers, and Iranian condensate would compete with similar condensates.” which are produced by Qatar USA and Australia. ”
“This could well put pressure on oil prices, although OPEC and its allies are hoping the increased demand will mean a bigger cake for everyone,” added Wang.
“At this stage, we are still observing the negotiations between the JCPOA parties in Vienna as the most important variable for oil prices in the near future,” Ed Bell, director of commodities research at Dubai-based bank Emirates NBD, told CNBC.
Although Raisi had signaled that he would support an agreement “that doesn’t address the persistent differences between the JCPOA parties, including the fact that Raisi himself is under US sanctions,” he said.
“The timeline for a return of freely exportable Iranian crude is continually being postponed until later in 2021, so we don’t see an imminent return that would help alleviate the tightness of the current market,” added Bell.
Oil, meanwhile, doesn’t seem too bothered by the prospect of a revitalized business; international benchmark Brent crude continued its steady uptrend on Monday, trading at $ 74.65 a barrel ET at midday, up 45% since the start of the year and 70% more than last year.
A more pressing longer-term problem, Bell said, would be how a Raisi government positions its relationship within OPEC and its oil-producing allies. Would Iran accept a production quota if sanctions were lifted or would it try to maximize its market share to make up for lost time?
“While Iran alone would not be enough to drive oil markets back into surplus this year, a race for market share could lead other members of OPEC + to do the same and risk putting downward pressure on oil prices,” Bell said .