The Iran Deal signed by the Obama administration has dramatically impacted Global Oil Production: it has opened up Iran’s huge crude oil reserve to the global oil market. Global oil production totals 97.42 million barrels per day of which the entire world uses about 96.99 million barrels of oil per day. The extra half million barrel has so much to do with so many things that directly impact the global geopolitical landscape. Donald Trump could be OPEC’s best friend, as Julian Lee predicts, through dismantling the Iran Nuclear Agreement. “My number-one priority is to dismantle the disastrous deal with Iran,” Trump said during his campaign and declared that “[he] will enforce it like you’ve never seen a contract enforced before, folks, believe me.” Both Russia and Saudi Arabia along with the other OPEC member countries will be directly benefited if the Iran Nuclear Agreement is cancelled as it would certainly increase the crude oil price.
Iran Deal and Global Oil Production:
The European Union and the United States lifted nuclear-related economic sanctions imposed on Iran after the International Atomic Energy Agency announced that Iran has met all obligations under the nuclear agreement. After a long time, Iran has joined global oil production and fulfilled its pre-sanctions target of 4 Mbd and aims at pumping 5.7 Mbd by 2018. If this steady supply continues, as energy analysts forecast, crude oil prices will remain at USD 50-60/bbl despite the speculated demand rise. This is certainly bad news for Russia and Saudi Arabia: Russian economy is stagnant due to the imposed sanctions and the low crude oil price whereas Saudi Arabia has already burnt 16% of its $737 billion foreign reserve.
Iran Deal and Saudi Arabia:
Historically the Iran-Saudi relation has been embittered with rivalry and distrust of each other, and Saudi Arabia always wants Iran cornered in the global community. For Saudi Arabia, an isolated Iran with or without nuclear power is much preferable than a competitive oil producer and responsible regional power. The Iran Deal transformed Iran from a rouge state to a more reliable partner in the global arena. However, as Saudi Arabia enjoys the lowest crude-oil production cost in the world, it rejected slowdown production to readjust the falling oil price. Saudi’s resistance to production cutbacks reflects its desire to strike a blow to Iran and Russia for their support of Bashar Al Assad. Saudi Arabia is ready to accept and withstand the long-term price decline with the hope that it would cripple the Russian and Iranian economy.
Is Trump Cancelling the Iran Deal?
The Joint Comprehensive Plan of Action, as the deal is officially called, was forced by President Obama through executive order. As it was not ratified by Congress, Trump can repeal it at any moment. Although Trump called the deal “stupid” and “a disgrace,” it would not be that easy to rescind it as EU reaffirmed its commitment to the Iran nuclear deal and reminded Trump that he can’t renegotiate or simply walk away. EU’s commitment to the Iran Deal is reflected in European oil companies move toward developing oil and gas fields in Iran: Royal Dutch Shell and Total announced massive investment in Iran. Like EU, China is also planning huge investment in Iran. If Trump backs out of the deal, US companies will loose potential business deals in Iran as the country is welcomed back into the global market. Like most of his campaign commitments, Trump’s promise of dismantling the Iran deal seems to be made only to be broken. Republican Senator Bob Corker reaffirmed this on Friday that Washington will not “tear up” the 2015 deal with Tehran after US President-elect Donald Trump assumes office on January 20.