BRUSSELS – As Russia squeezes Europe over natural gas supplies and Europe readies an embargo on Russian oil, some are seeking help from Iran. That is, of course, if and when Tehran and Washington agree to revive the 2015 nuclear deal, lifting tough economic sanctions on Iran that have limited its ability to export energy.
But even if a deal is struck tomorrow, putting it into practice will be complex and phased, and it is likely to take months before sanctions on Iran are lifted. . Experts say there may be an early impact on oil markets to ease nerves, but supply will come too late to ease world markets this winter.
For Europe, oil really isn’t the problem. Russia is refusing to supply large amounts of natural gas to European countries that are trying to supply it elsewhere. While Iran has lots of natural gasit uses most of the country, including many cars, and it lacks pipelines to Europe or facilities to liquefy natural gas.
“Iran in the short term will have some more oil exports, but not gas, which is what Europe really needs,” said Simone Tagliapietra, energy expert at Bruegel, an economic research organization. . “I wouldn’t bet on Iran rebalancing the global energy market soon.”
Jacob Funk Kirkegaard, an economist with the German Marshall Fund, said that “what Europe needs is gas and there is no way to get it from Iran and not in a timeframe that matters to anyone in the world. this winter”.
Even like European countries scramble to arrange alternative energy sourcesWestern officials insist that their timing on the Iran nuclear deal is not affected by the energy issue and point out that Oil prices have dropped significantly from its peak this summer.
The influx of Iranian oil into the market could help keep prices down. Some suggest that Iran, the world’s fourth-largest holder of proven oil reserves, could end up exporting more than two million barrels of crude per day, more than double estimates. which the country exports today.
However, oil is easier to transport and disguise than gas, and Russia, which makes more money from oil than from gas, has continued to pump and sell oil at near-prewar levels. Even the European Union, which has imposed phased sanctions on Russian oil, with many exceptions, is buying from Russia as much as it was before the war.
That could change in January, when more sanctions, especially the bans on EU operators from financing or insuring oil tankers, which will affect Russia’s ability to export some oil not through pipelines. The Biden administration believes that will raise oil prices again, so has instead supported a price cap on Russian energy.
Understanding the Iran Nuclear Deal
A phased nuclear deal – and that is expected to include some early waivers for Iran to allow Iran to sell some of its oil reserves – could calm the market. by adding non-Russian oil.
Experts say Iran is exporting around 800,000 bpd, mostly bought by China, but the country can increase production fairly quickly.
After President Donald J. Trump re-imposition of sanctions in 2018Iran has drastically reduced production, but handles the shutdown with care to minimize damage to fields and should allow it, when given the opportunity, to restore production quickly.
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“Within three months, we think they can increase production to almost a million bpd,” said Homayoun Falakshahi, senior analyst at Kpler, an energy research firm.
Falakshahi said that within a few months, Iran will likely add another 400,000 bpd to its 2017 production level of 3.8 million bpd, up from 2.5 million now.
Iranian oil marketers have also positioned themselves to increase sales as sanctions are lifted. Falakshahi estimates that some 44 million barrels of Iranian crude have been loaded onto tankers, mainly in waters near China and Singapore, which can quickly enter the market.
Some of these vessels may be engaged in transshipment operations designed to avoid sanctions and obscure where the oil is going, experts note.
The addition of 1.3 million barrels per day is about 1% of current world demand, but it will make a difference. A group of manufacturers led by Saudi Arabia and Russia known as OPEC Plus The Paris-based International Energy Agency is producing about 2.7 million bpd less than its target, despite lobbying from the Biden administration and others to increase it, according to the agency. Energy International is based in Paris.
Bringing Iranian oil back to the market would make up some of that shortfall and cushion a potential decline in Russian production. “Iran could be a significant source of supply if sanctions are eased, although a return to the market will not happen anytime soon,” IEA analysts wrote in a recent report. afternoon”.
Analysts at Goldman Sachs think the return of supply from Iran will prompt them to revise their Brent oil price forecast of $125 per barrel, by international standards, down $5 to $10 per barrel in 2023.
Ellie Geranmayeh, Iran expert at the European Council on Foreign Relations, said some European countries imported significant amounts of Iranian oil before US sanctions were reimposed in 2018. including Italy, France, Spain and the Netherlands. “They may see Iran as a short-term solution.”
But even if Iran doesn’t find an early market for oil in Europe, “it could ease some of the global pressure on markets going to Asia, which could free up some supply to Europe.” Europe,” she said.
However, politics and sanctions are not the only obstacles to Iran’s exports, said Tagliapietra, an energy expert. Poor export infrastructure, no pipelines to the European Union and no liquid natural gas production plants.
And Iran needs the technical expertise of international oil companies, who are likely to be reluctant to re-enter the country until after the 2024 US presidential election, because of a Republican president. may decide to withdraw from the nuclear agreement again and reapply. sanctions.
“Was the big companies in Iran before, will they go back to that level knowing what could happen in 2024?” Mr. Kirkegaard asked. “I find that very hard to believe.”
Saudi Arabia also hinted that it could cut production if Iran, its longtime rival, backtracks, to secure higher oil prices.
“OPEC can really shrink production once the Iranian barrels start hitting the market,” said Helima Croft, head of commodities at RBC Capital Markets. Such a move “could in turn erode the political dividend of making such a controversial deal for the Biden administration,” she added.
Steven Erlanger reports from Brussels and Stanley Reed from London.
