Experts: Iran's proposal to establish petrochemical forum is groundless

Experts: Iran's proposal to establish petrochemical forum is groundless

Azerbaijan, Baku, Aug.9  / Trend, T. Konyayeva /

Iran's proposal to establish a forum of countries exporting petrochemical products (Petrochemical Exporting Countries Forum (PECF)) is unfounded, experts say.

"This idea is an unsubstantiated fantasy that has been pushed by a regime in Iran that is looking for more and more reasons to show that it has clout in the world," Paul Sullivan, professor at the National Defense University and Georgetown University told Trend by e-mail.

Last week, Iran's Deputy Oil Minister Abdul-Hussein Bayat said that the Petrochemical Exporting Countries Forum, establishment of which is initiated by Iran, can include countries such as Russia, Turkey, Saudi Arabia, Qatar and United Arab Emirates.

The draft of the Forum is prepared by the National Petrochemical Industries Company and submitted in the form of proposals to the country's Spiritual Leader's office. The main purpose of the forum is to discuss the financial and technical sides of various issues in the petrochemical sphere, their assessment, selection of the production policy, production technologies.

According to Sullivan, Iran still needs to import most of its petrol for transport and has had serious problems keeping up with its own petrochemical demands.

This organization will likely not happen if the Iranians are behind it and, hence, will have little clout on the petrochemicals markets, Sullivan says.

"Cartels with such wide ranging political and other goals usually fail in most of their stated goals," he said.

In addition, according to the American expert, establishing another group to complement OPEC on the petrochemical side may tend to weaken OPEC.

The Organization of the Petroleum Exporting Countries (OPEC) is an international intergovernmental organization (also called a cartel), established by oil-producing powers in order to stabilize oil prices. OPEC includes 12 countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador and Angola. The Organization's headquarters is located in Vienna. In 2008, Russia declared its willingness to become a permanent observer in the cartel.

"Some members of OPEC may not like this. This new group will also have difficulty convincing the Saudis, the Emirates and others who have serious issues with the Iranians to come on board," Sullivan noted.  

Regarding Russia and Turkey, according to him, it will not quite comfortable even for the Russians, given the fact that they didn't join OPEC. He also noted that Turkey is not a leading country for the petrochemical products.

"Their joining would also tend to irritate the EU and the US even further and they would see that this could damage the chances for some of their other goals being reached with these nations and others," Sullivan said.

"It [OPEC] has had little impact during the times of rising of prices in recent years," Sullivan noted. "Its impact has normally and recently been in tempering the fall of prices to some degree," he said.

Sullivan said a significant amount of the power of price determination has moved to the financial markets, speculators and others. Political events also have shown to be more powerful than OPEC in price determination.

Iranian-born British analyst Reza Taghizadeh also believes that the idea of creating such a cartel is not the real one.

"Iran is keen on showing sings of connectivity with the rest of the world and with the same token employing models to regulate and control parts of its industries," Taghizadeh, professor at the University of Glasgow said by e-mail. "These models are old fashion, out of date from the 60s and wouldn't serve any purposes in the new world economies," he added.  

According to Taghizadeh, in the modern world and free market economies there is no room for creating new cartels and trusts and unions.

"The new world economy is mainly based on amalgamation of private sector entities and competition between the rival companies," he said.

Taghizadeh also pointed out that petrochemical exporting countries are not necessarily having control over their petrochemical producing or exporting companies.

"Moreover the local petrochemical companies in Turkey and Saudi Arabia and Qatar are either under licensed by big internationals or the international have direct investment with them. That's why these countries would not join the Iranian initiated forum," Taghizadeh said.

According to the Iranian expert, petrochemical industries mainly belong to industrialized countries and not necessarily oil or gas producing countries.

"The shares of developing countries like Russia and Iran in petrochemical productions to compare with industrialized states are very negligible. Moreover the types of their products are different," Taghizadeh said.

Iran produces from 15 to 23 million tons of petrochemical products per year (one of the leading figures in the Middle East). The structure of products cover very simple and cheap polymers, whereas in Saudi Arabia produce more sophisticated and far more expensive products.

"Therefore, their markets are different," Taghizadeh said. "They could only try to control their row material prices (natural gas) and for that reason they have to challenge their own authorities since oil and gas therein is basically under government control."

Professor in the Department of Economics at Northeastern University, Kamran Dadkhah, agrees with the previous experts. Dadkhah believes this proposal (to establish a forum), like many other gestures coming out of Iran, is more in the nature of propaganda and megalomania.

He said that production of petrochemicals in the Middle East is growing fast and Iran's share is considerable, but still major producers are in the United States and Western Europe.

"Thus, if the purpose is coordination among exporters and to espouse technological cooperation, why the membership is restricted to Iran, Saudi Arabia, UAE, Russia, Qatar, and Turkey? Why not have an international forum?" Dakhah said.

He believes even if all the countries listed accept the invitation and form the forum, it would be no more than a costly bureaucracy for Iran and a talking shop with no real effect on the international market for petrochemicals.

"Given the shares of countries named and given their diverse interests, the forum (even if formed) will not affect international pricing of petrochemicals," Dadkhah said.

In contrast to the Western experts, Former Chief Adviser of the Central Bank of Iran Bijan Bidabad is optimistic about the possibility of establishing a forum.

"Maybe at the moment creation of such a forum in Iran does not have the appropriate conditions, but in the end, this forum will be established," Bidabad told Trend by telephone from Tehran.

Earlier the same countries conducted extensive negotiations for the creation of "Gas OPEC", which was created in the end, he said. 

"All member countries of the forum are the producers of petrochemical products and have large reserves of oil and gas. Therefore, the need to establish such a forum increases," Bidabad said. "The success of this forum is guaranteed from this point of view."

He believes creating such a forum will affect the petrochemical market.

"Despite the fact that the member-countries of the Forum have large gas reserves, we should not forget that there are countries such as the U.S., Indonesia and others," Bidabad said. "If the forum, similar to OPEC is created, it will have an impact, but not so significant."

T.Jafarov contributed to the article.

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