Oil market could face double shock if Iran abandons nuke deal

Oil&Gas Materials 27 February 2018 13:57 (UTC +04:00)

Baku, Azerbaijan, Feb.27

By Leman Zeynalova – Trend:

If Iran abandons the nuclear deal, it would mean a double shock to the oil market, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

Iran's Deputy Foreign Minister Abbas Araghchi has said that Iran may abandon its nuclear accord with world powers if the US maintains a “policy of confusion and uncertainty” that’s scaring foreign businesses away from the Islamic Republic.

“First of all, Iran's future production will be calculated into a very high risk scenario. No doubt, already struggling production in future will be hit extremely hard, whatever Iranian officials are stating. Iran needs Western technology to reach its goals and produce enough to counter current economic crisis and instability,” the expert believes.

He noted that secondly, it will be opening up a new option of the strife between Arab/Saudi-UAE led opposition in OPEC and in the region.

Instability and less production will be pushing up prices for sure, noted Widdershoven.

In general the expert believes that it is possible for Iran to abandon the deal, legally it is possible for all, but the consequences will be grave.

“The current standpoint of Iran is very easy, threaten to leave the deal if the US will be backing more sanctions or will even block their participation in the deal further. However, Tehran understands that by playing hardball it still can force the European Powers and the EU to be scared of the consequences,” he said.

The expert pointed out that Brussels will be doing its utmost to keep the deal in place, just to keep the current equilibrium and have some inroads to Iranian power circles. The other issue for Europeans is that they are afraid to lose out on the possible deals, already signed or being committed too, he added.

“For the US, in general, any point is not of a real importance. US oil and gas companies will not be flocking to Iran, as this could be threatening their relations in the Arab world. Other companies also, water-energy-banks-defense in the US are too much linked to Arab countries to be willing to take this chance. If the US will abandon the deal, it will not really hurt their economy, only maybe put immense pressure on their European partners to assess the situation again,” said Widdershoven.

For Washington, he believes, the best play would be to increase pressure or sanctions on Islamic Revolutionary Guard Corps (IRGC) entities, Hezbollah and others, while keeping JCPOA in place.

“The current diffuse situation already blocks investments in Iran, leaving banks no option to be involved, while cutting off the regime financial instruments to support proxies. Without getting into a real conflict between Washington and Brussels, Trump is getting what he wants, a more instable and less powerful Iran,” said the expert.

If Iran would be abandoning JCPOA all deals are of the table, according to Widdershoven.

“No European country or company could be and should be involved at that time with Iran. Tehran would be putting itself straight away into the same situation as before the discussions even began. At the same time, it would be a very threatening situation for the Tehran regime, as it would mean that European countries and armies could be taking off their gloves, and join the US-Arab-Israeli military operations against Iran and Hezbollah-Houthis-Hashd in Iraq, Syria, Yemen and Lebanon. This would be for the Iranians not a good move at all,” he concluded.

Under the nuclear deal reached in 2015, Tehran agreed to restrict its nuclear program in return for the removal of sanctions that have crippled its economy.

However, the leading European banks still appear reluctant to do business with Tehran due to concerns over running afoul of the US regulations, hampering the Middle Eastern nation’s efforts to rebuild foreign trade and lure investment.

In the meantime, US President Donald Trump has told the Europeans that they must agree to “fix the terrible flaws of the Iran nuclear deal” or he would re-impose the sanctions Washington lifted as part of the pact.


Follow the author on Twitter: @Lyaman_Zeyn