Baku, Azerbaijan, April 23
By Leman Zeynalova – Trend:
Only China and India could remain significant buyers of Iranian oil and it does not mean that these two countries will maintain their imports at the present level, Francis Perrin, Senior Fellow at the Policy Center for the New South (Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris) told Trend.
He was commenting on the US decision not to extend sanctions waivers on oil imports from Iran.
“For the Trump Administration Iran is a very dangerous country and it is necessary to weaken it. As Iran is very much dependent on oil revenues (oil exports represent 60-70 percent of Iran's exports), the best way to reach this strategic goal is to reduce Iranian oil exports and production to the greatest extent possible and perhaps to zero. This goal has been repeatedly stated by US high officials since spring 2018,” said Perrin.
He pointed out that this strategy has some risks, especially an oil shortage and a strong increase in oil prices. “This difficult equation facing the US led the Trump Administration to grant waivers to eight countries between November 2018 and the beginning of May 2019 in order to avoid putting too much pressure on the oil market.”
The expert believes that today US officials think that they can get rid of all exemptions to their sanctions for the following reasons:
1) The world oil market is well supplied.
2) US oil production is increasing and will go on increasing thanks to the country's unconventional potential.
3) Key Middle East allies of the US, Saudi Arabia and the United Arab Emirates (UAE), will use their spare capacities to produce more and ensure adequate oil supplies for consumers. Let us remind that Saudi Arabia and the UAE share the same strategic goal with Washington: the necessity to weaken Iran.
4) Some other countries, such as Kuwait, Iraq, Canada and Brazil, could also put some more oil on the market.
Perrin went on to add that oil prices rose by almost 3% on 22 April with North Sea Brent reaching $74 per barrel for June contracts in London, its highest level over the past six months.
“One of the priorities of the Trump Administration is to convince oil traders that there is no risk of an oil shortage. The Saudi Energy Minister explained just after the US decision that Saudi Arabia will act in order to stabilize the oil market and will discuss with other producers in order to maintain this stability,” he said.
When coming to Iran, he said this country’s options are very limited. “Its crude oil exports plunged from 2.5 million barrels per day in the second quarter of 2018 to 1.1 million b/d now and it is very likely that this level will go on falling with the end of the waivers. Only China and India could remain significant buyers of Iranian oil and it does not mean that these two countries will maintain their imports at the present level. Iran will feel a strong pressure from these buyers in order to lower its prices. But, even in this case, Iranian oil exports will be reduced in the coming weeks and months.”
The US State Department said that the country won’t issue additional reduction exceptions to existing importers of Iranian oil.
“United States will not issue any additional Significant Reduction Exceptions to existing importers of Iranian oil. The Trump Administration has taken Iran’s oil exports to historic lows, and we are dramatically accelerating our pressure campaign in a calibrated way that meets our national security objectives while maintaining well supplied global oil markets. We stand by our allies and partners as they transition away from Iranian crude to other alternatives. We have had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply. This, in addition to increasing U.S. production, underscores our confidence that energy markets will remain well supplied,” reads the message.
---
Follow the author on Twitter: @Lyaman_Zeyn