||The secret of the new deal with Iran
the ins and outs of the new deal with Iran
|It seems that the potential deal between the United States and Iran will go beyond economic sanctions to more complex files.
According to the International Center for Development Studies in London (ICDS), the possible deal includes gradual easing of economic sanctions on Iran and stopping western support to Syrian opposition. In return, Iran stops enriching Uranium at a level of 20 percent, allows unarranged inspections to nuclear reactors, and ensures safe withdrawal of NATO forces from Afghanistan with a security agreement for limited military presence in some areas there.
The new deal will allow western oil companies to access parts of the developed oil field reserves in Iran with higher returns on investment than was agreed in previous decades.
The report notes that Tehran recently halted the expansion of its nuclear facilities and did not install any additional major components in the reactor (Arak) since August 2013. Uranium enrichment ratios ranged between 5 to 20 percent and the number of centrifuges in the reactor (Natanz) was confined to four only.
Iran's response went beyond the nuclear file, and defused some of the issues that may cause tension with the United States administration. So it halted the gas pipeline project to Pakistan, which has long angered Washington. Iran also offered its assistance to form the Afghan government with the accepted existence of NATO military bases in limited areas within Afghanistan.
The Iranian foreign ministry also cancelled an anti-Zionist conference which was scheduled to take place in November this year despite opposition from the hardliners.
Middle East oil is still important
Despite the rosy picture of the oil and gas sector in the United States, but the country still imports about 8 million bpd. The United States refineries in the Gulf of Mexico rely on the imported heavy oil from the Middle East and North Africa region. However, the tense security situation in some areas such as Iraq, Libya and Egypt sent warning signals to American oil companies and prevented them from carrying out their activities efficiently and raising production to their desired level.
In addition, the United States economy suffers from a financial crisis and a high debt ceiling. Some oil companies were forced to sell part of their assets to develop their own shale oil fields.
The United States also fears for the future of its alliances with Asian countries which have not found an alternative to the Iranian oil, although it reduced its reliance on it.
Japan, South Korea, Turkey and India are still net importers of Iranian oil and their dependence on oil increases day after day with the growth of their economies.
The report notes that the return of Iranian oil to European markets is a lifeline for Europe against the Russian monopoly of the energy market.
According to forecasts, the Russian oil exports may be reduced by 25 – 30 percent after 2015, which means that Russia may not be able to secure Europe's energy needs for today prices.
Iranian concern of sanctions
The report addresses how the sanctions on Iran have led to changing its position towards the nuclear file. Rising inflation and unemployment to very high ratios are exhausting Iranian families and increasing public anger towards government policies.
Budget revenues also decreased to a level that is threatening the development of the infrastructure and the whole energy sector.
The Iranian Oil Ministry has expressed a real concern about the sanctions as export of 1.5 million barrels a day is not enough to cover the investments in the oil and gas sector that Iran needs in the coming years.
Iranian concerns of losing stakes in the oil markets had pushed Iranian Oil Minister “Bijan Zanganeh” to criticize Iraq's oil policy for increasing its crude oil exports, which has compensated for the shortage of Iranian oil in the world market.
OPEC's future in jeopardy
According to ICDS, if Iran focuses on oil quotas more than barrel price, OPEC will find itself in a quandary of accepting lower prices.
The return of the Iranian oil to world markets with quantities equivalent to 2.5% of OECD reserves means that OPEC should increase the production ceiling to more than 30 million bpd or it will redistribute the quotas. This would be rejected by the majority of OPEC members.
Therefore, the future of OPEC will be subject to many questions, most importantly the organization's ability to regulate prices in light of the competition for the quota increase.
On the other hand, the report points out that the return of western oil companies to the Iranian market does not seem easy.
The nature of the contracts with the Iranian Oil Ministry is controversial. So Tehran announced its intention to formulate more attractive contracts which may allow western companies to book reserves or taking stakes in Iranian projects. The new oil contracts, will contribute to a large degree to expedite the lifting of sanctions on Tehran.
Fears of turning Iran into another North Korea
According to the report of ICDS, the Western-Iranian rapprochement is confronted with a major concern that the lifting of sanctions on Iran would create a new North Korea in the Middle East.
Therefore, some members of Congress are trying to restrict the lifting of sanctions by halting uranium enrichment, dismantling of the centrifuge, and to stop working on the reactor "Arak".
There is also another concern that lifting sanctions may affect negatively the United States’ relations with its allies in the Middle East. In the forefront is Israel that fears of strong post-sanctions Iran and allies, namely Hezbollah. Israel also fears of what it describes as a potential undisclosed nuclear program carried out by Tehran.
The Saudi anger
ICDS report shows that the United States rapprochement with Iran aroused resentment in the Saudi kingdom, although it will not be affected by the lifting of sanctions on Iran. The Kingdom sent a clear message to the United States by refusing a membership seat in the Security Council.
The Kingdom also reduced its oil output from 10.19 million bpd in August 2013 to 9.75 million bpd in October of the same year, which may be explained as a pressure exercised by the kingdom on the markets.
The report of ICDS indicates that Tehran is suffering from the control of the militant wing of the Islamic Revolution, which is still considering the United States as the "Great Satan’’.
But this issue has been eased by the Supreme Leader “Khamenei”, who declared his explicit support to Iran's negotiations with some criticism to President Hassan Rohani’s actions during his visit to the headquarters of the United Nations’ General Assembly in New York.
Finally, the report shows that the flowing of Iranian oil to international markets is just a matter of time and that the United States and its allies are working to facilitate this occurrence, but it all depends on the success of each team to grab the stick from the middle and the ability to make concessions.
For more information, please contact:
The International Centre for Development Studies
Public Relations Dept.
Tel.: +44 203 700 8940
© Press Release 2013
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