U.S. withdrawal from nuclear deal to likely push up oil prices, expert says

24 July 2018 15:00 (UTC+04:00)

By Sara Israfilbayova

After the U.S. withdrawal from the JCPOA, Tehran and Washington are set for more confrontation rather cooperation, fellow and the director of IranObserved Project at the Middle East Institute Ahmad Majidyar told Azernews.

“The Trump Administration will continue to ramp up economic pressure to force Iranian leaders to agree to negotiate a new, more comprehensive deal that would further strict Iran’s nuclear program and also address Iran’s controversial ballistic missile program and destabilizing role in the Middle East,” Majidyar said.

The expert went on to say that Tehran is unlikely to agree to Washington’s demands, but the Rouhani government will continue diplomacy with European powers to salvage the nuclear deal without the U.S, adding that however, once the U.S. sanctions are back next month, it will be difficult for Europeans – as well as Russia and China – to maintain the existing level of trade with Iran to incentivize the Iranian government to remain compliant to the deal.

“Major European banks and companies are already suspending their activities in Iran and more will follow suit once U.S. sanctions are back. While European governments are encouraging their companies to continue to do business with Iran, the companies make their own decisions and are unlikely to risk their bigger investments in the American market for much smaller deals in Iran,” he noted.

Earlier, it was reported that the uranium reserves in Iran, after reaching an agreement on the Iranian nuclear program, exceeded 900 tons. Touching this issue, Majidyar said that Iran announced last year that it planned to purchase 950 tons of concentrated uranium from Kazakhstan.

“The purchase does not violate the terms of the nuclear agreement Tehran signed with world powers in 2015, but it has generated concerns in the U.S. and regional countries, particularly Israel. What adds to existing concerns is the fact that Iran also plans to build new centrifuges to process these concentrated uranium. But the latest statements by Iranian officials, including one about the increase of uranium reserves and new centrifuges, are also aimed at signaling to Europe that Tehran would resume and develop its nuclear program if European powers fail to respond to Iranian demands about saving the nuclear deal,” according to him.

Commenting upon the effect of the U.S. withdrawal from the JCPOA on world oil market, the expert stressed that the U.S. withdrawal from the nuclear deal and re-imposition of sanctions on the Islamic Republic will likely push up oil prices, noting but the overall impact will not be very significant.

“While European import of Iranian crude oil is set to decline, other major importers, particularly China and India, are unlikely to stop or significantly reduce their oil imports from Iran. The reduction of Iranian oil in the market will also be partially offset by an increase in production by other OPEC members, particularly Saudi Arabia,” the expert explained.

 In November 2016, the OPEC summit was held in Vienna, where OPEC members reached an agreement on reducing oil output by 1.2 million barrels per day. In December 2016 was a meeting of oil producers outside the OPEC. The meeting ended with signing an agreement to reduce oil production by a total of 558,000 barrels per day starting from January 2017.

OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

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Sara Israfilbayova is AzerNews’ staff journalist, follow her on Twitter: @Sara_999Is

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