Iranian President-elect Ebrahim Raisi will attend a press conference in Tehran, Iran, on June 21, 2021.
Majid Asgaripour | WANA News Agency | Reuters
DUBAI, United Arab Emirates – Iranian President-elect Ebrahim Raisi gave his first press conference since the country’s election and said on Monday his priorities would be to improve relations with regional neighbors and revive the 2015 nuclear deal – and at the same time No meeting with US President Joe Biden.
“We support the negotiations that guarantee our national interests. … America should return to the deal immediately and fulfill its obligations under the deal, “said Raisi, the hard-line cleric who is himself under US sanctions, according to a Reuters translation.
The 2015 Joint Comprehensive Plan of Action (JCPOA) lifted sanctions against Iran to curtail its nuclear program.
The Obama administration-brokered JCPOA lifted the sanctions on Iran that had crippled its economy and roughly halved its oil exports. In exchange for billions of dollars in sanction relief, Iran agreed to dismantle part of its nuclear program and open its facilities to wider international inspections.
In addition to the USA, France, Germany, Great Britain, Russia and China were also signatories to the agreement.
In 2018, then-President Donald Trump kept an election promise and unilaterally withdrew the United States from the JCPOA in what was dubbed the “worst deal ever”. Trump has also reintroduced the previously lifted sanctions against Tehran.
After Washington pulled out of the groundbreaking nuclear deal, other signatories to the pact “fought to keep the deal alive.
When asked at the White House on Monday, press secretary Jen Psaki told reporters that the position of the Biden government has not changed as the US does not have diplomatic relations with Tehran.
“Well, we do not currently have diplomatic relations with Iran and we do not plan to meet at the head of state or government level,” said Psaki. “The Iranian nuclear negotiation teams have just completed six rounds of talks and have not yet announced the seventh round,” she said, adding that governments are hopeful of a way forward.
Tehran has since ramped up its nuclear activities well beyond the limits of the deal, in allegedly a protest against the sanctions – sanctions Washington says it will not be lifted until Iran has stepped up its nuclear activities, such as increased uranium enrichment and supplies , cancels.
And despite the ongoing negotiations between the JCPOA signatories in Vienna and the talk of “progress”, the two opponents seem to be stalling on important sticking points such as Iranian transparency vis-à-vis the nuclear inspectors.
Markets are now watching the talks and Raisi’s messages to see what this could mean for world oil supplies.
Iranian oil exports have been reduced to a fraction of what they once were by Trump’s sanctions. A revival of the deal and the lifting of levies could bring 3.8 million barrels of oil to market over time, up from 2.1 million barrels a day today, Iranian oil ministry officials say. However, this could be a long process due to underinvestment in oil fields and reduced production in recent years.
Pressure on the oil price?
The deal “would give a significant boost if the Iranian economy were to revive – it could grow 8-10% a year in 2021-23,” wrote Jason Tuvey, senior emerging markets economist at London-based advisory firm Capital Economics, in a note of choice. However, he added that higher crude oil production would put pressure on other dynamics in the region.
“More Iranian oil production would weigh on global oil prices and could lead governments in the Gulf States to tighten fiscal policies, which is hurting their recovery,” said Tuvey.
Once Iran can return to the global oil market, there will be no shortage of demand, according to Herman Wang, Senior Oil Writer at Platts.
“Many of Iran’s former oil customers, particularly in Asia, have said they are keen to resume buying once they have received the all-clear for the sanctions,” said Wang. He added that many of Asia’s refineries are well suited for Iranian crude oils, “which would increase competition for neighboring Saudi Arabia, Iraq, Oman and other heavy, acidic-grade producers, and Iranian condensate would compete with similar condensates.” which are produced by Qatar USA and Australia. ”
“This could well put pressure on oil prices, although OPEC and its allies are hoping the increased demand will mean a bigger cake for everyone,” added Wang.
No “Immediate Return” of Iranian Oil?
“At this stage we are still observing the negotiations between the JCPOA parties in Vienna as the most important variable for oil prices in the near future,” Ed Bell, director of raw materials research at Dubai-based bank Emirates NBD, told CNBC.
Despite Raisi’s signal that he would support an agreement “that does not address the persistent differences between the JCPOA parties, including the fact that Raisi himself is under US sanctions,” he said.
“The schedule for a return of freely exportable Iranian crude oil keeps being postponed until later in 2021, so we do not see any imminent return that would help alleviate the current tightness in the market,” added Bell.
The oil market doesn’t seem too bothered by the prospect of a revival of business; The international benchmark Brent crude continued its steady upward trend on Monday, trading at $ 74.65 a barrel at midday, up 45% year-to-date and 70% more than last year.
A more pressing longer-term problem, Bell said, would be how a Raisi government positions its relationship within OPEC and its oil-producing allies. Would Iran accept a production quota if sanctions were lifted or would it try to maximize its market share to make up for lost time?
“While Iran alone would not be enough to drive oil markets back into surplus this year, a race for market share could lead other OPEC + members to do the same and put oil prices under pressure,” Bell said.
CNBC’s Amanda Macias contributed to this Washington report.
