Iran and the U.S. are in the middle of some pressing talks about nuclear capabilities, but it’s not just about that; Iran is looking to get its oil export back on track.
Iran’s national economy is heavily dependent on oil export levels, and it has been going down after several sanctions have reduced Iran’s ability to sell it on international markets. Before the new ratifications in 2012, the country used to export 2.5 million barrels each day, but afterwards, that number dropped at just 1.3 million barrels.
Because oil exports are so important, the country’s economy has had a lot to suffer. Inflation is through the roof and youth unemployment increased to more than 20 percent. Any form of nuclear deal that Iran will sign is very likely to allow the country to sell its oil in larger quantities again. But there’s a problem: there’s already too much oil on the market as it is.
Prices for crude oil are not looking good; last summer, a barrel was worth a little over $100, but the prices have sunk to $43 this week – reaching an all-time low in more than six years. If Iran will be allowed to export more again, the prices are likely to drop even lower.
According to Deutsche Bank, these are bad news for Iran, who is planning of requesting more than $130 for an oil barrel in order to help raise its economy. An unfortunate paradox is going to take place; the more oil Iran sends on the market, the lower the prices will be.
However, Iran has no guarantee that a nuclear deal can be reached. Even in the less likely case that it does happen, Iran’s sanctions will take a while before being lifted and its oil production to gain traction again. After the U.S. resumed debates with Iran on Sunday, the White House stated that a mutual agreement has a 50/50 chance of happening.
Even with the heavy sanctioning that has been put over Iran, there is a lot of “cheating” still happening. An U.S. Energy Information Administration report has valued Iran to have the fourth-largest oil reserves, which prompted a lot of businessmen to go around the law in order to make transactions, such as using the black market.
Not just that, but Iranian oil is also being sold on the open market because sellers claim it comes from other countries and not Iran. But many industry observers believe that a deal is very likely to happen, as the country’s economy is on the verge of bankruptcy and because President Obama has a special interest in the legacy it leaves before he steps down from his office.
Image Source: Iran Daily