IEA: Return Of Iran Sanctions Could Impact Oil Market Balance

10 May, 2018, 14:25 | Author: Tina Rodriquez
  • OPEC's Barkindo Vows to Maintain Crude Market Stability, but Saudis Worry About Supply Shortage

The South Asian country remained a big buyer of Iranian oil even during previous Western sanctions, though it had to cut purchases to win some waivers as the trade was mostly done in U.S. dollars.

"I don't foresee any major economic impact after the sanctions being reinstated but the political impact will be felt if Trump tries to escalate a war with Tehran which would be a major challenge", said an Omani political analyst with government links who preferred to remain anonymous for fear of talking explicitly about the withdrawal to worldwide media.

The agreement is due to expire at the end of 2018.Saudi Arabia, the world´s largest oil exporter and top OPEC producer, is concerned about any negative impact from the possible supply shortage on oil-consuming countries, the OPEC source said.

Companies and countries with commercial deals with Iran would have either 90 or 180 days to wind down those activities, depending on the type of products being sanctioned.

Secretary of State Mike Pompeo shakes hands with his Saudi counterpart Adel al-Jubeir during a news conference, in Riyadh, Saudi Arabia, on April 29.

On Wednesday, a separate OPEC source had said Saudi Arabia was monitoring the impact of the USA move on oil supplies and was ready to offset any shortage but would not act alone.

While Gulf petro-states stand to benefit from a rise in prices, the USA move could mean new fissures in the region.




Trump announced Tuesday the United States's withdrawal from the Iran nuclear deal, calling it "defective to its core".

Riyadh's allies in the Gulf - the UAE and Bahrain - also issued statements via their foreign ministries supporting Trump's decision.

Qatar, alienated by a Saudi-led boycott, said priority must be given to non-proliferation and preventing a nuclear arms race.

Trump said his decision to leave the JCPOA was created to counter that possibility.

However, since Trump's announcement, Iran has threatened to gather uranium if negotations fail in response to the U.S. withdrawal from the agreement. The JCPOA is in America's interest - it has significantly rolled back Iran's nuclear program.

The administration would be wise to coordinate strategies on both the Iran and Saudi Arabia nuclear programs. Most notably, Iran's known adversaries: Israel and Saudi Arabia.

Assuming the USA sanctions are effective in curbing Iran's crude exports, Saudi Arabia and its OPEC allies will have to raise their production to make up the shortfall, or risk being blamed for a further rise in motoring costs.

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