Gulf states will benefit from Iran sanctions
By staff - Tue Jan 17, 8:47 am
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(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own)
DUBAI, Jan 16 (Reuters Breakingviews) – Gulf oil producers
are unlikely to heed Iran’s warning. Tehran cautions of
unpredictable consequences if Gulf producers increase production
to replace its embargoed oil. But Saudi Arabia and its allies
have strong incentives to fill any sanctions-supply gap.
Sunni-ruled Arab states stand to gain in the regional power
struggle for political and economic superiority if their shi’ite
neighbour is weakened.
Western sanctions will hurt Iran’s economy, forcing Tehran
to sell crude at a discount to Asian buyers. Their impact on
global oil markets is less clear. If Iran can’t export its usual
2.5 million barrels per day, a key issue is whether Gulf
producers — led by Saudi Arabia, which holds most of OPEC’s
estimated 3.2 million barrels per day of spare capacity — will
pump enough to offset any shortage.
Riyadh doesn’t want over supplied markets. But by pumping
more in the event of a shortfall, Gulf allies could benefit from
the current high prices at the start of a year where a slowdown
in global growth could hurt oil revenues. Keeping markets
well-supplied will also please the United States, which the Gulf
depends on for its security, and soothe Asian buyers that
provide its growth engine.
Sanctions provide Gulf producers a rare opportunity to take
a bite out of Iran’s influence. Their rulers fears the rise of
shi’ite power, as illustrated by the harsh recent crackdown in
Bahrain. And a nuclear-armed Iran would permanently alter the
balance of power in the region. So the Gulf’s indirect support
of sanctions against Iran may hamper Tehran’s nuclear progress
and its ability to support shi’ite groups in Lebanon, Iraq and
Syria.
Last year’s Arab uprisings reinforced the deep and
long-standing rift between Iran and Saudi Arabia. OPEC’s latest
forecasts for supply and demand suggest crude markets were
well-balanced before the latest sanctions. That provides the
Gulf with the cover it needs to raise production if Iran can’t
export. Saudi insists its oil sales are purely commercial. But
if it pumps more oil, few are likely to see it that way.
CONTEXT NEWS
– Iran on Jan. 15 warned its Arab neighbours not to raise
crude output to replace Iranian oil in the event of an embargo
by the European Union.
– “The consequences of this issue are unpredictable.
Therefore, our Arab neighbour countries should not cooperate
with these adventurers and should adopt wise policies,” Tehran’s
OPEC Governor Mohammad Ali Khatibi was quoted as saying in an
interview with Iran’s Sharq daily newspaper.
– Khatibi said Tehran would see any move to fill in for
Iranian crude as Gulf Arab oil producers siding with Iran’s
western opponents.
– “If the oil producing Gulf states give the green light to
replacing Iran’s oil these countries would be the main culprits
for whatever happens in the region — including the Strait of
Hormuz,” Khatibi added.
– Saudi Arabian Oil Minister Ali al-Naimi said on Jan. 14
that it was ready and able to meet any increase in demand,
without making any reference to sanctions on OPEC rival Iran.
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