Iran’s Petroleum Minister Bijan Zangeneh just announced that his country will not participate in the format widely known as OPEC+, a commercial alliance between OPEC and major oil producers from outside of the OPEC cartel. In practical terms, OPEC+ is driven by the leadership of de-facto OPEC leader Saudi Arabia and major non-OPEC oil producer Russia, while notably, the format has helped strengthen the rapidly growing Russo-Saudi partnership.
The announcement from Tehran comes just days after Qatar made the surprise announcement that it will be the first Arab state to formally withdraw from OPEC, effective from the 1st of January, 2019. At the same time, Qatari officials stated that unlike their soon to be former OPEC (and de-facto OPEC+) partners, Doha will increase rather than cut its modest oil production, while Qatar will simultaneously begin focusing more on exploiting its vast gas resources.
Implicit in Qatar’s decision is the long discussed possibility that as Qatar and Iran share the same large gas field beneath the waters of the Persian Gulf, both states who are increasingly seen as partners will work jointly to extract gas in the region. While Iran now also looks to increase its oil output in defiance of OPEC (a group to which Iran still belongs) and of the OPEC+ format, it becomes clear that Tehran seeks to bolster its alliance with Qatar while frustrating Saudi Arabia’s desire to cut oil production in order to stabilise the current trend in the declining price of a barrel of Brent Crude.
And yet while Iran’s motivations for seeking to bolster ties with an increasingly friendly Qatar and to frustrate the desires of Iran’s long term Saudi rival are obvious enough, what Iran is simultaneously doing is subtly stabbing its Russian partner in the back while playing into Donald Trump’s hands. This reality is made all the more awkward when one realises that Russia has been among Iran’s most vocal supporters in respect of resisting American sanctions while now that the US and the DPRK (North Korea) are engaged in a peace process, it is fair to say that Iran is the Trump administration’s most hated country on earth.
Donald Trump clearly wants to pressure his Saudi allies not to drastically cut oil production as in spite of the fact that the US is once again a top energy producer and exporter, Trump clearly wants car loving Americans not to have to pay more at the local pump as such a reality could be bad for Trump during the long march towards the 2020 Presidential and Congressional elections.
Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!
— Donald J. Trump (@realDonaldTrump) December 5, 2018
But while Saudi Arabia and Russia remain keen on cutting oil production as part of the mutual OPEC+ format, Iran is now defying both and in so doing is playing into America’s hands. Most oddly, it is not clear how Iran will actually benefit in the short term by taking this course of action.
As some of the world’s largest buyers of Iranian energy have been granted temporary sanctions waivers from Washington, Iran would benefit from a modest rise in oil prices as much as Russia or Saudi Arabia. Furthermore, even among countries with which Iran skirts sanctions by selling energy via barter rather than hard currency, the internationally determined price of oil could sill ostensibly benefit Iran under the present circumstances.
Yet while Russia and Saudi Arabia see increasingly eye-to-eye regarding the importance of stabilising oil prices, Iran is instead looking to gain leverage against both the OPEC and OPEC+ partnerships by defying their def-facto leadership and making a stand in solidarity with Qatar. In a further move that is ultimately meaningless, Iran has stated that it will not consider embracing OPEC+ until its energy producing partners call for the lifting of US sanctions on Iran. As one of the leading members of OPEC+ is Saudi Arabia – this is simply not going to happen. Yet by positioning itself as a competitor not just to rival Saudi Arabia but to its important partner Russia, Iran is sending a message of arrogance to Moscow at a time when the opposite is required.
Of course, some in Iran continue to privately vent frustration at the fact that Russia seeks to balance Iranian influence in Syria while working with Iran’s hated Israeli enemy in the process. And yet by defying the Russo-centric OPEC+, Iran is only going to draw Russia closer to its new Saudi partner as a result.
Thus, in an attempt to undermine Saudi Arabia while boosting solidarity with Saudi rival Qatar, Iran is not only hindering Russia’s aims within the framework of the OPEC+ format but is playing into Donald Trump’s hands as an emerging Iran-Qatar anti-OPEC+ alliance will help to at least somewhat drive down the price of oil in spite of the fact that both Qatar and Iran produce more gas than oil.
And the end of the day, while it is clear enough to see Iran’s short term motivations for the move (flawed though they might be), the long term efficacy of Iran’s strategy must be questioned as an Iranian state that is a decades long enemy of the US and a presently important partner to Russia is now harming its partner while playing into the hands of its chief adversary.