Signs of economic recovery

Báo Hậu Giang•03/06/2023

Iran's return to the global oil market has helped increase its oil supply, promising to revive the Islamic nation's economy .

Source: REUTERS

OPEC Secretary-General Haitham Al Ghais said the bloc would welcome Iran's full return to the oil market once sanctions are lifted. Ghais added that Iran has the capacity to significantly increase oil production in a short period of time and expressed confidence that Iran is a responsible member of OPEC. Ghais assured that all parties would cooperate effectively and synchronously to ensure the market remains balanced, as OPEC has done for many years.

Earlier in March, Saudi Arabia and Iran announced the restoration of diplomatic relations after years of tension, in an agreement brokered by China, the world's second-largest oil consumer. This means Iran now has the legal basis to expand its oil export market globally, increasing its oil supply to the world.

It's worth remembering that in a surprising move in early April 2023, Saudi Arabia and other members of OPEC+ (a group comprising OPEC and major non-OPEC producers) announced further oil production cuts of approximately 1.2 million barrels per day. That decision brought the total OPEC+ production cuts to 3.66 million barrels per day, according to Reuters. This caused a sudden surge in world oil prices, plunging many countries around the world into difficult circumstances.

Regarding OPEC's voluntary production cut decision and its impact on oil prices, Secretary-General Ghais stated that OPEC does not target a specific price level. Every action and decision made by the bloc is aimed at achieving a balance between global oil supply and demand.

Iran possesses underground oil reserves of approximately 132.5 billion barrels (about 11% of the world's reserves), making it the world's second-largest oil producer after Saudi Arabia, and also has the world's second-largest natural gas reserves, accounting for about 15% of the world's total, after Russia. However, this Islamic nation has been sanctioned by the United States and the United Nations (UN) in connection with its nuclear program.

Accordingly, in 2018, after the US withdrew from the nuclear agreement between Iran and the P5+1 group (comprising the UK, France, the US, Russia, China, and Germany) signed in 2015 and reimposed sanctions on Iran, Iran's oil exports were significantly affected as many countries stopped buying its oil.

Most recently, on March 9th, the US also imposed additional sanctions on approximately 39 entities that Washington considers to facilitate Iran's access to the global financial system. Former US Treasury official Brian O'Toole believes that this move by the US will further impact Iran's oil and gas exports.

However, despite US and UN sanctions, Iran continues to export oil through various means. Notably, in 2022, its oil exports increased by 83 million barrels compared to the previous year and by 190 million barrels compared to the level from March 2021.

Iran's Tasnim news agency quoted Oil Minister Javad Owji as saying that the country's oil exports have reached their highest level in four years, since 2018, when the US reimposed sanctions on Iran.

In mid-May 2023, Iran and Russia signed 10 cooperation documents in the oil industry in Tehran. According to Shana News, affiliated with Iran's Ministry of Oil, the newly signed documents included six memoranda of understanding (MoUs), two contracts, and an agreement and roadmap related to bilateral cooperation in industrial sectors, technology transfer, and enhanced oil recovery.

Iran's return to the oil market after sanctions has opened up prospects for the Islamic nation to soon restore its economy to a level commensurate with its position as one of the world's leading oil-producing countries.

HN compilation

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