Iran Fills Rhetoric Void With Bullish Words on Oil

WSJ

IRAN EYES PRICE WAR

Iran is willing to start an oil-price war to win back the market share lost through sanctions, Bloomberg reports.

The country’s new, old oil minister Bijan Zanganeh says Iran wants to increase production by 70% in an effort to retake its place as OPEC’s second-largest producer.

“We only ask those who have replaced us in the world’s oil markets to know that when we are re-entering these markets they will have to accept that the oil prices decline or they should reduce their production to create enough space for Iran’s oil,” Mr. Zanganeh said.

It is the use of “only” in that sentence that stands out. There may or may not be a transliteration error, but the minister isn’t asking a small favor here. Internal OPEC politics mean the group’s other members won’t roll out the red carpet for the return of Iranian oil.

Iran already needs oil to trade way above where it now is in order to break even. A price war would be in nobody’s interests.

Can Iran even manage to increase its production? Bullish noises come from the state oil company, and Mr. Zanganeh, who was an oil minister from 1997 to 2005, has been welcomed as an authoritative, knowledgeable figure who will remove the politics from domestic oil production.

Raising production will likely require the return of those foreign, western oil majors — Norway’s Statoil ASA, France’s Total or Italy’s Eni – that quit Iran when sanctions hit. Getting them back will likely require the lifting of sanctions.

Some 60 years of suspicion and enmity will have to be put to one side in order for this circle to be squared. This week the CIA admitted its role in the 1953 toppling of then Iranian President Mohammed Mossadegh. There’s some interesting timing behind that admission.

In the wider context of Iran’s relations with the outside world, the election of new President Hasan Rouhani has led to a pause in the sort of rhetoric from all sides that had come to represent diplomatic relations.

The U.S. has gone quiet on the need for more financial pain for Iran, Sanctions Law reports, perhaps to give Mr. Rouhani a chance to show his willingness to engage on the key nuclear issue.