iran trade with gcc set to grow but oil spat looms
Last Updated : GMT 13:14:30
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Iran trade with GCC set to grow but oil spat looms

Arab Today, arab today

Arab Today, arab today Iran trade with GCC set to grow but oil spat looms

Iran should boost trade with its Gulf Arab
Kuwait City - AFP

Iran should boost trade with its Gulf Arab neighbours if a deal on its nuclear programme sees sanctions and an oil embargo lifted, but higher Iranian crude production could worsen tensions within OPEC, analysts say.

As of Saturday, the prospects of such a deal were still very much in question, with no sign of an end to a nail-biting deadlock after 15 straight days of negotiations in Vienna between Iran and major world powers.

Iran's oil exports plummeted as a result of the embargo imposed by the United States and European Union, dropping from about 2.2 million barrels per day (bpd) in mid-2012 to about 1.2 million bpd now.

Fellow OPEC members Saudi Arabia, Kuwait and the United Arab Emirates boosted production to make up for that, keeping supply levels stable.

Iranian officials have said Tehran is looking to return to pre-embargo levels, though experts say production increases will take time.

"All additional Iranian production will go to export but this will not aggravate the surplus on the market because the increase will be gradual," said Jassem al-Saadun, head of Kuwait's Al-Shall Economic Consultants.
"I think it may take Iran a few years before reaching the target of an additional one million barrels."

Saudi Jadwa Investments said in a recent report that Iran would add just 150,000 bpd by the fourth quarter of this year.

"We do not see this (lifting of sanctions) resulting in Iranian crude flooding the market in the near-term," Jadwa said.

Eventually though, Iran will be able to reach pre-embargo levels, setting the stage for a showdown within OPEC.

- A fight for quotas -

Some OPEC countries, especially Gulf Arab nations, have been pumping furiously in a bid to keep the oil price down and drive out competitors, especially US shale producers.

Saudi Arabia alone is producing 10.3 million bpd -- about a third of the OPEC output ceiling.

Experts say that once Iran reaches its previous production levels, Saudi Arabia and others will not be keen to reduce their shares of production.

OPEC has already seen tensions high, with poorer members such as Algeria, Angola, Venezuela and Libya pushing for overall output to be reduced so prices can rise and they can boost revenues.
"The real problem starts when OPEC members begin to fight for quotas amid oversupply and market share disputes," Saadun said.

"If Iran, Venezuela, Algeria and Libya -- all of which need to pump more -- enter into a dispute with the Gulf producers, then it could be the end for OPEC," he said.

However, when it comes to trade with the six countries of the Gulf Cooperation Council (GCC), Iran's new economic freedom is expected to lead to a boost.

More than 80 percent of Iran's trade with the bloc is with the United Arab Emirates, and Tehran is the UAE's fourth-largest trading partner.

Most of that trade originates from Dubai, home to a 400,000-strong Iranian community that runs a large business network.

UAE Economy Minister Sultan al-Mansouri said in June that trade exchange with Iran rose to $17 billion (15.5 billion euros) last year but remains lower than a record $23 billion in 2011 before sanctions began to bite.

The vice president of the Iranian Business Council in Dubai, Hossein Haghighi, said he expected a surge in trade after the lifting of sanctions.

Within the first year, total trade between the UAE and Iran is likely "to go up by between 15 and 20 percent", Haghighi told AFP.

Trade ties are also likely to grow with Oman, which has maintained good relations with the Islamic republic.

But given the strong rivalries between other Sunni Arab Gulf states and Shiite Iran, Saadun said it was doubtful that economic links would grow further.

Saudi Arabia, the main Sunni power in the region, and Iran have backed rival sides in conflicts, from the civil war in Syria to the rebellion in Yemen.

"Trade ties are likely to improve with UAE but I don't think it will happen with Saudi Arabia and Kuwait as long as the political situation does not improve," he said.

 

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