Nuclear agreement with Iran, a nuclear threat or a lever of influence on the oil market

Nuclear agreement with Iran. A few dates.

Since 2005 negotiations between Iran and the 5 + 1 group (the USA, China, Russia, Great Britain, France and Germany) have lasted. The purpose of these talks was to find out that Iran is not going to create nuclear weapons, but to develop only a peaceful atom; and conclude a nuclear agreement.

June 15, 2015, Iran and the G-6 countries reached an agreement on the Iranian nuclear program, which resulted in the lifting of sanctions against Iran. This agreement, in addition to the complete lifting of sanctions from Iran and the permission to conduct international business, returned to the market one of the largest oil producers, which became one of the drivers of the decline in oil in 2015.

Figure: WTI Oil Graph in 2015

By the end of June, Iran began to resume up to authorized production volumes, which triggered a downward rally of oil.

On May 8, 2018, the US President D. Trump announced the US withdrawal from the agreement on Iran’s nuclear program, thereby actually imposing new sanctions against Iran. But these sanctions are directed mainly against the Iranian military forces and do not go into any comparison with the previous sanctions of the United States.

The reaction of the world community to the US withdrawal from the agreement on Iran

The main partners of the United States and the members of the “six”, including Britain, France and Germany, sharply criticized this decision. Relying on the fact that the US can aggravate the situation in the Middle East and unilaterally take decisions on this agreement.

At the same time, the States in their decision were supported by Israel and Saudi Arabia. So, earlier Israel stated about irrefutable evidence of the creation of nuclear weapons by Iran. And Saudi Arabia declared its intention to become a nuclear power on the fears of nuclear threat from Tehran.

Iran itself reacted very sharply to the actions of the United States and said that the States would regret their decision.

What to expect next

In the context of world relations and recent trade confrontations between the US and China and the EU, US actions remain aimed at realizing their interests. And this happens, against the backdrop of rising oil production in the US, which remains at historical highs and is only being extracted in Russia.

The EU, naturally, does not benefit from rising oil and energy prices, to say nothing of pulling them into a military confrontation in the Middle East. In the end, this will only confirm the importance of US influence on the world economy and the euro area economy.

In the current situation, oil is likely to continue to rise in price on the worsening situation in the Middle East. The catalyst for this conflict will be the number of US sanctions against Tehran.

This can be an excellent driver of oil for growth and upgrade levels of $ 80 per barrel, and this is at a very high volume of world oil production.

Anton Hanzenko