The Western world is going insane with speculation over what eased sanctions in a new nuclear arms deal with Iran will mean. However, regardless if it is potential nuclear terrorism or further oil glut fueling fear, particular economic and political conditions will guide history from here. Numerous scenarios can be imagined from the new deal spearheaded by the United States.
We might have solved the nuclear scare…for now
In a press conference Wednesday, Barack Obama addressed the Iranian deal, which was by far a prime objective of his foreign policy.
With Vice President Joe Biden in accompaniment , Obama stated that “Today after two years of negotiation the United States together with the international community has achieved something that decades of animosity has not: a comprehensive long-term deal with Iran that will prevent it from obtaining a nuclear weapon.”
Some of the specifics of the nuclear deal include the reduction of the number of Iranian centrifuges by two-thirds, banning enrichment at key facilities and limiting uranium enrichment for 15 years. According to a CNN report, Iran will be required to ship spent fuel out of the country forever, in addition to allowing inspectors from the IAEA to certain access in perpetuity. Heightened inspections, including tracking uranium mining and monitoring the production and storage of centrifuges, will last for up to 20 years. The U.S. estimates that the new measures take Iran from being able to assemble its first bomb within 2-3 months at least one year from now.
Or…we could have just made terrorists rich
While we may have put the brakes on Iran building a bomb within their borders, the amount of money about to slew into the nation is a worry for some of Iran’s enemies. Israel, for instance, has condemned the deal, calling is a “historic tragedy.”
“Iran will get a jackpot, a cash bonanza of hundreds of billions of dollars, which will enable it to continue to pursue its aggression and terror,” Israeli Prime Minister Benjamin Netanyahu said Wednesday. In his comments he added that Iran-related terrorists have killed more Americans than Al Qaeda.
Netanyahu’s fear is shared by the Arab world, where countries expressed skepticism that a deal would really prevent Iran from gaining a nuclear weapon.
“When Arabs and Israelis agree, it’s worth paying attention,” Netanyahu stated.
Nonetheless, President Obama called Netanyahu to stress that the nuclear accord does not undercut U.S. “concerns regarding Iran’s support for terrorism and threats toward Israel.”
John Kerry, a pivotal player in the nearly two years in the making deal, claimed those criticizing the deal really have no bearings on what the deal includes. Nonetheless, anxiety over an historic enemy reviving access to newfound funds is understandable for nations such as Israel.
No Matter what, American companies are about to make bank
When the news of the deal hit the Iran capital of Tehran, folks flooded the streets in celebration. Why? Because fewer sanctions means businesses have an unlocked market to develop and Iranian citizens will have all the access to a new quality of life.
“Maybe Iran and America’s government don’t like each other, but Iranian people love … American products. Everyone here wants an iPhone” cellphone store owner and Iranian citizen Hooman Masumi told NBC News. “This could be a new beginning for both of us. ”
While is will be months before Iran can feel the economic benefits of investors, eased sanctions will unfreeze roughly $100 billion in assets for Iran. Companies that were booming in the globalized pre-sanctions days are bound to come back to the country. If not, European competitors are sure to scoop up the new opportunities.
No one knows how much this will hurt American oil and gas
But most agree to some extent, it’s going to hurt.
In a recent WOAI news radio report, Eagle Ford economist Tom Tunstall of UTSA stated that prices will definitely fall, making any sort of positive gains in the last few weeks meaningless in the long run. However, he noted that Iranian crude oil won’t be enough to force profitability completely out of the Eagle Ford Shale play.
Independent Petroleum Association of America (IPAA) President Barry Russell released a statement that had a bit wearier tone. Russell stated that a new competitor in the world when America still has an export ban puts U.S. production companies at a huge disadvantage.
“As soon as Iran is permitted to export its surplus oil on the world market, why can’t we allow our own companies to do the same with their American-made surplus of crude oil?” Russell said.
According to the U.S. Energy Information Agency (EIA), Iran has the technical capability to ramp up crude oil production by at least 700,000 bbl/d by at least the end of 2016. Of that amount, 600,000 bbl/d represents capacity that was previously shut in and 100,000 bbl/d is new capacity.
Iran is believed to hold at least 30 million barrels in storage.
The EIA stated it is possible that Iran will attempt to move oil out of storage more quickly sometime during the second half of 2015 in preparation to increase production. As a result, the global market may see incremental increases in Iran’s crude oil exports before seeing a substantial increase to Iran’s production, but the pace at which oil in storage could be withdrawn is uncertain.
Iran signaled its intent to come back to the oil market in an article published in Shana, the oil ministry’s news agency. But experts are clear that Iran doesn’t have great reserves of crude oil supplies as of now to even push into the market. Tehran has stored around 25 million barrels of oil mainly consisting of condensate which is “not easy to sell,” according to Amrita Sen, chief oil analyst at Energy Aspects.
In addition, as a part of lifting sanctions, Iran has to essentially verify its progress until sometime the end of this year. Until the benefits of eased sanctions touch Iran, no new investments in Iranian oil and gas infrastructure (much of which has been degredated in the past three years of economic restrictions) is expected to take place. In essence, it’s going to take time for Iran to get on its feet, and this is great news for American oil and natural gas to adjust. At least for now, fears over a rendition of crippling oil prices can be saved for 2016.