Why OPEC deal is a Double-Edged Sword for Iran

By Dr. David Ramin Jalilvand for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

The Organization of Petroleum Exporting Countries finally agreed to cut oil production at its Nov. 30 meeting in Vienna. The decision was preceded by months of intense negotiations against the backdrop of dramatically declining oil prices since mid-2014. The talks in Vienna were complemented by intense telephone diplomacy involving Iran and Saudi Arabia as well as major non-OPEC producer Russia.

Overall, the cartel’s members pledged to cut production by some 1.2 million barrels per day (mbpd) from January onward. Several non-OPEC producers are joining the endeavor, with Russia and others adding some 0.6 mbpd to the cut.

Iranian officials have welcomed the outcome of long months of negotiations. Oil Minister Bijan Zanganeh praised how OPEC members managed to reach a deal despite many political differences and economic competition. Though repeatedly asked to cut production, Iran was able to negotiate an exemption, the minister noted. Iranian newspapers have enthusiastically celebrated the deal, with some outlets referring to it as a new Joint Comprehensive Plan of Action.

Iran will certainly benefit from the deal in several respects. Its reference production quota — the base against which production cuts are measured — has been set at just below 4.0 mbpd, which is effectively the level prior to the imposition of Western sanctions from 2011 onward. This figure reflects recognition of the fact that Iranian output in recent years, which according to official numbers was at times as low as 3.1 mbpd due to sanctions, was a deviation from traditional levels.

For Iran, whose officials have time and again argued that the sanctions were unfair, this exemption is of great symbolic importance, as fellow OPEC countries acknowledged what many in Tehran argue are Iran’s traditional rights. Iran’s defiance appears to have paid off, especially in the face of political pressure by its archrival Saudi Arabia, which advocated for the production cut and called upon OPEC members — including Iran — to join in reducing output.

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