Iran oil deal ends US boycott, snubs OPEC

Iran's first oil deal with the United States since late 1979 is a reminder both of the resilience of the Persian national will and of the Persians' ruthless expertise in commercial dealing.

The deal means in effect the end of the US boycott of Iran imposed shortly after the US Embassy staff were seized as hostages in November 1979.

It also means that although still in the throes of revolutionary upheaval and locked in war with neighboring Iraq, the Persians have lost none of their ability, proven since Old Testament times, to survive as a nation and to exploit the most unpromising situations to their advantage.

Explaining the US purchase of 1.8 million barrels of oil costing $53.12 million, a Department of Energy spokesman in Washington said: ''It's a good price, good oil, and we bought it.''

Simple arithmetic shows that it was indeed a good price: $29.51 a barrel, or Petroleum Exporting Countries) at its meeting in Vienna last month.

Not only that, to make the sale (and others on the world market), Iran is apparently also exceeding the production allocation decided for it at that same OPEC meeting, which fixed output ceilings for member-states in an attempt to put a brake on falling oil prices.

The well-informed Petroleum Intelligence Weekly (PIW) says Iran is in fact producing ''anything up to 300,000 barrels a day'' in excess of the daily quota of 1.2 billion barrels a day assigned to it by OPEC.

PIW comments: ''OPEC apparently realizes from a long string of brawls that it cannot control revolutionary Tehran, and so its practical policy has been to ignore Iran's oil transgressions.''

For the moment, the effect of Iran's ''transgressions'' on the world oil market is being cushioned in some measure by the removal from that market of Iraq's exports which reach the outside world through the Mediterranean pipeline terminals at Banyas (Syria) and Tripoli (Lebanon). The pipelines to these two outlets have been closed by Syria, across whose territory they run.

Syria is the only Arab land in Asia which sides with Iran in the Iran-Iraq war. Syrian President Hafez Assad is daggers drawn with Iraqi strongman Saddam Hussein, who apparently miscalculated when he invaded Iran 19 months ago in the hope of toppling Ayatollah Khomeini and his religious fundamenalists with one short, sharp blow.

Before losing its Banyas and Tripoli outlets, Iraq was exporting about 900, 000 barrels of oil a day, at least 400,000 of them through those two Mediterranean terminals. There is left to Iraq one other Mediterranean outlet, through the pipeline to Ceyhan in Turkey, which does not cross Syria. The latter's maximum capacity is believed to be about 700,000 barrels a day.

Before Syria closed the pipelines to Banyas and Tripoli (which supplied it with oil from Iraq for its internal needs), the Syrian Government signed a 10 -year economic agreement with Iran providing for - among other things - the supply of 180,000 barrels of Iranian oil a day. That is in fact in excess of Syria's current domestic needs.

The Arab oil producers of the Gulf - led by Saudi Arabia, which has a key role in US strategic planning - are bound to look askance at both Syria's deal to buy Iranian oil and the US resumption of oil purchases from Iran.

A further irritant in the latter case is that the buyer is the US government and that the oil bought is reportedly going into the US strategic oil reserve.

These Arab oil producers are affronted by the transactions on two counts, one political and the other economic.

To the Arab governments of the Gulf, Ayatollah Khomeini's revolutionary Shia Muslim fundamentalism is a political threat. That threat is perceived by them as all the greater since Iran went over to the offensive in March in the stalemated Iran-Iraq war, and since the uncovering last December of an Iranian-backed plot to overthrow the ruling house of Bahrain.

Any success Iran has in selling its oil is perceived by the Arab producers as not merely at their expense but also as politically buttressing the threat to them from Tehran.

Economically, Iran's flouting of OPEC rules - on both base prices and production ceilings - is a challenge to Saudi Arabia's leadership within that organization in the struggle to maintain price levels in the face of the current oil glut.

As long as Iran and Iraq are at war, the hostilities limit the amount of oil both are able to export. To that extent, OPEC may be able to live with what is happening at the moment.

But if the war ends and both Iran and Iraq - with production potential second and third after Saudi Arabia - simultaneously base their economic recovery on maximum oil sales, the dilemma for OPEC could be grave indeed.

You've read  of  free articles. Subscribe to continue.
QR Code to Iran oil deal ends US boycott, snubs OPEC
Read this article in
QR Code to Subscription page
Start your subscription today