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It would appear so, according to Ellen R. Wald, the President of Transversal Consulting and author of Saudi, Inc.
“There has been no meaningful progress on either side,” Wald told Rigzone.
“Iran is making plenty of money selling its oil in contravention of U.S. sanctions and there doesn’t seem to be much incentive or desire by the U.S. to crack down more stridently on it,” Wald added.
“Also, Israel’s ongoing military operations against Iranian influence in the Middle East is taking precedence,” Wald continued.
So, what does this mean for the global oil and gas industry?
“It means that Iranian oil will continue to be bought and sold as it currently is – ships will turn off their satellite transponders, engage in ship-to-ship transfers of oil to hide the oil’s origin, and Chinese buyers will continue to report Iranian oil as originating in Malaysia and everyone will know it really comes from Iran,” Wald said.
Ramona Moubarak, the Head of MENA Country Risk & Global Banking at BMI, told Rigzone that the company’s view since early 2023 is that the U.S. and Iran will not reach a comprehensive nuclear agreement prior to the U.S. presidential elections that will take place in November 2024.
“We also note that a return to the original Joint Comprehensive Plan of Action (JCPOA) will be very unlikely, as a number of important sunset clauses, including restrictions on Iran’s missile program, have now passed,” Moubarak said.
“Even so, despite the fact that the two countries were unable to agree to return to the initial JCPOA early in Biden presidency, indirect talks between the U.S. and Iran persisted, with Iran slowing its enrichment process and the US’s enforcement of its sanctions on Iranian oil exports becoming less strict,” Moubarak added.
“This has increased Iranian oil exports and culminated in a prisoner swap agreement in August 2023 that also gave Iran access to about $6.0 billion in frozen funds at South Korean banks,” the BMI head continued.
The start of the Israel-Hamas war made a new deal – separate, but perhaps based on the JCPOA – less likely in the short term as U.S. foreign policy efforts have been redirected towards preventing the conflict from further escalating, Moubarak told Rigzone.
“We suspect that unofficial communications between the two sides are also now largely devoted to this issue, rather than the question of Iran’s nuclear capabilities and enrichment processes,” Moubarak added.
Emma Richards, BMI’s Associate Director of Oil & Gas, told Rigzone that the re-imposition of nuclear-related secondary sanctions by the U.S. in 2018 “obviously had a significant impact on oil market fundamentals”, but added that “this has lessened over recent years, with the rise in Iranian exports”.
“Absent broad-based sanctions relief, export growth will be stunted by the heightened risk and complexity of trade with Iran, the shrunken pool of potential buyers, and an overreliance on Chinese demand,” Richards added.
“As a result, domestic oil production is likely to remain below its pre-sanction levels for the foreseeable future. That said, the nuclear deal (or lack thereof) isn’t having much of an impact on price action and this isn’t likely to change in the near term, given the political dynamics discussed above,” Richards continued.
“To the extent that Iran itself is influencing the oil markets, it’s mainly as a corollary of the Israel-Hamas war and the perceived threats to trade via the Strait of Hormuz,” Richards went on to state.
Lerato Monaisa, BMI’s Senior Power & Renewables Analyst, told Rigzone that Iran plans to expand nuclear power production to diversify its power mix and said the market has four nuclear power projects under development.
“The Bushehr Nuclear Power Plant, Darkhovin Nuclear Power Plant, Iran-Hormoz Nuclear Power Plant, and the Karun (Darkhoveyn) Nuclear Power Plant,” Monaisa pointed out.
“Furthermore, the market is adding units to the Bushehr Nuclear Power Plant, which are expected to contribute significantly to nuclear power production from 2026 onwards, enhancing the country’s nuclear generation capacity,” the analyst added.
“While three out of the four nuclear power plants are under construction, we highlight that lengthy delays and cost overruns associated with building nuclear power plants, as well as the fiscal and economic volatility in Iran, pose a risk to its nuclear power generation growth,” Monaisa continued.
On July 14, 2015, China, France, Germany, Russia, the UK, the U.S., the European Union, and Iran reached a JCPOA to ensure that Iran’s nuclear program will be exclusively peaceful, a statement posted on an archived U.S. state department website noted.
“January 16, 2016, marks Implementation Day of the JCPOA. The International Atomic Energy Agency (IAEA) has verified that Iran has implemented its key nuclear-related measures described in the JCPOA, and the Secretary State has confirmed the IAEA’s verification,” the statement added.
“As a result of Iran verifiably meeting its nuclear commitments, the United States and the EU have lifted nuclear-related sanctions on Iran, as described in the JCPOA,” it continued.
A fact sheet posted on an archived White House website in May 2018 stated that then President Donald J. Trump was terminating the United States’ participation in the JCPOA with Iran and re-imposing sanctions lifted under the deal.
“The Iran deal was one of the worst and most one-sided transactions the United States has ever entered into,” Trump was quoted as saying in that statement.
In a joint statement posted on the White House website in October 2021, the President of France Emmanuel Macron, then Chancellor of Germany Angela Merkel, then Prime Minister of the United Kingdom and Northern Ireland Boris Johnson, and U.S. President Joe Biden said a “return to the JCPOA would result both in sanctions lifting allowing for enhanced regional partnerships and a reduced risk of a nuclear crisis that would derail regional diplomacy”.
To contact the author, email andreas.exarheas@rigzone.com
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