As you know, OPEC plays a big part in oil prices.
They are, after all, the countries exporting lots of petroleum (it’s in the name).
Some countries within OPEC are on rather friendly terms with the US, like Saudia Arabia. They’re one of the US’ strategic allies in the Middle East.
However, other nations are a bit more touchy when it comes to US foreign policy — one of them being Iran.
A Quick History of US-Iran Relations
The US hasn’t had the friendliest relationship with Iran for several decades now.
The CIA helped overthrow Prime Minister Mohammad Mosaddegh in 1953 to strengthen the monarch Shah Mohammad Reza Pahlavi’s position as ruler of Iran. Pahlavi was much friendlier to the US, of course.
The theory is that many Iranians didn’t like a foreign country messing with their government, and so in 1979 came the Iranian Revolution. The pro-West Shah’s secular monarchy was thrown out and replaced by an anti-Western Islamic republic under the Grand Ayatollah Ruhollah Khomeini. Us-iran relations have been tense since then.
Thus, those in the West, including the US, became worried as Iran developed its nuclear program. The thought of an Iran with nuclear weapons was terrifying, so the US and other countries slapped Iran with sanctions.
However, towards the end of Barack Obama’s 2nd term, the US and other countries brokered the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran Nuclear Deal in 2015. Under the deal, Iran would dismantle most of its nuclear program in exchange for relief from sanctions.
In 2018, President Donald Trump withdrew the US from the deal out of concerns that it didn’t address Iran’s ballistic missile programs and proxy warfare in the Middle East.
Not to mention the sunset provisions in the deal that would allegedly let Iran pursue nuclear weaponry in the future.
Trump reimposed heavy sanctions on Iran, eventually leading to big bans on Iranian oil (along with banking and shipping sanctions).
Iran accused the US and its allies of reneging on the deal, so it naturally began more work on nuclear matters.
Then came the assassination of Iranian general Qasem Soleimani, which, along with other events, angered Iran and pushed them to disregard the deal even more.
The Nuclear Deal Might Be Back
After a few years of sanctions on Iran from the Trump administration, the new Biden administration is looking to revive that old nuclear deal.
Basically, Biden has agreed to re-enter the deal if Iran stops its own violations. At the same time, however, he wants a new agreement that adds provisions regarding other activities, such as Iran’s missile program.
Talks have been happening since April, but an EU official leading the discussions expressed confidence that a deal would be reached.
Additionally, Iranian president Rouhani reported that the US was ready to lift the oil, banking, and shipping sanctions.
With this news of progress on the deal, the oil market began declining at the prospect of Iranian oil entering the global market. They’re no small exporter — in 2010, the nation was the second-largest exporter in OPEC.
That means that, should sanctions be lifted, there will be tons more supply on the market. Prices may head downward, assuming OPEC will continue to slowly up production. However, it likely wouldn’t be more than a short-term issue, especially as the world returns to normal and demand amps up.
Still, the talks have seen some difficulties.
Abbas Araqchi, Iran’s top nuclear negotiator, said that they needed to discuss some “key issues” further. The extra provisions Biden wants may be part of that — he is, after all, looking for a deal that restricts more than the last one.
Along with that, a senior press official contradicted Rouhani, saying that the US had no intention of lifting the sanctions mentioned earlier.
Looks like we have to wait and see what comes of the nuclear deal talks.
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