Iran - a Putin ally - is gearing up to replace Russia's oil market share in Europe amid renewed nuclear deal talks
- Iran plans to fill some of Russia's share of Europe's oil market if the nuclear deal is renewed.
- The European Union is set to ban Russian oil imports by the end of 2022.
Iran is looking to fill Russia's market share for oil in Europe if a new nuclear deal with world powers goes through.
Tehran's plan comes amid stiff competition with its ally Russia in the international oil markets as both heavily sanctioned countries are slashing prices to sell to non-sanctioning buyers such as China and India, Bloomberg reported in July.
Iran's state oil producer would pursue customers in countries such as Greece, Italy, Spain, and Turkey should economic sanctions be eased, according to a Thursday report by Bloomberg that cited people with knowledge of Tehran's strategy.
There's anticipation that the nuclear deal could be revived after former President Donald Trump unilaterally withdrew from the agreement in May 2018. That was about three years after Iran reached a historic deal with six world powers — the US, UK, China, France, Germany, and Russia — to limit its nuclear program in exchange for sanctions relief, including for oil.
While Iran's missing barrels didn't impact global prices that much in the years that followed when there wasn't a supply crunch, they could make a difference now amid sweeping sanctions and boycotts against energy giant Russia over its invasion of Ukraine. In particular, the European Union, a major Russian consumer, is set to ban most of the country's oil by the end of this year.
As Tehran re-enters talks surrounding the nuclear deal, trade participants are expecting much-needed Iranian supply to make up for some Russian crude that has been taken out of the market due to sanctions or boycotts.
"A deal would trigger the return of sizable volumes of Iranian crude to the market, which would be a bearish factor for prices," said Henry Rome, Eurasia Group's deputy director of research and Iran analyst to the firm's GZERO media platform last week. US crude oil futures currently stand at around $95 a barrel, down about 30% from a 13-year high earlier this year.
Iran's already ramping its output, with oil production capacity expected to go up 6% to 4 million barrels a day by the end of the Iranian year in March 2023, said the National Iranian Oil company's CEO, Mohsen Khojasteh-Mehr, per the country's oil ministry news agency Shana on August 22.
However, analysts from Goldman Sachs think an Iran nuclear deal is unlikely to occur anytime soon because a stalemate is "mutually beneficial" to the US and Iran. The analysts added that Tehran and Moscow's close relationship also makes an agreement unlikely.