Iran Describes Output Freeze as "New Sanctions"

Aramco
Iranian minister of petroleum Bijan Zangeneh (file image)

By MarEx 2016-04-18 20:53:10

On Monday, Iranian officals protested a Saudi demand for Tehran to freeze oil output as a precondition for a broader international effort to raise crude prices, describing the demand as equivalent to a new round of sanctions. 

"What Iran is doing right now is trying to get back and secure its share of the market," said Central Bank of Iran director Valiollah Seif, speaking to CNBC. "What Saudi Arabia is asking Iran to do is not a very fair [or] logical request . . . right now, Iran is trying to just take back the quota it is entitled to get,” referring to Iran's pre-sanctions OPEC allotment of 2.4 million barrels per day (bpd).

In February, Iranian minister of petroleum Bijan Zangeneh described a similar OPEC proposal as "a joke," and on Monday, he described the Saudi demands as a new round of sanctions on Iran's oil industry: "they want to take Iran’s production back to the sanctions era,” he said. Sanctions were lifted in January, and the Saudi proposal would freeze output for all participants at January levels. Platts suggests that Iranian production has risen by 340,000 barrels since December. 

Iran and Saudi Arabia are in competition for more than just market share, each arming and advising combatants in multiple proxy wars around the Middle East; they no longer have diplomatic relations. Oman's oil minister, Mohammed Al Rumhy, has offered to broker a resolution on oil export volumes between the two. “Oman has a good relationship . . . with everyone, not just Saudis and Iran, and we are prepared to see what is good for all of us,” he told Bloomberg on Monday. “I’m willing to talk to anyone.”

Outside observers blamed Saudi Arabia for the collapse of the oil output deal. "Saudi Arabia intentionally torpedoed the agreement and was willing to accept its failure. This has severely damaged the credibility of oil producers in general and of OPEC in particular," Commerzbank said in a note. Brent crude futures fell almost seven percent in early trading on Monday before recovering to close at $43.