Iran Attempts to Take High Ground by Accusing Trump of Driving Up Oil Prices

China could benefit from Iran having sanctions reimposed against it by the U.S. File Image / Pixabay

For a republic with a long history of meddling with crude markets at the expense of other nations, it was with a great deal of irony on Thursday that Bijan Namdar Zanganeh, oil minister for Iran, complained to media that U.S. president Donald Trump is engaging in "shenanigans" in the oil market - and that he's cut a deal with some members of the Organization of Petroleum Exporting Countries (OPEC) to keep production down and prices high.

Zanganeh was disturbed by the notion that higher oil prices boost the U.S. economy and employment as well as increase taxes that the federal government collects.

The minister's outburst seemed to conflict with rhetoric he spouted on the same day, to the effect that "Trump's decision [to pull out of the Iran nuclear deal] will not have any impact on our oil export ... that era is history now"; Zanganeh added that his industry would survive even if foreigners decided not to do business with the Islamic republic for fear of U.S. penalties.

About the only thing that seems clear from the minister's contradictory stance is that consequences will indeed happen because of Trump's initiative, and at least one analyst believes the reimposition of sanctions might cause Iran to withdraw from OPEC's crude production cutback initiative, now in its second year.

Andy Critchlow, head of EMEA energy content at S&P Global Platts, said, "I think it is hard to believe that there won't be some gamesmanship the next time that we gather in Vienna in June.

"Is it really in [Iran's] interest now to sign up to a Saudi-led Russian deal to extend these cuts? Of course, the high oil price suits Saudi Arabia, but the Iranians can think 'now we will play the long game' and play hardball here," he added.

Those who appreciate the notion of opportunities existing in any conflict would presumably be buoyed to learn that sanctions against Iran could be good news for China's yuan, because it would give that country, which is the world's largest importer of crude, leverage to demand that imports be priced in that currency, according to experts.

They note that China in March launched a crude futures exchange that could become a yuan-denominated benchmark to rival Brent and WTI, and that Chinese regulators had informally asked financial institutions to prepare for pricing China's crude imports in the yuan; meanwhile, with Iran's exports and foreign investments in the country expected to decrease, the Islamic republic supposedly has an incentive to approach the People's Bank of China to discuss a yuan-denominated deal.

While every possible consequence of Trump scrapping the Iran deal is being discussed, with the overall sentiment that it will cause a tightening of the crude market, one organization that appears unfazed by the turn of events is OPEC itself: three sources familiar with the issue told Reuters that the cartel will take its time to decide whether to pump more oil to make up for Iran's upcoming shortfall.

One source said, "I think we have 180 days before any supply impact," and another remarked that   the safest thing for the group to do was to merely monitor the situation.

The third source pointed out that it was too soon to tell if extra oil was needed and that Iran had kept much of its exports flowing under a previous round of sanctions.

Even though Iran has persistently sought to pump all out regardless of the global consequences, Zanganeh of late has seemingly been trying to reinvent himself as a voice of moderation, by repeatedly telling media that reasonable oil prices would "encourage producers to keep supply while it would prevent global markets from, plunging into instability."