Oil’s rise buys Iran time in nuclear talks
Increased revenues from price surge eases sanctions pain and gives leverage in talks
Emboldened by an oil price surge since the Ukraine war, Iran’s clerical rulers are in no rush to revive a 2015 nuclear pact with world powers to ease sanctions on its energy-reliant economy, three officials familiar with Tehran’s thinking said.
While the ultimate aim is still to resurrect the deal and so have sanctions lifted, the Iranian officials said soaring oil prices had opened a window of opportunity for Iran by increasing revenues, giving the economy months of breathing space.
“Our nuclear programme is advancing as planned and time is on our side,” said a senior Iranian official, who declined to be named because he was not authorised to discuss sensitive policy issues with the media.
“If the talks fail it will not be the end of the world,” said the official, adding that the fact Iran’s economy was not now so reliant on a revival of the deal would provide strong leverage for its negotiators if or when the talks resumed.
Iran’s finances came under intense pressure in 2018 when then-US President Donald Trump ditched the nuclear pact between Iran and world powers and reimposed sanctions that sharply cut oil revenues.
Oil exports from Iran, which sits on the world’s fourth-largest reserves of crude, plummeted from a peak of 2.8 million barrels per day in 2018 to as low as 200,000 bpd.
Although Iran does not divulge exact figures on oil sales, an Iranian oil official said they were currently around 1.5 million bpd with most going to China with a big discount.
Global crude prices remain high, however, with Brent crude reaching $139 a barrel in March, its highest since 2008 after Russia’s war in Ukraine exacerbated supply concerns.
Jihad Azour, the International Monetary Fund’s (IMF) Middle East and Central Asia Department director, said the Iranian economy had adjusted to sanctions over the last few years. “And the increase in oil prices and an increase in [Iran’s] oil production are constituting an additional, I would say, increase in revenues,” he said.
Despite the recent rise in revenues, sanctions continue to have a major impact on daily life in Iran, meaning that everyone from the business elite to lower-income families face soaring inflation, a sinking currency and rising joblessness.
The official inflation rate is around 40 per cent while some people estimate it at over 50 per cent. Almost half of Iran’s 82 million population are now below the poverty line. Unofficial estimates suggest unemployment is well above the official rate of 11 per cent.
Prices of basic goods like bread, meat and rice are increasing daily. Iranian media frequently report layoffs and strikes by workers who have not been paid for months, including in government-owned factories.
Owning a home in Tehran is impossible for many. Prices have risen in recent months by around 50 per cent in some areas. The currency has dropped over 70 per cent against the US dollar since 2018.