OPEC success dependent on ‘grand bargain’ between Iran and S. Arabia: expert
TEHRAN - Hossein Askari, a professor of international business at George Washington University, is highly skeptical that Arab members of OPEC stick to the November 30 agreement to reduce oil output to push prices up.
In an exclusive interview with the Tehran Times, Askari says, “OPEC can only succeed if Iran and Saudi Arabia reach a ‘Grand Bargain’ that goes way beyond an OPEC production agreement.”
The agreement to cut crude only “looks good on paper”, notes Askari, who served as special advisor to Saudi finance minister.
“The agreement looks good on paper, but will it last? I don't think so. I say this for a number of reasons. Look at history. OPEC can only agree on a deal when no one has anything to lose. In this deal, Saudi Arabia for one has to cut output and lose market share.”
He gives an example why the agreement would not work.
“Recall a time in history when the Arab members of OPEC, or OAPEC, at the end of 1973 imposed an embargo to cut production to pressure the U.S. into changing its policy towards Israel, two countries cheated. Revolutionary Iraq, and yes Saudi Arabia that secretly sold oil to the U.S. fleet!”
He also disputes the view that the OPEC agreement was a victory for Iran, saying, “It looks a victory on paper, but in the medium and longer run will Saudi Arabia and the rest of the GCC maintain this level? I believe not.”
Iran and Saudi Arabia are at serious odds over the conflicts in Syria, Yemen, and the popular pro-democracy protests by Shias in Bahrain.
Iran supports the Syrian government while Saudi Arabia backs militant groups that some of them are aligned with extremist Salafi groups. Iran is also a vocal critic of the Saudi war on Yemen.
The George Washington University professor says the Arab members of OPEC stick to their quota only if they get “political concessions from Iran”.
Oil producing Arab states want concessions from Iran “when it comes to Iran's relations with Iraq, Lebanon, Bahrain, Yemen, and maybe even Syria,” he comments.
As a key OPEC member Iran has been seeking to regain its share of the oil market since the Western-led oil embargo against the country was lifted early this year under the July 2015 nuclear agreement.
“Saudi Arabia will not do anything that helps Iran,” the international business expert notes.
However, he says, "Even if OPEC members do not uphold this agreement at all, still all OPEC members benefit from this so-called agreement because in the short run we will see a bounce in oil prices.”