Never mind the statement at the end of today’s Opec meeting, which was never going to yield more than a continuation of the Saudi-led market share strategy that the Saudis no longer like calling a market share strategy. The decision — if that’s not too strong a word — to tacitly license current production levels and take another look in June kicks the can down the road. And things will get interesting in six months or a year’s time, if Iran has proved capable of rebuilding its exports.
Never mind the statement at the end of today’s Opec meeting, which was never going to yield more than a continuation of the Saudi-led market share strategy that the Saudis no longer like calling a market share strategy. The decision — if that’s not too strong a word — to tacitly license current production levels and take another look in June kicks the can down the road. And things will get interesting in six months or a year’s time, if Iran has proved capable of rebuilding its exports.
Barrels correlate to power in Opec. That’s why Saudi Arabia has always been king pin. But when there is a counter current to Saudi demands, it needs a champion and that champion needs to have barrels. Dissident voices such as Venezuela and Algeria carry little weight because they have relatively little market influence. That champion will be Iran, if it can rebuild its exports. And it is staking its claim by reminding anyone who will listen that, in the last divvying up of production, it got the second biggest slice of something over 3.3mn b/d.
And Iran is the natural counterbalance to the Saudis and their allies. It is a traditional price hawk in Opec. And, more broadly, since the revolution, it has painted itself as a hero of the downtrodden and aligned itself with the anti-colonialist rhetoric of fellow Opec members Algeria and Chavista Venezuela. Then, there is the dangerous regional rivalry, often dressed up in the historiography of Persian against Arab, Shia against Sunni, which played itself out in the bloodbath of Tehran’s war with Saddam and now echoes in jostling for influence in Syria, Iraq and Yemen.
The 1979 revolution, the Iran-Iraq war, and latterly sanctions have prevented Tehran from consistently and effectively playing the role of counterweight, although its mediation between Caracas and Riyadh probably paved the way for the reconciliation of 1998 for which Mexico took the credit.
Now, Tehran sees light at the end of the tunnel and is positioning itself. It has cast aspersions over the effectiveness of the market share strategy and called instead for a long-term strategy that would include a return to production controls, albeit not controls that would crimp the rebuilding of its own market share to pre-sanctions levels. It has characterised opinion within Opec as being split nine against four — the four being Saudi Arabia and its close allies. It has bemoaned the suffering that low prices impose on many member countries. It has said a long-term strategy “is necessary but to implement it we need consensus with other Opec members”. And who brokers that consensus? Zanganeh provided an answer last week: "When we reached consensus in Opec, it was because of good interaction and political ties between Iran and Saudi Arabia.”
So, how will Riyadh respond to the development of an alternative centre of power in Opec? While the proxy wars will continue across the plains and mountains of the Middle East, there will likely be more accommodation within Opec. Saudi Arabia put much effort at the end of the 1990s into transforming Opec gatherings from the political bear pit they were into something more akin to meetings of central bank governors. And the dealings between long-time Saudi minister Ali Naimi and his various Iranian counterparts have been businesslike, both parties knowing that, for their oil-dependent countries, without orderly markets nothing else is possible. Note that Zanganeh’s pitch for greater Iranian influence is put in terms of “good interaction” with Riyadh, while Naimi, by saying today that he expects relatively strong demand growth in 2016, is indicating that there is room for Iran to realise its full export potential.