After a week of meetings around the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, one thing is clear: Iran and Saudi Arabia are on a collision course that could eventually break the world’s largest oil producing group apart.
Faced with Saudi Arabia’s determination to keep OPEC pumping at full choke, Iran’s oil minister Bijan Zanganeh has upped the stakes in this game of double bluff between the Middle East’s two dominant political forces by stating confidently that the iran will pump an additional 1m barrels per day (bpd) of crude within months of nuclear sanctions being lifted by the West.
The move – assuming that Iran agrees to all US demands to curb its nuclear ambitions by the deadline on June 30 – effectively fires the starting gun in a race among OPEC’S most powerful producers including Iran, Saudi Arabia and Iraq to gain a bigger share of the market. It is a race that will be run regardless of the havoc it will cause within the group’s smaller producers who face complete economic meltdown.
In Riyadh, the country’s new ruler, King Salman bin Abdulaziz al-Saud, faces the risk of his family’s closest allies, the US, suddenly changing sides and shifting their support to Iran should a deal to lift sanctions be reached this summer.
Saudi Arabia’s political dilemma has been further complicated by the Iranian support of Houthi rebels which it is fighting in Yemen and the encroachment within its own borders of terrorists connected to the Islamic State of Iraq and the Levant (ISIL).
Sanctions against Iran had already exacted a heavy price in Tehran before the blow of the current oil price slump hit home. Rouhani said last October that income from crude sales had fallen by 30pc and that was before the price of crude slumped to a multi-year low around $43 per barrel. Starved of the foreign currency earnings from oil, Iran has found it increasingly tough to support its allies in the Middle East who also happen to be Saudi Arabia’s natural enemies among Shia Islam.
Even with a small recovery in prices this year, OPEC producers such as Nigeria, Venezuela and Algeria are being pushed to breaking point by the civil war that is being waged by the group’s most powerful members.

05 Jun 2015