Iran Deal: Winners & Losers in the Greater Middle East

By Juan Cole | (Informed Comment) | – –

The end of most UN and European sanctions on Iran and the likely end of US third party sanctions are shaping how regional states see the Vienna agreement between Iran and the 5 permanent members of the UN Security Council plus Germany.

Iran is expected to restore its pre-2012 level of petroleum exports, i.e. 2.5 million barrels a day (it is now down to 1.5 million barrels a day because of US arm-twisting of countries such as South Korea, Japan and those in the European Union).

With what is likely a permanent slowdown of the Chinese economy as it matures, demand for petroleum is already weak. China grew 10 percent a year from the mid-1980s until just a few years ago. It is now slowing to 7 percent a year. Even that level may be difficult to sustain given the country’s current stock market meltdown. Until other Asian economies begin rapidly growing and their citizens begin driving, that demand could remain weak for two or three years. After that, demand could pick up if Indians and Indonesians go toward automobile ownership.

The addition of a million barrels a day from Iran in this market could depress prices further.

Low oil prices benefit non-oil states with large populations.

Pakistan is therefore extremely excited about the deal. Its leaders had been working on a gas pipeline from Iran into Pakistan and perhaps thence to India or another neighboring country. Pakistan gets about half of its electricity from natural gas. But because of the US financial blockade on Iran, the Asian Development Bank in Manila pulled out of financing the pipeline. Now, the gas pipeline into Pakistan is plausible again. Pakistan suffers from extreme electricity shortages, which can cripple its factories and interfere with export of e.g. textiles. Its drivers and transporation infrastracture will benefit from low oil. Pakistan could also earn tolls if pipelines across its territory to China.

Also Egypt will benefit, even if it would be impolitic for its leaders to admit it, given the pledges of billions of dollars in aid Cairo has gathered up from Saudi Arabia, which opposes the deal. Egyptian transportation costs will fall. Shipped goods will be cheaper and there could be increased traffic in the Suez Canal, which Egypt is widening to allow two-way traffic. Egypt collects tolls on goods going through the canal, so this income should increase.

Dubai will benefit, because its banks do a lot of business on behalf of Iranian firms. Its import-export merchants will recover access to the Iranian market.

Morocco, another populous country that lacks its own hydrocarbons, will benefit from lower petroleum prices.

Because the extra million barrels a day will flood the market and drive down prices, the big losers are the Gulf oil states. They will see oil income fall. Saudi’s Stock Market fell on the news of a breakthrough. Saudi Arabia will likely also have smaller reserves, which it is squandering on bombing Yemen. So the development has postive geopolitical implications for the producers, weakening Saudi Arabia.

Related video:

Press TV: ” Pakistan to complete Iran gas project after nuclear agreement”

11 Responses

  1. If a lot of nations gain and only Israel and the KSA lose, then their loss is in a meaningful sense much greater. France was among the biggest losers from the sanctions and is straining at the bit to re-enter the Iranian market; Laurent Fabius accepted an invitation to visit Tehran a few days ago: link to english.rfi.fr.

    History may judge the sanctions, and their lifting, as among the more significant events of the period. They arguably inhibited Israel from attacking Iran, and the sudden release of pent up commerce will be an significant boon in these economically fragile times.

  2. I keep on reading stories about lower fuel prices, but the price at the pump for us is about the same as it was last year.

    The price of a barrel might be down, but the price of a litre is the same.

  3. Apparently, Turkey can be added to the list of gainers: “Turkey’s euphoria over Iran nuclear deal: While the Iran nuclear deal sparked optimism around the world, Turkey appears to be the one country where both the enthusiasm and expectations related to this new era with Iran are the highest. The overall mood in Ankara is positive,… ” By Altay Atli – link to atimes.com

  4. @Dave, i share your sentiments. in Nigeria, my country the price of a litre of petrol had even risen.
    despite the fact that, crude oil price had dropped to 60.
    @joan cole, please, let me know why the local price of petrol and transport had remained the same.
    And i know the drop in price of crude oil surely affect our budget in Nigeria.
    but then, i expect transport cost to drop also. which is not happening.
    so pls, i need you to explain that. thanks.

  5. Iran seems to have more potential to diversity its economy away from oil than Saudi Arabia:

    a. lower labor costs
    b. a more serious culture of scholarship
    c. proximity to Russia and China
    We all know the Saudis’ reputation as a bunch of self-entitled, servant-exploiting parasites. Whether that’s the fault of the oil or the monarchy, they’re not getting better as their population explosion dilutes their oil revenue. This is not a society capable of grasping the modern world on its own initiative. Whereas Iranians are trying to do that and are being held back.

  6. The price of gasoline remains “sticky” in many nations because of because of local monopoly/oligopoly market situations.

    The big boys got the stuff, and you don’t, and if there’s not a lot of competitive energy bringing things down towards world market levels, they don’t have to lower prices if they don’t really want to. And of course, they usually don’t want to.

    • Ron:

      The consensus is that gasoline prices in the United States will decline to about $2.00 per gallon as a result of this nuclear deal with Iran.

      Since the deal was announced I have seen retail prices in Metro Detroit where I’m from drop about thirty cents per gallon. I just saw a station this morning market its gasoline for $2.57 per gallon where other stations one week ago had it selling around $2.90-$3.00 per gallon.

      This petroleum glut will no doubt irk the Arab oil-producing states in the Persian Gulf – but U.S. consumers will be happy with all the money they will be saving.

  7. It seems to me the biggest winner is the United States. I just read on HuffPo about a major terrorism bust (more than 400 arrested) in Saudi Arabia. The Saudis realize they now have a significant rival for our favor, and they better start shaping up.

  8. I fear poor Yemen is the biggest loser of all, not directly because of the deal but because Saudi Arabia seems determined to destroy it simply to take out its spite over its own loss of prestige.

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