Washington wants its cake and to eat it to. For Iran to export zero oil, but for this not to cause an upsurge in world oil prices. Sure Russia could help, but why should it?
U.S. Secretary of Energy Rick Perry will meet this week with Saudi Arabia’s Khalid al-Falih and Russia’s Alexander Novak, Reuters reports, adding that the meetings will be separate, with the first one, with Al-Falih, to take place today in Washington, and the second, with Novak, to happen on Thursday in Moscow.
The topics to be discussed, according to diplomatic sources that Reuters spoke to, will likely be oil, and with Novak, the Nord Stream 2 project. Washington is concerned about oil prices ahead of the sanctions against Iran in November, and it would make sense to want to make sure there will be other producers that will guarantee the supply of crude as Iranian oil gets squeezed out.
Russia is currently the world’s top oil producer, with Saudi Arabia and the United States close behind. The Kingdom made commitments earlier this year to ramp up production to compensate for any decline in Iranian oil supply, but in July it surprisingly cut its production, raising concern about the future of oil supplies.
The situation with Russia is a lot more complicated. On the one hand, it can help keep the market in balance and prices under control ahead of the November midterm elections. On the other, it is the object of U.S. sanctions, and more are on the way. If this does not make for friendly grounds for winning a pledge to raise oil production, the other likely topic on the agenda at the Thursday meeting will be Nord Stream 2 – a project Washington dislikes on the grounds that it will deepen Russian influence in Europe, but Germany is pro-Nord Stream 2, with one senior government official calling Trumps’ opposition a cover for pushing U.S. LNG interests in Europe.
Ensuring that there is enough crude oil before the Iran sanctions kick in is essential as the main drivers of global demand—and prices—experience a slowdown in economic growth. Emerging economies in Southern and Southeast Asia have been touted as the spearhead of stable demand growth, but now that their economies are faltering, worry is rife that any price increase in oil benchmarks could pressure demand significantly.