Iran, it’s fair to say, is giddy at the prospect of the West’s lifting sanctions on its oil exports as part of ongoing nuclear talks. It reportedly intends to double those exports as soon as possible, a possibility the rest of the world’s oil suppliers—and especially Iran’s fellow OPEC member states—aren’t looking forward to in today’s oversupplied, bearish market. But while no petrostate wants crude prices dipping further because of a resurgent Iran, Russia may be the biggest loser if this deal goes through. Bloomberg reports:
“Iran is going to be competing in Europe head-on with Russia,” said Ed Morse, head of commodities research at Citigroup Inc.
Russia, whose benchmark export grade is similar to Iran’s flagship blend, has been the main beneficiary of [Iran’s oil production] decline. Exports into Iran’s main markets in Asia and Europe have more than doubled, growing by 420,000 barrels a day from 2011 to 2014, according to data compiled by Trade Map, a database of trade flows between nations.
Russia, that is, was the main beneficiary of Iran’s crimped exports because it produces a similar type of crude as the country, and it welcomed the opportunity to extend its grip over European energy markets when sanctions pushed Iran out. Moscow has made policymakers across Europe skittish (to say the least) with its aggression in Ukraine, which has kickstarted conversations about diversifying away from Russian energy supplies. In that context, increased competition in the continental market is potentially coming at the worst possible time for Putin.