Iraq to produce more oil than Iran by the end of the year as sanctions bitePosted on 28 May 2012 with 1 comment from readers
From July 2nd all Iranian oil sales to the European Union and Australia will stop, and many other nations such as South Korea have joined the embargo. Meantime. Iraq has quietly ramped up oil production to three million barrels per day and will overtake Iran sometime this autumn.
Rarely has a nation exposed to sanctions been confronted by such unity as Iran. Even sales of oil to China come at a huge discount, the sting in the dragon’s tail. Iran’s only regional ally Syria is mired in a de facto civil war.
It may still be safer on the streets of Tehran than Baghdad but there is no doubt which city is the better place to be doing business. And actually Baghdad has recently hosted two major diplomatic meetings without incident, includiing ironically the inconclusive Iranian nuclear talks.
These talks resume in Moscow next month. Iran is the all the poorer while they drag on. The ineffiicient old fashioned dhows from Dubai mainly carry essential foodstuffs these days, not consumer goods. Trade is down by more than half.
The Iranian rial has crashed this year losing more than half its value. Capital has left the country with rich Iranians buying homes in Dubai. Gold is the new currency of choice with oil sold to China for gold. Oil production is at its lowest for a decade.
At the same time Iraq is earning around $9 billion a month from oil sales and rising. Internal security is still an issue but economics and social stability do generally improve at the same time.
Gulf power shift
The balance of power is shifting in the Gulf of Arabia as many commentators now refer to the Persian Gulf. For with Iran’s klout in the oil market humbled by its long-standing rival and neighbor Iraq, the Islamic Republic has little economic muscle to exert in its own defense.
What happens next is anybody’s guess. Israel remains poised to strike Iranian nuclear installations but not while talks continue. If Tehran was hoping that events might drift in its favour then they will have been sadly disappointed.
The idea that a resurgent Iran would step into the power vacuum of the Arab Spring seems very far from the reality of a country more on the margins of regional economic and political life than ever.