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What's really at stake with the Iran nuclear deal?

By Robert Berke - posted Friday, 21 August 2015


Recall also that only first stage sanctions had been imposed on Cuba, Iran, and Russia, with each nation clearly warned that far worse lay in store if targeted activities continued.

The message was hardly lost on the ever pragmatic President Putin, who despite brave words of resistance, suddenly saw that it was to his country's benefit to cooperate with the US and its allies, particularly in the Iranian nuclear negotiations, and the ongoing war in Syria and Iraq.

Nor was the message lost on China either, who also suddenly found it in their interest to stop island building in the South China Sea, and began negotiations with its neighbors over territorial claims, as urged by the US and its allies in the region. China 'acting poor' when Russia recently came calling for financial help also smacked of western influence.

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Contrary to their rhetoric, Iran and Russia were deeply chastened by sanctions, even more so by the oil price collapse, and have agreed to major concessions. It's no accident that both countries are also becoming ever more important in the world's anti-terrorism campaign, an effort clearly being coordinated with the US

OPEC Support

Playing into Obama's hand was a different sort of victory taking place during the same period. That was the Saudis leading OPEC to defend their traditional market share by flooding the oil markets.

The ensuing trade war against competitors has caused every other major oil producing country and oil companies to cut future development plans. Importantly, the oil glut reinforced the damaging effects of sanctions on targeted countries.

Some conspiracy theorists have claimed that the US Administration conspired with the Saudi King to create an oil glut by over-producing, directly aimed at crashing the Russian economy, where energy accounts for nearly 50 percent of its budget.

US Investment Bank, Morgan Stanley recently reported that the Saudi's were over-producing by some 1.5 million barrels per day in a market with a surplus of around 800,000 barrels per day.

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The Bank added that the oil markets' fall could be worse and last longer than the one created 1986, in which Saudi Arabia grew tired of shouldering the burden of production cuts and decided to flood the market in an effort to pursue market share.

With Iran expected to return to markets, thereby adding to the glut, the bank also stated that these current moves made the risk in oil markets "historically unanalyzable," a red alert to the investment community.

Oil Glut Ricochet

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About the Author

Robert Berke writes for OilPrice.com.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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