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Asia Today ISSN 1861-4604 Tuesday, October 23, 2018

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End of Iranian nuclear deal can cause oil price hike

US will set up a strategy

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Baku, Azerbaijan, Oct. 10 By Leman Zeynalova – Trend: Possible end of the Iranian nuclear deal can push the oil prices up, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

It was earlier reported that the US President Donald Trump is expected to announce soon he will decertify the Joint Comprehensive Plan of Action (JCPOA).

"The unilateral end to the JCPOA by Washington is partly already figured into oil prices at present. However, the oil market is too optimistic about the possibilities that it will happen. Washington will be putting some new sanctions for sure, and in principle end the deal," said the expert. "Western companies will be feeling the heat of this, leaving less room for investments and operations in Iran."

Iran could really be hit if Washington would put sanctions on all companies worldwide if they act or work with Iran, the expert believes.

"It also could put sanctions on imports of Iranian crude oil, petroleum products and natural gas. This would not only hit Iran, but also take out a vast part of Iran's oil exports to the global market. If this would also be feasible for Iranian oil swaps with other countries, the prices will shoot up," noted Widdershoven.

He went on to add that any new disturbance in the region will have a direct effect.

"Oil prices are at present still showing very much movement upwards, new instability and possible war/sanctions will only increase the push for higher prices," added the expert.

As for the possibility of abandoning the nuclear deal, Widdershoven said there is a real chance that the US will end the nuclear deal.

"Most probably, the US will set up a strategy in which it will partly abandon the deal, with specific demands on Iran to comply. First main issue will be that Washington will be demanding a full stop to the development of ballistic missiles," he said.

Another demand will be full openness to Iranian nuclear technology developments, said the expert, adding that at present, the deal is also asking openness, but this only in cooperation with Iran.

"Trump's position would be detrimentally hit if he would now not put something very hard in place. For Iran, the direct effects can be minimal, as the deal is not with the US but with a long list of other countries too. It will not end the cooperation with Russia, and several European countries. However, if Washington not only end its part of the deal, but increases severely the US sanctions on doing business with Iran, Tehran could be and will be hit," said Widdershoven.

A full scale sanctions regime on not only oil and gas projects but also others would be very bad for Tehran, according to the expert.

"The latter could escalate, looking at the statements made by the Islamic Revolutionary Guard Corps ( IRGC) of Iran. If Tehran's military would act or even provoke the US at present, a full scale military action is not infeasible. Hardliners in Washington, but also Europe, will be waiting for a reaction of Iran, if negative, the country will be facing possible military action. Saudi Arabia, UAE and others will be taking part if necessary, while Egypt could be also assisting," he said.

A military action in the Gulf region will only be another reason for a price hike, concluded the expert.

Iran and the five permanent members of the United Nations Security Council plus Germany signed the JCPOA on July 14, 2015 and started implementing it on January 16, 2016.

Under the agreement, limits were put on Iran’s nuclear activities in exchange for, among other things, the removal of all nuclear-related bans against the Islamic Republic.

Follow the author on Twitter: @Lyaman_Zeyn

 

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