Amid Tensions With Saudi Arabia, Grim News for Iran’s Economy

BLACKEAGLE

SENIOR MEMBER
Joined
Dec 5, 2014
Messages
3,624
Reactions
1,984 10
Country
Jordan
Location
Jordan
  • By Mark Dubowitz

People in Tehran on Monday protest Saudi Arabia’s execution of Shiite cleric Nemer al-Nemer over the weekend.
Ahmad Halabisaz/Xinhua via Zuma Press
The devolution in relations between Saudi Arabia and Iran could easily evolve into an economic war—with the advantage to Riyadh.

The Saudis and Iranians are longtime rivals for regional dominance. They are fighting proxy wars in Syria and Iraq, as well as in Yemen, with the Sunni kingdom leading the military campaign against the Iranian-backed Houthi rebels. Amid the conflicts outside its borders, Saudi Arabia has been cracking down on dissent from restive Shiite citizens. It executed a prominent Shiite cleric, Nemer al-Nemer, on Saturday, along with 46 others–mostly Sunnis–accused of participating in al-Qaeda terrorist attacks in the kingdom.

After Iranians protesting the sheikh’s execution set fire to the Saudi embassy in Tehran, the Saudi government severed diplomatic and commercial relations with Iran and banned citizens from traveling there. Saudi allies Bahrain and Sudan have also cut diplomatic ties with Iran; the United Arab Emirates and Kuwait have withdrawn their ambassadors from Tehran. Tensions are high, and the Saudis have their own long-term financial concerns–the kingdom has been running deficits and cutting back on government subsidies–but still have strong advantages to deploy against Iran.

As Congress targeted Iranian oil exports with sanctions between 2011 and 2013, Saudi Arabia increased its oil production to head off a spike in prices–a critical step. Iranian oil sales fell from 2.5 million barrels per day to about 1 million by the end of 2013, and its oil production plunged from 3.7 million barrels per day in 2011 to 2.8 million in November 2013. Oil prices have declined precipitously, which meant that sanctions hit Iran’s economy all the harder.

The crippling effect of the sanctions contributed to Iran’s willingness to make the deal with global powers last year over its nuclear program. Iranian officials are banking on sanctions relief facilitating a return to oil markets and massive foreign energy investment, both of which would help rescue its battered economy and soothe a frustrated population.

That’s part of the reason Saudi Arabia opposed the nuclear deal. Together with increased U.S. shale production, the recent spike in Saudi oil production–from 9.6 million barrels per day in November 2014 to 10.2 million barrels per day one year later–has ensured that Iran will return to a depressed global oil market. Crude oil prices are around $37 a barrel, roughly a third of the rate when sanctions were imposed in January 2013. Tehran would have to sell about 7.5 million barrels a day to return to pre-sanctions revenue levels. That’s well beyond the 1.8 million barrels per day in sales and the 3.4 million to 3.6 million barrels per day in production that the International Energy Agency estimates that Tehran could reach within six months of sanctions being lifted.

And those projections may be optimistic if European and Asian energy companies slow-walk their investments in Iran’s energy infrastructure, which is badly damaged from the loss of capital and technology driven away by Western sanctions. So long as Riyadh is willing to run budget deficits to keep oil prices low, Tehran will get only about half of the oil price to which it pegged its budget last year.

Another economic weapon Saudi Arabia can deploy involves its hundreds of billions of dollars in overseas foreign holdings. The Saudis have significant influence at foreign banks and with foreign investors and could threaten to pull funds from entities doing business with Iran. Many institutions already worry that sanctions enforcement will become more aggressive after the Obama presidency ends. A Saudi threat could keep them further sidelined.

Through the nuclear deal, Iran found a way to free itself from U.S. and European economic pressures. But the Saudis have their own instruments of economic warfare. Whatever happens next, the fiscal picture for Iran could quickly become more grim.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies and head of its Center on Sanctions and Illicit Finance. He is on Twitter: @MDubowitz.
Amid Tensions With Saudi Arabia, Grim News for Iran’s Economy - Washington Wire - WSJ
 

Scorpion

THINK TANK
Joined
Nov 27, 2014
Messages
3,082
Reactions
2,264 29
Country
Saudi Arabia
Location
Saudi Arabia
Iran's economy has crippled. Now Iran restores to drugs trafficking and weapons smuggling to compensate the loss.
 

Redheart

SENIOR MEMBER
Joined
Dec 26, 2014
Messages
1,239
Reactions
319
Country
USA
Location
USA
The Obama administration threatened to impose new sanctions on Iran for firing a ballistic missile. While yes the likelihood of such action being taken is quite remote, Iran will find itself economically sidelined and with OPEC unity inexistent the prices of oil will stay low for a really long time. Iran won't make as much money as they thought they would and maybe this will stop them from stirring up trouble in the Middle East.

But what if they decide to focus on mining instead?

Iran's Mines Could Bring in Even More Cash Than Crude - Bloomberg Business
Iran, OPEC’s fifth-largest crude producer, has potential to generate more revenue from mining than it does from crude if the government puts more focus on developing the metals sector, according to Mojtaba Khosrowtaj, first deputy minister in charge of trade at Iran’s Ministry of Industry, Mine and Trade.

Metals such as copper and lead and higher-priced rare earth elements could be worth “much more” than the nation’s oil industry revenue of about $30 billion, assuming crude at $40 a barrel and exports of 2 million barrels a day, Khosrowtaj said in an interview. Iran is opening $30 billion of energy projects and $29 billion of mining deals to investors once international sanctions are lifted.
 

Corzhens

MEMBER
Joined
May 26, 2015
Messages
853
Reactions
111 1
Country
Philippines
Location
Philippines
It looks like Iran is on the brink of defeat even before the war with Saudi Arabia starts. Economic concerns will cripple the ambition of Iran to fight Saudi politically and militarily. And what happens to a country in war when its resources are depleted? But it would be an ugly war because religion is dragged as one of the issues and it's not good for the world particularly for non-Islamic countries.
 

Diane Lane

MEMBER
Joined
Jun 21, 2015
Messages
232
Reactions
70
Country
USA
Location
USA
The Obama administration threatened to impose new sanctions on Iran for firing a ballistic missile. While yes the likelihood of such action being taken is quite remote, Iran will find itself economically sidelined and with OPEC unity inexistent the prices of oil will stay low for a really long time. Iran won't make as much money as they thought they would and maybe this will stop them from stirring up trouble in the Middle East.

But what if they decide to focus on mining instead?

Iran's Mines Could Bring in Even More Cash Than Crude - Bloomberg Business
Iran, OPEC’s fifth-largest crude producer, has potential to generate more revenue from mining than it does from crude if the government puts more focus on developing the metals sector, according to Mojtaba Khosrowtaj, first deputy minister in charge of trade at Iran’s Ministry of Industry, Mine and Trade.

Metals such as copper and lead and higher-priced rare earth elements could be worth “much more” than the nation’s oil industry revenue of about $30 billion, assuming crude at $40 a barrel and exports of 2 million barrels a day, Khosrowtaj said in an interview. Iran is opening $30 billion of energy projects and $29 billion of mining deals to investors once international sanctions are lifted.
It doesn't sound as if the mining will help them much in the short term, unless investors are willing to front them money for rights to potential future interests. I'm sure someone would be willing to do that, but would it be enough and would those funds last long enough, assuming the international sanctions last until the matter is cleared up? It doesn't seem Iran wants to back down, and it's doubtful that others will either, so this situation could last for an extended period.
 

Redheart

SENIOR MEMBER
Joined
Dec 26, 2014
Messages
1,239
Reactions
319
Country
USA
Location
USA
Apparently there are lots of nations that are interested in making some money from Iran's minerals the moment the UN, EU and U.S sanctions against Iran are lifted.

Russian, Chinese, French Companies Plan to Fund Iran's Mine Projects
"The French, Russians and Chinese are planning to fund the country’s mine projects in various sectors and have drawn up a number of investment packages for this purpose," Mehdi Karbasian told the national Mehr news agency.
Karbasian added that Chinese businesses had revised their approach to dealing with Iran, opting to invest directly in the industry to get a competitive edge.


I'm sure China wouldn't mind spending some money as long as they are sure they'll make some decent profits eventually.
 

Scorpion

THINK TANK
Joined
Nov 27, 2014
Messages
3,082
Reactions
2,264 29
Country
Saudi Arabia
Location
Saudi Arabia
Apparently there are lots of nations that are interested in making some money from Iran's minerals the moment the UN, EU and U.S sanctions against Iran are lifted.

Russian, Chinese, French Companies Plan to Fund Iran's Mine Projects
"The French, Russians and Chinese are planning to fund the country’s mine projects in various sectors and have drawn up a number of investment packages for this purpose," Mehdi Karbasian told the national Mehr news agency.
Karbasian added that Chinese businesses had revised their approach to dealing with Iran, opting to invest directly in the industry to get a competitive edge.


I'm sure China wouldn't mind spending some money as long as they are sure they'll make some decent profits eventually.
Saudi Arabia has the largest untaped minerals in the whole world a card Saudi Arabia can use to push Iran further into the corner. As far as Russia concern the low oil prices is hurting its economy so badly. Saudi Arabia has second highest of oil reverse and second largest foreign exchange. For Iran I think the Arabs are lobbying to keep the sanctioned in place.
 

Redheart

SENIOR MEMBER
Joined
Dec 26, 2014
Messages
1,239
Reactions
319
Country
USA
Location
USA
For Iran I think the Arabs are lobbying to keep the sanctioned in place.
Question is will the international community do what the Arab nations want? Taking into account recent developments [re: North Korea testing a Hydrogen bomb] the international community which believes the nuclear deal will probably stop Iran from acquiring a nuclear weapon at least for a little while will not IMHO jeopardize that deal by keeping the sanctions in place even if it means ignoring Iran's aggression and other actions.
 

vegito12

MEMBER
Joined
Dec 26, 2014
Messages
349
Reactions
41
Country
New Zealand
Location
New Zealand
I wonder how the economy will work as fighting leads to wars and lives being lost which can mean resources used and money as well which may be used in areas where it is not needed, the places that need these resources will be affected if wars take place and hope the right choices are made, so Iran does not suffer from any losses which can bring devastating consequences later on down the road. Sauda Arabia has more power and a strong political world which makes them have more powers over other countries and also they are a very strict country when it comes to punishing any rebels or anyone who is against the country and think it will have a strong economy. I think that Iran needs to back away from confronting Sauda Arabia as it can make them lose power and also make the political world suffer which they are not that strong and it can cause problems which can be a bad thing for the country.
 

rz3300

NEW RECRUIT
Joined
Jan 16, 2016
Messages
24
Reactions
1
Country
USA
Location
USA
I actually just read a story today about a really prosperous future for the economy of Iran, even suggesting that investing in Iranian cars may be the best thing to do with your money. I am not sure if that is the case, but it is always interesting when you can read one thing and then the complete opposite on the same day. I wonder which is more accurate.
 

explorerx7

MEMBER
Joined
Jan 17, 2016
Messages
220
Reactions
36 1
Country
Jamaica
Location
Jamaica
These events a just natural progression. These nations have been at each other's throat for centuries. They are constantly seeking to gain the upper hand, trying to grind each other into the dirt. The Saudis now seem to be in the dominant position now, however, there will be the time when it turns around and Iran will be the victor again, so it has been in the beginning and so it shall continue. It seems conflict is a hobby amongst many of the nations in the area.
Let's hope, however, that they do not succeed in drawing other nations into their conflict.
 

Scorpion

THINK TANK
Joined
Nov 27, 2014
Messages
3,082
Reactions
2,264 29
Country
Saudi Arabia
Location
Saudi Arabia
These events a just natural progression. These nations have been at each other's throat for centuries. They are constantly seeking to gain the upper hand, trying to grind each other into the dirt. The Saudis now seem to be in the dominant position now, however, there will be the time when it turns around and Iran will be the victor again, so it has been in the beginning and so it shall continue. It seems conflict is a hobby amongst many of the nations in the area.
Let's hope, however, that they do not succeed in drawing other nations into their conflict.
Saudi Arabia will do every step necessary to make sure Iran is under the grip.
 

silentwarfare

MEMBER
Joined
Jan 20, 2016
Messages
66
Reactions
13
Country
USA
Location
USA
The more this happens and the further their and other economies fall, the more Iran is going to become radicalized as a result of impoverished conditions where they struggle to survive. It's likely they're going to start doing other trades and illegal markets to try and compensate for what's happening to them.
 

Redheart

SENIOR MEMBER
Joined
Dec 26, 2014
Messages
1,239
Reactions
319
Country
USA
Location
USA
The more this happens and the further their and other economies fall, the more Iran is going to become radicalized as a result of impoverished conditions where they struggle to survive. It's likely they're going to start doing other trades and illegal markets to try and compensate for what's happening to them.
True. They'll end up being like North Korea. Isolated but stirring up trouble wherever they can. Should that happen though forcing Iranians to grapple with poverty it wouldn't be long before an insurgency takes root.
 

Top