Iran’s dangerous nuclear ambitions will soon be circumscribed by new limitations, thanks to ongoing negotiations between the United States and Tehran. A new nuclear deal would have a significant effect on international oil prices. So far this week, those prices have already seen a significant drop. Negotiations arise from a backdrop of severe political pressure and economic crisis within Iran. These problems have worsened since the U.S. exited from the Joint Comprehensive Plan of Action (JCPOA) in 2018.
Under the 2015 original nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPoA), Iran committed to limiting its nuclear activity in return for sanctions relief. All the key international players were a part of the agreement. This sometimes antagonistic group consisted of Russia, China, the European Union, the United Kingdom, and the Obama administration. The reimposition of sanctions has devastated Iran’s economy, leading to a dramatic drop in its currency and loss of regional influence following the collapse of the Assad regime in Syria.
Recent signals show that Iran has a new openness to talks, but only under certain conditions. A senior advisor to Iran’s Supreme Leader, Ayatollah Ali Khamenei, confirmed that Iran is prepared to sign a nuclear deal if certain sanctions are lifted. Khamenei has always rejected U.S. negotiations from the outset. Senior Iranian officials are doing everything they can to convince him to change his mind.
If such a deal is indeed concluded and well-implemented, Iran has committed to end its enrichment of weapon-grade uranium. This shift could allow Iran’s crude oil exports to increase by as much as 1 million barrels per day, significantly impacting the global oil market.
Amid these evolving discussions, Donald Trump stated, “We’re in very serious negotiations with Iran for long-term peace.” His comments are a part of much larger optimism about a breakthrough of some kind to years of conflict.
Even before these negotiations, the impact of these negotiations on world oil prices has been significant. After Trump’s remarks, oil prices plummeted as investors anticipated that an accord is likely to be signed in the near future. LSE analyst Tamas Varga made a key observation. He claimed that the potential nuclear deal that popped out overnight is the sole cause of the morning’s weakness. If a deal is come to, the Saudi Arabians might be able to increase their heavy crude oil shipments. Specifically, they need to raise them at least 1 million barrels per day.
While the recent changes signal a major shift in Iran’s diplomatic approach, they do not break ongoing challenges Iran faces, from internal economic pressures to regional conflicts. The subsequent targeted assassination of senior Hezbollah leaders by Israel has made Iran’s hand in the Middle East overall that much more complicated.