Chronicle of the Middle East and North Africa

The U.S.-Iran Deal: A Convergence of Interests

Following the conclusion of the U.S.-Iran deal, Tehran could swiftly ramp up its oil production, as it had announced in August 2023.

The U.S.-Iran Deal
An Iranian woman walks past an Iranian flag painted on a wall in a street in Tehran on April 10, 2023. Police in Iran said on April 8 they plan to use “smart” technology in public places to identify and then penalise women who violate the country’s strict Islamic dress code. (Photo by ATTA KENARE / AFP)

This article was translated from Arabic to English
Ali Noureddine

In September 2023, the United States and Iran are poised to finalize the implementation of a deal that took two-and-a-half years to negotiate. This represents a significant milestone, marking the first substantial agreement between the two nations since the withdrawal of the United States from the 2015 nuclear accord with Iran during the tenure of then-U.S. President Donald Trump in 2018.

The announced deal focuses primarily on the exchange of prisoners between the United States and Iran, along with the release of some of Tehran’s frozen assets due to sanctions. However, the impact of this agreement has reverberated throughout global oil markets, indicating that it is the product of a convergence of Iranian and American economic interests, and possibly political ones as well.

Some analysts have even suggested that U.S. President Joe Biden could reap political benefits from the deal’s economic outcomes, particularly concerning global oil prices, in the lead-up to the upcoming U.S. presidential elections.

Meanwhile, reactions from Middle Eastern countries have varied, reflecting how they are individually affected by the evolving dynamics of Iranian-American relations and tensions. However, it is evident that all nations in the region view this deal as a significant turning point, one that may open the door to a comprehensive understanding of Iran’s nuclear program between Iran and the United States.

Much like the scenario following the signing of the 2015 nuclear agreement before the U.S. withdrawal, any potential new nuclear understanding would inevitably reshuffle the cards in current regional conflicts and tensions.

The U.S.-Iran deal: Exploring oil interests

There are numerous ambiguities surrounding the new U.S.-Iran deal, particularly due to its emergence as part of a broader secretive negotiation process between the two nations, mediated indirectly by Qatar.

As per official announcements from both sides, the deal will include the release of five American prisoners detained in Tehran, in exchange for the United States releasing five Iranian prisoners held by them. In a preliminary step toward finalizing the agreement, Iran has already allowed American prisoners to transition from prison to house arrest in Iranian hotels during August 2023, indicating an imminent repatriation.

On the financial front, the deal is expected to facilitate the release of approximately $6 billion worth of Tehran’s funds held in South Korea which were previously restricted under U.S. sanctions. According to the terms, Iran is required to transfer these funds from South Korean won to U.S. dollars and then euros through the Swiss Central Bank, before depositing them in special accounts at the Central Bank of Qatar.

Subsequently, Iran will have access to these funds, albeit under American supervision, for purchasing goods not subject to U.S. sanctions on Iran.
Beyond the publicly disclosed provisions of the agreement, it is noteworthy that the deal also includes some “unofficial” arrangements, as reported by Bloomberg, citing American officials familiar with the negotiations.

Foremost among these undisclosed provisions is the relaxation of restrictions on Iranian oil sales in international markets, resulting in a significant increase in the volume of these sales, reaching their highest levels in five years, since the U.S. imposed a ban on such transactions following its withdrawal from the nuclear agreement.

As the United States began implementing this aspect of the “informal” arrangements in August 2023, the impact on Iranian oil production became immediately apparent. By the end of the month, Tehran had begun preparations to raise its oil production to 3.4 million barrels per day, with the potential to further increase production to 3.6 million barrels per day by the end of 2023.

Consequently, Iran will have achieved a 44 percent increase in oil production compared to the average daily production in 2022, which did not exceed 2.5 million barrels.

It is evident that the crux of the American-Iranian understandings revolves around oil-related issues, with significant implications for the economic and strategic interests of both nations. Strikingly, Iranian and American officials refrained from discussing this pivotal aspect of the agreement openly.

Notably, Qatari Prime Minister Sheikh Mohammed bin Abdul Rahman al-Thani, who played a crucial role in mediating between the two parties, candidly addressed the deal’s impact on “ensuring the flow of oil supplies” and its contribution to “moderation and a decline in oil prices.” However, he refrained from providing further elaboration on this facet of the agreement.

Convergence of American-Iranian interests

The new deal, particularly its implications for the oil markets, must be viewed in the context of the current interests of the United States and Saudi Arabia, as well as recent developments in their respective agendas. President Biden’s administration has closely monitored and, at times, expressed skepticism and concern regarding the decision’s taken by the OPEC+ alliance, primarily led by Saudi Arabia and Russia, to implement successive production cuts.

These decisions have played a pivotal role throughout 2023. in driving global oil prices higher, posing a significant challenge to major industrial nations, with the U.S. at the forefront. This divergence in American and Saudi interests has contributed to strains in the relationship between Saudi Crown Prince Mohammed bin Salman and the Biden administration.

For Biden, the surge in oil prices represents one of the key factors contributing to rising inflation rates in U.S. markets. This, in turn, poses a threat to the popularity of the current U.S. administration, especially with the upcoming presidential elections on the horizon.

Moreover, these inflationary pressures have become a factor in slowing economic growth rates and have prompted the Federal Reserve to consider raising interest rates and adopting contractionary monetary policies. Consequently, Biden faces an urgent need to address this issue by any means available.

From this perspective, the Biden administration’s interest in finalizing the recent agreement with Tehran becomes more apparent. Easing restrictions on Iranian oil production would lead to an increase in global oil supplies, thereby mitigating the impact of the OPEC alliance’s production reduction decisions, albeit to some extent. It is worth noting that Iran was not subject to the production reduction quotas agreed upon within the OPEC+ alliance due to the sanctions imposed on the country.

As a result, following the conclusion of the U.S.-Iran deal, Tehran could swiftly ramp up its oil production, as it had announced in August 2023.

For its part, Iran views this recent deal as an opportunity to boost its oil revenues, which are essential in addressing imminent monetary and economic challenges.

Iran also seeks to enhance its capacity to sell oil on the global market before increasing investments in its oil and gas extraction and refining sector, and ultimately expanding its petroleum production capabilities.

Similar to the U.S. administration, the Iranian government is preoccupied with addressing economic and social issues, particularly in light of the upcoming Iranian parliamentary elections slated for 2024. These elections will serve as a referendum on the legitimacy of the Iranian regime following recent protests and social unrest.

Regional reactions

In the context of regional reactions, Qatar’s stance stands out as the most receptive to recent developments. This is particularly significant because the agreement represents a success for Qatari diplomacy, which seeks to establish a robust regional role. Qatari interests align seamlessly with this achievement, as the Gulf state enjoys strong economic and political ties with both parties involved.

Additionally, Doha is determined to surmount obstacles and sanctions that could potentially impede the progress of its collaborative oil projects with Tehran.

On the opposite end of the spectrum, the Israeli Prime Minister’s Office vehemently opposed the deal, denouncing it as “abetting terrorism sponsored by Iran.” Israel‘s apprehension arises from the belief that this agreement would bolster the Iranian regime’s financial resources without demanding any concessions regarding its support for militant groups in Lebanon, Syria and Iraq.

In fact, Israel fears that Iran’s increased oil production could offer greater financial support to these hostile organizations, intensifying the threat it faces. Consequently, Israel reiterates its opposition to any Western reconciliation with Iran, echoing its stance from the 2015 nuclear agreement.

The positions of other Gulf countries, however, appear muddled and ambiguous. These nations recognize that relaxing restrictions on Iran’s oil production could undermine their efforts to control global oil supply, potentially compromising their interests in the Middle East.

Nevertheless, they can no longer openly oppose Western settlements with Iran as they did when the 2015 nuclear agreement was reached. In the intervening years, several Gulf states pursued reconciliations and settlements with Tehran, eroding their ability to publicly challenge Iranian-Western relations on the grounds of countering Iranian influence.

The future trajectory of Iranian-American understandings and their capacity to facilitate the return of the comprehensive nuclear agreement should become clearer in the latter half of 2023. These negotiations could also have a significant impact on various unresolved regional issues, including those pertaining to the Palestinian-Israeli conflict, Syria and Iraq.

However, it is worth noting that these U.S.-Iran settlements are likely to weaken the Gulf countries’ bargaining position in their dealings with Tehran. The easing of U.S. sanctions on the Iranian regime reduces Tehran’s incentive to make substantial concessions in order to repair relations with its neighboring states.

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Kawthar Metwalli
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