To the wire

Nuclear negotiations in Lausanne between Iran and the P5+1 powers are going to the wire. The self-imposed deadline for a framework agreement is midnight tomorrow. Major issues remain to be resolved, but there is cautious optimism among negotiators and nervousness among those who oppose a deal.

The nuclear talks take place against a backdrop of deteriorating relations between Iran and Saudi Arabia and its friends. The number of points of friction has increased alarmingly. The precarious division of powers remains in place in Lebanon but is under constant threat. There is competition for influence in Iraq, where Iran is supporting a government led by politicians of the Shiite majority. In Bahrain, Riyadh and its allies vilify the democracy movement as an Iranian front. In Syria, Iran is supporting the government of President Bashar al-Assad. And now, Saudi Arabia and its allies have become embroiled in the latest instalment of Yemen’s internal strife, on the pretext that one of the anti-government forces there — the Houthis — is a stooge of Tehran because it draws its support from a Shiite region of the country.

Now, the Arab League has underwritten the Saudi-led intervention in Yemen and agreed the future formation of a joint force that will look suspiciously like a pan-Arab force to combat real or perceived Iranian influence.

Success at the nuclear talks in Lausanne will only be possible if Iran gets relief from sanctions, including sanctions against its crude exports. For all Riyadh’s talk of it not being incumbent on Opec members alone to cut production, a surge of Iranian crude exports, particularly towards Asia-Pacific, would be another bone of contention.

To be sure, even if all sanctions on Iranian crude were lifted immediately, Tehran could not quickly return to export levels it might have been achieving absent sanctions. But it has, by some estimates, 30mn bl of crude in storage that could go straight on to the market. And oil minister Bijan Namdar Zanganeh has just reiterated that Iran is ready to bump exports up by 1mn b/d, indicating that this increase would be from field production, not stocks. That followed comments he made in an interview with Argus last November when he said: “We have capacity of 4.4mn b/d, but we can produce 3.8mn b/d after two months.” Fields have not been damaged by being shut in because of sanctions, he said.

He has also made clear that Iran has not and will not cede what it considers to be its historic market share, warning: “We keep struggling and we do not retreat even one barrel from our previous quota.” Additionally, once sanctions are removed or there is a timetable for their removal, Iran will go ahead with its oft-delayed presentation to foreign oil companies of its new contract model, designed to compete for investment and expertise with other countries in the region and further boost its production.