Iran’s acting oil minister said today in Tehran that his government will continue to oppose an increase in OPEC's output quota.
“In accordance with the supply and demand situation, Iran will oppose raising OPEC's oil production quota ceiling at the next meeting (on 14 December),” Mohammad Aliabadi said [Mehr News Agency, 26 June.]
The International Energy Agency (IEA), which represents industrialized nations, announced on Thursday that it would release 60 million barrels of oil from its strategic reserves over the next month to force lowering the oil prices. The Brent Crude, a benchmark for Iran’s oil prices, fell sharply as a result of IEA’s move and is expected to go below $100 per barrels when the markets open on Monday.
The Iranian oil minister also accused Saudi Arabia of acting “at America’s request” when it decided unilaterally, outside OPEC, to raise its output levels.
“By lowering oil prices, the US is seeking to affect the next presidential election," Aliabadi said. “And Saudi Arabia was seeking to raise output levels at America's request,” he added.
7 comments:
"Iran Opposes Raising OPEC Production"
And a good thing too. Don't you think so Nader Jan? Why should OPEC countries sell a diminishing natural resource for lower prices by raising their agreed quota? It does not make sense.
In fact, if I were the Iranian oil minister, I would ask NIOC to produce enough oil for internal needs and an extra amount to sell in order to balance the budget until such time we no longer need the oil income to do so . It is far better to keep the stuff (which is a gift from God)underground for future generations of Iranians and to guarantee our own future energy needs as we reach high levels of industrialization.
heard of a Saudi plan to raise its production by 4 million to cover Irans part and ask the west to attack Iran.
Anon 12:49,
I do agree with you that Iran cannot afford to extract oil, sell it and use the revenue to fund its huge bureaucracy. For many years I have written about and argued for the creation of a national unit trust under the authority of a board trustees selected by Majlis where all oil revenues are deposited and the unit trust use the funds to invest in projects inside and outside the country and pay certain percentage in taxes to the government for its budgetary needs. If Iran had done this, the annual revenue from this sovereign fund would have become greater than the oil revenue.
Nader Jan,
Thanks for your reply. Your ideas regarding the management of our homeland's oil revenues seem to be eminently sensible. However, I beg to differ for the following two reasons:
I. It would have created another gigantic governmental bureaucracy with immense potential for graft and mismanagement.
II. Given the continuous hostility of the United States and some of her allies towards Iran, any major lucrative foreign investment would have been blocked or if allowed, the assets would have been frozen at a later stage for political reasons.
III.
Moreover, one should not forget the dire effects of the financial crash of recent years engineered by a group of avaricious and unscrupulous bankers which robbed many countries and individuals of their investments on the economy of Iran had she been fully integrated into the global economy.
I still believe that the best course of action for Iran is to extract enough oil to meet her domestic needs and a bit to sell to balance her books. As you know Nader jan, petroleum is a diminishing natural asset and should not be extracted and converted into worthless paper money. It is the patriotic duty of any government to make sure that the future generations are not robbed of their natural God given inheritance.
The most relevant experience is that of Norway’s, and the statistics does support my argument. The Norwegian sovereign fund created by the oil revenues from the North Field is not probably the world’s largest, even after the financial crisis that hit the West. Compare that to the British experience. The British did what Iran does: took the revenues from the very same North Field and put it in their budget and now have nothing to show.
Your argument that the fund would create a bureaucracy of its own is a valid one. But the alternative is to let much bigger bureaucracies in the form of the ministry of oil, NIOC, the government and the leader’s beit decide on how to invest or not to invest the country’s most important treasure. At lease here, the fund would be controlled by a board of trustees whose members serve a limited term and are not answerable to the government of the day.
Iran can convert the oil it extracts into a capital for future generations to come. This is a pragmatic way of doing it. Asking the government not to extract the maximum amount would not be practical and will be ignored.
Nader jan,
Thanks again for your thoughtful reply.
I think one thing which seems to have escaped your notice is the fact that unlike Norway, Iran has been subject to all sorts of sanctions spearheaded by the United States for the last thirty odd years,
Even if Iran had followed the example of Norway as you suggest, there is no doubt in my mind that the billions of dollars, euros and pounds invested abroad by the Iranian sovereign fund would have been seized or frozen at the first opportunity by American and certain European governments citing all sorts of dubious and illegal justifications for doing so.
As regards to the "impracticality of asking the government not to extract the maximum amount" of oil, I simply say that it is not cast in stone that governments should exploit the natural resources of their countries to the full for short term benefits. Any government with a long term vision for the future would exploit the natural resources gifted by God in a manner that factors in the interests of the future generations as well. Being practical or impractical is neither here nor there.
Nader Jan,
I tend to agree with the other anonymous reader's view regarding limiting oil extraction. Iran, like some other developing-country oil producers, has been suffering from what is called "oil curse" which, in my view, cannot easily be corrected by just creating an oil fund. Iran at this time does have a form of oil fund (oil-price stabilization fund) but it is mismanaged. It is somewhat optimistic to assume that an Iranian fund can function as efficiently as the Norwegian model [and, by the way, that remains to be the only successful one]. Even if Iran could establish a successful fund, the argument that funds "... would have been seized or frozen at the first opportunity ... " is a valid one.
Azar (Maryland)
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