Low Oil Prices Could Lead to More Cooperation from Iran
by Josh Garrett on February 11, 2010 at 4:48 pm




Iran’s president may have to tone down his belligerent rhetoric if oil prices stay below $100 much longer. (image: vimooz.com)

Iran’s influence on oil prices appears to be a two-way street. Just as saber rattling by President Ahmadinejad or any other hints of possible armed conflict between Iran and its neighbors can push up oil prices, oil prices can force the Iranian government into negotiating with the international community. According to a report published by CNN Money on Thursday, the current price of crude oil (around $75 per barrel) is wreaking havoc on Iran’s economy and could force Ahmadinejad to the negotiating table over his country’s controversial nuclear program.

According to CNN Money, the economy of Iran, the world’s fourth-largest exporter of crude, requires an oil price of $100 per barrel for sustained economic stability. With current prices at just three-quarters of that target, many believe that the Islamic republic is already feeling the economic pain. The poor state of the economy in Iran is playing a role in the growing unrest among its people. As Fariborc Ghadar, a senior adviser at the Center for Strategic and International Studies and a professor of global business strategy at Penn State, explained, “The regime has to shoot their own kids. Women in the cities are angry. The economy is in terrible shape. The place is a mess.”

As a result of this “mess,” Ahmadinejad and Iran’s ruling theocrats have seen their political power diminish both domestically and on the international stage. As Thursday’s reported antigovernment protests and resulting crackdown on dissidents in Tehran shows, the ruling party’s grip on power in Iran is already less than firm. A feeble economy and crumbling political power are enough to make any government swallow its pride in efforts to improve the situation. In Iran’s case, swallowing its pride may very well mean entering into negotiations with the US and other Western powers to halt or restrict its nuclear program, which many world powers see as a quest to attain a nuclear weapon. Agreeing to such negotiations would lead to an end of, or at least reduction in, trade sanctions that have exacerbated Iran’s economic woes. The lower the price of crude falls, the more pressure builds on Iran’s leadership to negotiate with the West.

If oil prices stay at or below current levels for the next few months, we may see a major shift in Iran’s tack in international relations sooner rather than later. When and if that shift occurs, Iran will likely be perceived as less of a threat to relative peace and stability in the oil-rich Middle East, which could, somewhat ironically, bring about lower and steadier oil prices.

And so it seems that the price of Iran’s power to control global oil prices is its vulnerability to being controlled by them.


http://www.heatingoil.com/blog/low-oil-prices-could-lead-to-more-cooperation-from-iran211/