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Business

Iran snubs oil giants, but optimism prevails

All eyes were on Iran as international leaders and global markets alike root for an end to the flood of cheap oil that's wreaking havoc on the world economy. But Tehran has stopped short of providing relief.

"Iran supports any measure to boost oil prices," Iranian Oil Minister Bijan Zanganeh said in the country's capital, Tehran, on Wednesday following talks with his counterparts from Iraq, Venezuela and Qatar.

But while he expressed his government's support for joint efforts to tackle the supply glut, he would not commit to turning off the taps at the nation's refineries.

The closely-watched announcement came a day after four of the world's biggest oil producers presented a surprise deal following a closed-door meeting in Doha. Russia, Saudi Arabia, Qatar and Venezuela said they were ready to freeze output at January levels as part of a global pact to keep markets from completely drowning in cut-rate barrels and shore up prices.

Markets were flush with excitement at the prospect of an agreement which would not only bring some much-needed stability to the volatile commodities market, but also mark the first joint OPEC and non-OPEC deal in 15 years. Russia is the only of the four countries, which is not a member of the oil cartel.

But there was one catch: Other major exporters must follow suit, they said, freezing their production to ensure fairness. Immediately, attention turned to Iran - the long-time arch rival of Saudi Arabia - which only returned to the international market last month after years of crippling sanctions, and has been

itching to crank up production

to fill up its state coffers.

Big surprise?

While Wednesday's announcement may be a disappointment, it barely came as a surprise. Iran was quick to bark at the proposal that levels be frozen at January levels - a month in which Russia and Saudi Arabia pumped out oil at near record highs, whereas Iran produced at least 1 million barrels per day below its capacity.

Watch video 11:16

Cheap oil and the consequences

Iran's envoy to OPEC, Mahdi Asali, had earlier said it was up to Saudi Arabia and others to cut production. He said the four nations that participated at the Doha gathering could stabilize oil prices on their own - if they cut their production by 2 million barrels a day.

"These countries increased their production by 4 million barrels when Iran was under sanctions," Asali was quoted as saying by Iran's Shargh daily. "Now it's primarily their responsibility to help restore balance on the market. There is no reason for Iran to do so."

A senior source familiar with Iran's thinking was equally quick to shoot down the preconditions. "We have not yet reached our level of pre-sanctions production. So when we get there, we will be on an equal level, then we can talk," he told the Reuters news agency following Tuesday's news.

'First step'

Still, the Iranian oil minister on Wednesday indicated that Tehran may budge - at some point - saying "this is the first step and other steps should also be taken."

But he didn't go as far as to bow to Riyadh's terms: "This cooperation between OPEC and non-OPEC members to stabilize the market is good news. We support any effort to stabilize the market and prices," the Iranian Shana news agency quoted the minister as saying.

With or without Iran, the question is whether the other oil giants can afford to wait to act. Whereas a barrel went for as much as $115 (103 euros) in mid-2014, it recently dropped below $30. This nose-dive has been particularly

excruciating for countries like Russia

, Saudi Arabia and Venezuela, whose budgets rely heavily on energy revenues. Riyadh, for instance, ran a $98- billion-budget deficit last year.

For now, at least, markets appear optimistic that the pain of the past months could soon subside. "Most of the major oil producing nations are willing to freeze their oil output and if this is backed up by evidence in the coming months then we could be seeing the light at the end of the tunnel soon," said Forex.com analyst Fawad Razaqzada.

pad/hg (AP, AFP, Reuters)

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