The first major event in the history of Iran, in relation to the Organization of Petroleum Exporting Countries (“OPEC”), was the establishment of OPEC as a founding member (OPEC 1). The establishment of OPEC was made possible through the groundwork laid by Iran, and four other petroleum-exporting countries. OPEC was founded through an event called the Baghdad Conference. In the beginning there were five founding members, and this includes Iraq, Kuwait, Saudi Arabia and Venezuela (OPEC 1). OPEC was established on September 14,1960 (OPEC 1).
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In the decade of the 70s Iran was one of the most dominant petroleum-exporting countries in the Middle East (Mina 1). Rivals in the oil production business such as Iraq and Saudi Arabia provided a counterbalance to the growing influence of Iran within OPEC. If not for the presence of the two countries Iran could have dictated terms that would have been detrimental to the rest of the oil consuming nations of the world. In other words, Iran could never control the OPEC and its members. However, Iran exerts tremendous influence over the organization.
On January 2006, the Western world, led by the United States of America began to make a formal protest with regards to Iran’s nuclear program (Hoyos & Dombey 1).There is no need to elaborate the implication of a nuclear program considering Iran’s past history and its ongoing struggle with Israel. The United States and the rest of the Western world were within their rights when they echoed the fears of the free world with regards to the possibility that a totalitarian regime is armed with a nuclear device.
After the United States filed its protest through diplomatic channels, Iran made an unusual move that was difficult to interpret. Iran requested the OPEC to cut the cartel’s oil production (Hoyos & Dombey 1). It was difficult to interpret Iran’s request to reduce oil output because it was unclear if the move was based on the need to stabilize global crude oil prices or an attempt to show the Western world that Iran was ready to use crude oil as a weapon against its detractors. Iran’s request may have been rooted in noble aspirations, such as to show the world that petroleum-exporting countries were sympathetic to the world’s needs. However, Iran’s request also demonstrated the fact that Iran and other oil exporters could compel other countries to follow their lead.
Four years later after the diplomatic row over Iran’s nuclear program, OPEC’s membership grew to include seven additional members. According to one report, “On October 13, 2010, Iran assumed the rotating presidency of the OPEC” (Voice of America 1). At this point, Iran did not offer any resolution to reduce tension within the international political scene and did not make any effort to develop a transparent nuclear program so that the whole world could see the extent of their scientific pursuits. At the same time, an Iranian national at the helm of OPEC means that Iran have greater leverage against the United States and its allies.
In 2011 the United States and the rest of the Western world reiterated their concern with regards to the growing nuclear capability of Iran (Turkish Weekly 1). The United States and its allies were ready to impose sanctions in order to create an effective deterrence against the creation of a nuclear weapon. But Iran said that the uranium enrichment program was for their energy needs and not to develop weapons of mass destruction (Turkish Weekly 1). The United States and key European nations were not convinced and demanded that Iran should dismantle the nuclear enhancement program that could lead to the creation of a nuclear warhead.
Five decades after Iran’s participation in the Baghdad Conference, the country faced a significant threat through the sanctions imposed by the Western world (Krukowska 1). On July 1, 2012 the sanctions against Iran was enforced and it was a tremendous blow to the economic conditions of Iran (Krukowska 1). As a consequence Iran could not import their products to America. There is no need to elaborate the economic impact if Iran could not export its products to major oil consumers around the world.
On July 11, 2012, Iranians saw their oil output tumble (Kent & Said 1). It was the lowest production level in twenty years. The low output was the direct result of sanctions imposed by the United States and European countries. One month later, on August 2012, there were news reports that Iraq surpassed Iran as the second largest producer of crude oil (Lashkari 1).
Iran’s low output made headlines all over the world. At the same time, the Iranian government made it known that it was not pleased with the report that made the claim that Iran was no longer the second biggest producer of oil (Reuters 1). In September of 2012, Iran’s OPEC governor issued a statement that Iran was still the second largest producer of oil, and that it is only behind Saudi Arabia in terms of crude oil production (Reuters 1).
In recent years Iran was seen as a primary mover when it comes to transforming the way OPEC does business with other countries. Iran’s desire to influence the whole OPEC should not be taken lightly. In addition, it is also important to realize that Iran has political clout within OPEC. Therefore, if Iran is determined to implement or block a particular policy, there is a great chance that Iran would succeed. Despite the sanctions imposed by the Western world, Iran was still active within OPEC and in June of 2012, Iran’s oil minister urged OPEC to take action amidst significant reductions in the price of crude oil in the world market (Tehran Times 1).
There are three things to consider when it comes to assessing the influence of Iran in the context of negotiations with OPEC. First, Iran is a founding member and it means that Iran carries something intangible called prestige. There is prestige linked to the fact that through the efforts of Iran, OPEC was established. In a way OPEC owes its existence to Iran.
The next factor that has to be considered is that Iran is one of the largest petroleum-exporting countries in the world. If one will combine this with the fact that the first oil well in the Middle East was established in Iran, then, it is easier to understand the fact that Iran is ahead of the other petroleum-exporting countries when it comes to the experience and maturity needed to deal with importers and traders of crude oil. In other words Iran is the ultimate insider when it comes to the international crude oil trade. As a result Iran continues to be dominant player and its decisions would continue to have a ripple effect in world markets.
The third and final factor to consider is Iran’s strategic location. The geographic boundaries of Iran allowed for easy access to Pakistan, Turkey, Iraq, and Turkmenistan. Therefore, if Iran wants to be uncooperative and decides to disrupt the crude oil trade, then, its actions would create a problem that may be difficult to overcome. The United States and its allies are aware of these complications. Thus, even if there is a need to impose sanctions, the United States is careful to address all issues through a diplomatic process.
Hoyos, Carola and Dan Dombey. “Iran’s Plan for Oil Cuts is Snubbed by OPEC”. The Financial Times. 2006. Web.
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Kent, Sarah and Summer Said. “OPEC Sees Iran Output at 20-Year Low as Sanctions Bite”. The Wall Street Journal, 2012. Web.
Krukowska, Ewa. “Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya”. Bloomberg, 2012. Web.
Lashkari, Azad. “Iraq Beats Iran to Become OPEC’s Second Largest Producer“. RT News, 2012. Web.
Mina, Parviz. “Iran and OPEC”. Foundation of Iranian Studies, 32012. Web.
OPEC. “Iran Facts and Figures”. OPEC, 2012. Web.
Reuters. “Iran Urges Emergency OPEC Meet as Price Drops”. Reuters, 2012. Web.
Tehran Times. “Iran Still Biggest Producer in OPEC”. Tehran Times, 2012. Web.
Turkish Weekly. “OPEC: Iran’s Oil Output Drops by 46,800 BPD”. Turkish Weekly, 2012. Web.
Voice of America. “Iran Elected to OPEC Presidency”. Voice of America, 2012. Web.