Iran’s top diplomat has embarked on a three-nation tour of the Gulf aimed at boosting ties with Arab neighbours following the landmark conclusion of Tehran’s nuclear deal with world powers.
Mohammad Javad Zarif, the Iranian Foreign Minister, visited Kuwait, Qatar and Iraq on Sunday (26 July).
The countries in the Middle East region have welcomed the nuclear deal struck on July 14 between Iran and the five permanent members of the UN Security Council plus Germany (P5+1).
Saudi Arabia’s Minister of Foreign Affairs, Adel bin Ahmed Al-Jubeir, was quoted by Saudi Press Agency as saying that all countries in the region want to see a peaceful solution for the Iranian nuclear programme, welcoming the agreement that is ‘based on a strong and continuous inspection system to reassure Iran’s non-violation of the accord’s clauses.’
However, the agreement, which was struck in exchange for the lifting of economic sanctions, has triggered an apprehension among the oil-exporting countries that Iran will now be able to flood the market with its oil.
This might have serious negative consequences on the world’s oil market, which has seen a massive drop in prices since last summer. Also, the International Energy Agency (IEA) has recently warned that oil prices, despite having stabilised in recent months, may fall further because of a massive oversupply.
Oil matters most
Zarif’s trip is being seen as an important diplomatic attempt to allay the fears of Iran’s neighbours after the country announced that it was targeting oil and gas projects worth $185 billion by 2020, outlining plans to rebuild its main industries and trade relationships following the nuclear agreement.
Iran, a member of the Organisation of the Petroleum Exporting Countries (OPEC), has the world’s largest gas reserves and is fourth on the global list of top holders of oil reserves. The country has been holding up to 40 million barrels of crude oil and condensate in floating storage, which it has been unable to sell because of the sanctions imposed on it over the past years.
Though analysts have said that the oil-exporting countries in the Middle East have no imminent reason to worry about a drop in oil prices at the outset of Iran’s re-entry into the market, a price of $60 per barrel will push most of the governments in the region to run deficits, which may force them to keep a close watch on their budget expenditure.
Moreover, the International Monetary Fund has already forecast that cheap oil will push the UAE into first fiscal deficit since 2009: it is here that the worry lies.
Many see Zarif’s visit as the beginning of a long process of Iran re-establishing amicable relations with the countries in the Middle East.
According to Iran’s Press TV, Zarif called for a united front among Middle Eastern nations to fight terrorism. He made the statement at a news conference hosted by the Iranian Embassy in Kuwait before he left for Qatar, a country with which Iran shares control of a vast underwater natural gas field.
In Iraq, a Reuters report says, Tehran has close ties with senior government leaders and Shiite militia groups. The report adds that Iran is playing an active role in fighting Islamic State militants who have seized a third of the country.
Meanwhile, AlJazeera reported that, a day before Zarif set out on his trip, Bahrain said it had foiled an arms smuggling plot by two Bahrainis with ties to Iran and announced the recall of the Gulf island kingdom’s ambassador to Tehran for consultations after what it said were repeated hostile Iranian statements.
Reuters quoted Iranian deputy foreign minister Hassan Ghashghavi as saying that Bahrain’s government disagreed with Iran’s “support of oppressed people in their country”.
“However we will continue doing so and we insist that the oppressed people of Bahrain need attention,” he added in the Reuters report.
In light of all these developments, one may expect to see Iran sending delegations to the rest of the region in days to follow.
It looks like this is going to be a complex, long battle for Iran, but peace and cooperation will be essential for the region’s political and economic stability.