Experts expect no progress at the Vienna nuclear talks

This image provided by IIPA (Iran’s International Photography Agency) shows a view of the reactor building at the Russian-built Bushehr nuclear power plant when the first fuel is loaded, on August 21, 2010 in Bushehr, in the southern Iran.

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The United States and Iran are stepping up their efforts to resolve a nuclear showdown that has global oil markets on edge and experts skeptical of success.

“It is a crucial time for these negotiations,” Helima Croft, global director of commodity strategy at RBC Capital Markets told CNBC’s Hadley Gamble, as representatives met in Vienna, Austria for “indirect talks” aimed at Both countries will once again comply with the 2015 Nuclear Agreement.

“We enter the election season in Iran in a couple of weeks, and if we do not make significant progress in these negotiations, everything is likely to freeze,” he said.

While the talks are the most significant step forward so far in efforts to revive the deal, neither side expects any major breakthrough. Iranian officials want the United States to end Trump-era economic sanctions before returning to compliance, a concession Washington appears unwilling to accept.

“I don’t think we can wait long,” Albert Wolf, associate fellow at the Johns Hopkins School of Advanced International Studies, told CNBC on Tuesday.

Skepticism about the talks was compounded by reports that European officials would act as intermediaries between the United States and Iran, rather than the two sides meeting face-to-face to discuss the issues.

“There have not even been formal or informal talks between the US and Iranian sides, so it looks like, at this point, these talks are going to be a failure,” Wolf said.

Others, including former US Secretary of Energy Ernest Moniz., They have said that time is running out for the United States to engage in meaningful diplomacy. The Iranian elections in June are expected to bring more hard-line political leadership, following years of economic suffering brought on by the Trump administration’s sanctions following Washington’s withdrawal from the deal in May 2018.

Iranian Foreign Ministry spokesman Saied Khatibzadeh gestured during a press conference in Tehran on February 22, 2021. Iran hailed as a “significant achievement” a temporary agreement reached by Tehran with the head of the nuclear watchdog. of the UN on site inspections.

Photo of ATTA KENARE | AFP via Getty Images

US officials themselves appear to be equally sober about the talks.

“We do not underestimate the scale of the challenges that lie ahead. These are the early days,” State Department spokesman Ned Price said during a press call Monday.

“We do not anticipate early or immediate breakthrough as these discussions that we expect will be difficult. But we believe that these discussions with our partners and, in turn, our partners with Iran is a healthy step forward.”

Price added: “We do not anticipate at this time that there will be direct talks with Iran, although of course we remain open to them. Therefore, we will have to see how things go early this week.”

Barrels coming back

As one of OPEC’s largest oil producers, Iran’s exports fell dramatically in the years after the United States withdrew from the Joint Comprehensive Plan of Action. A return to the agreement and the lifting of US sanctions on Iranian crude could significantly affect the dynamics of the oil market.

Croft said that “a significant move” in the talks would increase the possibility that large quantities of Iranian oil will return to the world market.

“If they make a big breakthrough in the next two weeks, I think we could be seeing significant amounts hitting the market in the second half of the year,” he said.

However, he added that if Washington or Tehran hurries and there is no progress, the chances of reviving the agreement and fully restoring Iranian exports this year will be greatly reduced.

However, not all market watchers see the talks with Iran as important for the price of crude in the short term. Goldman Sachs analysts, led by Damien Courvalin, do not see a full rebound in Iranian oil exports this year.

“After an increase in Iran’s exports so far this year, our base case remains that a full recovery will not occur until the summer of 2022, implying a deal likely in early 2022,” the analysts wrote. from Goldman in a note Tuesday.

“Even if a deal comes earlier, we believe it would not derail our constructive view of oil relative to market futures until 2022, given OPEC’s likely countervailing response and the consensus expectation for Iran’s return next year. “.

Iranian Crude Exports to China

Iranian crude production has seen a sharp rise in recent months, reaching 2.14 million barrels a day in February, according to S&P Global Platts, “an increase of 190,000 b / d from a 33-year low of 1.95. million b / d in August “. the company reported.

The momentum comes as Tehran increases its oil shipments to China in defiance of Washington, a venture made possible with the help of anti-detection methods such as turning off its ships’ transponders or the AIS (Automatic Identification System), a technique that has led their ships to be referred to as “ghost ships”.

While US officials have condemned this practice, Croft warned that Washington’s economic clout may have eroded thanks to stronger oil prices and growing Iranian exports to China.

“It does not appear that Iran has a tremendous fear of being detained by the US government,” Croft said.

– CNBC’s Amanda Macias contributed to this report.


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