[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]L[/dropcap]ast week when the stock markets across the world tumbled, for once the blame was not put on the Chinese turmoil. It was the fear that lifting of international sanction on Iran would further bring down crude oil prices that sent the global markets into a tizzy. On Friday last, the apprehension about the ramifications of the end of the Iranian sanctions saw Dow Jones shedding nearly 400 points and the European indices witnessing a free fall.
Fears that the Islamic Republic could quickly ramp up production sent Brent crude falling by 3.3% to $29.43 – matching lows last seen in 2004.
The timing of the lifting of the Iranian sanctions could not have come at a worse time for the global economy, which has been hard hit by the steep fall in crude oil prices. Now that Iran will start pumping its `sweet’ crude in the market, the prices, which have already slipped below $30 a barrel, could crash further. While most of the analysts feel that crude can form a bottom in the range of $ 20-25 a barrel, some of them have even predicted the price touching $10 a barrel.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he falling crude prices have hit hard the oil economy and nations that depend on the export of crude. Already, British Petroleum has warned it would give pink slips to 4000 employees; tens of thousands more workers employed in the oil production sector across the world could meet a similar fate.
Iran is expected to add between 600,000 and one million barrels per day to its oil output. This could go up to 1.5 million barrels by the end of 2016.
The loss of revenue of oil producing nations has put a severe strain on the global economy and impacted trade between nations in a big way. The Indian exports have seen a continuous decline over the last nine quarters and a further fall in oil prices could worsen the situation.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]ndia, which had substantially reduced its oil imports from Iran under US pressure, can now freely import oil from Teheran, but would now have to pay for it in dollars.
Due to the sanctions, India has been paying Iran in Indian rupees, with the money kept in an Indian account. India has to now release an estimated $6 billion in pending oil payments to Iran.
With Gulf nations forced to keep the oil prices low to compete with situation arising out of the shell boom in the USA, the OPEC is unlikely to take any steps to cut down the production.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]O[/dropcap]n the fear that crashing oil prices could impact the revenue of oil producing nations and oil companies, stock markets across the Middle East collapsed on Sunday. The downward slide in the stock market impacted all the seven stock markets in Gulf states. Dubai’s DFM General Index slumped 4.8% to 2,682.56, Saudi Arabia’s Tadawul All Share Index crashed by 7% to hit its lowest level in almost five years, and the Qatar Exchange was down 7%.
The Indian stock market that lost over 2% last week, is poised to fall further unless the Bulls are back in the game on the assumption that Iran’s development has already been discounted by the market.
What it means for Iran
At current prices, the lifting of energy sanctions means Iran could increase its revenue from oil exports by $10bn (£6.9bn) by next year
Iran’s central bank says lifting banking sanctions will allow $30bn of foreign reserves currently frozen in accounts around the world to be brought back – the US Treasury says the figure is $50 bn.
With sanctions gone Iran could boost its GDP growth to around 5% in 2016-17, from almost zero currently, says the International Monetary Fund.
Sanctions have added 15% to the cost of trading with Iran and lifting them will save the country some $15bn yearly in cheaper trade, says Iran’s first Vice-President Eshaq Jahangiri.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]O[/dropcap]n Saturday, the US and European Union lifted international economic sanctions against Iran, by implementing a historic deal with Teheran after the UN nuclear watchdog agency confirmed it has begun dismantling its nuclear programme as promised. The removal of sanction will de-freeze about $100 billion Iranain assets and remove hurdles in the path of India and other countries to do business with Teheran.
President Barack Obama signed an executive order lifting most of US economic sanctions on Iran, the White House announced on Saturday. In a statement, Secretary of State John Kerry confirmed that the International Atomic Energy Agency has verified that Iran “has fully implemented its required commitments”.
“Iran has undertaken significant steps that many, and I do mean many, people doubted would ever come to pass.”
“And that should be recognized, even though the full measure of this achievement can only be realized by assuring continued full compliance in the coming years,” Kerry said.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he implementation came hours after Iran freed four American prisoners, including Washington Post journalist Jason Rezaian, in exchange for seven Iranian prisoners. Another American, who was not a part of the exchange, also was released.
But Republican presidential candidates Donald Trump slammed the decision saying that Iran was getting more in the deal than the US. “They’re getting seven people, so essentially they get $150 billion plus seven, and we get four,” Trump said in New Hampshire.
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