Last week in Geneva, a deal was struck between Iran and six world powers, including the U.S. and the European Union, to relax global trade restrictions on cars, petrochemicals, aviation parts, gold, and insurance for oil cargoes. Additionally, Iran will be permitted to continue exporting oil at current levels instead of forcing further reductions.
The agreement is aimed at reducing the advancement of Iran’s nuclear program and will require them to curtail sensitive nuclear activities, reduce its stockpile of enriched uranium and agree to increased international inspections of its nuclear facilities in exchange for this selective easing of sanctions. Over the next six months, U.S. Secretary of State John Kerry and his partners from the U.K., France, Germany, China and Russia will pursue a final agreement that could yield a far-reaching easing of sanctions.
Iran has suffered approximately $120 billion in lost revenue since the U.S. and European Union started imposing strict penalties on energy, ports, insurance, shipping, banking and other transactions in 2010. The limited relief provided by this temporary deal will have little impact on Iran’s economy, which has continued to contract largely due to the restrictions on crude oil exports. Once the second largest producer in OPEC, Iran has fallen to the sixth largest producer due to the sanctions that took effect in July 2012.
However, due to this relaxing of restrictions, companies that transport Iranian oil are potential beneficiaries of the agreement. The lifting of an EU ban on insuring tankers carrying Iranian crude also will ease the process of importing it to countries including India and Turkey. While the U.S. sanctions that reduced Iran’s crude exports by 60 percent since last year will continue, the deal eases some rules so buyers of Iranian oil and the shippers transporting it will be able to maintain their current volumes.
For a more in depth look into the Iran deal, check out this article from Bloomberg.
