Iranian Energy: a comeback with hurdles

One year ago, on 16 January 2016, the Iran nuclear deal was formally implemented. Officially known as the Joint Comprehensive Plan of Action (JCPOA), the deal was concluded in July 2015 between Iran and the ‘E3+3’, which comprises France, Germany, and Great Britain, China, Russia, and the United States. In essence, the JCPOA allows for the lifting of several sanctions against Iran in exchange for limitations on, and greater international inspections of, Iran’s nuclear programme. In the Iranian energy sector, the JCPOA was greeted with hope and expectations of a revival. Sanctions have constrained the industry for several years; amongst other effects they have forced Western companies to leave the country and reduced oil production and exports. Indeed, implementation of the JCPOA was accompanied by the lifting of energy sector-related sanctions and has encouraged several international oil companies (IOCs) to move to Iran to explore the potential for co-operation. Against this backdrop, it is worth examining the merits of the JCPOA for the Iranian energy sector up to this point – a year since the beginning of its implementation. It is argued in this comment that the Iranian government has been trying to strike a balance between various competing power centres at home, while attempting to hedge risks at the international stage. On the ground, however, actual progress has been rather modest so far. Iran has increased its oil production to the pre-sanctions level but is still waiting to see an expansion of its productive capacity. In the meantime, uncertainty with regard to the outlook of Iran’s energy sector has increased, as the future course of US policy – incoming President Donald Trump has been an outspoken critic of the JCPOA – remains unclear.

By: David Ramin Jalilvand

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