Syed Rashid Husain If signals emanating from Washington, Vienna and Tehran are to be taken seriously, the crude world is getting prepared to accommodate additional flow from Iran — sooner rather than later. The reality that was unthinkable at least until last November now appears a virtual possibility. Much would depend on the outcome of ongoing negotiations between Tehran and P5+1. However, the will to take the negotiations to a final agreement is apparent. Abbas Araqchi, Iran's deputy foreign minister and one of the country's top nuclear negotiators, said Tehran is determined to continue nuclear talks with the world powers. An Iranian official says negotiations are tough, but moving forward. “Negotiations are in a path that we can say they are (being conducted) with difficulty, but moving forward,” spokesman for the Atomic Energy Organization of Iran (AEOI) Behrouz Kamalvandi told IRNA. And now the two sides have agreed to meet again on May 13 in Vienna, to begin drafting the text of a final, long-awaited deal on Tehran's peaceful nuclear program. The two sides also planned to hold an expert-level meeting early May in New York to prepare the ground for the next round. Once the deal is clinched, the constraints on Iranian crude outflow would be lifted. Paving way for a final deal, the United Nations' nuclear monitoring body in a report attested that Iran was complying with the terms of an interim nuclear agreement struck between the country and six world powers last November. In its monthly report released mid-April, the International Atomic Energy Agency (IAEA) said Tehran has diluted half of its uranium earlier enriched to the 20-percent purity to a lower grade to power reactors. The other half of the stockpile is to be converted into a form that would be relatively difficult to be reconverted to the 20 percent level. Giving a boost to the overall sentiments, IAEA head Yukiya Amano emphasized: “I can tell you, these measures (by Iran) are being implemented as planned.” Iran and the six world powers – the United States, France, Britain, Russia, China and Germany – sealed an interim deal in Geneva on November 24, 2013 to pave the way for the full resolution of the decade-old dispute with Iran over the country's nuclear energy program. The deal came into force on January 20. Under the Geneva deal, dubbed the Joint Plan of Action, the six countries have undertaken to provide Iran with some sanctions' relief in exchange for Tehran agreeing to limit certain aspects of its nuclear activities during a six-month period. Capitalizing on the window of opportunity provided by the interim deal, Tehran has been working overtime to increase its crude sales, its economic lifeline, bypassing the constraints. Tehran is the new variable, beginning to impact the overall global energy equation now. Already China, the world's largest crude buyer's imports from Iran, rose in March by more than a third from a year ago, keeping imports in the first three months of 2014 close to the levels seen before Western sanctions were applied more than two years ago. China's intake from Iran rose 36.1 percent in March to 555,182 barrels per day (bpd), customs data showed. China's imports have been higher this year largely due to new volumes of condensate, a super light crude, and also because top refiner Sinopec Corp may have boosted liftings under a long-term agreement, traders said. China's oil arrivals from Iran in the first quarter of this year were seen at 557,605 bpd, up 36.2 percent from a year ago. On a daily basis, China's March imports of Iranian oil climbed 0.5 percent from February's 552,613 bpd. Ship loading data seen by Reuters shows that China's crude and condensate intake this month — based on March tanker schedules — should be around 562,000 bpd before jumping to more than 600,000 bpd in May. In fact, China may have trouble holding down its own Iranian oil imports in 2014 as state-run trader Zhuhai Zhenrong Corp is negotiating a new condensate contract to supply an independent petrochemical firm Dragon Aromatics, Reuters reported. Dragon Aromatics has, since the second half of 2013, been buying condensate from Iran as feedstock. On the other hand, Sinopec, under a new push to cut crude purchase costs, may have stepped up Iranian oil lifting since late 2013 as the supplies are deemed competitive versus similar grades, traders were reported as saying. Iran's oil exports in March thus have stayed above levels allowed under Western sanctions for a fifth month, sources tracking tanker movements were quoted as saying. Iran's crude exports have averaged 1.3 million barrels per day (bpd) in March, though down from 1.4 million bpd in February, one source said. That is still an elevated rate, as imports of Iranian oil in 2013 averaged 1.1 million bpd. A second tanker tracking source told the press that Iranian crude exports, excluding to Japan, reached 1.28 million bpd in March and included sales to top buyers such as China and India as well as South Korea, Turkey and Tehran's major ally Syria. That points to steady Iranian shipments overall, he added. "Shipments to India stand out in March and it looks like there has been a slight increase which works out at around 326,000 bpd, up by around 14 percent from February," said the source, who declined to be identified. And in the meantime, the IEA's monthly report has also revised February's crude imports from Iran upwards by 240,000 bpd to 1.65 million bpd, the highest since June 2012. The sanctions had a crippling effect on Iranian oil industry. In the latter half of the last decade Iran was pumping around 4 million bpd. Courtesy the sanctions, Iranian exports had dwindled to less than a million bpd, generating economic mayhem for Tehran. Apparently the dire economic scenario compelled President Rouhani and his team to break open with the policies of the former president Ahmedinejad and carve out a more open relationship with West, especially on the nuclear issue. Iran has also unveiled plans to double its oil production by the end of the decade, pumping billions of dollars of its currency reserves into developing its share of the world's largest natural gas reservoir in the Gulf. Oil minister, Bijan Zanganeh, has set a new output target of 5.7m barrels per day (bpd) of crude by 2018, according to the official state-run news agency Shana. OPEC says Iran is currently pumping about 3m bpd of crude. In the backdrop of the anticipated full return of Tehran into the folds of the markets, OPEC seems also getting reading for the ultimate eventuality. OPEC will accommodate additional output from members, Secretary-General Abdalla El-Badri was quoted as saying. OPEC foresees gradual increases from Iraq and Iran and Libya. "There is no problem for OPEC to absorb any production increment from Iraq and Iran in 2014," El-Badri said. The reality is finally dawning on major stake holders.
