The Wall Street Journal reported on Wednesday that the White House, despite its promises a year ago to have a ‘longer and stronger’ nuclear pact with Iran, would likely roll out concessions in Iran nuclear deal.
According to the report, last January the Biden administration came to power pledging to revive the 2015 Iran nuclear deal that his predecessor had abrogated. That, however, was supposed to be just the beginning. Incoming national security adviser Jake Sullivan insisted that doing so would be a prelude to a “longer and stronger” deal with Tehran. Fast forward 12 months, and the likeliest outcome of the Biden administration’s diplomatic outreach is a compromise pact far less comprehensive and robust than the original.
The reason has to do with oil. As the U.S. Energy Administration has noted, “oil prices rose during much of 2021, with Brent crude oil spot prices averaging $71 [a barrel] for the year compared with $42/b in 2020.” Today, the price for crude on the world market is even higher, nearly $85 a barrel.
This surge has been a significant driver of the president’s plummeting popularity. Administration officials are desperate to find a way to lower prices and reduce what Americans are paying at the pump. Iran could provide part of the solution they are seeking.
While the Islamic Republic ranks as a bona fide energy superpower, the “maximum pressure” policy of the Trump administration profoundly crippled Iran’s global oil trade. By 2020 its output had declined to a historic low of less than two million barrels a day as U.S. sanctions kept Iran from selling crude abroad. This, however, is only a temporary condition. Without persistent pressure on potential clients, Iran’s energy trade could resume business comparatively quickly.
Iran has massive quantities of oil, which could be brought to market almost immediately. These reserves, kept in Iran or offshore, are estimated to total around 120 million barrels—equivalent to more than a day’s worth of oil consumed by the entire planet.
Analysts also predict that the Islamic Republic could increase its oil output in short order. Iranian officials have already announced plans to scale up production to the pre-sanctions level of four million barrels daily by as early as this spring.
Such a surge could make a real difference in today’s market. Global demand for energy is currently outpacing supply, and the addition of Iranian supplies would significantly boost the amount of available crude, and could consequently lower global oil prices by as much as 10%. That scenario depends on loosening current U.S. sanctions against Iran—which the Biden administration could do.
That’s the calculus now confronting the White House. Any deal with Iran, no matter how flimsy, would provide sufficient justification for the Biden administration to begin rolling back sanctions, especially on Iran’s oil industry. If that happens, Iranian crude would flood the market, available supply would go up, and the marginal price of oil (and consequently refined products like gasoline) would go down. And that, in turn, will ease at least some of the inflationary and economic pressure confronting President Biden at home.
All of which gives the Biden administration, which once promised a robust effort to contain and deter Tehran, the incentive to reach an accommodation with Iran, no matter the particulars.