A future of unknowns
Iran views the OPEC agreement positively, with one caveat. Its positive short-term effects on prices and Iran's production capacity could be countered by a more hostile administration in Washington

On September 28, 2016, after eight years of negotiations, OPEC finally reached a preliminary agreement in Algiers to reduce oil production quotas from 33.2 million barrels per day (bpd) to 32.5 million bpd. Saudi Arabia will reduce its production by approximately 500,000 bpd, while the  UAE has seen a decline in its total production by 150,000 bpd. The agreement includes further reductions in production, amounting to 1.2 million bpd for non-OPEC countries such as Russia, which will cut its oil production by approximately 300,000 bpd. The announcement of the preliminary agreement quickly caused significant changes in oil prices, which increased from $26 per barrel in February 2016 to $54 in January 2017. However, this decrease in production may not be enough to produce significant long-term effects on oil prices. OPEC hopes for a possible increase in oil prices in the first quarter of 2017 to close to $60. The final agreement was formalized on November 30, 2016 during the meeting in Vienna of the 14 OPEC producing countries. This cut, less than one percent of global production, came after months of discussions between the major producing countries, especially between Iran and Saudi Arabia. Between September and November 2016, constant technical meetings were held between Saudi and Iranian delegates to finalize the agreement. The Iranian authorities have attempted to delay the reduction in oil production as much as possible. Tehran’s goal during the negotiation stage was to return to production levels close to those of the period prior to the international sanctions imposed in 2003 before agreeing to any cut in production. Therefore, the decision made in Vienna during the November OPEC meeting will not involve a reduction in Iranian oil production. Iran will continue to pursue its goal of increasing production in the domestic oil market, offsetting the reduced production levels of other countries, especially Nigeria and Venezuela. Meetings continued after reaching the agreement in Vienna, with the aim of creating a committee for monitoring the production cuts comprised of five OPEC and non-OPEC countries (Kuwait, Algeria, Venezuela, Oman and Russia). According to the data provided, the countries that agreed to cut their oil production are to date complying with the Vienna agreement. In February 2017, the committee began presenting a monthly report on the oil production cuts.

Iran's positions during the negotiation phase

The Iranian authorities immediately expressed their support for the preliminary agreement in Algiers. Specifically, Iranian Oil Minister Bijan Zanganeh admitted that Iran could only look with favor towards a formal agreement for the freezing of oil production. The Iranian authorities, during the technical meetings held between September and November 2016, focused on an agreement providing for a ceiling to Tehran’s oil production as close as possible to four million bpd. According to some analysts, the Iranian authorities have finally given the green light to a first cut in production, as hoped for by the Saudis, only because this would not necessarily involve a downsizing in Iran’s production capacity. In other words, despite the cut in oil production established by OPEC countries, Iran could also pursue its goal of increasing production in the domestic oil market. The ceiling to which the country can aspire, according to Iranian analysts, is 4.2 million bpd, approximately 13 percent of OPEC production. This is a very high level of production, considering the improved quality of Iranian technology in the oil sector and only a partial lifting of the international sanctions against Tehran following the entry into force of the Vienna agreement in January 2016. For these reasons, according to the Financial Times, Iran’s capacity to increase production in a short period of time to up to 3.9 million bpd has yet to occur. Therefore, Saudi Arabia wanted to leave the current estimate of 3.6 million bpd in Iran unchanged. The Saudi authorities estimate the maximum level to which Tehran could aspire at this stage at 3.7 million bpd. The Vienna agreement in oil production cuts came in an encouraging context for the Iranian economy. According to the Iranian oil minister, the production level recorded at the end of 2016 was 3.8 million bpd, close to pre-sanction levels, 4.2 million barrels per day, when Iran was the second largest oil producer within OPEC. Not only that, Iran has signed numerous oil industry contracts in recent months. The latest concerned the company Setad, which signed an agreement amounting to $2.5 billion for the development of the oil wells of Yaran. Moreover, foreign investments have also involved other industries, especially the automobile industry. Italy, Germany and France, the three European countries that first unfroze billions of Iranian currency frozen in local banks, are competing for primacy of bilateral trade with Iran.

Iran's reactions to the OPEC agreement

After the announcement of an agreement, Tehran immediately confirmed that it ''will not cut'' its oil production. The agreement will instead allow Iran to continue to invite foreign companies to invest in its energy industry.  Even Iranian oil export levels are slowly returning to pre-sanction volumes. While in 2003 Tehran exported 2.5 million barrels of crude oil per day, in 2015 export levels declined to just 1.3 bpd and rose back up to 2.6 million bpd in September 2016, following the entry into force of the Vienna agreement on the nuclear issue. According to Reuters data, in February 2017, Iranian oil export volumes remain below September 2016 levels. This would suggest that Iran is experiencing difficulty in finding new buyers. Crude oil exports are expected to be 2.2 million bpd in February 2017, the lowest level since July 2016. However, Deputy Oil Minister Abbas Kazemi has assured that Iran’s intentions are to significantly increase oil production and export volumes in 2017, thanks to improvement in extraction technology. Iran’s main customers are Asian countries, which will import 1.5 billion barrels of oil by February (Reuters data). Exports to Europe were 610,000 bpd in January 2017, down from the 800,000 bpd recorded in December. 70,000 bpd are sent to the Dutch market alone. Here, another taboo imposed by the sanctions against the Iranian nuclear program has been overcome. Iran is intensifying its delivery of foreign oil operating from the port of Rotterdam, this following the easing of restrictions on ship insurance approved in April 2016 as a result of the 2015 Vienna agreement. In recent months, large Greek and Croatian oil tankers have transported Iranian crude oil from the island of Kharg to Spain, Italy and Thailand. Thirty-two thousand barrels of Iranian oil per day were delivered to Italy in January 2016 while 110,000 will be exported this February. Exports to Spain will grow from 30,000 to 70,000 bpd. According to Reuters data, as many as 25 European and Asian countries are transporting Iranian oil abroad. This has enabled the limits imposed by the international sanctions to be overcome must faster than expected. Until April 2016, the Iranian authorities had encountered many obstacles to exporting local oil. However, some companies remain skeptical regarding the possibility of doing business with the authorities in Tehran, especially due to the continued restrictions imposed by the United States. Despite this skepticism the Iranian Oil Ministry has promised new plans for the exploration of oil fields in the south of the country, and at least a dozen international companies could be involved in the revival of the industry. According to Ali Kardor, Director of the National Iranian Oil Company (NIOC), the foreign companies involved in the recovery plan will be mainly European and Asian.

The nuclear deal and relations between Iran and the United States

Iran has effectively returned to the global market as a result of the Vienna agreement of July 2015 and the rapprochement between the Obama administration and the moderate presidency of Hassan Rouhani. However, the election of Donald Trump in the United States and his first executive orders have already produced an outcry from ultraconservative Iranians who could do well in the country’s presidential elections in May 2017. Were they to prevail, it could bring the country to a confrontation with the international community, a confrontation similar to that which occurred during the presidency of Mahmud Ahmadinejad (2005-2013). Specifically, the appointments of Michael Flynn as National Security Advisor and Mike Pompeo as head of the CIA, both opposed to the agreement reached in Vienna by France, Great Britain, Russia, China, the United States and Germany (P5+1) in July 2015, could call into question and possibly reinstate international sanctions against Iran. This is why the outgoing director of the CIA, John Brennan, warned President Donald Trump that revoking the agreement with Tehran would be a ''disaster'' and ''the height of folly''. Possibly Moscow could mediate to facilitate a full implementation of the agreement, with the aim of reaching a shared solution with Washington on the Syrian crisis. U.N. Security Council Resolution 2231, which acknowledges Iran’s right to enrich its uranium for civil purposes, should ensure the air-tightness of the Vienna agreement. However, Michael Flynn warned the Iranian authorities that further breaches would not be tolerated, specifically referring to ballistic missile tests such as the recent one carried out by Tehran on January 29, 2017. According to Flynn, this would be a breach of Resolution 2231 and of the nuclear deal, which he assessed as ''weak and ineffective''. Iran’s reactions to these statements were not long in coming. ''Iran will remain indifferent towards Washington’s threats'' and ''will not seek the permission of any country to defend itself'', reiterated Ali Akbar Velayati, Advisor for International Affairs of the Supreme Leader, with regard to the warnings made by the U.S. authorities. As if that wasn’t enough, on December 2, 2016, the U.S. Congress approved a ten-year extension to the Iran and Libya Sanctions Act (ILSA). The U.S. sanctions against Libya and Iran were approved for the first time in 1996 and would have expired at the end of next year. The possibility that the U.S. would take a step back from the Vienna agreement soon provoked strong reactions in Iran. Specifically, Supreme Leader Ali Khamenei heavily criticized the new package of sanctions approved by the U.S. Congress against Iran. ''There are no differences between the imposition of a new ban or the continuation of a previous one. The latter is an explicit denial of what was agreed with the Americans'', said Khamenei. The Supreme Leader added that the new measures are a breach of the nuclear deal. In response to the imposition of the new sanctions, Tehran immediately announced the start of a plan for the production of nuclear marine propellers and of legal action against Washington for failure to lift the international measures against Iran as provided for by the Vienna agreement. The announcement was confirmed by the Atomic Energy Organization of Iran (AEOI), previously accused by the Atomic International Energy Agency (AIEA) of having resumed the enrichment of uranium to levels above the limits set by the Vienna agreement as of November 2016. In a letter written by Hassan Rouhani to the Iran’s Chief Negotiator and Foreign Minister Javad Zarif, the Iranian president reported on ''delays in implementing the nuclear deal'' and a ''blatant breach'' of the Vienna agreement in relation to the new sanctions approved by Washington. Therefore, the Iranian government continues to look towards Russia and Europe to balance the freeze in its bilateral relations with the United States. The Iranian authorities have signed a memorandum of understanding for $2.2 billion with Russian company Gazprom and another agreement with Royal Dutch Shell for the development of two of the country’s major oil fields, Azadegan Sud and Yadavaran. Billion-dollar agreements have also been reached with France’s Total, Germany’s Wintershall, Holland’s Schlumberger and Norway’s DNO.

A program of expansion in international disputes

Since 2013 and for the coming years, the Iranian authorities have been and will be committed to following a policy of rapprochement with the international community, one drawn up by the former moderate president, Hashemi Rafsanjani, who died on January 8, 2017. This policy provides for the easing of the main international disputes, from the nuclear program to the downsizing of bilateral tensions with Saudi Arabia. In the first case, the Vienna agreement of July 2015 established Tehran’s return to the global market; in the second case, the agreements of Algiers and Vienna of September and November 2016 for the reduction in OPEC oil production reiterated Iran’s right to return to pre-international sanction oil production and export levels. This latter decision could mark an expansion in the bilateral relations between Iran and Saudi Arabia, which are currently extremely tense as a result of the conflicts in Yemen and Syria. Curbing the enthusiasm of Iranian negotiators, on the one hand, is the skepticism of the conservative elite and Iranian radicals who never believed in a long-term rapprochement with the United States and, on the other, the Trump administration’s new policies in the Middle. The temporary ban on entry into the United States of citizens from seven mostly Islamic countries, including Iran, has led to the approval of non-retroactive reciprocity measures by Iranian authorities. In addition bad feelings exist due to the delay in compliance by the U.S. in lessening international sanctions  instituted by the outgoing administration of Barack Obama concerning the end of the banking sanctions against Tehran. Finally, despite the significant increase in oil exports to Europe and Asia, the return from foreign investments, especially European, and the achievement of one of OPEC’s main goals, that is, the long-term increase in oil prices thanks to a reduced output, are not preventing an escalation in bad bilateral relations between Iran and the United States, which could result in a phase of continuous tensions between Iranian authorities and the Trump administration.  A new phase of strengthened Iranian ultra-conservatives as a response to a tightening in U.S. foreign policy could lead to many setbacks on both the nuclear issue and as regards the end of international sanctions. Ultimately, this could downsize the short-term positive effects that a cut in oil production has caused, both in terms of oi prices and Iran’s ability to return to good crude oil production and export levels, close to pre-sanction volumes.