Showdown in Doha
The stalemate resulting from the oil summit in Qatar has further exacerbated the already difficult relations between Saudi Arabia and Iran. While Tehran is not giving up the chance to reach again pre-sanction production levels, Riyadh is not agreeing to hand back the sceptre of regional power and is limiting any possibility of an agreement at the expense of the public budgets of the other producing countries

At the extraordinary summit in Doha, Iran has chosen to play hard - or rather, not to play at all - dividing the exporting countries front, weakening OPEC’s unity and causing crude oil to plunge (WTI) again below the $40/barrel threshold. Although Tehran’s uncooperative approach with regard to the attempt of the exporting countries to place a limit on global crude oil production is up in the air, the decision of the Ayatollah regime not to send its own delegation to Qatar heightens the uncertainty and volatility on the international energy markets and, above all, marks the fault line of a non-rectifiable geopolitical conflict with Saudi Arabia.


Need for action

e strategy of inaction in the face of plunging crude oil prices, driven by Saudi Arabia since the OPEC summit in November 2014, has not only proven ineffective but also unsustainable for the major producing countries, which have decided to hold an extraordinary meeting in Doha in an attempt to place a limit on global oil production and to stabilize a price rise on the markets. In addition to the cartel members – excluding Iran and Libya – taking part in the meeting were also the delegations of producing countries such as Azerbaijan, Mexico, Oman and Russia, all eager to reach a broad formal agreement of historic proportions, capable of stabilizing such a volatile market and ensuring a breath of fresh air to their state coffers. The situation, in fact, is becoming financially unsustainable for most oil exporting countries. The circumstances are dramatic in Venezuela, 1 of the 4 countries promoting the extended agreement, where the tax deficit is now completely out of control, having reached 20% of the GDP. Even the wealthy members of the Gulf Cooperation Council, or GCC (Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Oman and Qatar), after more than a decade of double-digit surplus, in 2015 found themselves to be reckoning with a deficit equal to 7.9% of the GDP, with forecasts at around 3.6% for 2016. The position of Iraq, Algeria and Azerbaijan (12%, 7% and 5.5%, respectively) is also critical, while in Russia the financial impact appears significant but yet still manageable, with the deficit standing at 3% of the GDP. This situation has, virtually everywhere, led to drastic austerity policies and public spending cuts, as well as a substantial slowdown in the economic performance of producing countries.


The Iranian position

Despite the need to act quickly in order to drain this leaking of financial resources, the group meeting in Doha failed to reach an agreement to freeze production: although characterized by a less hard-line approach than the last eighteen months, Saudi Arabia in fact used Sunday’s summit to reiterate the impossibility of reaching an agreement until Tehran signs its commitment along with the other producers. Doha’s major absentee, Iran, has, however, no immediate interest in taking part in a general compromise that will reduce its production and export capacity, although it is not, in principle, contrary to a stabilization of the oil market at the expense of others. Tehran, in fact, arrives after years of international sanctions, and has no intention of limiting the recovery of its energy industry, claiming the right to return, as soon as possible, to pre-sanction production levels. A rhetoric, that of the Ayatollah regime, that dumps onto its bitter regional rival – Saudi Arabia – most of the responsibilities of the non-agreement and of the current market condition. The uncompromising attitude of the Saudi leadership in Doha, since the Iranian position with regard to the freezing of production had been clear for some time, has fueled discontent and resentment even among the main regional allies of Riyadh.


In search of new balances

The going around in circles in Doha once again confirms the inability of the producing countries to place the collective good before their own interests and immediate advantages. Despite the dynamics implemented at the February meeting between Saudi Arabia, Qatar, Russia and Venezuela, these highlighted the need to go beyond the rigid structure of OPEC and to extend the cooperation beyond the perimeter of the cartel in order to face challenges never faced before, Sunday’s extraordinary meeting shows that the path towards cooperation is still inaccessible. Broadening the decision-making basis, despite theoretically representing an excellent choice, does not in reality necessarily guarantee greater operational effectiveness. On the contrary, in the absence of a strong commitment in terms of compliance by all players involved, and especially in the absence of a mutual trust between them, the entry of new key players in the game (of which some are particularly cumbersome, such as Russia) risks further diminishing the chances of success. In the background, the conflict between a revived Iran – legitimated by the agreement on the nuclear issue and by the gradual lifting of sanctions – and a Saudi Arabia crossed by a strong wind of political change at the heart of its leadership, appears stronger than ever. Characterised by conflicting regional leadership ambitions and by divergent views on most political dossiers in the region, Tehran and Riyadh appear to have embraced the energy weapon to settle their scores, with a good harmony of the other producing countries, currently at the mercy of the tensions running through the Persian Gulf. A subtle oil war, this time between producing countries, very different from what we learned and experienced in the ’70s.