Zanganeh Exit Brings Uncertainty for Opec-Plus

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The retirement of Iran's veteran Oil Minister Bijan Zanganeh after presidential elections on Jun. 18 will mark the departure of the longest serving oil minister in the Opec-plus alliance of producer countries. But it may not be only his experience that will be missed. Zanganeh has been combative and defiant at times, especially in recent years when US sanctions -- supported by some Opec countries -- hammered Iran’s oil exports and crippled its economy. But he is also a respected technocrat with the deft diplomatic skills needed to navigate some of the politically challenging Opec and Opec-plus meetings (IOD May17'21). Observers note, in particular, the strong working relationship he has with his Saudi counterpart, Prince Abdulaziz bin Salman, despite their countries' fierce rivalry and differences. It's not yet clear who will succeed Zanganeh when he steps down, most likely in mid-August. But whoever it is will take the reins at a sensitive time. If US-Iran talks in Vienna lead to sanctions relief, Tehran has made clear its intention to swiftly restore its crude output to pre-sanctions levels and hike exports, even if some voices within Opec-plus -- probably led by Saudi Arabia -- call for restraint. At the most recent Opec-plus meeting in early June, Zanganeh indicated that Iran would return to the market in a "transparent and orderly" way, echoing comments from Opec Secretary-General Mohammed Barkindo that were intended to allay market concerns of a sudden surge in supply. But such an approach cannot be taken for granted, says Helima Croft, managing director at RBC Capital Markets. "We can't assume that what Bijan Zanganeh says now will reflect future Iranian policy," says Croft. Future Cooperation at Risk A senior Iranian oil source insists the choice of the country's next oil minister won't affect Iran’s position toward Opec-plus, or affect its planned return to the market. Moreover, the projected huge rise in global oil demand this year and next should help absorb any increase in Iranian oil supplies, which Energy Intelligence's Research & Advisory unit expects to reach around 3.6 million barrels per day by March 2022, up from 2.55 million b/d now, under a base-case scenario. But sooner or later calls are likely to come from Iran's rivals within Opec-plus for cooperation and compromise. "I think Iran becomes an important part of the conversation, in terms of how much Opec-plus brings back, as soon as sanctions are lifted," says Croft. Those calls for cooperation may be taken less seriously if the Iranian government is headed by the presidential candidate widely expected to win Friday's vote. A victory for Ebrahim Raisi, a hard-line cleric known for his anti-Western views, would reflect the consolidation of power by Iran's conservatives. It is also likely to be accompanied by the appointment of a cabinet more aligned with the regime’s uncompromising, "revolutionary" ideology, rather than a cabinet of talented technocrats. Among those tipped to succeed Zanganeh is Rostam Ghasemi, a commander in the Revolutionary Guard who served as oil minister for two years under former President Mahmoud Ahmadinejad and who was blacklisted by the US Treasury in 2019 (IOD Oct.26'20). Masoud Mir Kazemi, another former oil minister under Ahmadinejad who was criticized for lacking experience and also has a background in the Revolutionary Guard, has previously advised Raisi. Change of Guard, Change of Policy Zanganeh's departure is not an isolated event in the upper ranks of Iran's oil sector. Other major personnel changes include the death last year of Iran's veteran Opec Governor Hossein Kazempour Ardebili, himself a skilled diplomat and negotiator who represented the country at Opec for 20 years. His successor, Deputy Oil Minister Amir Hossein Zamaninia, will probably also be replaced, sources say, as will the managing director of the National Iranian Oil Co. and many other officials in the company. When Zanganeh was reappointed in 2013, he energetically set about restructuring Iran's oil industry with the aim of reversing declining output and boosting production capacity. Among other things, he introduced the Iran Petroleum Contract (IPC) to attract foreign investors (IOD Dec.9'14). Despite signing a number of upstream deals -- notably with TotalEnergies for the $4.8 billion Phase 11 development of the giant South Pars gas field -- the IPC essentially failed to excite the industry. And Zanganeh's plans were ultimately thwarted by US sanctions, which drove investors away and saw Iran's oil production capacity stall at around 4 million b/d. With Zanganeh and his team on their way out, the likely future president favoring domestic efforts to raise capacity over Western investment, and foreign firms likely to be much more cautious about the US reinstating sanctions in future, the benefits of sanctions relief -- at least for Iran's upstream oil and gas sector -- appear less obvious this time. Simon Martelli, London, and Oliver Klaus, Dubai

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