The Doha negotiations revealed the outline of a new balance of power in the region. Iran's influence is going up, leading to improved relations with the United States and Europe, while the influence of Saudi Arabia is declining.
The main reason for the Doha talks failure was the fact that Saudi Arabia did not accept the position of Iran which is going to increase production rate decreased as a result of the western sanctions. “Its requests for production limits are much higher than the current levels,” Bochkarev said. “Russia has not approached the ceiling, but is about to. It can easily freeze production at the current level (almost 11 mln barrels a day), the Saudis are approaching their limit, too, while Iran needs to sharply increase both production and exports. Iran has requested 4 million barrels a day, which is much more than they have now, and they will not reach this level overnight,” he added.
Bochkarev believes it will take 6 to 12 months for Iran to restore production levels, but it does not mean that no new attempts to stabilize oil prices will be undertaken. “Now we can see that the Saudis’ main objective – to knock shale oil, Canadian tar sands and subsea rigging [out of the market] – has been achieved, and production is being decreased. At this moment, the comfortable price for investment in the US shale oil is $40-50 a barrel. Cartel agreements to manipulate oil prices are useless when oil is at above $60. But when it is at $40-50, any decision can significantly influence the markets,” he explained.
According to Bochkarev, the Doha negotiations revealed the outline of a new balance of power in the region. "Iran's influence is going up – and the nuclear deal helped them a lot in this respect, leading to improved relations with the United States and Europe, while the influence of Saudi Arabia is declining," he noted.
This is due, in part, to a certain chill in relations, which began between the US and Saudi Arabia. According to Bochkarev, the US establishment considers Saudi Arabia to be a more unstable country than Iran, and is willing to return to an alliance with Tehran, as before the 1979 revolution, when Iran and Israel were the United States’ main allies in the Middle East.
"When relations with the United States began to slump, Riyadh began seeking to diversify relations, including establishing friendly relations with Russia,” said Bochkarev. “There has been a common interest in oil. It is more pronounced for Russia, but also matters for Saudi Arabia, given that its reserves have shrunk greatly, and with current prices, they can keep going for four years. Against the backdrop of the geopolitical turn, a basis has emerged for at least a short-lived rapprochement between Riyadh and Moscow."
According to Bochkarev, Iran's departure from international isolation will lead to a certain weakening of Moscow's influence on Tehran, but not to the changing international priorities for the country.
"Iran will have additional opportunities to reach Europeans and Americans, and not just Russia and China, but Tehran will not put all eggs in one basket and focus only on the US and the EU", he concluded.