Valdai Club

If we consider the scale of global economy and energy, including deliveries, we’ll see that Iran’s share in global oil production is quite moderate at 1 or 2 percent of the total.

When he was in Tehran, Russian Minister of Energy Alexander Novak discussed bilateral relations in energy. Unfortunately, his visit has failed to advance the possibility of Iran’s agreeing to freeze oil production, contrary to observers’ expectations. Valdai Club expert Andrei Baklanov, deputy board chair of the Association of Russian Diplomats, believes that an agreement on oil prices was not a priority at the talks in Tehran.

“The talks primarily concerned bilateral cooperation and were highly successful in terms of results,” Baklanov told valdaiclub.com. “In particular, the sides agreed that Russia would build a large thermal power plant and that they would continue their cooperation in the field of alternative energies, including solar energy. They also discussed several other constructive issues,” he said.

Furthermore, Novak’s visit has no direct connection to the energy market, Baklanov said. “Alexander Novak is co-chair of the Russian-Iranian Interdepartmental Commission on Trade and Economic Cooperation. During his visit, he was to meet with the top leaders of Iran’s economic ministries and agencies, including the ministers of energy, oil and information and communication technologies,” he said.

Baklanov pointed to the politicized and unprofessional nature of fears concerning a dramatic change in oil prices following Iran’s re-emergence in the global oil market. “If we consider the scale of global economy and energy, including deliveries, we’ll see that Iran’s share in global oil production is quite moderate at 1 or 2 percent of the total. Without the Iranian factor, oil prices varied between $120 and $35 per barrel,” he said.

According to Baklanov, the idea of freezing oil output or regulating the energy market is a new one for Russia. “The Soviet Union and Russia have always been averse to regulating the energy market. We hardly ever joined the global efforts in this sphere in the 1980s, 1990s and 2000s. It was only recently that we announced our willingness to do so,” he said.

“Fortunately, our energy ministry now supports the idea of joining forces in order to stabilize the market and develop common approaches. This policy should be coordinated at talks with the biggest energy suppliers and ultimately produce the desired effect,” the expert said.

“Under current conditions, a reasonable oil price should be $52-59 per barrel, as I said back when oil prices were between $80 and $90,” Baklanov said. “This would be a reasonable price in that it will offer opportunities for deep and diversified investment in the energy sector. Lower prices reduce investment appetites, which has a negative effect on the global economy,” he concluded.