The Peter Zeihan Podcast Series - What's Going On with Iran and Oil Markets? || Peter Zeihan

Episode Date: July 25, 2023

Over the last few weeks, we've seen Iranian oil hit markets at nearly decade-high volumes...but production has remained relatively flat. So what's really happening here? Full Newsletter: https://mailchi.mp/zeihan/whats-going-on-with-iran-and-oil-markets

Hey everybody, Peter Zine here coming to you from Colorado. A quick video today about what's going on with Iran and oil markets. Over the course of the last couple of weeks, getting into July, we've had Iranian oil come on market in a surprising large volume. We're looking at about 1.6 million barrels a day of exports right now, which is the highest we've seen in five years. I mean, really since near the beginning of when the Obama administration really were to curtail Iranian exports. So we're looking at a significant high. But if you look at overall production, it has hardly shifted at all. It's about three million barrels a day. What's happening here isn't that more oil is hitting the market.

It's that more oil is hitting the legal market. A lot of the sanctions that are being used right now against the Russians that are forcing the Russians to sell crude at a $20 to a $25 discount per barrel have been in place on Iran for years. In fact, they were, in many cases, designed for the Iranians, and now those strategies were picked up and applied to the Russians. And what the Iranians have discovered is that if they do the same thing that the Russians have done, sell their crude on international markets at a massive discount,

then they come in under the sanctions regime as legal exports. And that's really all that's happened here. They've moved their exports from the gray sector into the white sector, and in doing so, the official data for once is actually getting closer to accurate. It used to be that, you know, over a million barrel letting which is smunk. Now, for the Iranians, staying in the good graces of the oil markets in general and the consumers in general, and even in the United States in general, is much, much, much more important than it is to the Russians. The Russians see themselves as in a state of existential crisis, and they know that over the course of the next few years, if they're going to lose the capacity to act militarily at all, therefore, there really is no price that is too high considering their goals at hand. Iran's not in a situation like that. Iran is obviously in an ongoing joucing match with the United States

about everything in the Middle East, but the life and death enmity that has developed between Moscow and a lot of the world just isn't there. There's hostility, certainly. I don't mean to suggest that this is all sunshine and rainbows. But Iran's not fighting for its existence here, and that gives it a little bit more patience in dealing with this or that. Second, despite Russia's many, many, many, many, It is still a significant manufacturing power and agricultural power. It produces a lot of what it needs, even if the quality is horrible. Iran doesn't. Iran never industrialized like the Soviet system did,

and they rely on the outside world for cars and for planes and electronics and paperboard and food. And so they need to maintain connections to the rest of the world in order to survive as a modern state at all. And that means they're willing to suck it up, politically in cases where the Russians wouldn't even consider it. There's an opening here diplomatically should the Biden administration choose to take it. No idea if that's going to happen. But it does mean that the Iranians are more willing to do something that the Russians will not even consider.

And that's talk. And that provides some opportunities for both sides. Okay. That's it for me. You guys take care.