Iran's nuclear agreement with World Powers.....

7/4/15

 Iran's nuclear agreement with World Powers.....

"Iran nuclear accord excites oil majors ......." , the Financial Times, p.6

Whether or not you'll be sleeping easier after last week's nuclear agreement in Lausanne, one has to applaud the stickability of the negotiators who brought in a deal aftertime and arguably against the odds. Cynical traders however may be less interested in whether the agreement has made the world a safer place than in the effect it might have on the price of crude oil.

Iran has the 4th largest reserves of oil and its 2nd largest gas deposits, but sanctions have reduced output from a high of about 4m barrels per day (bpd) to 2.8m bpd. Exports have halved to 1.1m bpd. With the lifting of sanctions, Iranian officials are now talking about being able to raise production to 5.7m bpd by 2018. On the face of it, the increased supply is clearly bearish for oil prices. But things are never that simple .....  the process of modernizing  infrastructure will take both time and huge investment. Dealings with Iran have never been straightforward, and given the obvious geopolitical tensions in that part of the world, who's to say that another breakdown of trust is not just a matter of time ?

Greece's Finance Minister promises to make next payment .... it's just one small step but are Greek eyes already looking eastward ?

 The Daily Telegraph : "Lagarde : Greece has pledged...." p. B1  /   "Greece would be taking a stupendous gamble ....." p.B2  /   "Under pressure Greeks cast wider net ...." p.B4

Yanis Varoufakis has assured IMF chief Christine Lagarde that Greece will make the 450m euro payment due this Thursday. If he says it's true we'd better believe him, although frankly nothing this fellow does should surprise us anymore. More monies are due on April 14th and by month-end. The Greeks are awaiting approval of their proposals for reforms (taxes, social security, labour market etc) that given the Syriza government's hard-left credentials are unlikely to have gone far enough to unlock further rescue funds. If Greece is playing a game of bluff and counter-bluff in the hope that her European partners wont ultimately let her fall, it's a fantastically dangerous one.

And what if it all does go belly-up? Greece has been courting Russian favour for some time, and PM Tsipras sees President Putin in Moscow tomorrow in a visit deliberately re-scheduled to fall the day before Thursday's payment to the IMF. China is also on Greece's dance-card and now Iran has been mentioned as a possible friend in need. None of these prospective tie-ups would be good news either economically or geopolitically for either the EU or NATO.