Western music was banned in Iran yesterday, AP reports via Chron.com. “Blocking indecent and Western music from the Islamic Republic of Iran Broadcasting is required,” according to a statement on the council’s official Web site.
It’s too early to tell what, if anything, the new prohibition means for oil production in the Islamic state. The optimist interpretation is that it’s merely culture, separate and distinct from oil. But oil and culture are hardly unrelated in the Middle East. One necessarily bleeds into the other.
From an outsider’s perspective, the latest turn of events recalls the era of the 1979 Iranian Revolution. Among the prominent repercussions of that upheaval from a generation ago was a sharp reduction in Iran’s oil production and, and by extension, its exports. For a country like the United States, which imports vastly greater quantities of oil today relative to 1979, the unfolding events in Iran these days is something less than comforting.
Still, the leap from music to oil remains a huge and imponderable chasm in the 21st century. Iran still needs to sell oil to fund its economy and satisfy its growing population. Nonetheless, there’s reason to wonder what’s coming, given Iran’s history of political upheaval.
Raising eyebrows of late are the comments from the country’s newly elected president, Mahmoud Ahmadinejad. Iran’s president is no stranger to controversy since ascending to the post in August. His most contentious remarks came earlier this month in reference to Israel, essentially calling for the Jewish state’s destruction and questioning the existence of the Holocaust. The resulting outrage from the international community has since escalated, threatening to isolate Iran while stoking tensions in the Middle East.
Then there are reports that Israel is preparing for possible strikes on Iranian uranium enrichment facilities, according to the Times of London. “Israel — and not only Israel — cannot accept a nuclear Iran,” Israel Prime Minister Sharon warned recently. “We have the ability to deal with this and we’re making all the necessary preparations to be ready for such a situation.” Adding to the anxiety is news today that Iran recently obtained 12 cruise missiles that can be armed with nuclear weapons and are capable of reaching Israeli soil.
Iran’s nuclear program has in fact been a growing source of stress between the theocractic nation and the West. And if that diplomatic conflict is any indication, Iran’s current government is in no mood for negotiating.
When the 1979 revolution unfolded in Iran, one byproduct was a drastic fall in oil production, from about six million barrels a day in the late-1970s to roughly 1.5 million b/d by the early 1980s, according to the Energy Information Administration. It was no coincidence that oil prices in that period rose sharply.
Iran’s oil production represents roughly 13% of Opec’s crude output, according to the EIA. And while that output has been growing in recent years, to around 4.1 million barrels per day as of this past August, up from 3.4 million b/d in 2002, the six-million b/d era of the 1970s is still a long way off. World consumption, however, has taken no vacations. Demand, in short, keeps rising, largely unaffected by ideologies. Supply, on the other hand, can fall victim to local politics.
Raising Iranian oil production is of no small interest to either the West or for Iran, which continues to consume ever larger quantities of its own crude as its population grows. The question is whether the recent turn of events threatens future Iranian oil output. On that score, there’s nothing new to report other than to wonder if there’s new reason to worry.
Lowell Feld, who follows Iran’s oil business for the EIA, tells CS that “the prospects for Iranian oil and gas development are looking more uncertain….” That doesn’t necessarily mean there’s trouble ahead for increasing production, but the future’s not getting any clearer, he suggested.
A murky future or not, Iran needs foreign investment to expand and modernize its oil business if it’s to offset its natural decline rate of about 500,000 barrels a day, Lowell said. “The question is whether [Iran] can do that under new regime?”
Foreign investment and expertise are almost surely needed, Lowell speculated. Whether the country will be inclined to reach out promises to be a hot-button issue in 2006. One indication of the potential for disorder and confusion on such matters came with the political turmoil that accompanied President Ahmadinejad’s three failed attempts to install a new oil minister before his fourth choice was approved by the parliament.
Officially, Iran says that a foreign oil presence is still welcome in Iran, the new oil minister announced last week. But the fact that such announcements are needed at all implies that alternative scenarios aren’t necessarily beyond the pale.
Revolution and chaos, history reminds, aren’t favorable for boosting oil production. As Lowell points out, after the turmoil the turmoil of December 2002 in Venezuela’s state-run oil company, crude output in that South American member of Opec has yet to return to levels recorded before that year-end disorder. Indeed, Iran’s pre-1979 oil output also remains an elusive target more than 25 years hence.
History doesn’t repeat, but it rhymes, Mark Twain once observed. Will any less be true for Iran in 2006?
One reason for thinking there’s trouble ahead comes from the school of thought that reasons that the Iranian president is intentionally trying to isolate his country so as to spawn a defensive mentality at home that rallies around him. In that case, the theory runs, the president will reduce the pressure for delivering on his economic promises that catapulted him into the presidency earlier this year.
“His comments are more for domestic consumption,” Saeed Laylaz, an Iranian political analyst, told the New York Times today. “He wants to control the domestic situation through isolating Iran. Then he can suppress the voices inside the country and control the situation.”
If so, what, then, will be the price, if any, for oil consumers?