Energy

The agreement to freeze production was geopolitical not economic, writes Meghan O’Sullivan in the Financial Times.

In this new oped for the Bulletin of the Atomic Scientist, MTA Associate Aaron Arnold and colleague Nikos Passas consider the role of banks in monitoring and verifying proliferation-related transactions. He outlines steps that the P5+1 and Iran can take in a final agreement that will allow them to remain vigilant about proliferation financing.

With a few exceptions, the consensus emerging from last week’s inconclusive Organization of Petroleum Exporting Countries meeting is that if OPEC is not dead, it is at least in a coma.  This may be a reasonable judgment based on the group’s ability to take collective action on a production cut to bolster the price of oil in the short run. 

Financial sanctions against Iran are contributing to the growth of regional criminal networks, which use fraud, bribery, and corruption to facilitate commerce. From airplane parts and medical equipment, to specialized materials for weapons programs, an intricate underground economy of financial and logistic intermediaries play a critical role in helping Iran circumvent Western sanctions. Do not expect this to change in a post-sanctions world...

"Many states in the region, especially those that have been vocal in their criticism of Iran's nuclear program, feel threatened not by the prospects of a nuclear Iran, but by Iranian-Western rapprochement. Political and economic isolation have helped states like Saudi Arabia, who fear losing their military, economic, and political ties and privileges with the United States. After all, Tehran and Washington did have close relations prior to 1979 and, given that the two countries have a lot in common, they could develop ties again."

Fears that events in Iraq will send global oil prices soaring have abated. Yet, the crisis has potentially huge implications for oil. Under any conceivable outcome to the current situation, oil production from Iraq will fail to meet recent expectations. The reason for this dire prognosis is that politics – not security or logistics – will be the biggest determinant of Iraq’s oil trajectory in the years ahead.

The world is rightly worried about Iran's uranium enrichment program. Iran claims this technology is for producing fuel for nuclear power plants, but it could be quickly shifted to making nuclear bomb material.

Observers would be forgiven for dismissing negotiations over Iran's nuclear program as Kabuki theater. Despite years of on-again, off-again efforts, after all, fears of war continue to simmer. Such frustrations are understandable -- but they may not be entirely justified.