Strategic Geography 2015

Abstract

© IISS Iran Tehran had already been hit by Western sanctions over its disputed nuclear programme, when low oil prices worsened its liquidity, investor con dence and ability to balance its budget. The US$20bn–25bn it is expected to earn from its crude in 2015 is only around one-quarter of its 2011 oil earnings. On the other hand, a global deal over its nuclear programme and the lifting of sanctions could see a glut of Iranian oil hit the international market, further weakening prices. Saudi Arabia OPEC’s purpose has been to keep oil prices stable by unifying its members’ policies. But at a cartel meeting in November 2014, leading member Saudi Arabia, the world’s largest oil exporter, broke with this practice by declining to cut production to prop up prices. This squeezed the growing US shale-oil and -gas industry, and some high-cost shale extraction was abandoned due to continuing low prices. While Saudi Arabia has a US$700bn reserve fund to survive leaner times, it needs US$85 per barrel to break even, and will not be able to hold off the rival shale industry forever. Venezuela With the world’s largest proven crude reserves, Venezuela relies on oil for around 95% of its exports, and has seen revenue fall through lower prices and reduced sales. The US, a political foe but Venezuela’s largest export market, bought only 700,000 b/d from Caracas in 2014, half the 1995 peak. Facing 60% in ation, goods shortages and impending recession, socialist president Nicolas Maduro has called for fellow OPEC members to help restore prices to US$100 per barrel. State oil rm Petróleos de Venezuela is diversifying sales, including to China and India, among other strategies.