Iranian oil industry exhibits considerable resilience: Senior expert
Global petroleum sensitivity to geopolitical developments been reduced
Amid unprecedented tensions and the imposed 12-day aggression by the Zionist regime and the United States against Iran, numerous observers anticipated that the global oil market would once again confront a price shock. Contrary to such predictions, the market continued its trajectory with relative tranquility, failing to record any significant volatility. Perhaps the most salient inquiry pertains to why events of this nature, which ordinarily precipitate price turbulence, proved ineffectual on this occasion. In this context, one must not disregard the marked augmentation in the resilience of Iran’s petroleum sector. Over recent years, the modalities of sales, transportation methodologies, and commercial networks have evolved into a diversified and flexible architecture such that the severity of sanctions no longer possesses the erstwhile efficacy. The nation’s production and export capacities have incrementally attained a magnitude capable of substantially countervailing external pressures and imparting greater stability to regional and global markets. Nevertheless, the current exigencies and challenges confronting Iran’s oil industry, exacerbated by the United States’ endeavor to reduce Iranian oil sales to zero under the policy known as maximum pressure, must not be overlooked. To elucidate these interrogatives and explore the underpinnings of the energy markets’ responses, an interview was conducted with Fereydoun Barkeshli, an eminent expert in the petroleum industry and former general manager for the National Iranian Oil Company (NIOC) in OPEC, the text of which is translated below:
It was anticipated that any military conflict in the Persian Gulf, even of short duration, would induce shocks in the oil and gas markets; however, this did not transpire during the imposed 12-day war. Despite direct conflict involving Iran and limited regional assaults, why did this imposed 12-day war fail to exert a discernible effect on global oil or gas prices?
BARKESHLI: It is accurate that throughout past decades, every geopolitical upheaval in the Middle East and Persian Gulf has influenced the global oil market and pricing proportionate to the magnitude and significance of the unrest. The correlation between geopolitical developments and the oil market commenced in 1971 during the Yom Kippur War and, subsequently, the oil embargo imposed by certain oil-exporting countries against several major oil-importing nations. Indeed, since that juncture, the connection between Middle Eastern developments and the global oil market has entered political petroleum discourse. Earlier, in the early 1950s, events such as the nationalization of Iran’s oil and the initial oil embargo on the country caused the global oil price on the London exchange to increase — though only to 6.5 cents per barrel, which, though non-negligible by the standards of that era, did not constitute a shock.
During the imposed 12-day intrusion by Israel and America into Iranian airspace, the global oil price only experienced a transitory increase of around two dollars and several cents, followed by a decline. The rationale for this phenomenon pertains to multiple factors.
Consider the Ukraine conflict. On the eve of Russia’s attack on Ukraine, i.e., February and March 2022, Brent North Sea crude was trading at around $97.15 per barrel. The market endured several weeks of turbulence and concluded 2022 at $85 per barrel. On October 7, 2023, with the onset of the bloody Gaza war, Brent stood at $83.35 per barrel. Again, there were several tenuous days accompanied by diverse analyses, succeeded by a downward trend in global oil prices. At the initiation of the Israeli air strikes against the Islamic Republic, global oil prices rose by 7%, yet by October 2025, they barely sustained $70 per barrel.
In essence, it can be asserted that the global oil market has lost sensitivity to geopolitical developments.
Indeed, the geopolitical significance has relinquished a considerable portion of its influence. In other words, geopolitical events have been assimilated and embedded in the current global oil market pricing. Consequently, even today’s prices owe their endurance to the succession of crises and developments in the Middle East.
Many experts attribute the substantial reduction in geopolitical impact on price trends to American self-sufficiency. To what extent do you concur with this interpretation?
Overall, I identify three influential factors, the foremost being the one you mentioned: the United States’ self-sufficiency in domestic oil supply and subsequently its emergence as the largest producer and exporter of petroleum. In the 1950s, amid the struggle of the nationalization of the Iranian oil industry and the consequent embargo on Iranian oil exports by Britain, the US was self-sufficient. The removal of 650,000 barrels per day of Iranian crude and products did not exert a notable market impact.
In the 1970s, during the Arab oil embargo, the US transitioned from a major producer to a major oil importer. Until the mid-2000s, America remained a significant oil importer. However, with the advent of shale oil, the US transformed into a principal exporter of oil and petroleum products. Shale emerged rather abruptly on the international oil scene.
The rapid expansion of shale surprised many market participants. Hydraulic fracturing of shale rock commenced relatively quietly and gradually advanced. Shale-producing entities were primarily small to medium-sized and often family-run companies operating in shale-rich regions. No prominent, renowned corporations were initially active in shale production. These companies were highly vulnerable and generally commenced operations with loans from local banks. Accordingly, shale producers were price-sensitive relative to global oil rates. The average break-even cost per barrel of shale oil was approximately $60. Therefore, producers sought to sell their crude at WTI prices exceeding $60 per barrel.
Given global oil price volatility, smaller shale producers gradually lost competitiveness, giving rise to the entrance of major oil companies into shale operations. Advanced technologies and extensive investments have ushered shale crude production into new economic phases. The current crude oil production in the United States stands at 13.8 million barrels per day, approximately only 1.6 million of which entails conventional crude.
The reentry of the United States among the major oil producers has profoundly impacted its international ambitions and policies. After 70 years, the US evolved into a major petroleum exporter.
The first oil shock in the early 1970s confronted the US and the world with the most severe oil crisis. In the early 1950s, with Iran’s oil nationalization movement and the subsequent embargo, 650,000 barrels per day of Iranian crude were excised from global markets. Global oil prices rose by as much as 22% in 1953 and the first half of 1954, constituting a considerable shock. Nevertheless, prior to the embargo by Britain and the US, substantial stockpiling had occurred, enabling endurance of the removal of Iranian oil. Of note, in the 1950s, the United States was among the major exporters of oil and petroleum products.
In 2015, Barack Obama promulgated legislation lifting the US oil export ban after several decades. America rapidly became a net petroleum exporter. In the first half of 2025, the US exported 4.7 million barrels per day of crude oil and 6.6 million barrels per day of petroleum products. Concurrently, the United States remains an oil importer as well.
Could it be stated that America’s disregard for the International Energy Agency and environmental conventions commenced at this aforementioned period?
Yes, indeed. With Donald Trump’s first electoral victory in 2016, the pace of shale oil production in the United States accelerated. Trump monetized the Strategic Petroleum Reserves, which since 1975 had been established by the International Energy Agency to ensure readiness for emergencies and potential sanctions from producers. He utilized them commercially to augment supply and depress prices. This act conveyed the first posture of a nation independent of imports to the global audience.
His action provoked condemnation. Henry Kissinger, architect of the Strategic Petroleum Reserves, criticized Trump’s decision as erroneous. However, this was merely the inception of American disregard for a series of international commitments, facilitated by its attainment of self-sufficiency through shale oil and gas.
Today, most market analysts recognize the cessation of shale oil growth. Nonetheless, the persistent inquiry remains: should an analogous shale phenomenon emerge anew, how will OPEC member states and their allies contend with it?
And the second phenomenon that has overshadowed the geopolitical influences on oil?
The advent of the phenomenon known as the “Paris Climate Change Convention,” colloquially referred to as COP, whose 30th convocation recently transpired in Brazil. COP, forged initially in 1995 with a political orientation adverse to fossil fuels, crystallized in 2015 within the Paris Accord as a potent anti-oil movement exerting profound deleterious ramifications on investment trajectories and petroleum consumption.
Trump’s America, in the very year 2025, extricated itself from this treaty. The American withdrawal destabilized the foundational pillars of the climate change accord and ameliorated the prospects for oil and gas production and consumption. One might contemplate extolling Trump’s initiative in this regard. Indeed, a robust tie was forged between the International Energy Agency in Paris and the Paris Climate Accord. This tie has engendered a statist, quasi-dictatorial hegemony of metrics, whose scope has expanded within myriad multinational corporations, institutions, and centers engaged in statistical estimation and the generation of data analytics.
America, having metamorphosed into a significant oil exporter, harbors an unfavorable disposition towards fossil fuel denunciatory entities. In truth, today, OPEC and its allied nations regard Trump as a savior confronting the anti-oil onslaught emanating from Europe. OPEC member states traditionally align with the Republican Party of the United States, whose principal bases comprise the oil, gas, and industrial manufacturing sectors.
The lobbying apparatus of principal OPEC constituents, exemplified by Saudi Arabia and the United Arab Emirates in Washington, is entrenched within Republican circles. Saudi Arabia and the UAE wield considerable influence within American oil enterprises.
Conversely, Iranian-supporting lobbies in America are ideologically aligned with the Democratic Party. In effect, Iran’s lobbying endeavors within the current echelons of American power and policymaking remain impotent. America epitomizes the “country of lobbies”; without connection and influence, effectuating progress is infeasible.
Now that COP30 in Brazil has concluded, the world and the global oil market must adjudicate how, concomitant with the closure of the honeymoon epoch for renewable energies and the green political movements advocating them, OPEC and the oil market will architect their configurations.
The third subject pertains to the economic conditions of the United States and the world. The indebtedness of global governments will exceed $111 trillion by year-end. The United States government, with $38 trillion, leads the world’s debtors. China’s debt stands at $18.7 trillion, and Japan’s at $8.9 trillion. European governments, India, and other industrial nations have accrued historical and unprecedented debts, collectively expending far beyond their national capacities.
In other words, the global economy is presently in a precarious state. Topics such as geopolitical developments are not within the purview of macroeconomic principles and infrastructures. When the macroeconomic groundwork of the global economy is unfavorable, the milieu is ill-prepared for supra-structural dynamics and interactions. Consequently, geopolitical developments have attenuated efficacy. The phenomenon of Trump and the “Trump economy” will not terminate with his presidential tenure conclusion in 2028; one might assert that Trumpism is merely nascent.
Certain analysts contend that the oil market has transcended the “Iran-centric risk”. Do you concur with this sentiment?
Manifestly, every producer, commensurate with its production capacity, possesses a voice and power to exert influence. I recall that at prior OPEC assemblies, the then-minister of Kuwait brusquely questioned the legitimacy of a country with sub-half-million barrel production possessing the right to speak vis-à-vis a nation with a daily output of 5 million barrels. This is an old story, but I mention it to underscore that the productive capacity of a country buttresses its power and standing. Iran is no exception. It is paramount to note that Iran is a founding member of OPEC, conferring certain privileges and credence to the Islamic Republic. Put differently, Iran-centrism was not a risk, provided one subscribes to the idea of petroleum Iranophobia. Iran and Saudi Arabia have, for decades, constituted the two principal members of OPEC and the global oil market. No resolutions within OPEC or global oil markets transpired without concordance between these two nations. The rationale exceeded mere political considerations; it was also in the national interests of both. Other states articulated their interests within the framework of these two countries’ interests and orientations.
Hence, from this perspective, the assertion that the Iran-centric risk has abated may be valid. Concurrently, the essence and nature of threats have evolved. From one vantage, the primary bipolar actors in the oil market are presently Saudi Arabia and Russia. From another, I posit that in the medium term, they shall be Saudi Arabia and the UAE; and in the long term, Saudi Arabia and Iraq.
The truth is that Iran’s status in the global oil market remains indeterminate. Universal acknowledgment exists regarding Iran’s criticality and its paramount position as an investment locus in oil, gas, and corridor infrastructure. Nonetheless, presently, discourses revolve around ancillary issues such as shadow tankers, sanction circumvention, or the aggregation of crude oil upon the waters, given existing sanctions.
May it be posited that Iran has entered an economic habituation phase vis-à-vis sanctions, thereby amplifying its resilience?
My response is negative; at a minimum, I assert that sanctions have not become habituated for Iran’s petroleum sector. Indeed, oil is so internationalized that it resists sanction imposition. Iran’s oil industry remains international. What has transpired is that the operational cost of internationalization has escalated compared to normal conditions. Consequently, financing constraints have emerged for the oil industry, and requisite expenditure for maintenance and development has not been met. The Iranian oil industry is in urgent need of investment.
Compared to other economic and industrial sectors in the country, Iran’s petroleum industry exhibits pronounced resilience. Iranian oil has been sanctioned by America since the summer of 1979. It was severely afflicted during the Iraqi-imposed war and constituted the primary target of adversaries. Mismanagement, as well as injudicious policies and political outlooks, inflicted significant damage upon the oil sector; however, the oil industry perhaps uniquely engendered a structurally resilient economy.
What severely pressures Iran’s oil industry concerning sanctions is the restriction on financial and banking operations. At first glance, all issues seem attributable to sanctions, but the fundamental problem is Iran’s non-membership in the Financial Action Task Force (FATF). Since the early 1990s, membership in this financial regime has become, more or less, obligatory for conducting banking and financial operations. Iran, even absent sanctions, cannot access its financial resources without FATF membership. Of course, obstacles multiply for a sanctioned country.
Without membership in the Financial Action Task Force, performing banking operations in other international currencies is also unfeasible. Some smaller banks and monetary institutions devise mechanisms to maintain transactions, albeit with elevated costs and attendant risk.
The sole pragmatic means to circumvent the FATF stranglehold is barter trade, the challenges of which are well-recognized. Though in a foreseeable temporal continuum, Global South countries may establish their own FATF group, this does not imply that transactions and banking operations will be facilitated without acceptance of FATF standards.
The reality is that scant opportunity remains for Iran and the global petroleum industry. The Middle East demands peace and tranquility. Under conditions of tension, development is absent or proceeds sluggishly. Iran has effectively forfeited the 20th century in oil. Should the next two-decade span also elapse, the dossier of oil in economic history will irrevocably close. The National Iranian Oil Company is a trillion-dollar entity. Its stewardship must conform to the standards of a colossal national enterprise with the longest tenure in the Middle East.
The full interview first appeared in
Persian on IRNA.