Saudi Arabia is worried about a sanctionless Iran and a revival of the two country’s bitter rivalry over oil, according to a Monday Reuters’ report.
Oil prices tumbled after Iran’s oil export bans were lifted over the weekend. The lift coincided with Iran ordering production of 500,000 barrels per day.
“The legs of Iran’s economy are now free of the chains of sanctions and it’s time to build and grow,” Rouhani tweeted Sunday.
Saudi Arabia fears relieving sanctions on Iran could ultimately hurt the Middle East because region is not big enough for two massive oil-producing nations.
“Iran is able to increase its oil production by 500,000 barrels a day after the lifting of sanctions, and the order to increase production was issued today,” Iran’s Deputy Oil Minister Rokneddin Javadi is quoted as saying by Iranian media.
Both Sunni-dominated Saudi Arabia and the Shiite militias in Iran have been regional rivals for years and the U.S. decision to lift sanctions is reigniting tensions.
The United States removed sanctions on Iran that previously resulted in a cut of two million barrels per day.
Iran’s re-entry has many worrying about its effect on an already glutted oil market, with Brent Crude falling to $27.67 a barrel Monday, the biggest drop since 2003.
“Iranian exports come at a very bad time,” Barclay analysts told Reuters Monday.
American economist Anatole Kaletsky suggested last month that Iran could, if all things go according to plan, produce oil for as little as $1 per barrel.
“Iran, for example, claims to produce oil for only $1 a barrel. Its readily accessible reserves — second only in the Middle East to Saudi Arabia’s — will be rapidly developed once international economic sanctions are lifted,” Kaletsky wrote in an op-ed at The Guardian.
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