BRUSSELS - As Russia squeezes Europe on supplies of natural gas and Europe readies an embargo on Russian oil, some are looking for help from Iran. That is, of course, if and when Teheran and Washington agree to revive the 2015 nuclear deal, lifting tough economic sanctions on Iran that have limited its ability to export energy.
But even if a deal comes tomorrow, putting it in place will be complicated and phased, and it is likely to take several months before sanctions on Iran are lifted.
There may be an early impact on the oil market to soothe nerves, but supplies would come too late to alleviate world markets this winter, experts say.
For Europe, oil is not really the problem. Russia is denying large amounts of natural gas to European countries, which are trying to source it elsewhere. While Iran has lots of natural gas, it uses most of it domestically, including for many automobiles, and it lacks pipelines to Europe or facilities to liquefy natural gas.
"Iran in the short term will have some additional oil exports, but not gas, which is what Europe really needs," said Simone Tagliapietra, an energy expert at Bruegel, an economic research institution. "I would not bet on Iran to rebalance the global energy market anytime soon."
Jacob Funk Kirkegaard, an economist with the German Marshall Fund, said that "what Europe needs is gas, and there's no way to get it there from Iran and not in a time frame that matters to anyone this winter".
Even as European countries scramble to line up alternative energy sources, Western officials insist that their timing on the Iran nuclear deal is not being affected by the energy issue and point out that the price of oil has dropped considerably from its heights this summer.
An influx of Iranian oil on the market could help keep prices down. Some suggest that Iran, which holds the world's fourth-largest proven oil reserves, could eventually export more than 2 million barrels a day of crude oil, more than twice estimates of what it exports now.
But oil is easier to ship and disguise than gas, and Russia, which makes much more money from oil than from gas, has continued to pump and sell oil at close to pre-war levels.
Even the European Union, which has introduced phased sanctions on Russian oil, with numerous exceptions, is buying as much from Russia as it did before the war.
That may change in January, when more sanctions kick in, especially ones banning EU operators from financing or insuring oil tankers, which will hit Russia's ability to export some of its non-pipeline oil. The Biden administration believes that will raise oil prices again, so has instead supported a price cap on Russian energy.
A nuclear deal that is phased - and that reportedly will include some early waivers for Iran to enable it to sell some of its stored oil - could ease the market by adding more non-Russian oil.
Iran is exporting about 800,000 barrels a day, most of it bought by China, but it could increase output fairly quickly, experts say.
After former US president Donald Trump reimposed sanctions in 2018, the Iranians throttled back production sharply.
But they handled the shutdowns in a careful way that minimised damage to the fields and should allow them, when the opportunity arises, to restore output rapidly.
"In a matter of three months, we think they could increase production by almost 1 million barrels a day," said Homayoun Falakshahi, a senior analyst at Kpler, an energy research firm.
Falakshahi said that within a few more months Iran is likely to be able to add up to 400,000 barrels a day more, reaching its 2017 production level of 3.8 million barrels a day, up from around 2.5 million currently.
An addition of 1.3 million barrels a day is roughly 1 per cent of current world demand, but it would make a difference. The Saudi- and Russian-led producers group known as OPEC+ is producing about 2.7 million barrels a day less than its targets, despite lobbying from the Biden administration and others for increases, according to the Paris-based International Energy Agency.
Bringing Iranian oil back onto the market would make up some of that shortfall and buffer potential declines in Russian production. "Iran could be a source of significant supplies if sanctions were eased, although its return to the market would not happen overnight," IEA analysts wrote in a recent report.
Analysts at Goldman Sachs said that a return of Iranian supplies would cause them to adjust their forecast of US$125 (S$175) a barrel for Brent crude, the international bench mark, down by US$5 to US$10 a barrel for 2023.
Some European countries imported significant amounts of Iranian oil before American sanctions were reimposed in 2018, including Italy, France, Spain and the Netherlands, said Ellie Geranmayeh, an Iran expert with the European Council on Foreign Relations. "They may see Iran as a short-term fix."
But even if Iran does not find early markets for oil in Europe, "it could relieve some of the global pressure on markets to Asia, which could free up some supply to Europe", she said.
Politics and sanctions are not the only obstacles for Iran's exports, said Tagliapietra, the energy expert. There is poor export infrastructure, with no pipelines to the European Union and no plants to make liquid natural gas.
And Iran needs the technical expertise of international oil companies, which are likely to be reluctant to re-enter the country in force until after the 2024 American presidential election, since a Republican president may decide to pull out of the nuclear deal once again and reimpose sanctions.
"Would big companies that were in Iran before, would they go back at that level knowing what may happen in 2024?" Kirkegaard asked. "I find it hard to believe."
Saudi Arabia has also hinted that it might cut production if Iran, its long-time rival, mounts a comeback, to ensure higher oil prices.
"OPEC could indeed scale back output once Iranian barrels start hitting the market," Helima Croft, head of commodities at RBC Capital Markets, said in a recent note to clients.
Such a move "could in turn erode the political dividends of doing such a controversial deal for the Biden administration," she added. NYTIMES