Norwegian Foreign Minister Børge Brende said he welcomed the international agreement on Iran’s atomic program that was announced on Tuesday, even though it’s likely to cost the Norwegian economy at a time of already falling oil prices. The value of Norway’s oil and its currency sunk immediately on news of the pact, as the market braced for Iran’s oil flowing back into it.
Some oil analysts were claiming the agreement, which will ease decades of economic sanctions against Iran, will change the entire oil market. It’s still subject to approval by the governments of the nations involved in the negotiations (Iran, the US, the UK, Russia, China, France and Germany), but Torbjørn Kjus of DNB Markets told newspaper Dagens Næringsliv (DN) that assuming the Iran agreement goes through, it will add considerable amounts of oil to the market.
“Iran has large resources and they have under-invested (in oil) for years,” Kjus told DN. “Now they’ll attract as much capital as they can by offering better contract terms than those they had the last time western companies were involved.”
He said that will lead to many other countries, keen on developing their own oil resources, offering better terms to the oil companies, too, to stay competitive. That can mean new opportunities for the oil industry, including Norway’s. DN reported that companies like Oslo-based Aker Solutions are already interested in returning to Iran.
‘Double-edged sword’ for Norway
At the same time, though, oil prices were falling on the news after already being cut by more than half since last year. Tuesday’s price slump hit the Norway’s currency quickly, meaning it cost nearly NOK 8.2 to buy a US dollar, up from less than NOK 8 last week. North Sea Brent crude was trading down USD 1.50 to around USD 57 a barrel on Tuesday, and lower oil prices hurt the Norwegian economy.
Kjus downplayed the fall in the oil price, claiming it was not dramatic, while oil analyst Thina Saltvedt of Nordea Markets said there’s “no doubt” the agreement will press prices down further. She called the Iran agreement “a double-edged sword” for Norway.
“Iran is ready to increase oil production as soon as possible, and will expand capacity,” she told DN. “They’ll want to cooperate with commercial oil companies.” That will lead to lower prices but also new opportunites for Norwegian companies, she said.
Official emphasis on the positive
Foreign Minister Brende preferred to stress the positive aspects of the agreement, calling it both “historic” and “important.” He said the agreement would clear the way for closer political and economic contact with Iran and suggested it was significant that such a major international agreement could be reached at a time of tension between many of the key players.
Norway has contributed millions in financial support for the negotiations, and Brende pointed to the “many years” of work that went into a deal that he believes will assure peaceful goals for Irans atomic program. The International Atomic Energy Association will work to verify that Iran follows up on its obligations, and Brende said Norway would continue to support the IAEA’s efforts.
“I wish the agreement on Iran’s atomic program welcome,” Brende stated. “This historic agreement will serve both the world, the Middle East and Iran.”