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TEXT OF INTERVIEW
KAI RYSSDAL: Here’s what happened in the global oil market today: Not too darn much. Crude rose a dime to just over $145 a barrel. Mostly because we didn’t hear much from or about Iran. We’re going to take some time this week and look past prices in the oil market, and try to understand why they move the way they do. Iran’s the world’s No. 4 oil exporter. We’ve called George Joffe at Cambridge University to get some insight. Professor Joffe, good to have you with us.
GEORGE JOFFE: My pleasure.
RYSSDAL: How important is oil to the Iranian economy.
JOFFE: Oh, it’s absolutley vital. Oil exports form 97 percent of Iran’s total export revenues. To that extent, the Iranian government is utterly dependent on what it can export.
RYSSDAL: The other economic story with Iran, of course, is international sanctions and international barriers to trade there. Does that contribute to their feelings of insecurity and then make them lean on oil at all.
JOFFE: It certainly makes them feel much less secure. And despite the bombast with which they respond to the introduction of sanctions, they know how effective they can be. Iran’s major bank, the Bank of Medii, is now sanction by the European Union and just a few days ago, Total, a major French oil company, announced that it was not going to pursue a gas contract in the Persian Gulf. Now, those sorts of things, although Iran can live with them, certainly cause perturbations in the economy. And they’re bound to increase Iran’s sense of insecurity — that sense that it is going to be attacked, and that it is a target for the hostility, not just of the United States, but of European states as well.
RYSSDAL: The issue of oil as a matter of national security — not in terms of the external appearances but internal peace of mind just doesn’t seem to be there.
JOFFE: No, I don’t think it is in the same way. I don’t think they make that kind of distinction. For them, their external activities are of a piece. They all reflect in some way the power of the States, its ability to talk to other States on an equal footing, and to be taken seriously by the States. Now, the problem for Iran has been that the United States doesn’t take it seriously. It hasn’t done so since the hostage crisis. And, therefore, the hostility shown by the United States towards Iran is returned in kind. There’s another consideration, too. The United States has not taken oil from Iran ever since the Reagan administration. Simply because at that time it was embargoed and the embargo’s remained in force ever since. And that, of course, means the Iranians feel even less willingness to compromise with the United States because they can see no benefit in doing so.
RYSSDAL: It’s not like oil’s going to get cheaper any time soon. And I’m wondering what your take is on how that will affect the international geopolitical situation as it regards Iran.
JOFFE: My response, I think, would be first of all to say, “What actually does one mean by saying oil is not going to get cheapear anytime soon. In nominal terms, of course, you’re right. But you need to remember that the dollar has declined in value. That means, that for a country like Iran, the real purchasing power of the oil it sells is really no more than $70 a barrel — that isn’t very great. And that is one of the reasons why it, together with other OPEC members, is very reluctant to see any reduction in the nominal value of oil to avoid real climes in the nominal value of the revenues they receive. That means these prices will remain high, there’s no doubt about it. But, again, what we’re actually seeing is a change in the nature of the global oil market. The geopolitics of oil are going to focus on a much more multipolar, not a unipolar world. And that has implications, too, for America’s view of itself, and of its role inside the wider world. It’s going to be a much more difficult world inside of which it operate — simply because of the question of oil.
RYSSDAL: George Joffe at the Center for International Studies at the University of Cambridge in England. Professor Joffee, thank you so much for your time.
JOFFE: You’re welcome.
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