Is Iran too cheap to haggle? Over the last week, we have observed the following out of Tehran: a halt of oil sales to the U.K. and France; threats against the West and its neighbors; and alleged bombings and bombing attempts in Georgia, India and Thailand. All of this has flowed out of Western-led efforts to choke off revenue from Iran's 2.5 million barrels a day of crude oil exports that last year totaled about $100 billion.
As a result, oil traders bid up oil prices early today to a nine-month high for both the benchmark U.S. and European blends. They are betting on the prospect of fighting, primarily the possibility of an Israeli strike, and a violent and unpredictable chain reaction.
Will Iran offer up serious concessions to nuclear inspectors from the International Atomic Energy Agency, who are currently in Tehran (pictured above, street scene in Tehran on Sunday)? If the record is an indication, Iran will stall. Meanwhile there is the danger of a miscalculation that, because of the U.S. presidential campaign, could force President Barack Obama -- despite his preference to press on sanctions -- to carry out a military attack. That's according to Karim Sadjadpour, an Iran export at the Carnegie Endowment who spoke with National Public Radio from Washington, D.C. Sadjadpour said:
According to the law of averages, if Iran continues to aspire to commit these acts of terror, at some point they're going to be successful. They are going to hit their target, and if they hit either a major American target abroad or they strike on American soil, I think it's going to be difficult for President Obama, in an election year, not to respond.
As of now, the sanctions appear to be gravely hurting Iran financially. Tehran is having trouble unloading about 500,000 barrels a day of its oil exports (about 23 percent of last year's figure), write the Financial Times' Javier Blas and Najmeh Bozorgmehr. Even China and India have not been willing to buy, Blas and Bozorgmehr report.
What is hobbling these sales? It could be that, until now, Iran has not appeared willing to cut its price, suggest Blas and Bozorgmehr. Iran -- facing a surprisingly successful effort to cut off its exit routes -- somehow doesn't grasp that business is different from politics; sharps will hold tight while the boa constricts its victim.
That is mystifying. True, Tehran would have to swallow lower revenue. But to the degree it does discount its crude, Iran would induce smugglers into assuming the time and risk to disguise and peddle it, and buyers into taking the gamble in purchasing it. It would manage to sell its oil production.
So why is Iran committing this unforced error? Is its nuclear development so advanced that it feels it can more or less wait out the sanctions? Or are we merely witnessing a couple of age-old maladies -- thrift and pride?
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.