Wednesday, November 11, 2015

Saudi Arabia and Iran in Latin America

People in the United States obsess about Iran's presence in Latin America, all too often blustering about the threat. But Saudi Arabia reminds us that it may well be better to view it in terms of Iran's weakness.

Saudi Foreign Minister Adel al-Jubeir said Arab countries’ rapprochement with South American countries will increase Iran’s isolation in the world ahead of a Latin America-Arab world summit in Riyadh on Tuesday 
Prior to the Summit of the Arab and South American countries, Jubeir told Al Arabiya News Channel that South American countries have always supported Arab causes, adding that “Iran seeks to establish relations with these countries due to its weak international stance and because it does not have many friends across the world.” 
Jubeir added Tehran has become “weak” and “seeks to gain favor from any country.”

What this "rapprochement" means is less clear. Saudi Arabia is important to Latin American governments almost entirely in terms of oil prices, and right now the Saudis are squeezing oil producers tightly. Nicolás Maduro and Rafael Correa asked for the Saudis to support a plan to stabilize oil about about $80 a barrel. So far OPEC has kept the price low, but the International Energy Agency sees prices moving up:

The process of adjustment in the oil market is rarely a smooth one, but, in our central scenario, the market rebalances at $80/bbl in 2020, with further increases in price thereafter. 

Now, that's five years away, which is a long time for cash-starved oil producers in Latin America. So is there is more to rapprochement?

If there is something more (or if this somehow mollifies Maduro and Correa) then Iran will be the loser. It is already much less threatening in Latin America than alarmists claim, and this will reduce its influence further.


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