Iranian Letter Reaffirms OPEC Divisions

(Bloomberg) -- Iran has written to fellow OPEC members to complain that some countries are conducting oil production policy unilaterally, laying bare fissures in the group as officials prepare to meet in Algiers this weekend.

While Iran avoids naming names, the letter is clearly aimed at Saudi Arabia, the largest producer in the OPEC+ group, that joined forces in 2016 to end a global oil glut. Iran says some countries are acting alone, breaking policy making rules. Riyadh has raised production in recent months to compensate for barrels lost by renewed U.S. sanctions on Iran.

“We have noticed to our dismay, OPEC’s spirit of solidarity, collective action, and accountability are being eroded with unilateral measures,” two senior Iranian oil officials said in the letter, addressed to members of OPEC’s board of governors and seen by Bloomberg News.

The letter echoes comments made by Iranian Oil Minister Bijan Namdar Zanganeh earlier this week, threatening to veto future Organization of Petroleum Exporting Countries decisions on group-wide production. In practice, the Islamic Republic has little leverage over Saudi Arabia, the main driving force in the global oil market.

Saudi Arabia and Russia chair the Joint Ministerial Monitoring Committee that oversees 2016’s OPEC+ deal between OPEC and its allies outside the group. The Saudi minister made clear the kingdom intended to increase production to mitigate the impact of Iranian sanctions and the economic crisis in Venezuela, bringing the group’s total output in line with its overall target.

Iran argues one member has no right to steal the quota of another and the current agreement merely commits members who are producing below their target to restore output to the agreed target.

The role of the JMMC, which meets in Algiers on Sunday, is confined to monitoring the market and is not a policy making body, Iran’s letter says. Zanganeh, who isn’t a member of the committee, said this week he won’t attend the meeting in Algiers.

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