Minor implications for Namibia if Iran sanctions re-imposed: Experts

WINDHOEK, 29 MAY  – American President Donald Trump’s announcement earlier this month that his country would re-impose sanctions on Iran, will have minor implications on Namibia, local experts have said.

With Iran being one of the top three oil-producing nations in the Organisation of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia and Iraq, recent international reports had posited that oil dependent countries, such as Namibia, would bear the consequences of the sanctions on Iran.

Nampa enquired on the implications the sanctions would have on the economy, Namibia’s domestic oil and foreign reserves.

XOBOXOBOS, 21 September 2015 – Mines and Energy Deputy Minister Kornelia Shilunga handed over mining equipment and protective clothing to small-scale miners of Xoboxobos in the Erongo Region on Monday. (Photo by: Paulus Kiiyala Shiku) NAMPA

Deputy Minister of Mines and Energy, Kornelia Shilunga last week said the implications of the withdrawal of Iranian oil from the market would be close to none for Namibia, as long as they do not create a shortage of supply in the global oil market.

She added that any volatility that would come in global oil prices, would not be caused by the United States of America’s sanctions on Iran.

“Iran can still supply big economies like China and Germany, because they have not withdrawn from the nuclear agreement,” Shilunga stated.

She explained that should any event cause adverse fluctuations in global oil prices, only the Ministry of Mines and Energy can subsidise fuel pump prices through the National Energy Fund.

“As oil is a labour input for most sectors, industries such as mining and agriculture would be impacted by the said sanctions, due to fuel price increases which carry additional costs and hinder production to some extent.”

Shilunga further explained that decisions of that nature are felt in the stock and commodity markets in real time, as oil is one commodity that is priced in real time.

“The markets reacted in some way when the announcement was made and oil prices went up because of traders’ speculations,” she stated, adding that speculations are short-lived due to realities on the ground and prices would stabilise in the long haul.

The Bank of Namibia’s Deputy Director for Corporate Communications, Kazembire Zemburuka said last  Thursday that the impact of Trump’s decision would only become visible if the US re-imposes sanctions on Iran and on the position of other UN Security Council members on the Iran agreement.

“In general, however, any introduction of new risks including geo-political tensions may impact global market sentiments and create uncertainties, which do not augur well for the stability of markets in the long run,” he said.

The decision by the US to withdraw from the Iran agreement has not resulted in a significant impact on the US Dollar and Namibia Dollar exchange rate thus far.

Furthermore, BoN said the withdrawal of the US from the Iran deal was expected to contribute to the increase in the price of oil due to supply uncertainty it introduced, as Iran is one of the world’s major oil producers.

“As a net importer of oil, the increase in the oil price entails that the oil import bill for Namibia is likely to increase and exert pressure on foreign reserves,” Zemburuka said, adding that BoN would continue to study the developments around the re-imposition of sanctions on Iran by the US.

NAMPA

Photo Credit Main Image: XINHUA