Russia and Iran are taking steps to strengthen energy, industrial and logistical ties as the two countries seek to ease the burden of US sanctions against them.
August 24 Iranian Oil Minister Javad Ooji (also known as Oudji and Ovji) announced that Iran and Russia are close to completing a natural gas swap deal that would allow Iran to import Russian gas and then ship a certain amount of it to third countries. Uji told reporters that Moscow and Tehran are also in talks to jointly develop 14 oil and gas fields in Iran.
In July, the two countries signed a $40 billion memorandum of understanding under which Russian state-owned energy conglomerate Gazprom agreed to help develop seven oil and gas fields in Iran. Khabibolla ZafaryanAmirkabir, an energy expert at Tehran’s Technological University, told the Fars news agency that the deal opened the way for Iran to become a “regional hub” for Russian gas.
“Now Iran and Russia have the opportunity to sit down at the same table and share the gas market among themselves,” he said. “Russia is the world’s first largest and Iran the second largest owner of gas resources in the world, and by working together they can determine the optimal strategy for developing the market.”
Zafaryan argues that Iran could start buying surplus Russian gas, which was originally destined for the European market, and then resell it to neighboring countries such as Pakistan and Iraq. Russia has drastically cut gas supplies to Europe in recent months, citing problems with sanctions and disputes over payment methods.
Some Western diplomats fear that if the 2015 nuclear deal is revived, Iran could also become a “back door” to delivering sanctioned Russian oil to Europe. Politico recently reported that Tehran could start “importing Russian oil to its northern Caspian coast and then selling an equivalent amount of oil to Russia’s interests by Iranian tankers leaving the Persian Gulf.”
In addition to energy, the Kremlin is increasingly turning to Iran for help in filling the gaps created by Western sanctions and the withdrawal of multinational corporations from Russia.
During a trip to Moscow, the Minister of Industry of Iran Reza Fatemi Amin said the two countries are expanding cooperation in the shipbuilding, automotive and aviation industries.
He said Iran hopes to strike a free trade agreement with the Eurasian Economic Union, a Moscow-led trading bloc that includes Russia and several of its traditional allies in the post-Soviet space.
New car sales in Russia fell 60.5% year-on-year in the first seven months of 2022 as many foreign brands went out of business and domestic manufacturers struggle to acquire critical components. Meanwhile, Russian airlines have begun stripping planes that are no longer available due to sanctions for parts, according to Reuters.
In early August, the leading Iranian automaker announced that it was paying “special attention” to the Russian market and would start exporting its vehicles to Russia later this year. Russian and Iranian automakers, as well as parts manufacturers, signed deals worth $700 million on the sidelines of an auto industry show in Moscow.
A similar story played out in the aviation sector. Last month, the two countries signed a memorandum of understanding allowing Iran to start exporting spare parts and equipment to Russia and provide repairs, maintenance and technical services to Russian aircraft.
Another way Iran can help Moscow bypass sanctions is to offer itself as a new logistics center for Russian goods bound for the outside world.
The main option at the moment is the International North-South Transport Corridor (ITC), a 7,200-kilometer network of sea, rail and road routes connecting Russia and India via Iran. According to a study by the Federation of Freight Forwarders of India, ITC is 30% cheaper and 40% shorter than the traditional Suez Canal route.
Although Russia and Iran have been in talks to launch the ITC for more than two decades, the project began to move forward after the US and European countries banned Russian ships and aircraft from their ports and airspace in March.
According to the Minister of Transport Vitaly Savelievthese new restrictions “virtually destroyed” Russia’s trade logistics and forced the Kremlin to look for alternative routes. At the same time, India’s importance as an economic partner for Moscow has increased significantly, as New Delhi began to actively buy Russian oil.
In June, the Iranian state shipping company announced that it had successfully delivered the first batch of Russian goods to India through the ITC.
Since then, about 3,000 tons of goods and 114 containers have been shipped via this route, according to the India Economic Times. Iranian officials indicated that Russia could potentially help build new railroads in Iran under the MTC in exchange for oil barter.
Author: Dimitry Simes – American political scientist, historian, scientist. He was appointed by Richard Nixon as chairman and chief executive officer of the Center for the National Interest when it was founded on January 20, 1994. Publisher and CEO of the American magazine The National Interest.
Translation by Sergei Dukhanov.