What's Driving Russia-Iran Energy Cooperation| MENAFN.COM

Tuesday, 29 November 2022 11:50 GMT

What's Driving Russia-Iran Energy Cooperation

(MENAFN- Asia Times)

As Europe prepares for a winter without Russian gas, the Kremlin is looking to move its natural gas sales further to the east. Although China and India remain Moscow's most important export destinations in Asia, Russia seems to have found a new buyer – the Islamic Republic of Iran. 

Why would a country that holds some of the world's largest proven reserves of oil and natural gas purchase energy from the Russian Federation?

Iran needs new gas pipelines to send its own energy products abroad, as the existing routes to Turkey and Iraq can supply only small volumes. In 2021, Iran's total gas exports were  . By comparison, Russia exported  last year. Pipeline capacity was Iran's primary bottleneck.

Another problem for Iran is the absence of LNG (liquefied natural gas) production. The Islamic Republic needs Russia to help it develop the country's energy infrastructure.

A US$40 billion  signed in July between Russian energy giant Gazprom and the National Iranian Oil Company could close this gap. Shut out from accessing Western LNG technology after the imposition of sanctions by the United States in 2018, Iran lacks access to expertise needed to develop its energy industry – and Gazprom could deliver it. 

Indeed, Russia's international isolation amid its war in Ukraine has presented Iran with an opportunity. As part of the MoU, Moscow will assist in developing Iran's Kish and North Pars gas fields, as well as six oilfields.

Russia is set to help Iran develop its oil potential. Image: Facebook

If Russia and Iran can agree on mechanisms to circumvent Western sanctions and coordinate on energy exports, the European Union would have to rely on oil supplies from Saudi Arabia and the United Arab Emirates, and LNG from the US and Qatar.

Such an outcome could lead to higher energy prices globally, and additional gas shortages in Europe, especially after Moscow and Riyadh  deep oil cuts at the recent meeting of the OPEC+ alliance. 

Moscow and Tehran could even attempt to create a“ ,” giving them significant leverage over the West, particularly European countries that remain heavily dependent on gas imports.

While Iran and Russia are cooperating now, Tehran has expressed interest in easing the  in Europe that Russia's war in Ukraine has caused. The problem is that Iran, like Russia, is under export restrictions, and without a reduction in Western sanctions – which seems unlikely – the Islamic Republic won't be able to help Europe meet its gas needs this winter. 

But even with a green light from Washington, Iran lacks the infrastructure to increase its exports, which is why it is seeking to establish strong energy ties with“friendly countries” that can help Tehran  its oil and gas industries.

Some are skeptical of this approach. Morteza Behruzifar, an energy expert in Tehran, told the  that Moscow has“never invested a penny in the Islamic Republic's energy sector,” and the recent MoU will go nowhere. Indeed, Russia currently lacks large-scale  of its own.

And yet, assuming the deal proceeds, Iran does stand to benefit. In mid-September, the Iranian Oil Ministry said Iran would buy 9 million cubic meters of  per day, primarily for  (and most likely to secure energy stability in Iran's northwest). With the EU intent on  Russian gas imports, Moscow clearly needs new markets, and Iran is in a good position to bargain. 

An additional 6 million cubic meters of Russian supplies could be  . Analysts expect Tehran to purchase this gas at a low price, and then sell it to Turkey, Pakistan, and even Afghanistan, which would allow Iran to close a yawning  . The arrangement would also benefit Gazprom, given that it would not bear the risk of non-payment because Tehran, rather than Kabul or Islamabad, would be the buyer.

To be sure, Iran will not replace Europe as the major market for Russian natural gas. Even if expected daily targets are met, Gazprom would only provide Iran with 5.5 billion cubic meters of natural gas per year, which is just  of what Russia previously supplied Europe via the Nord Stream pipeline.

A worker moves a pipe at the construction site of the Nord Stream 2 gas pipeline in Lubmin, northeastern Germany. Photo: AFP / Tobia Schwarz

Now that Nord Stream and Nord Stream 2 are out of commission  , Gazprom will likely seek to increase export volumes to Iran and elsewhere.

In other words, Russia, isolated from the West, has become more dependent on markets in the Middle East and Asia, and Iran could factor prominently in those calculations. Eventually, the Kremlin might even seek to  over Iran's gas resources.

For now, most of these plans remain aspirational. Even the best-laid strategies will be affected by the outcome of the Ukraine war, especially if Russia suffers a stinging defeat. Iran is also in the throes of an unprecedented wave of anti-government opposition that is diverting attention from daily concerns to regime survival.

Therefore, Russia and Iran may have ambitious goals in the field of energy, but there are no guarantees that they will achieve them any time soon.

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