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Analysis

Russia-Iran $40 Billion Agreement Renders Western Sanctions Ineffective

Saturday 23 July 2022
Russia-Iran $40 Billion Agreement Renders Western Sanctions Ineffective

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Putin’s Respect and Devotion to Iran’s Leader Driving Tehran-Moscow Strategic Partnership

’Unipolar World Order’ Ended: Putin

Alwaght- While the US is pushing for Iran and Russia isolation on world stage using sanctions and regional coalition making, Tehran and Moscow are wreaking Washington and its allies' plans with their bilateral strategic partnership. Their strategic cooperation recently produced an initial agreement between National Iranian Oil Company and Russia's oil giant Gazprom. Gazprom officials had visited Iran over the past days and discussed oil partnership with their Iranian counterparts. Expert-level talks led to an understanding and on Tuesday and during Russian President Vladimir Putin's visit to Tehran, an agreement was signed. 

The agreement includes Russian investment for drilling in the North Pars oilfield, launching the second phase of the Kish gas field project, the South Pars pressure boosting project, investment in LNG projects, the construction of gas export pipelines, gas and oil products swap, scientific and technological cooperation, catalyst supplies and production of sensitive equipment for the oil industry. 

Projects worth of $4 billion Russian investment are already underway in Iran and the new agreement increases the investment in the Iranian energy industry to $40 billion, namely a 10-fold growth. This will considerably increase the Iranian oil and gas productions with the help of the Russians. According to the Iranian officials, this is the biggest and most unprecedented foreign investment in the Iranian oil industry history by a foreign oil giant. 

According to the recent agreement, part of the investments of Russian companies will be in the South Pars field, where France's Total oil company was supposed to invest earlier. Although Total signed agreements with Iran for the development of the South Pars field after the signing of the nuclear agreement between Iran and world powers, after a short period of time, under the pretext of American sanctions, it broke its commitments and left Iran. In May 2017, a week after the withdrawal of the US from the nuclear agreement, Total announced in a statement that if it could not receive exemptions from the American sanctions, it would withdraw from the phase 11 of the South Pars gas field. Failing to receive waivers, it left Iran's energy sector, perhaps forever. 

The recent energy investment agreement follows a "20-year strategic partnership document" signed with Moscow during President Sayyed Ibrahim Raeisi's visit to Russia in January. One of the key points of emphasis of the document is advancing the cooperation in economy and oil industry. 

Russian companies' technological capabilities 

Given that, Russia has the largest gas reserves in the world, Russian companies are leading in gas projects globally. Gazprom, which is known as the largest gas company in the world, has executed large projects in the world in recent decades, and it will not have any problems to execute projects in Iran. Large projects such as "Nord Stream", which is a set of marine natural gas transmission pipelines to Europe and passes the Baltic Sea to deliver gas from Russia to Germany with a length of 1223 kilometers, is considered one of the giant projects in the gas industry. Even in recent years, Nord Stream 2 was constructed to increase the capacity of Russian gas supplies to Germany, but recently, due to the US sanctions over the Ukraine crisis, the transfer from this pipeline was halted. 

In addition to participating in gas transfer projects to Europe, Russian companies have also played an effective role in transferring energy to China. According to the agreements made between Chinese and Russian authorities, Siberia gas will be transferred to China through a pipeline. Worth more than $400 billion, this project is described by the Chinese as the "project of the century." Therefore, Russian companies that have such a brilliant track record in the field of energy globally will also be successful in Iran's oil and gas industry. 

Tehran-Moscow strategic cooperation 

The signing of large oil and gas contracts between Iran and Russia will lead to the development of relations between the two countries in energy sector. Since Iran and Russia have 70 trillion cubic meters of gas reserves, which is 30 percent of the world's reserves, they play an important role in the energy markets. This issue can help maintain and develop cooperation at a time when two countries are under sanctions from the West. Contrary to the history of bad faith of companies like Total, Russian companies have fulfilled their commitments in this field in the past, and new contracts will be executed soon and can greatly help in increasing the production of oil and gas and developing the Iran's energy infrastructure. 

The increase in Tehran-Moscow energy interactions comes while a free trade agreement between Iran and the Eurasian Economic Union was signed recently, a deal that is expected to increase trade between the two sides by 75 percent. Taking advantage of global dollar dominance, the US has always used the lever of economic sanctions to punish countries that are not aligned with it. Likewise, Iran and Russia can use energy lever to pressurize the West in response. The Western sanctions against Russia have caused more damage to the Europeans themselves and the European leaders have repeatedly stated that they cannot survive without Russian oil and gas and there is currently no alternative to it. 

In recent months, Russia has tried to bring gas and oil-rich countries on board and hurt the West with energy crisis, and it has been successful so far. Washington is trying to cut off this Russian access to energy revenues by sanctioning its oil and gas, but the developments of the last few months showed that, contrary to Western thoughts, Russia not only did not suffer but also by exporting its oil to Asian countries and striking deals with allies like Iran managed to neutralize the effect of these sanctions and even according to statistics, in the 5 months since the Ukraine war started, the Russians have earned more than $200 billion only through oil sales, which is unique of its kind. 

Upgrade in Iran-Russia cooperation in recent months is driven by "pivot to the East" policy pursued by administration of President Raeisi. Moscow-Tehran ties have been good over the past four decades but they have never been as high-level and quality as today, showing they are close to strategic level. Russia and Iran fall in the same front in fighting Western-backed terrorism and US unilateralism and they can ditch the dollar dominance over the world trade by de-dollarization in their trade. 

With Iran-hosted North-South Corridor launched recently, the two countries can remarkablely improve their trade amid Western sanctions. European trade routes with Russia are closed and the corridor can play an important role in Russian products exports and benefit Iran. Additionally, China and Russia recently invited Iran to BRICS (Brazil, Russia, India, China, and South Africa). Presence in this effective international bloc will give their partnership even a stronger boost. 

As a conclusion, recent economic and energy agreements show that the Western push to sideline the two countries from world trade has met its failure and stronger bilateral and multilateral cooperation render the US sanctions practically ineffective. 

 

Tags :

Iran Russia Agreement Putin Partnership Sanctions West

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