Dr. Najam Abbas is a Senior Fellow with East West Institute focusing on Central and South Asia
Russia and Iran have announced initiatives to implement measures to effectively cope, counter and overcome not only any new restrictions but also the present economic sanctions that the two countries are experiencing on different fronts.
Two major projects highlighted include the development of Iran’s oil and gas fields through the signing of a roadmap between Rosneft, Russia's major oil producer, and Iran for Iranian oil and gas investments. Secondly, the gas pipeline project to India in which Russia’s energy giant Gazprom is eager to participate. The companies have prepared plans and memorandums of understanding in these projects that promise high returns, but they could also present political risks, TASS reported Friday citing Russian Minister for Energy Alexander Novak.
One of the main goals of President Vladimir Putin's Nov. 1 visit to Tehran was to discuss the situation affecting Iran in the light of new sanctions threatened by the U.S. At a time when both countries are "subject to incessant pressure", contacts and interaction on all issues become increasingly important, Russian Deputy Foreign Minister Sergey Ryabkov told reporters. Ryabkov called for the need to “develop joint options to counter efforts which could hamper their growth potential", Press TV reported.
In a new strategy aimed to compensate for comparatively reduced turnover owing to the lowering of world oil prices, Russia is seeking bigger stakes in energy supplies to South and East Asia. By extending political backing and technical support to enable Iran to exploit and transport its gas production, big dividends for Russia are envisaged.
“Russia has not been given a range to choose from. Our country is being forced out into regions with high political or economic risks. Hence, the Russians have to work in high-risk markets, such as Venezuela and Iran, though in case of success, the win would be big," TASS quoted analyst Sberbank’s Valery Nesterov on Friday.
“The thrust to raise the level of economic relations between the two countries comes in the wake of an unstable political situation around Iran since U.S. President Donald Trump said that Washington would be ready to quit the Iranian nuclear deal that was concluded two years ago, unless it was changed to meet the new demands of the White House. Furthermore, Trump threatened to re-impose some sanctions,” Nesterov continued.
Novak told Rossiya24 that “considerable attention is paid to prospects of developing the infrastructure and energy sectors and engaging with Iran to reap rewards from future energy supplies extended to South and East Asia.”
The energy agreements signed in Tehran are Moscow’s bid to seek wider coordination on future energy supplies to Asian markets where Iran's exports do not compromise Russia's interests.
Chairman of Rosneft Igor Sechin spoke about Russia’s interest in developing Iran’s oil and gas exploitation infrastructure to help it raise its production capacity, Rossiya24 news channel reported Wednesday. Rosneft signed a Memorandum of Understanding with the National Iranian Oil Company "for the upgrading and development of oil and gas projects in Iran with a total value of $30 billion".
Sechin expressed hope that the two sides would sign binding agreements on these projects, which over a 10-15 year period, would help Iran increase its total hydrocarbon production up to 55 million tons of hydrocarbons per year.
Rosneft and Gazprom are both hopeful of attracting Chinese investment for Iranian oil and gas projects.
It remains pertinent that limitations imposed on any increased Iranian energy production should be analyzed in a pragmatic way. The dark clouds looming over Iran's nuclear agreement have delayed the prospects of bringing substantial oil reserves back on the world market. West Asia observer Vadim Sazhin points out that the Iranian oil industry requires huge investments, up to an estimated $185 billion towards 2020, to attain efficiency. Sazhin predicts that under the current circumstances, it is very difficult for Iran to increase oil production and exports considerably and: “only after new investments are made and improved technological equipment are put in place” will this happen.
According to Alexey Belogoriev, deputy director at the Russian Institute for Energy and Finance, Russia next aims to expand its status as a key stakeholder in future energy supplies for the sizeable and growing markets in South and East Asia in its aim after profiteering from brokering Iranian crude oil for its refined petroleum. Belogoriev said that the participation of Gazprom in the joint project with Iran would serve as an attempt to develop a reliable relationship with its key competitor in the gas market, which also includes the EU, Russia’s Economy Today agency reported.
Belogoriev considers the market comprising Pakistan, India, West, South and East Asia as significant in terms of size when calculating the prospect of constructing a gas transmission network. He believes that Russia can play a significant role with the interested parties to overcome the enduring hurdles and can offer a big push to thrust the project forward.
“We need to compete to get a share there. If we could manage assurances of supply, then Gazprom will not need to invest in the project itself as many interested investors may be found through project financing," he said.
On an official visit to Tehran, Vladimir Putin backed the 2015 Iran nuclear agreement and hailed cooperation with Iran. Coinciding with his visit, the excavation process for the construction of a new site for the second and third reactors for the Bushehr nuclear power plant in southern Iran began on Tuesday, Tasnim Agency reported.
A second unit of the Bushehr plant is expected to take 10 years to complete. The third unit is also planned for construction near the second one. A total of $10 billion has been allocated for the construction of the two units. The capacity of the second phase is expected to be over 1,000 megawatts (MW) and the total capacity of the two units is set to be 2,100 MW, Tasnim Agency noted.
Earlier on Wednesday, leaders of three oil producing countries, Azerbaijan, Iran and Russia met in Tehran to review further prospects for developing “the North-South Transport Corridor (NSTC) – a ship, rail and road route for moving freight between India, Russia, Iran, Europe and Central Asia. The international transport corridor, with a length of 7,200 kilometers, is aimed at creating optimal opportunities for the transport of transit cargo from India, Iran, the Gulf countries through the territories of Azerbaijan and Russia to countries of Northern and Western Europe,” Baku’s 1News agency reported Friday.
Later these tracks may subsequently be extended further to link Pakistan as well as China, Rossiya24 reported Wednesday.
London, Nov. 3, 2017
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.