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Iran and Russia negotiating $1.5B oil-for-goods deal

U.S. and European sanctions have cut Iran’s oil exports by more than half over the past 18 months, while Russia has no sanctions on the country.

LONDON/ANKARA: Iran and Russia are negotiating an oil-for-goods swap worth $1.5 billion a month that would let Iran lift oil exports substantially, in defiance of Western sanctions that helped force Tehran to agree a preliminary deal to end its nuclear program. Russian and Iranian sources close to the barter negotiations said final details were in discussion for a deal that would see Moscow buy up to 500,000 barrels per day of Iranian oil in exchange for Russian equipment and goods.

“Good progress is being made at the moment with strong chances of success,” a Russian source said. “We are discussing the details and the date of signing a deal depends on those details.” The Kremlin declined comment.

“Our desire is to sign the deal as soon as possible,” said a senior Iranian official, who declined to be identified. “Our officials are discussing the matter with the Russians and hopefully it will be inked soon, regardless of whether we can reach a [nuclear] agreement in Geneva.”

It is not clear whether the deal would be implemented before the nuclear agreement, outlined in Geneva in November between Iran and six world powers, is finalized.

Nor is it clear how Moscow will justify to other powers a barter deal that could jeopardize the nuclear negotiations by easing the economic pressure on Tehran.

Russia is one of the countries involved in the nuclear talks but, unlike the United States and the European Union, has not imposed sanctions on Iran.

Technical nuclear talks between Iran and the EU started Thursday. The November deal was designed to halt Iran’s nuclear advances for six months to buy time for a final settlement by May.

U.S. and European sanctions have cut Iran’s oil exports by more than half over the past 18 months to about one million bpd. Russia has no sanctions on Iran.

Russian purchases of 500,000 bpd of Iranian crude would lift Iran’s oil exports by 50 percent and provide a major boost to its struggling economy. At current oil prices near $100 a barrel Iran would earn about an additional $1.5 billion a month.

“ Iran has to find a way to accommodate more exports: this is the reason behind this,” an Iranian official said. “Both sides should rush for it. Russia will be able to guarantee a large amount of trade with its neighbor, and Iran will be able to overcome its export difficulties.”

No details were available about the equipment and goods on offer from Russia.

Given that Russia is a major oil exporter, the Iranian oil would likely be exported from Iran on Russia’s account, with Russian goods and equipment bartered in exchange.

Most Iranian oil goes to Asia.

Iran’s biggest oil buyer is China, importing about 420,000 bpd in 2013. Unlike Iran’s other oil buyers, China has not cut purchases much, despite efforts from the United States.

Other major Asian buyers of Iranian oil including Japan, South Korea and India have cut imports sharply under pressure from Washington. Turkey and South Africa also have reduced or eliminated imports.

 
A version of this article appeared in the print edition of The Daily Star on January 11, 2014, on page 4.

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Summary

Iran and Russia are negotiating an oil-for-goods swap worth $1.5 billion a month that would let Iran lift oil exports substantially, in defiance of Western sanctions that helped force Tehran to agree a preliminary deal to end its nuclear program. Russian and Iranian sources close to the barter negotiations said final details were in discussion for a deal that would see Moscow buy up to 500,000 barrels per day of Iranian oil in exchange for Russian equipment and goods.

Russia has no sanctions on Iran.

Given that Russia is a major oil exporter, the Iranian oil would likely be exported from Iran on Russia's account, with Russian goods and equipment bartered in exchange.


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