Friday, January 31, 2014

Russia Considers Itself Not Bound by Sanctions on Oil Trade with Iran

Despite US and EU protests, Russia is negotiating a trade deal with Iran. This trade deal will consist of Russia acquiring 500 thousand barrels of oil a day in exchange for Russian goods, making Russia the largest importer of Iranian oil and bringing 1.5 billion dollars a month to Iran. Moreover, this comes only a month and half after Russian Foreign Minister Sergei Lavrov met with Iranian leaders in Tehran on December 11th to discuss topics such as the fate of the Iranian nuclear program, which the permanent members of the United Nations Security Council and Iran made an agreement upon during talks in Geneva a few weeks before. 
According to US authorities, a Russia-Iran trade deal may make Tehran less likely to comply with the agreement made in Geneva and other sanctions such as those imposed by the United Nations Security Council, in which Russia has veto power. This deal would likely affect the legitmacy of other UN sanctions. However, Russia's representative to EU Vladimir Chizhov, in anticipation of the Russia-EU Summit on January 28th, stated that Russia is not violating any sanctions against Iran because it only follows UN sanctions, not Western trade sanctions against Iran. Russia finds these Western sanctions illegitimate.
Some Russians believe that if they wait until the sanctions are lifted, Western countries will infiltrate the Iranian market first. Moscow is currently in a good position to establish economics ties with Iran, which would would be more difficult if the West, primarily the United States, established relations first. Rajab Safarov, Chairman of the Center for a Modern Iran, says that Russia is in a favorable situation; Iran needs the money and goods because in the last 18 months sanctions have limited its exportability of oil, and Russia gains a political and economical advantages with one of the strongest countries in the region.
Why does Russia need Iranian oil? It is already the largest producer of oil in the world. One important aspect of oil and gas is that it is hard to prove of its origin. Russia will likely sell the imported Iranian oil as Russian. Iranian law forbids foreign investors having mining rights for oil and gas, but Russian companies are seeking that exclusive right. The Sberbank Investment Research team suggests that because of the need for more energy domestically, Russia could sell the the Iranian oil to the Asian-Pacific market while keeping some of its own, strengthening itself in the regional and global energy market. However, Russia and Iran attempted to make such deals in the past, but without success after Iran withdrew from the agreement with Gazprom in 2011 after "failed negotiations."


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