BERLIN (Dispatches) —
Russia is turning to Iran to beat sanctions, Western diplomats say.
Moscow dispatched teams of trade and finance officials as well as executives from Gazprom and other companies to Tehran in July following Russian President Vladimir Putin’s meeting with the Iranian leadership to lay the groundwork for closer cooperation between the two countries.
In recent weeks, Iran also sent two official delegations to Moscow focused on energy and finance. Among the senior officials in attendance were Iranian central bank chief Ali Saleh Abadi, Deputy Economy Minister Ali Fekri, and the head of the Iranian legislature’s economy committee, Muhammad Reza Pourebrahimi. The Iranians spent several days meeting with their counterparts and private sector executives, according to the diplomats.
The principal attraction of Iran is that it provides an invaluable wealth of experience on how weather sanctions, including for selling sanctioned Russian crude oil — the Kremlin’s chief source of hard currency.
Russian oil exports face an almost total embargo from EU countries from December. Under what traders call a “swap” arrangement, Iran could import Russian crude to its northern Caspian coast and then sell equivalent amounts of crude on Russia’s behalf in Iranian tankers leaving from the Persian Gulf.
In addition, Iran could eventually use its fleet of tankers to pick up Russian oil in ports outside the Caspian.
In a sign of the importance being accorded to Tehran, Putin’s visit to Iran in July was his first to a country outside the former Soviet Union since the outbreak of the war. As a gesture of goodwill, Tehran and Moscow used the occasion to announce a memorandum of understanding on $40 billion-worth of joint projects, particularly aimed at developing gas reserves in the Persian Gulf and producing high-value liquefied natural gas.
Ali Akbar Velayati, a foreign policy adviser to Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, has left little doubt that swaps are high on the priority list. “We receive oil from Russia and Kazakhstan via the Caspian Sea to use it for domestic consumption and then we deliver oil in the same quantity to their customers in the south,” he was quoted as saying by the Fars news agency shortly after Putin’s trip to Iran.
“Iran is a good partner in this endeavor,” one of the Western diplomats said. “Russia has a difficulty and Iran has a capability.”
The swap strategy has enjoyed varying degrees of success in the past. Swaps had to be suspended more than a decade ago when Iran complained that it was losing money on the arrangement and that Russia was providing substandard crude. This time around, Iran would also have to find a way to bridge any complications associated with Russia’s crude selling at a heavy discount on global markets because of the sanctions.
In addition to the attractions of energy cooperation, several diplomats have noted that Moscow is also looking broadly across Central Asia, Iran and Turkey to find loopholes around restrictions on goods’ imports.
Russia is well aware that Iran has a long pedigree in finding such alternatives. After years of sanctions, Tehran has proven adept at finding ways to subvert controls. Russia is eager to tap into that expertise and is betting that Iran would prove helpful.
Earlier this month, Russia’s space agency launched an Iranian spy satellite into orbit.
In their discussions with the Iranians, Russian officials have also signaled that they intend to upgrade rail and road infrastructure to the Caspian port city of Astrakhan in order to facilitate trade between the two countries. An Iranian company holds a controlling stake in the Russian region’s main port, Solyanka.
On a visit to a Moscow auto industry trade fair this week, Iran’s deputy industry minister, Manouchehr Manteqi, said his country was exploring cooperation with Russia in “rail, air and sea transportation,” the official IRNA news agency reported.
This week, Russia, Iran and Azerbaijan also signed a “memorandum to simplify transit transportation,” in order to ease trade across the region, Russia’s TASS reported.
A further area of cooperation is finance. During Putin’s meeting with Ayatollah Khamenei in July, the two men discussed ways to break the dollar’s hold on global trade. Both countries’ banks have been banned from SWIFT, a U.S.-dominated system used to facilitate international trade, and their economies face extreme difficulty undertaking cross-border transactions.
Iran is also eager to help Russia find ways to hasten “de-dollarization,” the Western diplomats said.