By Mehdi Soltani

Russia and Iran in the energy market: Competition or cooperation?

February 1, 2023 - 20:45

Many observers believe Moscow is behind every significant international development or organization, be that the results of the US Presidential elections or the decisions of the European Parliament.

That is rooted in lack of systemic understanding of international relations and sovereign motivation of its actors. A similar approach is taken with regard to Iran’s policy in the Middle East. Where a Shiite individual or movement makes a step, Iran’s opponents see footprints leading to Tehran. Neither of the two capitals has both motivation and capabilities to control such developments abroad, so before ascribing any role to Moscow or Tehran, one should better study how things work in reality, rather than according to their imaginary schemes, even if such schemes make sense to the public.

One of these approaches, which is rather similar to the conspiracy theory, is to blame Russia of taking deliberate actions to strain the relations between Iran and Europe, and subsequently, targeting Iran in the energy market as a potential actor to replace Russia in Europe's energy supply.   The global developments that have turned up in the last few years have caused Iran-Russia relations to enter a new, comprehensive and rather strategic phase. Despite the unprecedented violations and sanctions imposed on Iran by Western countries, the evidences of new cooperation between Iran and Russia show that the recent alliances are on the path of comprehensive development. Cooperation in the field of advanced technologies (Khayyam remote sensing satellite that lifted off from the Baikonur Commodore), unprecedented trade volume up to 4 billion dollars in 2022, bilateral military collaboration , gas memorandum between Iran and Russia's Gazprom and also, Russia's support for Iran's membership in the Shanghai Cooperation Organization shows the remarkable expansion of strategic relations in recent years, especially after the intensification of Western sanctions on both countries.

In a completely simplistic judgment, some analysts believe in Russia's pre-planned strategy to completely eliminate Iran from global equations, especially by preventing the restoration of this country's relations with the European Union in the field of energy exports as an alternative to the sanctioned Russia in this market. In order to justify their claim, they pointed to the military cooperation between Iran and Russia, which became an excuse to intensify the sanctions of the European Union against Iran, as well as diminishing the possibility of revitalizing the JCPOA, and they consider it as a scheme by Russia.

Spreading such pessimistic views lead to questions that can invalidate such views to some extent. Considering the disconnection between Russia and European countries in the field of energy trade, how Iran is able to supply the amount of energy needed by Europe as an alternative to Russia in terms of production infrastructure, production volume, export capacity, as well as logistical ability?

Agreement between Iran and Russia’s Gazprom is concluded with anticipation of the infrastructure expansion, which is a manifestation of Russia's willingness to strategic cooperation with Iran.

A detailed examination of Iran's production and export capacities and capabilities in the field of energy such as oil, gas and even petrochemical products can well answer the above question and negate the mentioned point of view.

According to the gas crisis occurred in Europe during the last year, many suppose that Iran will be the best option to compensate for the shortage of gas in Europe. Declaration of such a proposal shows that some analysts are not informed about the production capacity and conditions of facilities and infrastructure of Iran's gas fields.

According to statistics, the average gas consumption in the country is 250 billion cubic meters per year, and the total gas production in 2021 was about 269 billion cubic meters. Moreover, Iran's total gas exports to Iraq and Turkey are 17 billion cubic meters annually. Therefore, if we consider consumption and export to Turkey and Iraq, the amount of production is almost equal to both consumption and exports. Therefore, considering gas export, Iran will need a large investment for development of production infrastructure, that the recent agreement between Iran and the Russian company Gazprom is concluded with the anticipation of the infrastructure expansion, which is a manifestation of Russia's willingness to strategic cooperation with Iran even in the field of energy.

Others point to Europe's greater need for Iranian oil than gas, and this will be the best opportunity for Iran to take advantage of the current situation by supplying oil to European union countries.

Although this expectation seems reasonable to some extent, it should be noted that in the current situation Europe's immediate demand for oil is lower than gas. We should acknowledge that oil transportation is easier than gas, and Europe's supply sources, such as Saudi Arabia have more variety of products. Moreover, it should also be taken into consideration that even with restoration of the JCPOA and the beginning process of exporting oil to Europe, in the current conditions Iran's oil will not have a notable impact on the reduction of Europe's oil demands. Considering the production of 4 million barrels of oil per day and also in light of domestic consumption, Iran's export capacity is expected to be 2 to 2.5 million barrels per day. Referring to the number of barrels that will be exported to South Korea, Japan, China and India, therefore ultimately we cannot imagine a significant amount for export to Europe. Although we should admit that this number of barrels will make no difference to Russia and the long-term prospects of this country in international relations.

According to the mentioned points, it implies that some criticisms toward the enlargement of Iran and Russia's relation are completely thoughtless and stem from the lack of correct and systematic understanding of international relations, and undoubtedly, some of them are rooted in some historical narratives in the relations between the two countries. The analysis of any international policies should be based on the principles of international relations and realities, not on our excitement and personal interests to a particular side or even conspiracy theories. The relations between Iran and Russia have been progressing towards comprehensive development in recent years, and its effects can be seen in the internal and external developments of both countries. One of these fields is energy trade, where both countries have had valuable cooperation to increase each other's production and export capabilities. Nevertheless, the Russia's strategy in destruction of relations between Iran and Europe with the aim of maintaining the monopoly of energy exports is completely simplistic as well as short-sightedness of the depth of Iran-Russia relations in recent years.

By Mehdi Soltani is a student at MGIMO University, Russia

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