The Return of Iranian Oil to the Market and Its Impact on the Russian Economy

Russia and Iran have expressed a desire to expand oil cooperation, but they continue to send mixed messages regarding the controversial barter of oil for goods. According to the Russian Energy Minister, the return of Iranian oil to the global market will not significantly impact oil prices. Ali-Ahmad Yarmohammadi, a senior official in Iran's Ministry of Oil, expressed hope for expanding cooperation with Russia in the post-sanctions era, especially since, according to him, this cooperation had not stopped during the sanctions period. He also stated that Iran sells its oil production directly in the global market without intermediaries, but this will not hinder cooperation between Tehran and Moscow in the global oil market. These remarks come after Alexander Novak, the Russian Energy Minister, indicated that Russia would not export Iranian oil, but Russian brokers could participate in this process. He also mentioned that Russia intends to discuss the participation of Russian companies in Iran's oil and gas projects with Iranian representatives at the next intergovernmental commission meeting. He added that no privileges have been granted to Russian companies so far. Alexei Strovsky, a political analyst in Moscow, stated that economic cooperation between Russia and Iran has been minimal and is unlikely to change fundamentally: "Our level of economic cooperation is low. Essentially, Russia's trade relations with all Eastern countries account for less than 15% of its total exchanges, and trade with Iran is only one billion dollars a year. This situation cannot be changed overnight, especially since Russia and Iran are dependent on the oil and gas industry and, while they are competitors in this area, effective cooperation is very unlikely. This is especially true as Iran seeks to expand cooperation with the West while Russia is under Western sanctions. In my opinion, Moscow and Tehran view each other as partners who only need each other if their cooperation with the West does not materialize." Alexander Novak, speaking to reporters in Moscow, stated that Russia believes the return of Iran to the global oil market will not cause severe fluctuations in its price. He added that according to experts' estimates, Iran could add about one million barrels to its current production after sanctions are lifted next year, and in the future, it could increase production by two and a half million barrels. However, according to the Russian Energy Minister, the market has long reacted to this potential change. He also noted that Russia produces over 10 million barrels of oil per day, with extraction costs (excluding taxes) ranging from $3 to $15 per barrel. The Russian Energy Minister emphasized that this production level will remain stable in the medium term. Recently, Bijan Zanganeh, Iran's Oil Minister, stated that Iran's oil production capacity would reach 4 million and 700 thousand barrels per day in the near future. Mikhail Yuriev, an energy expert in Moscow, stated that Iran's return to the oil market poses challenges for Russia: "Undoubtedly, Iran's return will lead to a decrease in oil prices. On the other hand, we must not forget that non-economic factors also influence global oil prices. If chaos erupts at the borders of Saudi Arabia, oil prices could reach $200 per barrel. Otherwise, we must change the entire structure of our economy to save it." Recently, Bloomberg reported that Russia is the biggest loser from Iran's return to the oil market. On Tuesday, the Russian Energy Minister announced that he would discuss the market situation and its outlook concerning the lifting of sanctions against Iran with the OPEC Secretary-General in ten days. According to an agreement reached last week between six world powers and Iran, sanctions against Iran will be lifted in exchange for limiting its nuclear program.