Dmitry Zaks
Last updated: 12 February, 2014

Rumors of an Iranian oil-for-cars program

Russia's economy chief on Wednesday announced plans to visit Iran amid reports of the two sides nearing a mammoth oil-for-goods deal that has raised consternation in the United States.

Economy Minister Alexei Ulyukayev told Russian media his late April trip would focus on a “wide range of trade and economic issues” but provided no further details.

Moscow’s Kommersant business daily on January 16 said the two close trading partners were negotiating a barter agreement under which Russia could import up to 500,000 barrels of Iranian oil per day.

Russian officials have neither confirmed nor denied the discussions. They stress that such deliveries would not break UN sanctions on the Islamic state.

But Washington and EU nations have imposed their own restrictions over Tehran’s disputed nuclear programme that also penalise countries and companies dealing in certain areas with Iran.

The White House last month expressed “serious concern” over the rumoured swap because it could potentially boost Iran’s oil exports by more than 50 percent.

Iran’s crude shipments are believed to have shrunk under the impact of the unilateral Western sanctions from 2.5 million barrels per day in late 2011 to less than one million barrels per day at the end of last year.

Tehran’s Fars news agency quoted Moscow’s Iranian ambassador as saying on Saturday that the latest terms of the proposed deal would see Russia build Iran railroads in exchange for oil.

Russia has not imposed its own Iran sanctions and is helping the Islamic republic with both arms shipments and nuclear energy production.

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Moscow media have been speculating since the weekend that the deal would see Russia re-export the oil to China while also providing Iran with train cars and locomotives.

Russian Railways state corporation chief Vladimir Yakunin had earlier expressed interest in helping Iran develop a railroad to its northern neighbour Armenia.

Some analysts believe that Washington would be less upset with Russia developing Iran’s 100-year-old rail network because this would reduce the possibility of Moscow providing Tehran with weapons or advanced equipment with a dual civilian-military use.

The United States is particularly concerned about Iran acquiring Russian knowhow necessary to develop long-range missiles and expand uranium enrichment.

Russian Centre for Policy Studies analyst Andrei Baklitsky said Moscow was probably preparing the ground for a deal that would go ahead only if Iran and world powers struck a comprehensive nuclear programme agreement by their summer deadline.

“Russia does not want to be late to the party once the Iranian sanctions are lifted. But there is little sense for Russia to act before a comprehensive agreement is struck,” Baklitsky said in a telephone interview.

“Russia has expanded too much effort into making such a comprehensive deal possible for it to undermine it now.”

Other reported aspects of the proposed deal would see Russia’s state-run energy behemoth Gazprom get access to natural gas deposits controlled by Iran in the Caspian Sea.

Russia’s private crude producer Lukoil also confirmed on Wednesday that it was in talks with the Iranian oil ministry about resuming work in its energy sector once the Western sanctions are removed.

Relations between Russia and Iran have wavered throughout history but included a close alliance in the 1980s after the fall of the Shah.

Moscow has since developed Iran’s first nuclear power plant and lobbied unsuccessfully for Tehran’s inclusion in the international peace talks on Syria that resumed last month in Switzerland.