August 08, 2014
Russia announced Tuesday that it has signed a deal strongly opposed by Washington—to help Iran sell its oil. But minutes after issuing the announcement, Moscow withdrew it.
The speedy deal/no deal left jaws dropping. No one explained what was going on.
In January, sources told Reuters Iran and Russia were negotiating an oil-for-goods swap worth $1.5 billion a month that would enable Iran to lift oil exports substantially, undermining Western sanctions.
Under the proposed deal, Russia would buy up to 500,000 barrels a day—which would boost Iranian oil exports by half—in barter exchange for Russian equipment and goods, the sources said in January.
Russian and Iranian officials later acknowledged such talks were taking place, but said the deal was uncertain as both Russia and Iran are competing oil exporters and they also lack the infrastructure to move so much crude between them.
On Tuesday, Russian Energy Minister Alexander Novak and his Iranian counterpart, Bijan Namdar-Zanganeh, signed a five-year memorandum of understanding in Moscow, which included cooperation in the oil sector.
“Based on Iran’s proposal, we will participate in arranging shipments of crude oil, including to the Russian market,” Novak was quoted as saying.
The five-year accord will see Russia help Iran organize oil sales as well as “cooperate in the oil-gas industry, construction of power plants, grids, supply of machinery, consumer goods and agriculture products”, according to a statement by the Energy Ministry in Moscow.
There’s a question over “how substantive this memorandum is,” Richard Mallinson, an analyst at Energy Aspects in London, told Bloomberg. “There would be various practical limitations in terms of Iran’s current production capacity, geography and shipping logistics, as well as US sanctions.”
The agreement was described as a memorandum of understanding (MOU), which is not a contract, and is normally used to outline plans. Specific contracts can then be negotiated in line with an MOU.
Neither Novak nor the memorandum gave any details on timing or possible volumes. Novak said the deal would not violate international sanctions.
However, several minutes later the Energy Ministry said it was withdrawing the statement and would issue a new one on Wednesday, after the Iran Times went to press. It gave no reason for the withdrawal.