The existing state of energy cooperation between Russia and Iran is based on the evolving dynamics of global politics and the recent escalation of tensions in the Middle East.
Russia and Iran are now evaluating the geopolitical and economic implications of their energy cooperation to potentially gain a competitive advantage over the United States and its Western allies. Both nations are engaged in many initiatives and arrangements aimed at strengthening their collaboration in the energy domain, including nuclear power, renewable energy sources, gas pipelines, and liquefied natural gas (LNG) production.
In light of the continuing conflict between Russia and Ukraine, there has been a notable intensification in energy collaboration between Russia and Iran, which may be attributed to the heightened concerns around the global oil crisis. A deal valued at $40 billion has been inked between Gazprom, a state-owned energy corporation in Russia, and the National Iranian Oil Corporation (NIOC) of Iran to develop oil and gas reserves.
The two states are engaged in discussions over the potential establishment of an electronic platform for gas trade in the southern region of Iran. In February 2023, Iran and Russia entered into a strategic cooperation pact covering a range of domains, such as energy, military, commerce, and security. The deal furthermore included a strategic plan outlining the progression of Iran’s nuclear program with the goal of peaceful applications, whereby Russia would provide technical support and specialized knowledge.
In March 2023, an agreement was reached between Pakistan and Russia to finalize energy cooperation. This proposal included the construction of a gas pipeline originating from Iran and extending to Pakistan, with potential extensions to India and China. The proposed pipeline would facilitate the exportation of Iran’s natural gas to the aforementioned nations while also generating transit fees for Pakistan and Russia.
In July 2023, Russia and Iran demonstrated their intention to establish a worldwide gas cartel that would potentially compete with the Organization of the Petroleum Exporting Countries (OPEC) in terms of its sway and dominance inside the global energy market. The proposed market would include prominent gas producers and exporters, including Russia, Iran, Qatar, Turkmenistan, and Algeria. Its primary objective would be to synchronize its gas policies and pricing strategies, therefore enhancing its influence over Western markets, particularly Europe.
In August 2023, the Russian government put up a proposal to construct an energy hub in collaboration with Iran. This proposal included the creation of a joint venture aimed at the production and exportation of liquefied natural gas (LNG) derived from Iran’s South Pars gas field. Additionally, the establishment of the hub would include the advancement of Iran’s gas infrastructure as well as the establishment of a regional gas market, including neighboring nations in the Caspian Sea and Central Asia areas. Additionally, it is anticipated that Russian authorities will participate in the Iran Oil Show, a prominent oil and gas industry show in the Middle East, scheduled for September 2023.
With Iran’s cooperation, Russia is putting forth a proposal to establish an energy hub. Russia and Iran are subject to Western sanctions that impose restrictions on their participation in the global energy market. Through collaboration, they can have the ability to circumvent some limitations and enhance their prospects for trade and investment.
Additionally, it is worth noting that Russia and Iran possess energy resources and infrastructure that are mutually supportive. Russia has advanced knowledge and technological capabilities in the manufacture of LNG and the building of gas pipelines. On the other hand, Iran boasts extensive deposits of natural gas and oil that need both development and modernization efforts. Furthermore, it is worth noting that Russia and Iran possess shared geopolitical interests and strategic objectives in the area. Both parties express their opposition to the United States presence and influence in the Middle East. Both countries are expressing their support for the Syrian government and its allied forces.
In addition, there is a desire to oppose the Saudi-led coalition and its affiliated entities, including Israel and the United Arab Emirates. In addition, Russia and Iran want to establish a worldwide gas cartel to gain further influence over Western nations, particularly Europe, which exhibits a significant reliance on gas imports. Through strategic coordination of their energy exports, countries can exert influence on the supply and demand dynamics of natural gas, therefore impacting global market pricing and the overall availability of this resource.
From a geopolitical perspective, the energy collaboration between Russia and Iran might potentially have varying consequences for other countries in the area, depending on their respective relationships and interests with the two collaborating nations.
The potential collaboration might be advantageous for Turkey since it has the potential to enhance its energy security and broaden its supply sources. Turkey is now a significant importer of Russian gas and serves as a transit nation for the Turk-Stream pipeline, which facilitates the transportation of gas from Russia to Europe. Turkey is now considering the prospect of importing natural gas from Iran through a pipeline via Pakistan. Turkey stands to gain advantages from participating in the proposed regional gas market by Russia and Iran, which aims to include other nations in the Caspian Sea and Central Asia. Nevertheless, Turkey may encounter some obstacles due to its conflicting interests with Russia and Iran in regions like Syria, the Caucasus, and Central Asia. Turkey will potentially encounter pressure from the United States and its NATO partners to diminish its reliance on energy sources from Russia and Iran.
The potential collaboration between Saudi Arabia and the UAE may have adverse consequences since it has the potential to harm their regional influence and interests. Saudi Arabia and the United Arab Emirates are considered adversaries of Iran, engaging in proxy wars across several regions such as Yemen, Iraq, Syria, and Lebanon. Saudi Arabia and the United Arab Emirates are significant contributors to the global oil export market. However, they may encounter competition from other big players, such as Russia and Iran. The potential collaboration between Israel and Iran may be seen as a source of concern since it has the potential to bolster Iran’s influence and standing within the region.
Israel has also engaged in operations and launched aerial attacks against Iran’s nuclear installations and military infrastructure. Israel may have concerns over the potential implications of Russia’s engagement in Iran’s energy sector, as it may potentially enhance Iran’s access to resources and bolster its ability to pursue nuclear objectives and expand its influence. Furthermore, Oman stands to gain potential advantages from the planned collaborative endeavor between Russia and Iran, which entails the production and exportation of liquefied natural gas (LNG) derived from Iran’s South Pars field.
The potential impact of the energy cooperation between Russia and Iran on Europe’s energy security is based on their collaboration as well as the reactions of the European Union and other relevant stakeholders. The successful development of Iran’s gas resources and infrastructure by Russia and Iran, together with the establishment of a joint venture for the production and export of LNG, has the potential to enhance their market position in the global gas industry. This collaboration might enable them to provide Asian nations, like China and India, with more competitive pricing and dependable gas supplies.
Moreover, it is plausible for Russia and Iran to establish a collaborative framework for their energy exports and policies, potentially leading to the creation of a global gas market with other significant gas-producing nations like Qatar, Turkmenistan, and Algeria. Through this alliance, these countries may potentially exert control over the supply and demand dynamics of gas, thereby exerting influence over global gas pricing and availability.
The aforementioned scenario has the potential to provide a significant obstacle to the energy security of the European Union (EU), as it would render the EU more susceptible to gas shortages, price volatility, and political coercion exerted by the members of the cartel.
In conclusion, Russia-Iran energy cooperation is based on mutual interest. With this nexus, Iran wants to emerge as a significant gas producer in both the Middle East and the global arena, and Russia aims to subvert the impact of sanctions. The proposed strategy involves the procurement of Russian gas by Iran, which would create new tensions in the global energy market and forge new rivalries between the countries in the Middle East.