Given the unreliable significance of energy in development and progress, energy security is instrumental, as many political events, friendships, and competitions across the globe revolve around energy. Energy is not merely an economic commodity; rather, it is a powerful tool in international relations. The countries rich in oil, gas, and petrochemical products can benefit from this potential in their foreign policy, national security, and economic development. Iran and Russia remain two key players in this domain. Although they face such political challenges as sanctions, they continue to impact the global energy market.
Energy Standing
Over the years, energy has grown into a strong bridge between Iran and Russia. In fact, given the similar economic structure of the two countries (reliance on energy revenues), similar political conditions (Western sanctions and pressures), and common interests in confronting Western hegemony, energy has become a focus of their convergence. Both countries are facing extensive economic sanctions, and in such circumstances, energy has become a tactical tool for economic continuity and the development of regional interactions.
Energy cooperation between Iran and Russia has grown stronger over the past five decades, and various memoranda of understanding have been signed between the two countries in the fields of oil, gas, and petrochemicals during different periods. The participation of Russian companies in Iranian oil industry projects over the past 44 years can be divided into three periods: During the first period (1978-1989), Russian companies participated in projects to develop Iranian oil and gas fields. During the second period (1989-2005), Iran-Russia cooperation in the oil and gas sector declined due to political disagreements between the two nations. During the third period (2005-2023), they saw their cooperation grow in the oil and gas sector anew. One case in point was the development of the West Paydar oil field. Over recent years, Russian companies have been further involved in developing oil and gas fields in Iran.
From March 2021 to March 2024, National Iranian Oil Co. (NIOC) signed MOUs with Russian companies like Gazprom for investment in developing oil and gas fields, investment in completing the incomplete Iran LNG project, defining new FLNG and mini-LNG projects, gas swap, petroleum products swap, building the high-pressure export pipeline, and transferring oil and gas technology. The MOUs are worth $40 billion.
Last calendar year, Iran and Russia struck several key MOUs in the energy sector, showing the depth of their cooperation in this sector. National Iranian Gas Co. (NIGC) and Gazprom in June 2024 signed a strategic MOU for the transmission of natural gas from Russia to Iran. Signed, while top officials from Iran and Russia were in attendance, it was a key step in favor of upgrading energy cooperation between the two countries. By that time, Iran’s petroleum minister said this agreement would bolster Iran as the regional gas hub and change the energy balance in the region.
In October 2024, Iranian and Russian energy ministers met in Moscow to discuss cooperation in the energy sector. During the meeting, they emphasized implementing joint energy projects, exchanging experience, and transferring technology in the field of design and manufacturing of gas turbines, and linking the two countries’ energy networks.
NIOC and Gazprom continued talks on how to implement the $40 billion MOU that covers development of the Kish and North Pars gas fields, compression at the South Pars gas field, development of six oil fields, swapping gas and petroleum products, completing LNG projects, and building gas export pipelines. That represented the largest foreign investment in the history of Iran’s petroleum industry.
Generally speaking, major contracts have been signed with Russian companies to develop oil fields in the country, totaling $4 billion in investment. The most important agreements are: the development of the Aban and West Paydar fields (76% completed), the development of the Cheshmeh Khosh, Dalpari, and East Paydar fields (26% completed).
Energy interactions continued between Iran and Russia into the current calendar year. Iran’s Petroleum Engineering and Development Co. (PEDEC) and Russia’s ZN Vostok (ZNV) held a high-level meeting on April 14 to explore options for developing oil fields, including “Aban and West Paydar” and “Cheshmeh Khosh, Dalpari and East Paydar”. On April 23-25, the Russian-Iranian Business Council (RIBC) held expert-level meetings in the run-up to its 18th economic meeting. Explaining about the achievements of the 18th RIBC meeting, Iran’s Minister of Petroleum Mohsen Paknejad said the agreements reached between Iran and Russia had sketched out the framework of long-term cooperation between the two nations, adding that the Ministry of Petroleum would severely follow up on implementing the agreements.
Asked about gas cooperation with Russia, Paknejad said cooperation would continue with Russian firms in the upstream sector. Gas trading was also a topic of discussion between Paknejad and Russian Deputy Prime Minister Alexander Novak. He said Iran was waiting for a response from the Russian side to finalize some MOUs. Several MOUs with Russian companies in the upstream sector would turn into agreements shortly.
In response to a question on Russian gas transmission to Iran, the minister said that an MOU had already been signed for Iran to receive 55 bcm/y of gas from Russia. Iran and Russia agreed on using the Azerbaijan territory for the planned gas transmission.
Russia would deliver gas to Iran in Astara, Paknejad said, adding: “Necessary arrangements are underway between Russia and Azerbaijan. The project would also have a second phase to be finalized in the future.”
Benefits of Cooperation
One key issue the 14th administration is pursuing severely in the energy diplomacy domain, in line with the 7th National Five-Year Economic Development Plan, is to increase Iran’s share of gas trading to turn the country into a gas hub in the region. Experts say Iran-Russia cooperation would facilitate Iran’s access to sophisticated technology and let Russia find a new oil and gas market. Iran-Russia gas cooperation would also bolster Iran’s status in future energy equations and subsequently the regional economy and security. Most neighbors of Iran currently suffer from a gas shortage. Russia has restrictions on gas exports. Therefore, Iran can take Russian gas and sell it to neighboring nations.
Furthermore, in light of US and European sanctions on Russia, Moscow’s ties with Tehran can prove beneficial for the Iranian and Russian petroleum industry. Iran would benefit from gas cooperation with Russia, be it gas swap or gas marketing. Such cooperation would finally help Iran become a gas and energy distribution hub in the region. Since Russia is far from India, the Iran route would be the best route for the transit of Russian energy and commodities to East Asia. That requires energy cooperation between Iran and Russia, particularly in the energy sector.
Iran’s gas cooperation with Russia can help us gain the necessary technology. For instance, Russia can help Iran in building infrastructure for offshore gas exports. Iran needs Russian technology to build a subsea pipeline to Oman for gas delivery. Swapping Russian gas can strengthen Iran’s political influence in the region, not to mention numerous political benefits for Iran. Iran has always sought to be a gas and energy hub in the region, therefore, gas cooperation with Russia can help it reach this objective.
Blunting Sanctions
Given Russia’s current situation in terms of sanctions from European countries and the United States, relations with Iran could be very beneficial for the Iranian and Russian oil industries. Reducing the effects of sanctions for both sides would include access to advanced technologies and investment for Iran, but it would also bring a new oil and gas market for Russia.
Russia is a country with significant experience and potential in the field of LNG and natural gas liquefaction; it has five major LNG facilities and 22 small-scale LNG facilities, so it can provide significant assistance to the Iranian oil industry in the field of LNG and natural gas liquefaction technology. This assistance includes technology transfer, investment, and technical cooperation. This cooperation can help Iran benefit from Russia’s experience and knowledge in this field.
On the other hand, Iran and Russia have had proper cooperation in the petrochemical sector, given the Russians’ interest. For example, an Iranian tech company exported about $9 million worth of various catalysts to Russia in the first half of the calendar year to March 2024 to supply its oil and gas industries.
Outlook for Cooperation
Given the geopolitical conditions, the huge capacities of both countries and Western sanctions, the prospects for cooperation between the two countries in the field of energy are expected to expand, deepen, and become more strategic. Because both Iran and Russia have massive reserves of natural gas. Given the European sanctions against Russian gas, the country is looking for new markets and reliable transit routes.
Iran can act as a transit route for swaps or exports of Russian gas to South Asian countries, the Persian Gulf, or even Africa. On the other hand, Iran needs advanced Russian technology in the field of directional drilling, gas injection, and enhanced recovery. Russia, under Western sanctions, is also interested in the Iranian energy market and access to profitable projects. Iran and Russia may increase their influence in the global market by coordinating in international forums such as OPEC+, the Gas Exporting Countries Forum (GECF), and the Shanghai Cooperation Organization (SCO).
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