Lambert here: Not a geopolitics maven, but Iran sure did offer Russia the right hand of good fellowship with those drone sales.
By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. Originally published at OilPrice.com.
• Iran’s Supreme Leader Ayatollah Khamenei gave his official approval to a new 20-year comprehensive cooperation deal between the Islamic Republic of Iran and Russia.
• The agreement will replace the 10-year-deal signed in March 2001 and has been expanded not only in duration but also in scope and scale.
• The new deal includes far-going agreements on defense and energy.
Iran’s Supreme Leader, Ali Khamenei, gave his official approval on 18 January to a new 20-year comprehensive cooperation deal between the Islamic Republic of Iran and Russia, according to a senior energy source in Iran and a senior source in the European Union’s (E.U.) energy security complex, exclusively spoken to by OilPrice.com last week. The 20-year deal – ‘The Treaty on the Basis of Mutual Relations and Principles of Cooperation between Iran and Russia’ – was presented for his consideration on 11 December 2023. It will replace the 10-year-deal signed in March 2001 (extended twice by five years) and has been expanded not only in duration but also in scope and scale, particularly in the defense and energy sectors. In several respects, the new deal additionally complements key elements of the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my new book on the new global oil market order.
In the energy sector to begin with, the new deal gives Russia the first right of extraction in the Iranian section of the Caspian Sea, including the potentially huge Chalous field. The wider Caspian basins area, including both onshore and offshore fields, is conservatively estimated to have around 48 billion barrels of oil and 292 trillion cubic feet (tcf) of natural gas in proven and probable reserves. In 2019, Russia was instrumental in changing the legal status of the Caspian basins area, cutting Iran’s share from 50 percent to just 11.875 percent in the process, as also detailed in my new book. Before the Chalous discovery, this meant that Iran would lose at least US$3.2 trillion in revenues from the lost value of energy products across the shared assets of the Caspian Sea resource going forward. Given the newest internal-use only estimates from Iran and Russia, this figure could be a lot higher. Previously, the estimates were that Chalous contained around 124 billion cubic feet (bcf) of gas in place. This equated to around one quarter of the gas reserves contained in Iran’s supergiant South Pars natural gas field that account for around 40 percent of Iran’s total estimated gas reserves and about 80 per cent of its gas production. The new estimates are that it is a twin-field site, nine kilometres apart, with ‘Greater’ Chalous having 208 bcf of gas in place, and ‘Lesser’ Chalous having 42 bcf of gas, giving a combined figure of 250 bcm of gas.
The same right of first extraction for Russia will also now apply to Iran’s major oil and gas fields in the Khorramshahr and nearby Ilam provinces that border Iraq. The shared fields of Iran and Iraq have long allowed Tehran to side-step sanctions in place against its key oil sector, as it is impossible to tell what oil has come from the Iranian side or the Iraqi side of these fields, which means that Iran is able simply to rebrand its own sanctioned oil as unsanctioned Iraqi oil and ship it anywhere it wants, as also analysed in full in my new book on the new global oil market order. Former Petroleum Minister, Bijan Zanganeh, publicly highlighted this very practice when he said in 2020: “What we export is not under Iran’s name. The documents are changed over and over, as well as [the] specifications.” Another advantage of the shared fields is that they allow effectively free movement of personnel from the Iranian side to the Iraqi side, and the utilisation of key oil and gas developments across Iraq is a key part of Iran’s longstanding plan, fully supported by Russia, to build a ‘land bridge’ to the Mediterranean Sea coast of Syria. This would enable Iran and Russia to exponentially increase weapons delivery into southern Lebanon and the Golan Heights area of Syria to be used in attacks on Israel. The core aim of this policy is to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan, and which may soon be seen as the Israel-Hamas War escalates.
The price of all manufactured items traded between Russia and Iran, including military and energy hardware, has been formalised in the new deal, although also not in Iran’s favour. For Iranian goods exported to Russia, Tehran will receive the cost of production plus 8 percent. However, these export sales to Russia will not be transferred to Iran, but rather they will be held as credit in the Central Bank of Russia (CBR). Moreover, Iran will receive a huge markdown on US dollar/Rouble or Euro/Rouble exchange rates used to calculate its credits in the CBR. Conversely, for Russian goods exported to Iran, Moscow will receive the payment in advance of delivery and at a much stronger exchange rate that benefits Russia. Moreover, the base price before any exchange rate calculations are made, will be founded on the highest price that Russia has received in the previous 180 days for whichever product it is selling Iran. This system has informally been in place for several weeks now, and according to the senior energy sector source in Tehran exclusively spoken to by OilPrice.com last week, Russia has ensured itself the highest possible price by selling to Belarus at a very large premium whichever product it intends to sell later to Iran, so establishing the required pricing benchmark. Payments for goods and services falling outside the direct finance route between the central banks of the two countries can now be done through interbank transfers between Iranian and Russian banks. Those also involving renminbi can also be done through China’s Cross-Border Interbank Payment System (CIPS) system, its alternative to the globally-dominant Society for Worldwide Interbank Financial Telecommunications (SWIFT) system.
In many cases, the expansion of military cooperation between Iran and Russia is tied into the energy sector elements of the new 20-year deal. Progress is earmarked to be made on upgrading the facilities at the key airports and seaports that have long been targeted by Russia as being especially useful for dual-use by its air force and navy, and which are also close to major oil and gas facilities. Top of the list of Iranian airports that Russia regards as the best for dual-use by its air force are Hamedan, Bandar Abbas, Chabahar, and Abadan, and it is apposite to note that in August 2016, Russia used the Hamedan airbase to launch attacks on targets in Syria using both Tupolev-22M3 long-range bombers and Sukhoi-34 strike fighters. Top of the list of seaports for use by its navy are Chabahar, Bandar-e-Bushehr, and Bandar Abbas. Similarly linked to Russia’s gaining the first right of extraction in the Iranian section of the Caspian Sea is that it will also be given a joint command capability over the northern aerospace defense section of Iran’s Caspian area.
It is also apposite to note here that Iran’s electronic warfare (EW) system can easily be tied into Russia’s Southern Joint Strategic Command 19th EW Brigade (Rassvet) near Rostov-on-Don to the northwest of the Caspian. This can also be linked in with China’s EW capabilities. These EW capabilities would include jamming systems for neutralising air defences in the region. This will be augmented with new missiles designated to be sent to Iran by Russia under the new deal, according to the senior E.U. security sector source exclusively spoken to by OilPrice.com last week. “Selected IRGC [Islamic Revolutionary Guard Corps] personnel will be trained on the latest Russian upgrades of several short- and long-range missiles – the Kh-47M2 Kinzhal, the Iskander M, the RS-26 Rubezh, the BrahMos3, and the Avangard – before the plan to manufacture them under licence in Iran begins, with the aim being to have 30 percent of them stay in Iran, with the rest being sent back to Russia,” he said.
“What all of this means, is that the new 20 -year deal between Iran and Russia will change the landscape of the Middle East, southern Europe, and Asia as Iran will have a much-extended military reach that will give it much more leverage to make political demands across those region,” he exclusively told OilPrice.com last week. “This reach also means that countries in these areas will feel that continuing to rely on the U.S. for their protection is a lot more of a precarious option than it was before,” he concluded.
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I would take that report with a very big pinch of salt . The economic aspects do not seem to be favourable to Iran and therefore not worth signing . I cannot see Iran allowing Russian military to be based in their country . Not having foreign militaries based in their country is very basic for the Government . As for the armaments . Iskander M and Kinzhal are possibilities ( slim I think ) , Rubezh is an ICBM which Avangard sits on top of . This system isn’t on the export list much less available for manufacture / and tech. transfer . BraHmos is an Indian system .
I think that it is in Iran’s constitution that foreign bases are not allowed as they are very sensitive about outside troops in their country. Of course ships, troops and squadrons on good will missions may be another matter altogether. ;)
It’s also impossible to find anything about this deal in Russian media or even on the website of the Russian foreign ministry. Russian deputy foreign minister has met often with Iran’s ambassador to Russia, but none of the communiques mention any deal or even negotiations of a deal – just concern for over Gaza and Syria, addressing some issues related to Iran’s integration to BRICS and repeated willingness to develop the mutual relations.
IRNA reports that on 24th January meeting with Iranians in Moscow Patrushev referred to the comprehensive cooperation agreement saying it “would pave the way for strategic cooperation between the two countries”. Not will, but would, which would be odd thing to say if Khamenei agreed on the deal a week earlier.
Brahmos is Indian-Russian system.. The Phillippines has started the purchase. Russians will get some dividends as well…
There may be items of value in here but the piece does give rise to doubts about its accuracy.
Iran have never been less desperate, and the idea that Russia could gain a disproportionate advantage seems implausible.
Though Russia’s very latest missile, AD, & EW systems may still have an edge on Iran’s, these are not areas of greatest need for Iran, and Russia seems very unlikely to share Kinzhal tech (tech transfer tends to be an Iranian emphasis), and Avangard would be almost certainly out of the question. It’s actually not really a missile at all anyway. It’s a gliding warhead, and not generally for short-range use–usually yoked to an ICBM from which it gets its velocity on deployment.
Russia / Iran military cooperation has been a fraught thing to this point. Russia has reneged on at least one deal (S-300s), the Su-35s are still not to be seen. Tech transfer seems something Russia is reluctant to do with a player as capable as Iran. Though relations with Israel are in steep decline, there’s a sense that Russia would sell S-400s to Iran & Saudi to provide security to both, Su-35s will be more capable than anything Saudi (and even Israel, arguably) could obtain elsewhere, except for China. My guess is that Russia does not want to shift the balance of power in the region by too much, but I’ll admit things are changing fast and in opaque ways.
Additionally, Iran is on the verge of becoming a superpower–their engineering & human capital are world class. Not sure how much Russia really wants to help their ascendance.
The Israelis are gonna have kittens if Iran deploys Avengards.
“Another advantage of the shared fields is that they allow effectively free movement of personnel from the Iranian side to the Iraqi side, and the utilisation of key oil and gas developments across Iraq is a key part of Iran’s longstanding plan, fully supported by Russia, to build a ‘land bridge’ to the Mediterranean Sea coast of Syria. This would enable Iran and Russia to exponentially increase weapons delivery into southern Lebanon and the Golan Heights area of Syria to be used in attacks on Israel. The core aim of this policy is to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan, and which may soon be seen as the Israel-Hamas War escalates.”
This seems to be uncharacteristic of both Russia & Iran, both of whom are very cautious about military adventures. I would guess that such a land bridge would be used to facilitate oil and gas exports and shipping in general. In addition, the author goes on to some extreme to paint the deal as overwhelmingly benefitting Russia, & paints Iran as a Russian vassal state. I’d like to see additional analyses before making any conclusions.
I’m also wondering why Iran amd Russia would even need to develop policy with the “core aim” of drawing the USA into a wider conflict.
The USA is already has involvement in wider conflicts. And elements in the USA are already working day and night to get into bombing Iran and continuing war with Russia.
I agree that sounds like a twisted rationalization. It is now is apparent that we went into Iraq and Syria to stop Russian/Iranian plans to do a pipeline to the Mediterranean. None of this whole post 9/11 war made any sense until this revelation. Somehow it s also now no longer verboten to mention the Caspian which is another piece of the puzzle and a hot spot for competing oil interests, most recently the US and UK messing around with Azerbaijan and Armenia. It’s very interesting to read how complex the Russian and Iranian negotiations have been, especially the tidbit about the benefits of horizontal drilling for Iran and probably Iraq too. There appears to be some very creative foreign exchange going on as well. One big thing emerging out of this fog is that modern genocidal warfare is horrible overkill, but it looks like that’s how we roll when we are so skillfully outmaneuvered politically. Especially when it comes to our fatuous sanctions. We need to give our military a new mandate to match a new reality.
I admit to being taken aback by this quote; but also recognize my own bias, due to an academic appreciation for how the Russians have conducted themselves… exercising restraint, pacing their military action with political developments; however, with them having identified their true foe as the West, and the reality that for whatever deranged reasons, the royal ‘We’ will not rest until Russia is a loose association of colonies… well, it would be foolish to believe no one in Russia intended the same for us.
That said, much like the Houthis have done in the Red Sea, a proper war in the ‘Middle East’ seems like it might be ruinously expensive, but perhaps far enough from the homeland that it won’t trigger our pride as to result in Doomsday. I cannot speak for the Israelis. Also, it seems the Russians may have a lot on their plates shortly; perhaps they can manage, but a second front might improve their odds.
It shouldn’t surprise us is all I’m saying, and to dismiss the idea outright is perhaps more telling of us, than it is of the scenario.
aye.
and this looks like a bit of projection, to me:
“The core aim of this policy is to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan”
Russians are way, way more subtle in their FP machinations.
and this sort of thing would seem contrary to their stance for the last 2 or 3 decades.
…and, i reckon both Russia and Iran are content to sit back and watch us flail around anyway.
*content to sit-back and watch Palestinians/Ukrainians flail around…
For better or worse, my Starbucks is still open. If Waffle House goes down it’s 777.
If the report is true and Russia’s best missiles could end up in Iran, this could be just what the neocons need to justify attacking Iran now. At the least, they can definitely turn the heat up on the propaganda pot.
The cat is already out of the bag. If the Israeli’s like pictures of Gaza, then given Iran’s existing ballistic missile capabilities (they are something like 7th in the world in this respect), an attack on Iran could make Tel Aviv indistinguishable in a photo from North Gaza. Further, if the US wants a war with Iran, they have no place where they can deploy, and they are stuck with trying to conduct an amphibious assault with massive casualties. Its hard to imagine the DoD has any interest in a war with Iran, the US can’t even handle the Houthi’s.
One interesting aspect that this development shows is the nature of the Neocons. Col. Wilkinson has defined Neocons as people who are unable to distinguish between the national interest of America and the national interest of Israel. Prominent Neocons like Max Boot, nominally American, has/had his son serve not in US armed services, but in the IDF, and this is only one example.
However, the Ukraine conflict, Russophobia, and Israel’s involvement with Ukraine has decisively shifted Russia away from the West and away from Israel, and into not only the arms of China but into the arms of Iran. In fact, you could say Russia is now providing Iran’s arms, Russia’s best arms, as well as training and experience against NATO weapons. This is going to in the long-run shift the conventional military balance in the region decisively against Israel.
The idea that Neocon’s push for this conflict in Ukraine serves the interests of Israel is false. The Neocons could not have found a better way to threaten the existence of Israel then has been achieved by the Ukraine conflict. Obviously, Israel is doing a good job of destroying itself with the conduct of a military campaign in Gaza which in the eyes of most of the world, and the overwhelming majority of the ICJ, demonstrate plausible evidence of genocidal intent and genocidal conduct. However, in the long-term, Russian security cooperation with Iran is probably much more dangerous to Israel’s survival.
So its time to push back on this idea that Neocons exist to subvert the US into policies that serve Israel. They have no strategic goals, their policies harm Israel as much as they harm the US, much as they claim loyalty and support to both nations. The only driving force for the Neocons is blind hatred of others and reflexive aggression. All id and no brains.
KD, can you provide some links to what are “Israel’s involvement with Ukraine”?
Here’s an article on the Su-35 deal and how it may complicate national security concerns in the Gulf:
https://www.ainonline.com/aviation-news/defense/2023-11-09/iranian-su-35-fighter-deal-could-prompt-gulf-defense-rethink
People are commenting on the Oil Price article and the specific factual claims made, that is fine. There is a clearly a deal on economic and military lines which is happening, whether the specifics are accurately being reported in Oil Price News, and it is bad news for Israel.
From Wikipedia:
In May 2023, an Israeli-made missile alert system began operating in Kyiv. Ukrainian Ambassador to Israel, Yevgen Korniychuk, credited Netanyahu’s personal involvement in this process. However, Israel refuses to supply Ukraine with missile defenses.[34] Israel has noted the danger posed by Russians capturing an Iron Dome system, which could result in Iran gaining access to it and reverse-engineering the weapons.[35]
[Cynics claim they won’t supply the Iron Dome because its a POS designed to take out bottle rockets and use by Ukraine would expose it as fake AD.]
Describing neo-conservatism or neo-imperialism:
https://www.nytimes.com/2003/04/27/magazine/the-empire-slinks-back.html
April 27, 2003
The Empire Slinks Back
By NIALL FERGUSON
Let me come clean. I am a fully paid-up member of the neoimperialist gang. Two years ago — when it was not at all fashionable to say so — I was already arguing that it would be ”desirable for the United States to depose” tyrants like Saddam Hussein. ”Capitalism and democracy,” I wrote, ”are not naturally occurring, but require strong institutional foundations of law and order. The proper role of an imperial America is to establish these institutions where they are lacking, if necessary . . . by military force.” Today this argument is in danger of becoming commonplace…
His favorite international institution is “the stick”.
The original “neoconservatives” were followers of Leo Stauss and members of PNAC. Now the term has come to mean garden-variety, imperialist chickenhawk warmonger. I don’t agree that US foreign policy is to serve Israel, although there are many neocons in the foreign policy establishment.
I do agree with Mearsheimer, Wilkinson et al. but I don’t put everything on serving Israel. As if the US has no powerful domestic interests that converge with Israel policy. The domestic oligarchy benefits the most from US policy. The “national interest” is whatever the oligarchy says it is, the US is NOT a democracy.
The US does indeed have a geo-strategic plan: to prevent China, Russia from dominating the region; block Belt and Road, control hydrocarbon flows etc. That plan is to maintain US hegemony, USD hegemony etc. The policies are not working as expected. China must be “contained”, and Russia weakened and isolated, that has little to do with Israel.
For example, the Iraq war transferred several TRILLIONS of public funds into the hands of the private oligarchy. Israel was not the primary beneficiary at all. Once again, the domestic oligarchy benefited the most. IMO, the domestic kleptocracy is the primary beneficiary.
Who benefits? Trillions more cannot be accounted for at the Pentagon. Where did the money go?
Seems like a guns-for-oil deal, but I’d like to see more coverage. The author, no geopolitics maven himself, reports only some of the details of allowing access to the Caspian Sea fields, turning to speculation regarding the defense aspects, with phrases like “can easily be” and “effectively”, followed by an unsubstantiated claim about the “core aim of this policy”. More “delenda est Carthago” from oil-men.
Also, Mr. Strether, thanks for the Marx Bros. reference to start the morning! Here’s a clip for anyone who wants to laugh at the absurdity of statesmanship and war: (2:24, relevant portion begins at :28)
This report looks like a selection of a few details from multiple treaties in order to paint a cartoonish image of naive Persians. Iranians are not naive, they are rational actors who trade for profit/reward/benefit.
Forgive me for pointing out the recent example of painting our adversaries as naive a.k.a. underestimating them. We just lost naval battles against sandals wearing tribesmen. If only our overlords had more realistic perception of reality instead of cartoonish one, then we could trade more and fight less.
Regarding the defense treaty, Iran and North Korea are under the Russian nuclear umbrella. Moreover, Tehran is plugged into the Russian automated targeting system and apparently it is able to fire a massive retaliatory salvo in under 6 minutes if an attack against Iran is detected: use it or loose it doctrine.
Regarding the energy trade, there is one overlooked aspect of taking advantage of geography. Russia can easily deliver energy to Iran’s customers in Mediterranean and the Far East. Iran can easily deliver energy on behalf of Russia in the Indian Ocean area.
In summary: our overlords are the naive and don’t know geography. Recommend to follow Scott Ritter’s advice.
“… We just lost naval battles against sandals wearing tribesmen”
not to pick nits, but its germane that those tribesmen also have no navy.
so we lost a naval battle to hillbillies without a navy,lol.
I made a comment about this a few days ago, but everything I try and post gets eaten since the moderation went into overdrive.
We also learnt that the number of slow ballistic missiles it takes to overwhelm an Arleigh-Burke class destroyer’s defenses is three(3). That’s significant for the calculations of nations like Iran (or China).
Well, he has a book to sell. The alleged military cooperation part is very thin, and I am absolutely unpersuaded by statements like :
“The core aim of this policy is to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan, and which may soon be seen as the Israel-Hamas War escalates.”
Sorry, that’s strictly amateur-level stuff.
Agreed, draw the US and vassals into a wider war? One can argue the opposite as well. It appears that Russia, and especially Iran, have bent over backwards not to escalate the conflict in the region. On the contrary, blatant attacks and provocations by the US/UK were not met with proportional response.
Now that the US/UK and vassals have cut UNRWA funding, it will be telling if Turkey, Iran, KSA, gulf states et al. will step up and demand aid for the dire situation in Gaza. So far, it has mostly been empty rhetoric, while the Yemeni “Houthis” are the only ones who are fighting back.
I check in with Simon on oilprice.com routinely if not frequently.
He documents the large, growing Chinese and Russian investments in Iran/Iraq overlapping oil properties.
Today we should look down the Damascus-al Tanf highway for the “Islamic Resistance” attack which killed 3 US servicemembers in al Tanf in Syria (Jordanian sources) or Tower 22 in Jordan near al Tanf (Biden).
Hedging oil futures!
I agree with some of you; this deal article smells fishy, and might be a bit of propaganda to make the US more aggressive with Iran. It also seems to make Iran subservient to the Russian, and this also does not seem correct. And certainly, there seems to be no issue issue for Iranians to ship weapons to its proxies in Iraq, and Hezbollah, and (quite remarkably) Yemen Houthi. However, if this write up is true or partially true, the points of benefit to Iran are
A) Giving then Russians use of some airports and ports, because with Russians present within the country, foreign invaders will have to think twice about attacking Iran, lest it trigger a much larger war
B) the section about Iran manufacturing some advanced weapons like the Kinzhal, and Avangaard, and keeping 30% of the produce… depending on how this is done, this represents and enormous transfer of technology, expertise, and the opportunity to develop craftsmanship to Iranian manufacturing Enginers and workers; strengthening Iran’s indigenous capabilities as well as its portfolio of weapons. … both initiatives make Iran much more dangerous to attack.
I think the author is projecting.
Most western commentators came from a west cultural/ideological perspective and state what they would do if they were in that position rather than trying to place themselves (however uncomfortably) in Russian/Iranian shoes.
This is where it gets dangerous:
Three US troops killed, up to 34 injured in Jordan drone strike linked to Iran
https://www.reuters.com/world/biden-says-three-us-service-members-killed-drone-attack-us-forces-jordan-2024-01-28/
It’s notable that both America and Israel went bonkers after 9/11 and October 7th. Attacks of this sort are not predictable in the details, but that attacks of these sort would happen was well understood. In America’s case the resulting invasions could be called peak unipolarity or the provocations that began the end of unipolarity. Israel has no such unipolarity buffer, and it’s reliance on America to cover it’s actions might have worked twenty years ago, but is increasingly putting their nation in deeper peril. Genocide Joe’s unswerving support is not doing Israel any real favors. Israel needs to take a good hard look at Ukraine and decide if that’s the future they want.
My Mr. Cynic whispers in my ear: “A false flag? Who would be that devious and criminal?”