Is the lack of clarity about the Iran-Russia oil-for-goods deal intentional?

Iran Matters - August 25, 2014

Nader Habibi is the Henry J. Leir professor of the economics of the Middle East in the Crown Center at Brandeis University.

The growing tensions between the United States and Russia in recent months have further complicated their strategic cooperation in P5+1 nuclear negotiations with Iran. On one hand, the United States has imposed economic sanctions on Russia and, on the other hand, it insists that Russia must respect the economic sanctions against Iran. These contradictions escalated in early August as Iran and Russia announced a framework for a future oil-for-goods economic agreement worth $20 billion over a five-year interval. The Obama Administration’s point man on Iran sanctions, David Cohen, warned Russia that this agreement would violate anti-Iran sanctions and that the United States will impose additional sanctions on Russia if it implements this deal. Russia has rejected this objection and has argued that the agreement does not violate the sanctions.

The details of the proposed agreement are gradually emerging. Under this agreement Iran would export 500,000 barrels of crude oil per day to Russia (either direct delivery to Russia or delivered to oil tankers in Persian Gulf on behalf of Russia). There is no clear and finalized list of items that Iran would purchase in exchange for this crude oil. The potential list, based on various news reports in Iran and Russia, includes heavy machinery, sale of electricity up to 500 megawatts, railroad construction material, additional nuclear power plants, and investment in Iran’s oil and gas industry.

Iran and Russia began their negotiations on this economic agreement in November 2013 and finally issued statements about the signing of agreements in July and August. However, some official statements about the agreement have been vague and contradictory. The statements by Iranian and Russian officials did not match each other. Furthermore, the Russian statement was later changed to indicate that what had been achieved was a memorandum of understanding instead of a formal agreement. It is safe to say that what has been signed so far is a memorandum of understanding which serves as a framework agreement with the commitment to workout the details at a future date. Another high-level meeting between Iranian and Russian officials is scheduled for mid-September. This vagueness and contradiction is not entirely accidental. There are two possible explanations for it. First, it could be a result of Iran and Russia’s attempts to use each other as bargaining chips in their dealings with the United States. Second, there are interest groups in both countries that are slowing down the progress of these negotiations. ... Read the Full Text