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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Russian And Iran’s New ‘Energy Corridor’ Is Packed With Dangers For The West

  • It is not down to sheer good luck that Iran is still functioning as an economy despite massive international sanctions being in place against it.
  • Iran’s offer to establish an ‘energy corridor’ from Russia to the Persian Gulf could have major consequences for energy flows.
  • The creation of two possible land bridges for Iran from its mainland to the shores of the Mediterranean – one in southeastern Turkey and the other in northwestern Syria could help both Tehran and Russia to export hydrocarbons.
Russia Iran flags

Two announcements made on consecutive days last week may have far-reaching consequences for the security of the Middle East and the West for years to come if they reach the implementation stage. One was Iran’s offer on 11 May to establish an ‘energy corridor’ from Russia to the Persian Gulf. The other was Turkey’s announcement on 12 May that it is interested in buying more gas and oil from Iran and that the subsequent transit of these resources to eastern Europe through the country is possible. In the simplest terms, these developments would mean two things. First, Russia would be able to bypass many current international restrictions using Iran’s long-established mechanisms to avoid sanctions on gas and oil flows – both into Turkey and then southern and eastern Europe, and via Iraq into the rest of the world. Second, Iran would be able to expedite the progress of its long-sought ‘land bridge’ from Tehran to the Mediterranean Sea by which it could exponentially increase the scale and scope of weapons delivery into southern Lebanon and the Golan Heights area of Syria to be used against Israel and the U.S. in Middle Eastern conflicts.

It is not down to sheer good luck that Iran is still functioning as an economy despite massive international sanctions being in place against it in one form or another since its 1979 Islamic Revolution. Through several mechanisms analysed in full in my new book on the new global oil market order it has been able to continue to sell its oil and gas into both southern and Eastern Europe and to much of the rest of the world since then. So well-developed and effective are these methods that they have become a matter of great national pride for Iran, with its then-Foreign Minister, Mohammad Zarif, stating in December 2018 at the Doha Forum that: “If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions.” The starting points for the bulk of these illegal energy flows are the oil fields shared by Iran and Iraq and with both sides drilling from the same reservoirs, it is impossible to tell from which side any resultant oil comes from. So, Iran, with the full agreement of Iraq – over which it has long held enormous influence through its various economic, political, and military proxies – simply rebrands (sanctioned) oil from the Iran side as (unsanctioned) Iraqi oil instead and then it is free to be shipped anywhere. An added element of obfuscation of the country of origin of the oil comes from simply changing the documentation on the shipping documents. As former Iranian Oil Minister, Bijan Zanganeh, unashamedly underlined in 2020: “What we export is not under Iran’s name. The documents are changed over and over, as well as [the] specifications.”

Related: Saudi Crude Oil Exports Rose To 9-Month High in March

From that point, the Iranian oil (rebranded as Iraqi oil) usually goes to one of two major export areas for Iran. The first is Asia, with the key buyer there remaining China. The second is southern and Eastern Europe, and in particular the less rigorously policed ports of Albania, Montenegro, Bosnia and Herzegovina, Serbia, Macedonia and Croatia, among others. Oil can also easily be moved across borders to Europe’s bigger oil consumers, including through Turkey. It is also apposite to note in this latter regard that Iraq is currently in the process of rebuilding its direct oil pipeline into the Turkish port city of Ceyhan, which will make this Iran-Iraq-Turkey route even more reliable for Tehran. All the transit routes currently being used to move Iranian oil via Iraq and into southern and Eastern Europe will be made available as well to Russia. And so would any of the routes to Asia, in which Russia is struggling to move its oil due to sanctions, although Asia in general – and China in particular – is less concerned about abiding by any U.S.-led sanctions than Europe. Iran’s secretary-general of the Eurasian Department at the Ministry of Foreign Affairs, Mojtaba Damirchilou, highlighted last week that ‘the use of existing infrastructure and the creation of new infrastructure to reach regional markets should be considered, and this in in this regard constructive cooperation has started and we have a clear vision’.

Perhaps in the spirit of straight reciprocation for this deal, Russia has told Iran that these regional infrastructure buildouts in Iran and then Iraq and towards Turkey will be boosted by similar work in Syria. This means the creation of two possible land bridges for Iran from its mainland to the shores of the Mediterranean – one in southeastern Turkey and the other in northwestern Syria. A key mechanism to do achieve this is the planned resuscitation of the 825-kilometre Iraq-Syria oil pipeline that linked Iraq’s Kirkuk region with the Syrian port of Banias on the Mediterranean, as also analysed in full in my new book on the new global oil market order. October 2023 saw senior figures from Iraq’s government, Oil Ministry, and energy firms agree to the resumption of work on this pipeline, followed by detailed discussions about work timetables and the cost of rebuilding. A senior oil industry source who works closely with Iraq’s Oil Ministry exclusively confirmed to OilPrice.com around that time that it was not just Iraqis who were looped into these discussions about this key infrastructure link between Iraq and Syria, but Iranians and Russians too. “The plans for this link to be brought back have been in place since June 2017, when it was overtly talked about in terms of being the ‘Iran-Iraq-Syria pipeline’ and was seen in a similar context to the gas pipeline plan of that name,” he said. “The plans were for the pipelines to run from [Iraq’s] Kirkuk to Banias [on Syria’s Mediterranean Sea coast] via Haditha [in Iraq], with an initial nameplate capacity of 300,000 barrels per day [bpd], and Russia was to be involved in both of the plans, and that is unchanged now,” he added.

For Iran, a land bridge into southern Lebanon and the Golan Heights area of Syria would have a huge force multiplier effect for Iran’s own Islamic Revolutionary Guard Corps (IRGC) in Syria - and for its proxy Hezbollah forces in Lebanon and Hamas in Palestine – to use in attacks on Israel. This cornerstone policy of Iran since its 1979 Islamic Revolution was always geared towards provoking 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. The aim of this on Iran’s part was to unite the world’s Islamic countries against what it believes to be an existential battle against the broadly Judeo-Christian democratic alliance of the West, with the U.S. at its centre. Russia’s interest alongside Iran in such a plan aligns with Moscow’s broad foreign policy objective of creating chaos where possible, into which it can eventually project its own solutions. Under the Russian- and Iranian-backed regime of President Bashar al-Assad, Syria has four huge strategic advantages to Russia, as fully detailed in my new book on the new global oil market order. Briefly, first, it is the biggest country on the western side of the Shia Crescent of Power, which Russia has been developing for years as a counterpoint to the U.S.’s own sphere of influence that had been centred on Saudi Arabia (for hydrocarbons supplies) and Israel (for military and intelligence assets). Second, it offers a long Mediterranean coastline from which Russia can send oil and gas products (either its own or those of its allies, notably Iran) for cash export, plus weapons and other military items for political export. Third, it is a vital Russian military hub, with one major naval port (Tartus), one major air force base (Latakia) and one major listening station (just outside Latakia). And fourth, it shows the rest of the Middle East that Russia can and will act decisively on the side of the autocratic dynasties across the region.

By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on May 22 2024 said:
    Iran and Russia share a lot f economic, strategic and energy objectives. They are oil and gas giants looking for connectivity and routes to expand further their oil and gas exports. They are both facing the toughest US sanctions and overcoming them. Both of them are members of the gas exporting countries forum (GECF) which will become an OPEC-like organization for gas in a few years. They both have solid relations with China the world's largest economy based on purchasing power parity (PPP) with Iran having a 25-year treaty of cooperation with China while Russia is the closest strategic ally to China. Last but not least both are hell bent on ejecting the United States from Syria and Iraq and the eventually the whole Middle East.

    Therefore, it comes as no surprise that Iran is offering to establish an ‘energy corridor’ from Russia to the Persian Gulf and the creation of two possible land bridges for Iran from its mainland to the shores of the Mediterranean – one via in southeastern Turkey and the other via in northwestern Syria aimed at enhancing Iranian and Russian exports of oil and gas

    And while there will be some major hurdles to overcome on the way like US uninvited military presence in Syria and Israeli objections, these plans are feasible and could get a huge boost once Russia has finished its job in Ukraine.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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