Russian Gazprom's deal with Iran could prompt further cooperation

Al-Monitor PRO Members

Dr. Bijan Khajehpour

Managing Partner, Eurasian Nexus Partners, Vienna, Austria

July 28, 2022

The memorandum of understanding worth about $40 billion signed between Russia’s Gazprom and the National Iranian Oil Company (NIOC) last week is not going to lead to massive Russian investments in the Iranian gas sector, but it has the potential to create paths of cooperation and bring the two gas giants closer to each other.  

Scenario 1: Realization of the Iranian desire to obtain Russian investments.

The Iranian petroleum sector is starved of new international investments and technology and would benefit from receiving Russian technology in a number of fields.  

Evidently, as long as both countries remain subject to Western sanctions, they will have an incentive to cooperate.  

Gazprom will have the technological capability to help Iran in some of the listed areas, but it won’t have the financial means to invest.  Therefore, the Iranian narrative of the MoU won’t materialize.  

Scenario 2: Materialization of the Russian narrative.  

 The Russian narrative is different. The Telegram channel of Gazprom describes the “possibilities of interaction” as follows: “the development of oil and gas fields in Iran, the implementation of trade operations with natural gas and petroleum products, the implementation of large-scale and low-tonnage LNG projects, the construction of main gas pipelines, scientific, technical and technological cooperation”.  

For Russia, the objective of the agreement may be to put some of its idle engineering and operational capacities in the petroleum sector to good use.  

Evidently, Iran’s oil and gas projects could benefit from Russian technology and equipment.  

This scenario could materialize without major investments, through coordinated utilization of resources and capabilities. In fact, it has been reported that a number of oil tankers that were previously carrying Iranian crude have recently  carried Russian oil for international clients.  

Organizing product swaps, or even gas swaps, would actually make commercial sense. Since Iran’s gas-producing fields are located in the south, receiving some Russian gas or products in the population centers in the north would free up gas and products for export in the south of Iran. Both companies could benefit from such export potential.  

Gazprom’s access to Russian technologies and heavy machinery could also address some of the shortcomings in Iranian petroleum projects.    

Scenario 3: Non-materialization of the plans. 

This MoU may end up just being a political maneuver at a time when both Moscow and Tehran wish to indicate that they are not isolated.  

The fact that the MoU includes objectives that are non-feasible may be a sign of the political nature of the agreement. One such reference is the “completion of LNG projects.” But the fact is that Russia’s own LNG projects will face technological and operational obstacles due to EU sanctions.  

This scenario may also materialize because technocratic decision-makers in the Iranian petroleum sector are likely to opt for Western solutions and minimize collaboration with Gazprom and other Russian entities.  

Bijan Khajehpour is the managing partner at Eurasian Nexus Partners - eunepa.com - a Vienna-based international consulting firm. He also sits on the board of the Europe Middle East Research Group. He is considered an expert on geopolitics of energy and the Iranian economy and energy sector.