On August 2, 2019, the Chairman of the Board of Islamic Azad University and Senior International Relations Advisor to the Supreme Leader of Iran Akbar Velayati delivered the message about the willingness of the Russian Federation to invest USD 50 billion into development of Iran’s oil and gas sector.
A. Velayati noted that both countries oppose Washington’s sanctions policy and that Iran’s economic, military and technical cooperation with Russia has a high priority for Tehran. According to A. Velayati, negotiations between the parties on Russian investments in Iran’s energy sector began during the visit of the Presidents of the Russian Federation and Turkey to Iran in September 2018. In fact, a Russian energy company, the name of which is not disclosed, has already signed an investment agreement totaling USD 4 billion with Iran. This deal is the second largest investment after the USD 750 million agreement signed between Iranian National Oil Company and Russia’s Zarubezhneft in March 2018 to develop the Aban oil field in West Paydar. In October 2018, due to the threat of the new US sanctions, Zarubezhneft transferred the rights to develop the Aban deposit to another Russian company, Promsyrioimport.
A. Velayati reported that the main topic of negotiations on energy issues between Iran and Russia is the preparation of a comprehensive investment agreement for 10 years, under which Moscow will invest USD 50 billion in energy and economy of Tehran annually. He noted that the modernization of Iran’s energy sector in accordance with Western standards requires about USD 250 billion of investment. Another USD 250 billion will be used to develop the country’s economy. Russian companies, in turn, will receive exclusive preferences in all future Iranian oil and gas development projects.
Iranian authorities have already granted Russian companies seven licenses for the development of hydrocarbons in the country (“Zarubezhneft” – “Aban” and “Paydar-e Gharb” fields; “Lukoil” – “Ab Teymour” and “Mansouri”; “Gazpromneft” – “Changouleh” and “Cheshmeh-Khosh”;“Tatneft”- the “Dehloran” deposit).
The agreement will not provide any sanctions for the delay in the development of hydrocarbon fields on behalf of the Russian companies and the possibility of transferring the license to other foreign companies, even if no progress is made in the development of the fields. Within 10 years, after the signing of the general investment agreement, the Russian Federation will determine what volumes of oil or gas will be produced by the company and to whom and at what price the hydrocarbons will be sold. Russia will have the exclusive right to buy all volumes of extracted hydrocarbons at a price that will amount to 55-72% of the market price for the period of 10 years. In addition, Russia will have the exclusive right to export all hydrocarbons extracted in the Iranian part of the Caspian Sea to the foreign markets.
According to the former head of Platts Analytical Agency, Simon Watkins, having fulfilled its investment obligations to Iran, Russia will receive a full monopoly for the exploitation of Iran’s energy resources for 10 years, will determine the price and volume of supplies of Iranian hydrocarbons to foreign markets, which will provide Russia with an additional opportunity to influence pricing at the global energy market.
