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Is Iran Opening A “Secret Passage” To Asia For Russian Crude?

Is Iran Opening A “Secret Passage” To Asia For Russian Crude?

Russia is looking to expand its influence through oil trade. And a little-reported deal this week may give it access to an entirely new part of the planet when it comes to crude exports.

That's the Persian Gulf. Where reports suggest Russia is close to negotiating a "secret passage" for its oil shipments.

The move is coming through a deal with Iran, which that government says could open the door for crude oil swaps between the two countries -- facilitating exports of "Russian" oil out into Asia and beyond.

Iran's Deputy Petroleum Minister Amir Hossein Zamaninia told local press Monday that Russian energy company representatives will be arriving in Iran this week to discuss such a swap deal. Related: Oil Sands Still Face Pipeline Problems

Here's how it would work.

Russia lacks access to ocean shipping routes beyond the Pacific and Arctic. Iran has better access, through its ports on the Persian Gulf.

But Russia does have ports on the Caspian Sea. And as the map below shows, that provides a short shipping route into Iran.

 

Russia and Iran can exchange crude oil shipments along the Caspian Sea

The swap scheme would see Russian crude oil sent to Iran, in exchange for equal shipments of Iranian crude flowing to Russia.

And from there, it will be interesting to see what happens. Related: Oil Megaprojects Won’t Stay On The Shelf For Long

Officials said that Russian oil would likely be used within Iran's northern provinces. But the swaps agreement opens up another possibility -- Russian crude could be sent further south, and even exported through Persian Gulf ports.

That would give Russia unprecedented access to markets around the Indian Ocean -- including go-to crude buyers in Asia, greatly changing the dynamics of oil markets in this part of the world.

It's unclear how much oil might be exchanged under the swap agreements. We should have more details after this week's meetings are completed -- watch for more details coming.

Here's to a crude exchange,

Dave Forest

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