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Will Russia Start Reselling Iranian Oil?

Russia has no contract with Iran to import its oil, but may help resell it on the world market, according to Russian Energy Minister Alexander Novak.

“Russia is a producing country, we are not going to buy,” Novak told a news conference in Moscow on June 8. Still, he said, oil traders in Russia could help Iran sell the oil if necessary.

Novak was referring to a statement earlier that day issued by Rosselkhoznadzor, Russia’s food-safety regulator that it had sent the first 100,000 tons of grain to Iran as part of a deal signed in August in which the two countries agreed to explore wider commercial ties. Related: Kurdish Oil Exports Under Threat

That agreement, signed last August, covered trade in agriculture and consumer good as well as closer cooperation on energy issues, the building and rehabilitation of generators, developing power supply infrastructure. It became known as an “oil-for-goods” barter arrangement between Iran and Russia.

Novak also was referring to comments made June 5 by Iran’s energy minister, Bijan Zanganeh, that Russia would actually buy the oil from Iran and that Tehran would use those funds to buy Russian merchandise including petroleum products, steel and wheat.

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During his flight home to Tehran from Vienna, where he had just attended OPEC’s most recent meeting, Zanganeh said he hoped that Russia would receive its first imports of oil within the coming week. “Much of this will be for cash,” he told Bloomberg, “and we will be using this money to buy commodities from the Russians.” Related: Oil Markets Could Be In For A Shock From China Soon

Zanganeh added, “We agreed with Alexander Novak in Vienna [during talks on June 3] that Russia will buy less than 500,000 [barrels per day of oil] from Iran in exchange for cash, and Iran will use this cash to buy Russian goods such as steel, wheat and oil products from Russia.”

In Moscow, the Russian minister said he believed that Zanganeh was referring to the deal on closer economic ties under the August memorandum.

Novak said his country’s arrangement with Iran may eventually include Moscow’s help in selling Iranian crude to other countries. “Our traders will facilitate the sale of Iran’s oil on the global market,” he said. Related: OPEC Set To Play The Waiting Game

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Already the two countries cooperate in a variety of commercial sectors. One key aspect is Russia supplying fuel for Iran’s nuclear power reactor at Bushehr in central Iran on the Persian Gulf coast.

Last August’ deal could be essential for Iran, whose crude exports have plunged by more than half – from 2.5 million barrels per day to about 1 million barrels per day – since 2011, when the international community tightened sanctions. Any company trading with Iran is forbidden under the sanctions from doing business with the U.S. and Europe.

Iran recently has expressed hope and even confidence that the sanctions imposed on it may be lifted soon. In April it reached a tentative agreement with the five permanent members of the U.N. Security Council – Britain, China, France, Russia and the United States – plus Germany, known as the P5+1, to drop the sanctions in exchange for Iran’s agreement to open its nuclear sites to international inspections.

The deadline to reach a full comprehensive agreement is June 30.

By Andy Tully of Oilprice.com

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