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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Putin Has The Middle East In His Sights And It’s Not Just about Oil

Putin

It has become perfectly clear by now that Russia is putting a lot of effort into building its relationship with Iran, focusing, of course, on its oil and gas industry that urgently needs development. This is perfectly convenient for Russian energy companies seeking new revenue channels after Russia was slammed by sanctions over the annexation of Crimea. What comes as a surprise is that Russia is also ready to work on energy projects with anyone in the region, even Iran’s arch-enemy Saudi Arabia, to advance its regional interests.

Last week produced two pieces of important news in this respect. First, Russian shipyard Krasnye Barrikady agreed with the Iranian government to build five offshore drilling rigs, to be used by the Tasdid Offshore Development Company in southern Iran. This deal also involves the transfer of rig-building know-how to the Iranian government.

Secondly, it was reported that Rosatom, the state-owned nuclear plant builder, has sealed a deal with Riyadh to take part in the construction of 16 nuclear reactors. The whole project is worth $100 billion and it will take 20 years to be completed, with the first reactor coming online in six years.

As a side note, Gazprom officials arrived in Ankara yesterday to discuss the Turkish Stream gas pipeline project, which was shelved when Russia and Turkey were temporarily estranged following the downing of a Russian bomber by the Turkish army. Now that Turkey has apologized, the two are back together in the international energy game.

The cozying up between Moscow and Tehran has been explained with the overlapping political and, most importantly economic, interests of the two states. Some suggest that this overlap is temporary, judging by the history of the two countries and their certainly uneven relations, but however long it lasts, this relationship will put Russia on a firmer footing in the Middle East, to the disadvantage of other major players.

The latest demonstration of this firmer footing was the Russian air strike against IS targets in Syria carried out from an Iranian air base, which attracted a lot of probably unwanted attention and was called “anti-constitutional” by the Iranian opposition. According to local observers, it will probably not be the last time the Russian military uses Iranian bases, regardless of the reactions.

Yet, Russia is not carrying all its eggs in one basket: it’s also obviously open to co-operation with Riyadh, despite the hostility between Saudi Arabia and Iran. There’s tension between Turkey and Iran as well, as they support opposing sides in the Syrian war, but this too has been set aside as both countries have prioritized the growth of their influence in the energy dynamics in the region. After all, whoever controls the more oil and gas in the Middle East calls the shots, and not just on a strictly regional level. Related: Oil Wars: Can Russia Hold Off Middle Eastern Oil In Eastern Europe

One Russian Middle East expert, commenting on the Russia-Iran rig-building deal, said this is just the beginning, adding that Iran is the new powerhouse of the Middle East and Russia must do whatever it takes to secure long-term cooperation with it. Iran is a natural ally of Russia, and not just because both are supporters of the Assad government in Syria. It’s also because both want to extend their regional influence and the best way to do it is by using their oil and gas reserves.

Things are more complicated with Saudi Arabia, where there is open rivalry in the energy field, especially on Asian markets, which are key ones for both Russia and Saudi Arabia. But then, one would say, Iran is also a rival to Russia when it comes to oil and gas. That’s true as well, but one feels this rivalry has not yet unfolded in full and might never unfold if the alliance between the two countries proves to be indeed a strategic one and they decide to play the oil market – and regional politics – together.

When the dust settles in Syria, it might emerge that the Middle East has an all-new balance of power, featuring a much more central part for Russia. Then again, it might not, if the idea that the Islamic State is actually good for keeping Iran in check, expressed by an Israeli scholar, gains more support.

By Irina Slav for Oilprice.com

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