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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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What’s In The 20-Year Draft Agreement Between Iran And Russia?

  • While the new 20-year cooperation between Iran and Russia is yet to be finalized, significant progress appears to have been made on its drafting.
  • If Russia agrees to sell Tehran the S-400 system and its latest warplanes, Iran could be convinced to give up considerable elements of its nuclear program.
  • Russia, as always, will be looking to extract strong terms in energy deals and to establish its influence in Syria. 

The new 20-year co-operation deal between Iran and Russia was not finalized at last week’s visit to Moscow of Iranian President, Ebrahim Raisi, and his Russian counterpart, Vladimir Putin. Instead, according to a senior source close to Iran’s Petroleum Ministry spoken to exclusively by OilPrice.com, the first visit of an Iranian president to Russia in almost five years discussed in-depth key points that are contained in Tehran’s final draft proposal for the agreement. This draft covers a wide range of issues relating to the general trade agreement, transportation initiatives, banking and finance structures, and security. According to comments from Iran’s Petroleum Minister, Javad Owji, several parts of the 20-year cooperation deal that relate to the development of oil and gas fields, construction of petro-refineries, and technology transfer were signed. 

For Iran, a key concern reflected in various elements of the draft agreement is that Moscow supports its interests at the United Nations Security Council (UNSC), at which Russia holds one of the five Permanent Member seats, with the others being held by the U.S., the U.K., France, and China. “Russia has long been playing a double game with Iran on this issue, using promises of protecting Iran’s interests at the Security Council to extract favorable deals in oil and gas fields, but the facts are that Iran still has no new JCPOA [Joint Comprehensive Plan of Action – ‘nuclear deal’] and sanctions are still in place,” said the Iran source last week. “Even before the U.S. withdrew from the JCPOA, Iran had also been asking Russia for the means to defend itself better against any attacks, especially those that might come from Israel or the U.S. – specifically the S-400 missile defense system and the latest jet fighters,” the source added.

The resolution of these two issues in Iran’s favor might well allow some of the senior political and Islamic Revolutionary Guard Corps (IRGC) figures to agree to the other tougher clauses that the U.S. wants in any new iteration of the JCPOA. “A significant part of the main meeting between Putin and Raisi on Wednesday [19 January 2022] was taken up with discussion over Russia finally providing Iran with the S-400 missile defense system and Sukhoi Su-35 fighter jets, with payments again to be made through favorable terms for oil and gas sector deals,” the Iran source said. The favorable terms for the recent supergiant Chalous gas find – exclusively reported by OilPrice.com – were cited by Iran during the meetings in Moscow, the source added.

The full list of the original 12 tough clauses that former U.S. President Barack Obama and his Secretary of State, John Kerry, wanted in the original draft of the JCPOA but which were removed after U.N. Permanent Members France, China, and Russia – plus Germany - supported Iranian objections to them can be found here, as delineated exclusively at the time by OilPrice.com. These were precisely the key clauses that Trump – and his former National Security Advisor, John Bolton – wanted to be put back in any new version of the JCPOA that would occur after Iran was suitably crippled (as the plan was) after sanctions were re-imposed after the unilateral U.S. withdrawal from the deal in May 2018, as analyzed in-depth in my new book on the global oil markets. Iran’s ongoing negotiating position can be found here, as also delineated exclusively at the time by OilPrice.com, and these basic positions are still those held by each side as of now, according to Iran’s source. 

However, the source added, because of continued economic difficulties that are affecting the scope of the IRGC’s power at home and abroad, there is the possibility that Iran will trade in a considerable element of its ballistic missiles and nuclear enrichment capabilities and ambitions if it can be assured of better protection from its enemies, via the S-400 system and the latest warplanes, the provision of the former having long been intimated by Russia. The most serious economic ramification for the Supreme Leader and his core supporters of the IRGC is that its foreign currency reserves fell again last year to stand at less than US$10 billion at the nd of December 2021 [compared to about US$114 billion just before the U.S. withdrew from the JCPOA in May 2018], and its gold reserves are also very low. “This means that the IRGC is facing a crunch point when it comes to funding its international network of proxies used to project Iranian influence, including in the key operational theatres right now of Yemen, Syria, Iraq, and Lebanon, as these people want payment in either [U.S.] dollars or gold,” the source underlined.

Russia, though, has perennially linked these military hardware requests from Iran not just to favorable terms for its companies in the Islamic Republic’s oil and gas sectors but also to other of its own security concerns across the Middle East. “There is Syria, where Iran and Russia need to finalize the political settlement process and, more importantly, determine the terms of cooperation on Syrian territory after the war,” said Gevorg Mirzayan, associate professor of the department of political science and mass communication at the Financial University, in Moscow. “On the one hand, Iran perceives Syria to be its exclusive sphere of influence, but on the other hand, the Iranians have a sound understanding of the situation and understand that Moscow’s and Tehran's interests on Syrian lands don’t necessarily contradict each other,” he added. “Russia’s long-term military presence in Syria complicates any of the Americans’ and Turks’ military and political plans in the Levant, and in the Middle East as a whole, and their Russian military bases per se will help the Iranians neutralize external threats,” he underlined. This said, he concluded, although Moscow’s behind-the-scenes agreements with Tel Aviv and even Washington have been cited as obstacles to the sale of the weapons [the S-400 system and Sukhoi Su-35 warplanes], now the chances of selling the weapons have slightly grown, as Moscow has promised the Americans to respond to the refusal by NATO to take its concerns into account.” 

By Simon Watkins for Oilprice.com

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