Russia Not Betraying Iran's Oil Market Trust

EghtesadOnline: Russia is committed to its domestic oil producers and it is a mistake to think that Moscow's current policy toward the oil market is a betrayal of Tehran's trust.

News ID: ۷۴۵۸۴۸

11 August 2018

Reza Modir, the Oil Ministry's former deputy director for OPEC affairs, made the statement in an interview with ILNA.

"Russia has never adopted a consistent policy with OPEC and its cooperation with the organization has always been provisional and tactical, so this time is no exception," he said.

"Russia's economy is heavily reliant on oil revenues … Hence, Moscow's position toward Tehran and Riyadh merely aims to preserve the control of its market share and oil prices."

According to Financial Tribune, the former official noted that Moscow is trying to fulfill its promises to its oil firms and to do so, it is now seeking higher oil prices.

"In fact, what Russia is doing now is what we have done many years ago–that is trying to keep market share with high oil prices," he said.

However, the expert dismissed "a full unanimity" between Tehran and Moscow and said "we cannot be 100% sure that Russia is a strategic partner of our country".

Modir noted that although Moscow genuinely prizes cooperation with Iran, it has separated the oil sector from other affairs, as both countries are "producers and stand on the same side of the market".

About a week ago, Russia announced it was boosting its production by 250,000 barrels a day, producing far above its quota set in late 2016, when OPEC and oil-producing countries agreed to cut output by 1.8 million barrels a day to shore up collapsing oil prices.

By the end of June, Saudi Arabia had surpassed its allocation by about 460,000 barrels a day and increased its output by an additional 340,000 barrels a day, according to Vienna-based consultancy JBC.

Washington is set to reimpose secondary sanctions on Tehran by Nov. 4, including a prohibition on the purchase of Iranian oil.

Russia's Oil Minister Alexander Novak had announced his country was about to boost production by 170,000 barrels a day, during a technical conference call to monitor production cuts in July.

Iran's Market

Modir said Iran's oil flows are expected to fall sharply in the coming months, as the second round of US sanctions targeting the oil sector resume in early November.

OPEC's third biggest producer's output stood at 3.8 million barrels per day in May, 2.7 million barrels of which were exported.

The country's exports have already fallen for three successive months.

Iran's oil exports fell to their lowest in four months in July, S&P Global Platts estimates, as key buyers have started to curtail their purchases as the first set of US sanctions on Iran kick in. Total estimated export volumes on Aframaxes, Suezmaxes and VLCCs from Iranian ports in July fell by 7% to 2.32 million b/d from 2.49 million b/d in June, according to data from S&P Global Platts trade flow software cFlow. Iranian oil production fell to 3.72 million b/d in July—the lowest since January 2017, according to Platts estimates.

Analysts expect Iranian exports to drop by anything between 500,000 and 1 million b/d after full US sanctions are reimposed in early November. Modir noted that the country should adopt new marketing strategies and seek out new customers for its oil in the face of renewed sanctions.