Monday, September 1, 2014

The Russia-Iran energy deal may be a losing proposition | Russia Direct

The forthcoming signing of a set of “breakthrough” trade and economic agreements between Russia and Iran may not be the blockbuster economic deal everyone thinks it will be. The unraveling of relations with the West and the forced policy of diversification leaves Russia short of prospective partners, China notwithstanding. Essentially, Russia may have been forced into a deal with Iran that it did not really want.

Economics is still predominantly governed by the law of “opposites attract,” in which regard, Iran and Russia are simply too alike (as strange as it may sound to the patriotic ear) for the new trade partnership to make sense.

First, the two countries possess some of the largest reserves of hydrocarbons anywhere in the world. Second, both Russia and Iran are critically dependent on oil and gas exports. Third and most importantly, they are friends in need, both hit hard by Western sanctions (Iran significantly more so than Russia).

Thus, in world trade (and world politics) Russia and Iran are more like natural competitors than partners. More specifically, Iran is theoretically capable of replacing Russia as the main supplier of gas to European markets, whereupon it is no coincidence that Tehran recently stated its readiness to feed the Nabucco pipeline, a once dead-in-the-water alternative to Russia’s South Stream. Unfortunately, by threatening its neighbors with retaliatory sanctions, Russia continues to push the European Union into the arms of other suitors.

Complete story at - The Russia-Iran energy deal may be a losing proposition | Russia Direct

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