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Western experts doubt about effectiveness of Iranian-Russian energy cooperation

Oil&Gas Materials 16 July 2010 16:54 (UTC +04:00)

Azerbaijan, Baku, July 16 / Trend N.Ismayilova /

Although Iran and Russia signed an agreement to develop a "road map" implying the development of bilateral relations in the energy sphere for period of 30 years, experts doubt about the effectiveness of cooperation between the two countries.

Iranian Oil Minister Masoud Mirkazemi's Russia visit aimed to avoid the international isolation of the country will have no political results, Professor on petrochemical at Southern California University Muhammad Sahimi said.

The two countries could sing the treaty, but it is unlikely will be implemented, Sahimi wrote Trend in an e-mail.  

Russian Energy Minister Sergei Shmatko and Iranian Oil Minister Masoud Mirkazemi inked a "roadmap" in Moscow on Wednesday outlining long-term energy cooperation. Following signing of the document Shmatko said Russia is ready to sell oil products to Iran if there economic benefits for the country, the media reported.

However, the Russian company LUKOIL suspended oil supplies to Iran in 2009. To date, about 10 major oil companies have ceased cooperation with the Islamic republic. Royal Dutch Shell, Reliance Industries, Shell, British Petroleum, Trafigura, Glencore and Ingersoll Rand suspended shipments of gasoline to Iran after the U.S. imposed sanctions against that country.

To date, nearly 40 percent (approximately 20 million liters per day) of Iran's gasoline demand are met through imports from other countries.

Iranian Professor at the University of Glasgow Reza Taghizadeh believes the scope of energy cooperation between Iran and Russia could be all but promising by any standard for a host of various reasons.

"It is impossible to predict any significant and specific prospects for the 'road map' of cooperation between the two countries," Taghizadeh said.

Russia has been increasingly critical of Iran, Sahimi said. "Moscow agreed with a new round of sanctions against Iran, and in any event will use Iran to extract concessions from the West, and in particular the United States. Sure, the two sides may sign agreements for cooperation, but signing it is one thing, implementing it is another thing. Russia also signed an agreement with Iran to deliver to it S-300 air defense system, but has refused to deliver it. It has been dragging its feet to bring the Bushehr reactor online," Sahimi said.

Russia and Iran signed an agreement worth $ 800 million to transfer S300 anti-missile systems in 2005. The contract value totaled $ 800 million. A few years Russia has delayed the delivery of S300systems and after the adoption of the UN Security Council (UNSC) resolution 1929 and stop the contract completely.

Iranian expert on international affairs Hasan Behishtipur believes being one of the largest energy-producing countries Iran and Russia could enhance cooperation in this field. He said the UNSC resolution 1929 does not reflect any article prohibiting cooperation in the energy sector.

The UNSC adopted a resolution imposing new sanctions on Iran over its refusal to cease its uranium enrichment activities June 9. The UNSC 12 members voiced support to the document, however Turkey and Brazil voted against, Lebanon abstained.

This is the fourth resolution adopted by the UNSC due to Tehran's reluctance to comply with international demands regarding its nuclear program.

Contrast to Behishtipur, Taghizadeh believes the Russian companies, compared to Iranian companies, have by far more resources enabling them to get involved in Iran's gas and oil projects. The road map is referring to possibilities for Iranian oil and gas companies to invest in Russia's oil and gas fields.

However, Iran with a state controlled economy has failed to create efficient private sector capable of undertaking and financially supporting oil and gas projects abroad. The Iranian Ministry of Oil is capable of managing small scale oil and gas development projects but not independently, Taghizadeh said.

"Iran's Oil Ministry is not enough financed. Iran is not able to fully provide investment in energy projects within the country. Participation in foreign projects does appear to be impossible," Taghizadeh said.

Iran's oil production in the course of last year has declined by 20% (from 4.2 million bbd to 3.6 bbd) due to the lack of investment in the oil fields and insufficiency of technical supports that the ministry has mobilized, he added.

"Exactly the same set of circumstances can be traced in Iran's gas sector. Development of the main gas project Asalouyeh was suspended for the lack of financial and  technical resources in place," Taghizadeh said.

"Iran would like though, to portrait such investment right in Russian's oil projects as an advantage that could make the so called energy cooperation between the two countries a balanced partnership pact," Taghizadeh said. "The main reason for the Iranian minister Mirkazemi's to visit Russia is to try to get technical support for Iran's Revolutionary Guards Corps subsidiary companies."

The U.S. and other Western countries accuse Iran of developing nuclear weapons for military purposes under the guise of peaceful nuclear energy program. Tehran denies the charges, saying that its nuclear program is aimed solely at meeting the country's electricity needs. 

T.Jafarov, T.Konyayeva contributed to the article.

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