Iran: key international players adding fuel to the fire

The recent UN and EU sanctions in response to its continued nuclear programme have left Tehran with few friends in the international community, and it is unsurprising that the states who intend to carry on doing business with such a contentious partner clearly have their own political agendas to pursue, and are seeking to ensure maximum financial gain in the process.

Turkey: neighbourly mutual interests

When the latest restrictions on gasoline shipments were imposed on Iran it was Turkey who immediately stepped up to help its neighbour, selling an estimated 139,000 tonnes of gasoline in June at a premium of roughly 25%, with this figure falling significantly to 35,444 tonnes in July. However, with Iran being Turkey’s second largest supplier of natural gas it is logical to assume that these high profile oil shipments are part of a longer term energy strategy to maintain and improve this co-dependent relationship; Ankara and Tehran recently signed a deal to build a new gas pipeline to Europe via Turkey, which will secure increased gas exports to Turkey as domestic energy consumption continues to rise. Furthermore it is hoped by the governments of both states that bilateral trade between Turkey and Iran will continue to grow, opening up the possibility of co-operation in other spheres of industry, notably real estate and banking. For its part, Ankara is hoping to capitalise on the Gulf States’ decision to observe the sanctions and could be looking to absorb much of the Iranian trade traditionally handled via the UAE.

Russia and China: co-operative competitors

No Iranian-bound Turkish oil shipments were registered in August, and whether Iran would have continued to pay over the odds for its imports in the long term is debatable, particularly as there are several alternative suppliers in the market also prepared to defy sanctions who can be increasingly competitive to secure Tehran’s business. Whilst the Kremlin pushes ahead with its construction of Bushehr nuclear power plant, privately-owned Russian oil major Lukoil resumed its deliveries to Iran in August after initially suspending such activities in March, and despite public statements made by CEO Vagit Alekperov that Lukoil will refrain from doing business with Tehran whilst sanctions are in place, its trading arm Litasco continues to co-operate with China’s Zhuhai Zhenrong to co-ordinate Iranian shipments. State firms Rosneft and Tatneft were also said to be considering deliveries to Iran, although this poses wider concerns about how other Russian energy clients will react to being even indirectly linked to funding a company that is breaking sanctions, so it will have to remain a calculated and financially worthwhile risk.

Chinese firms are potentially the most secure in this sense, given their extensive state backing and the government’s scant regard for international pressure. These firms are notable as Moscow’s biggest rivals, not only in terms of Iranian partnership, but also regional dominance as Moscow and Beijing continue to jostle for access to natural resources across Central Asia. Whilst Russian firms may be willing to cash in on Iran, it is unlikely they would ultimately jeopardise lucrative European or US contracts to do so. Despite political sympathies with Tehran held by Venezuela, state oil firm PdVSA is not currently in a position to export significant quantities to Iran owing to a number of domestic issues which have seen production and output decrease.

International implications

Taking a stance on Iran is part of a bigger narrative than bilateral relations alone, and is generally indicative of the trends within a state’s wider foreign policy; China, Russia and Venezuela all reject the US/EU sanctions against Tehran and are all arguably pursuing their various national interests by establishing a relationship with Iran, primarily to demonstrate opposition to perceived US dominance of international relations. Whilst Turkey is not overtly opposed to Washington and has stated its intention to follow UN rulings, its pro-Iranian actions are also intended to be witnessed by a global audience, highlighting Ankara’s importance as a growing regional player in the Middle East.

Author: Samantha Wolreich, Senior Risk Consultant, AKE Limited.

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