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No Evidence of Russia Buying Iran’s Oil in Claimed Defiance of US Sanctions

Oil supertanker Grace 1 sits anchored in waters of the British overseas territory of Gibraltar.

This article originated in VOA’s Persian Service. Danila Galperovich of VOA’s Russian Service contributed.

A Russian bid to defy U.S. sanctions on Iran appears to have failed, with Russian energy experts saying Moscow has made no recent purchases of Iranian oil as part of a sputtering 2014 deal with Tehran.

Russian state media have said that under the August 2014 memorandum, which was never published in full, Moscow agreed to buy Iranian oil in order to deliver it to international customers, while Iran would use the payments received from Russia to buy and import Russian goods. Iranian state media have said only half of the received Russian funds would be used to buy Russian imports.

The two sides reached the agreement on what they called an “oil for goods” program at a time when Iran was under a previous round of international sanctions against its oil exports. Russia said the deal was intended to boost trade ties with Iran, a longtime purchaser of Russian weapons. It was not aimed at delivering Iranian crude to the territory of Russia, already one of the world’s top oil producers.

Moscow announced a brief suspension of the program in 2016 after having failed to get it operational. Russian Energy Minister Alexander Novak said the program was no longer necessary because oil sanctions on Iran had been lifted that year. The sanctions relief was Iran’s reward for a 2015 deal with world powers, in which it promised to restrict nuclear activities that could be diverted to making bombs.

Russia began talks with Iran to revive the program in February 2017 after the inauguration a month earlier of U.S. President Donald Trump, who had campaigned on withdrawing from the 2015 nuclear deal. In May 2017, Russia and Iran declared a new agreement for Moscow to buy 100,000 barrels of Iranian oil per day, equivalent to 5 million tons of oil per year (1 metric ton equals 7.33 barrels).

Russian media said Moscow secured its first, and so far only, Iranian oil delivery in November 2017, in the form of a tanker carrying just 1 million barrels, or about 136,000 tons, of crude. They did not specify to which country Moscow’s energy ministry re-sold the oil through Russian state-owned trading unit Promsyrioimport.

The Russian state news agency Interfax said Novak later acknowledged that he was having problems finding buyers for the Iranian oil, telling journalists in March 2018 that Moscow had stopped taking deliveries from Tehran due to a “lack of contracts with end customers” for the crude.

In further complications for Russia, Washington sanctioned Promsyrioimport in November 2018, accusing it of helping Iran to make illicit shipments of millions of barrels of oil to Syrian President Bashar al-Assad’s government, in defiance of Western sanctions on Damascus. The Trump administration also re-imposed U.S. sanctions on Iranian oil exports that month to pressure Tehran into negotiating a new deal to end its perceived malign behaviors.

In the past year, Russian Energy Minister Novak has made several attempts to portray the “oil for goods” program as operational, but without disclosing evidence of any Russian purchases of Iranian oil.

In September 2018, Interfax quoted Novak as saying the program had been “resumed.” In his next public comment on the program while visiting Iran in June, Interfax said Novak confirmed that Iran has imported Russian goods using proceeds from past “deliveries” of oil to Moscow. But he did not confirm any new delivery of Iranian oil to Russia since the apparent test-case transfer of November 2017.

Earlier this month, Novak reiterated Russia’s rejection of U.S. sanctions that have targeted Iran’s ability to sell oil and other commodities. In an interview with U.S. TV network CNBC, he called the sanctions “unlawful.”

(L-R) Russia's Energy Minister Alexander Novak, Venezuela's Oil Minister Manuel Quevedo, OPEC Secretary General Mohammad Barkindo, Saudi Arabia's Oil Minister Khalid Al-Falih are seen at an OPEC and NON-OPEC meeting in Vienna, Austria, July 2, 2019.
(L-R) Russia's Energy Minister Alexander Novak, Venezuela's Oil Minister Manuel Quevedo, OPEC Secretary General Mohammad Barkindo, Saudi Arabia's Oil Minister Khalid Al-Falih are seen at an OPEC and NON-OPEC meeting in Vienna, Austria, July 2, 2019.

Mikhail Krutihin, founder of the Moscow-based consultancy RusEnergy Agency, told VOA Russian that he has not heard of Russia buying any Iranian oil since its November 2017 purchase. Speaking by phone last week, he described the Russian government’s promotion of the oil for goods program as “purely political.”

“Russian companies have no interest in buying any oil from Iran, and all these plans are just for loud statements, not for practical use,” Krutihin said.

In a July 9 online article, Russian economist Alexander Karavayev of the Russian Academy of Sciences also said there had not been a single transfer of Iranian oil to Russia so far this year. Writing for the Valdai Discussion Club, a Moscow-based policy forum whose annual meetings are attended by Russian President Vladimir Putin, Karavayev said: “The Russian ‘oil for goods’ program (with Iran) is seriously stuck.”

The State Department has declined to respond to questions by VOA Persian about Russia’s policy of buying Iranian oil to sell to third parties and whether it would trigger secondary U.S. sanctions against Moscow.

“The fact that the U.S. government has not moved forward with such sanctions may indicate one of two possible causes,” said John E. Smith, a former director of the Treasury Department’s Office of Foreign Assets Control (OFAC) under President Donald Trump, in a VOA Persian interview earlier this month.

“One is that the U.S. may have information that Russia has continued to buy Iranian oil but may be unwilling to go after the energy or financial institutions involved because of their size or magnitude,” said Smith, a partner at global law firm Morrison & Foerster. “More likely, U.S. officials may not have convincing evidence that such activity has continued after the November 2018 snapback of U.S. sanctions (on Iran’s oil exports),” he added.

Smith said Russia likes to make political displays of support for Iran. “But they may not be willing to take the risk of having their companies sanctioned (by the U.S.), so they may be proclaiming support for Iran while actually not really buying Iranian oil in a way that would be sanctionable,” he said.

There have been no recent statements by Iranian officials about selling oil to Russia.

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