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2nd meeting of the Russian-Iranian working group for energy cooperation

May 29, 2017, 18:37 UTC+3
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The working group will meet following the victory of Hassan Rouhani in Iran's recent presidential race. It was during Mr Rouhani's previous term in office that Russia and Iran achieved considerable progress in strengthening their security and economic partnership, with energy being a key cooperation area encompassing a number of important long-term agreements signed or pending.

Iran's economy is gradually recovering after the partial lifting of international sanctions, which gives Tehran an opportunity to step up cooperation with Russia.

  • According to the IMF, Iran's GDP rose by 6.5% last year, whereas in the next few years it will be growing at a rate of 4%.
  • The Russian Federal Customs Service's data show that, in 2016 the trade turnover between Russia and Iran skyrocketed by 70% (up to USD 2.1 billion).
  • Russian exports to Iran increased by 85%, while Iranian imports rose by 13%. The share of Russia in Iran's external trade stands at 4.2%.
  • Although the bilateral agreements are estimated to be worth some USD 40 billion, many of them are still waiting to be implemented.

Energy is a key area of cooperation between Russia and Iran.

  • With the support from Russia, in 2015 Iran signed the Joint Comprehensive Plan of Action regarding its nuclear programme, which cleared the way for the lifting of restrictions imposed on Iran's oil exports.
  • There are eight working groups established under the Permanent Russian–Iranian Joint Trade and Economic Commission to tackle the relevant matters of mutual interest. The energy working group first met in December 2016 to sign a roadmap on trade and industry projects through 2020.
  • Last year, Zarubezhneft inked a memorandum of understanding to cooperate with Iran on improving oil recovery in the country's ongoing development projects. Technopromexport signed a contract to construct four generating units at the Hormozgan Thermal Power Plant and two other TPPs in Iran, with Russia providing government export loans to that end.
  • Russia played a pivotal role in expanding the capacities of the Bushehr Nuclear Power Plant, with negotiations underway about Russia's involvement in Iran's other nuclear projects.

The March talks between the Presidents of the two nations culminated in the signing of:

  • A memorandum of understanding between the Ministries of Energy of the two countries on arranging power supply from Russia;
  • A memorandum on strategic cooperation in railway electrification involving Russian Railways;
  • Memoranda of understanding between Gazprom and ROSGEO, on the one side, and the National Iranian Oil Company, on the other side;
  • A memorandum of understanding between ROSATOM and the Atomic Energy Organisation of Iran (AEOI) on transportation of nuclear materials.

The key stumbling block on the way to a stronger energy partnership is the lack of a basic agreement on oil production in Iran.

  • Tehran is still working on a draft for approval by the Iranian Parliament.
  • The Russian companies are therefore compelled to negotiate with their potential Iranian partners on a case-by-case basis, while their projects are put on hold pending the ratification of the basic agreement.

Despite the challenges, a new oil-for-goods deal is in the offing.

  • According to the trade agreement, Russia undertakes to buy five million tonnes of oil per year from Iran, while Iran will use the proceeds to purchase Russian goods.
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