Countering the new US embargo on petroleum and oil distillates embargo on Iran, Russian Energy Minister Sergei Shmatko and Iranian Oil Minister Masud Mir-Kazemi Wednesday, July 14 signed a series of far-reaching energy-related agreements, including a deal to sell Tehran Russian petroleum products and petrochemicals.
debkafile's Moscow sources report that the pacts aim squarely at the law signed by President Barack Obama on July 2 to hit Iran's Revolutionary Guards Corps' prime source of income, imported refined oil products including gasoline. The Russian and Iranian energy ministers contracted specifically to "increase cooperation in transit, swaps and marketing of natural gas as well as sales of petroleum products and petrochemicals."
The accords also set up "a joint bank to help fund bilateral energy projects."
This latter provision bypasses the US ban on the banks and insurance companies involved in funding refined oil supplies to Iran by creating a shared banking instrument for handling the funding of fuel purchases. Russian insurance firms connected with the new joint bank may insure shipments.
By this step, Moscow moved to offset the penalties America imposed on Iran in the wake of UN Security Council sanctions of June 9 and challenged the United States to blacklist Russian firms by invoking the new US law closing American markets to companies and banks doing energy business with Iran.
Important multinationals have already complied with this US edict, including two oil giants, the American-British BP and the French Total – which have ordered their vast networks of partners and subsidiaries to deny fuel to Iranian consumers – and Lloyds insurance as well as the United Arab Emirates.
But punishing Russian breakers of the US sanction could trigger a serious crisis in relations with Russia.
Sources in Moscow do not believe Obama will find upsetting his newly "reset" ties with Russian President Dmitry Medvedev and Russian Prime Minister Vladimir Putin worth the candle, especially in the light of the new joint mechanisms and bank for conducting their business.
At the same time, debkafile sources predict that US inaction against the Russian sanctions-busting transactions with Iran will encourage other countries and international business interests, particularly in the Caucasus and Central Asia which share borders with Iran, to follow their lead and defy the US embargo.
According to the latest rumors flying around the oil markets, China and Turkey are willing to help Iran evade the fuel sanctions. Pictures have appeared in some Western media showing long convoys of hundreds of fuel tankers standing by on the Iraqi Kurdistan border and waiting to cross into Iran to deliver tons of petroleum.
Even the heavy presence of US and Iraqi troops nearby appears to pose no deterrent to the prospective traffic – much less its absence on Iran's other borders.
An important factor too is Putin's personal and active support – disclosed here by debkafile's Moscow sources – for the mechanisms to break Obama's anti-Iran fuel embargo.
These mechanisms could not have been set up overnight; they required time and attention. So they must have been completed by Monday, July 12, when President Medvedev commented that Iran was closer than ever to building a nuclear weapon, knowing that the US maneuver for deterring Iran from making the last leap in its race for a nuke was about to be sabotaged by his own government.
As for the impact on Israel, debkafile's sources note that the Russian step has demolished the last remnant of Prime Minister Benjamin Netanyahu's strategy which, during all his eighteen months in office, relied on Tehran being held back from attaining a nuclear weapon by expanded international sanctions harsh enough to hurt its economy. He trusted Obama's new energy sanctions to be the ultimate preventative – until Wednesday, when Moscow stepped in to pull their punch.