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Iran-Russia oil barter deal not in Iran’s interest (JMD quoted on Azernews)

Iran-Russia oil barter deal not in Iran’s interest

21 JULY 2014, 11:00 (GMT+05:00)

By Sara Rajabova

Iran and Russia's commitment to continue negotiations on oil barter deal has sparked concerns in some countries, especially the United States.

Some experts said such a deal would not be beneficial for Iran and even would damage the nuclear talks between Iran and P5+1 on Tehran's nuclear energy program.

However, a senior Iranian official said Tehran and Moscow are in talks to finalize the oil agreement irrespective of Tehran's nuclear talks with six world powers.

Commenting on the issue, James M. Dorsey, Senior fellow at Nanyang Technological University's S. Rajaratnam School of International Studies told AzerNews that a barter deal with Russia won't impact the nuclear negotiations.

"It would hedge Iran to some degree Iran against a potential failure of the nuclear talks and it would serve Russia's interest by positioning it in Iran in advance of a competitive rush should the talks succeed," Dorsey said.

Another expert believes that oil barter deal between Iran and Russia isn't in the interest of Iran.

Professor of economics at U.S. Northeastern University, Kamran Dadkhah said such a deal is quite against Iran's interest.

"On the surface it may seem that Russia is helping Iran to bypass international sanctions. But in reality it is Russia that is taking advantage of Iran's weak position to benefit economically. Russia is the third largest oil producer (after Saudi Arabia and the United States) and second largest oil exporter (after Saudi Arabia). Therefore, it cannot use the half million per day barrels of oil domestically; it has to sell it to its international customers. Therefore, Iran will be forced to accept a price far below the prevailing international oil price. On the other hand, Iran has to buy Russian goods at the market price. But because this is a barter trade (no international money involved) Russians will limit Iran to certain items and indeed to lower quality goods. Iran has had the same experience with China," Dadkhah said.

Earlier in April, Reuters reported that Iran and Russia were close to sealing a $ 20-billion oil-for-commodities deal.

Under the agreement, which is yet to be finalized, Russia will buy 500,000 barrels of Iranian oil per day in return for Russian goods needed by Iran.

Washington said such a deal would go against the terms of the interim nuclear deal between the world powers and Iran.

Earlier, U.S. Senators threatened to reinstate Iran sanctions that were eased under the Geneva deal in case Russia and Iran sign the barter deal.

Iranian Oil Minister Bijan Namdar Zanganeh said in April that Tehran is determined to raise the volume of its economic transactions with Russia under long-term deals.

Russian Energy Minister Alexander Novak, who co-chairs the permanent Russian-Iranian Commission on trade and economic cooperation, said the agreement on trade and industrial cooperation with Iran is expected to be signed in September, ITAR-TASS news agency reported.

However, Novak did not specify, whether the oil-for-goods deal would be included in the agreement or not.

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