Russia Begins Exporting Fuel to Iran to Undermine Western Sanctions

Tue Apr 11 2023
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MOSCOW: Russia has started exporting fuel to Iran by rail this year, marking the first time that such supplies have been sent by this method, according to three industry sources and export data.

This move comes as Russia seeks to forge closer ties with Iran, which is also under Western sanctions, in order to support their economies and undermine what both Moscow and Tehran call unjustified sanctions.

Western sanctions on Russian oil products, which were imposed over Moscow’s “special military operation” in Ukraine, have had a significant impact on global fuel markets, with oil tankers taking longer routes and suppliers exploring new destinations and ways of transportation.

Meanwhile, Iran has been under Western sanctions for several years, with limited access to global markets.

Last autumn, Russian Deputy Prime Minister Alexander Novak announced that the country would begin swapping oil products with Iran.

However, actual shipments did not start until this year. In February and March this year, Russia supplied up to 30,000 tonnes of diesel and gasoline to Iran, according to two sources familiar with the export data.

A third source confirmed the oil trade but was unable to confirm the volumes.

All the fuel was supplied by rail from Russia via Kazakhstan and Turkmenistan. One source revealed that some gasoline cargoes were sent from Iran to neighboring states, including Iraq, by truck.

Although Iran is an oil producer and has its own refineries, its consumption has exceeded domestic fuel production in recent years, especially in its northern provinces.

Russian oil companies export diesel and gasoline to Iran

Russian oil companies are currently keen to export diesel and gasoline to Iran by rail, as exports by sea face high freight rates and a price cap imposed by the Western countries.

However, sources warn that the rail exports face bottlenecks along the route, which could hamper the expected rise in fuel supplies to Iran this year.

“We expect fuel supplies to Iran to rise this year, but we already see several issues with logistics due to rail congestion. That may keep exports from booming,” one of the sources familiar with supplies to Iran said.

Despite these potential challenges, the fuel exports by rail represent a significant shift in Russia’s trade with Iran and a further example of both countries seeking to build closer ties and support each other’s economies in the face of Western sanctions.

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