1658044391 Russia and Iran are allies against the West rivals in

Russia and Iran are allies against the West, rivals in the sale of goods

TEHRAN — Iran and Russia are in fierce competition to sell oil, refined commodities and metals in India, China and across Asia, as Moscow sells at prices undercutting one of its few backers during the Ukraine invasion.

The battle for market share between Iran and Russia is a stark example of how the war in Ukraine is rewiring global energy markets, throwing Moscow out of the West only to resurface elsewhere. India and China — two of the world’s biggest consumers of commodities — have remained largely neutral in the Ukraine war, refusing to align themselves with Western sanctions and relying on cheap Russian oil at the expense of Iran, which they previously relied on for discounted products and metals fell.

The competition has spread across Asia. It has reached smaller markets like Turkey, United Arab Emirates and Afghanistan. Iran and Russia share anti-Western political stances, but have been hit by Western sanctions – Tehran for its nuclear program and Moscow for its actions in Ukraine. Russian President Vladimir Putin will visit Iran on Tuesday as part of a trip to demonstrate the countries’ close partnership.

Inside Iran, the fight has highlighted divisions over the country’s rapprochement with Russia, which the Tehran government has backed by invading Ukraine, while Iran’s business community privately seethes over what it sees as unfair competition.


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“It’s killer,” said an Iranian trader of the $30-per-ton discounts that Indian and Chinese buyers are trying to match with Russian steel prices.

The competition will hurt Iran’s ability to avoid sanctions and reduce its influence during stalled nuclear talks with Europe and the US, said Henry Rome, deputy research director at the Eurasia Group, which studies global macropolitics and the Middle East.

“There is a real disconnect between the political and strategic relationship” with Russia and competition in the commodities business, Mr Rome said, calling the sale of oil and products “at the core of the regime’s efforts to withstand economic pressures”.

Over the past decade, Iran had refined ways to avoid sanctions, selling oil to China, which never fully implemented US nuclear sanctions, and processing fossil fuels such as asphalt, petrochemicals, gasoline and liquefied natural gas to markets in India, the Turkey, the UAE and Afghanistan.

The strategy paid off once. The value of Iran’s international oil sales rose 91% to $27.9 billion in the nine months to last December, half of the country’s export earnings, according to the Central Bank of Iran.

Russia and Iran are allies against the West rivals in

A gas station in Wuhan, China. Chinese imports of Russian crude rose 25% to nearly 2 million barrels a day in May, according to Chinese customs data.

Photo: Getty Images/Getty Images

But that achievement now faces challenges as Moscow’s state-owned oil companies and traders move into Iran’s backyard as they are increasingly locked out of European deals.

“They are destroying the market,” said Hamid Hosseini, spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters Union, speaking of Russia.

Across Asia and the Caucasus, Russia sells liquefied gas at $300 a ton, a third of the normal price of $900. It sells diesel for $900 a ton, compared to $1,200 for international prices.

Russia’s sale of discounted crude oil to Indian refiners has also been disruptive for Iranian oil traders. Iran has maintained a semi-secret trade in discounted asphalt with India that has been competitive because domestic producers of the commodity India depended on expensive foreign supplies of crude oil.

Now India is scooping huge amounts of Russian oil at discounts of up to $40 a barrel on international prices, making local refining much cheaper.

“We cannot compete with them,” Mr Hosseini said.

The same phenomenon is occurring in China, Iran’s largest crude oil customer.

Iran’s sales in China were initially resilient, although the price was $10 a barrel higher than Russia’s. Iran is selling at a discount of around $30 less than the price of Brent crude, the international benchmark, which was above $110 a barrel for most of the year. Russia sells Brent at a discount of about $40.

But Moscow’s crude has started to find willing buyers in Beijing, as buyers face little punishment from the US and Europe for taking over Russian oil. Chinese imports of Russian crude rose 25% to nearly 2 million barrels a day in May, according to Chinese customs data.

High oil prices have been beneficial for OPEC+, an alliance of oil-producing countries that control more than half of world production. WSJ’s Shelby Holliday explains what OPEC+ countries are doing with the windfall and why they’re unlikely to distance themselves from Russia. Pictured: Adele Morgan

In contrast, Iranian crude sales to China – which are not disclosed by Beijing – have almost halved to 395,000 barrels a day over the same period, according to commodities data provider Kpler.

Many of the discounted sales that compete with Iran are handled by large state-owned companies like Rosneft, Russia’s largest refiner, as well as smaller independent Russian companies and big traders like Vitol. Rosneft and Vitol have not responded to requests for comment.

The scramble over commodity sales has not resulted in an open diplomatic rift between Iran and Russia. In May, Russian Deputy Prime Minister Alexander Novak, who is also the country’s energy chief, said the two countries would neutralize Western sanctions by working together. Iran and Russia have plans to increase their trade tenfold to $40 billion annually, up from $4 billion last year, with sales of Iranian clothing and auto parts, Russian wheat and a goods corridor to India.

Iran’s rapprochement with Russia and China is a divisive idea within Iran. Many Iranians distrust Russia, which conquered the Caucasus territories of the Persian Empire such as Azerbaijan in the 19th century and interfered in Iranian affairs until the 1940s.

Some Iranian leaders say partnering with Russia is also bad for business.

In Fujairah, where the UAE has a major trading and storage center for oil and its refined products, Russian fuel oil is selling for $35 less a ton to Asian buyers, an Iranian trader said. According to Kpler, Russia shipped a record 116,000 barrels per day of heating oil to Fujairah in June, almost six times more than in January.

On the part of Russian companies, they have little choice. Russia’s excess oil and fuel storage tanks are full in Russia, the Netherlands and the United Arab Emirates

“You have to sell,” said the Iranian oil trader.

write to Benoit Faucon at [email protected]

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