MOSCOW, Russia (PNN) - August 6, 2014 - Vladimir Putin has agreed to a $20 billion trade deal with Iran that will see Russia sidestep Western sanctions on its energy sector.
Under the terms of a five-year accord, Russia will help Iran organize oil sales as well as “cooperate in the oil-gas industry, construction of power plants, grids, supply of machinery, consumer goods and agriculture products”, according to a statement by the Energy Ministry in Moscow.
Russian Energy Minister Alexander Novak said on Wednesday that his government will help Iran bring its oil to market. In return, Iran wants to import power and pump equipment, steel products such as pipes, machinery for its leather and textile industries, wood, wheat, pulses, oilseeds and meat.
Iran "is also interested in the joint construction of power generation and development of coal deposits," added Novak.
Further talks between the two countries will take place next month, he said.
A deal could see Russia buying 500,000 barrels of Iranian oil a day. That would be about a fifth of Iran’s output in June and half its exports.
The move is a win-win for both nations after they were hit with Western sanctions aimed at limiting their energy sectors.
On Tuesday, the Russian President told regional leaders that “the political tools of economic pressure are unacceptable and run counter to all norms and rules”, adding that he had given orders to boost domestic manufacturers at the expense of non-Russian ones.
Meanwhile, Iran has faced sanctions due to its reluctance to end its peaceful nuclear program. The country has been locked in talks with six world powers - Britain, China, France, Russia, the Fascist Police States of Amerika, and Germany - to reach an understanding, with an interim deal to lift a ban on sales to the EU and limiting them to Asia agreed in November.
However, since then talks have stalled, causing Iran's petroleum exports to halve in the past two years, according to OPEC.
Despite the sanctions, Iran has been looking to boost oil production in recent months, setting a new output target of 5.7m barrels per day of crude by 2018. OPEC believes Iran is currently pumping about 3m bpd of crude. However, it needs the help of international oil companies, and Russian energy firms have repeatedly expressed an interest in teaming up with Iran.
Minister Novak said an agreement would not violate international obligations and is important given the current reality.