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Saturday, April 19, 2014

Experts say Russia-Iran barter deal harmful (JMD quoted)

Experts say Russia-Iran barter deal harmful

By Sara Rajabova
Iran is in talks with Russia on bartering the Iranian oil with Russian goods, which has caused concerns of some countries, especially the United States.
Negotiations on Russia-Iran barter deal came up while the West is angry with Russia over the events in Ukraine, and the six world powers and Iran are trying to bridge the gaps and prepare the final deal.
Iran and Russia have been discussing various ways of increasing bilateral trade, including Moscow possibly taking up to 500,000 barrels a day of the Iranian oil in exchange 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, reached in Geneva in last November.
In case Russia and Iran's barter deal happens, the U.S. senators have threatened to reinstate Iran sanctions that were eased under the Geneva deal.
The senators said if Iran moves forward with this effort to evade U.S. sanctions and violate the terms of the oil sanctions relief, the United States will respond by re-instating the oil sanctions, rigorously enforcing significant reductions in global purchases of Iranian crude oil.
However, Russia doesn't take the United States' concerns and warnings too seriously. Russian Finance Minister Anton Siluanov said recently that any oil-for-goods deal between Moscow and Iran would follow the United Nations' rules on sanctions, not the U.S.
Speaking about the possibility of the Russia-Iran barter deal, some experts believe that such deal will not be in Iran's interests.
Commenting on the issue, professor of economics at U.S. Northeastern University Kamran Dadkhah told AzerNews that even if the United States does not reinstate the sanctions, the oil-for-goods deal with Russia will damage Iran.
Dadkhah said if the U.S. reinstates the sanctions, Iran's loss would be even greater.
"There are two ways to look at this oil-for-goods deal. It may be a political move by Iran to have a bargaining chip during the nuclear negotiations with P5+1 group. As such, it cannot and will not go through.But Iran may ask for more speedy removal of sanctions from the United States and Europe in return for not pursuing the deal. But if Iran is serious about going through with the deal as an economic move, then it is a grave mistake and will bring nothing but loss for Iran," Dadkhah noted.
He said Iran has always been the loser in any transactions with Russia. "Consider the Bushehr nuclear power plant that seems to be taking forever to start operation or the deal on the Caspian Sea resources, where Russia deprived Iran of its share," Dadkhah said.
He said in the case of oil-for-goods deal, it should be taken into consideration that Russia is one of the three top oil producers in the world along with the United States and Saudi Arabia. "Thus, Russia does not need Iran's oil and has to sell the 500,000 barrels per day of oil from Iran to its own clients.Therefore, Russia will insist on receiving the oil at a price far below the international market price. On the other hand, Russia is not the supplier of the goods and material that Iran needs," Dadkhah underlined.
Furthermore, he noted that in barter agreements, Russia can try to sell its low-quality products to Iran.
"We have observed this in case of Iran-China trade, where China has flooded Iran's market with low-quality goods that Iran itself could produce. In a trade agreement, both sides will benefit if they are on an equal footing. But if one side has the upper hand (in this case Russia) it can impose its will to the detriment of the other side," the expert said.
Dadkhah stressed that in the barter trade, this situation is worse for the side with lower bargaining power.
"Thus, for the sake of the Iranians, let us assume that this is only a bargaining chip and nothing more," he added.
Speaking about the possibility of Russia-Iran deal, senior fellow at Nanyang Technological University's S. Rajaratnam School of International Studies James M. Dorsey said such a deal is certainly possible.
He said against the backdrop of the Ukraine crisis and the threat of escalating sanctions against Russia, the latter has far less need to be concerned about a U.S. response.
Dorsey added that such a deal will not affect the nuclear deal, but much depends on the substance and terms of the deal.
He also said Iran's relations with Russia are independent of the Ukraine crisis. "In fact, Russian relations with Iran played and continue to play a significant role in getting the talks started and advancing them," Dorsey noted.

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