Iran Promoting Idea Of Joining Russia, Venezuela As Energy Block

Iran, Russia and Venezuela have a large potential to thwart sanctions on their energy sectors if they cooperate, Iran’s government news agency said Wednesday.

The Islamic Republic News Agency (IRNA) in an unsigned article highlighted United States sanctions against the energy industries of the three countries, although each is a different case.

In Iran’s case, sanctions were imposed for its nuclear program after former US president Donald Trump withdrew from the 2015 nuclear agreement known as the JCPOA.

In Venezuela’s case the Obama Administration and many Western countries imposed targeted sanctions against individuals for human rights abuses, corruption, and antidemocratic actions. The Trump Administration expanded economic sanctions, including on the oil industry, in response to the increasing authoritarianism of President Nicolás Maduro.

Russian oil imports have been banned by many countries after its February 24 invasion of Ukraine and many European countries are ending their natural gas imports from Russia for the same reason. However, there are no third-party sanctions on Russian energy exports, which might be the next phase of sanctions.

IRNA argued that Venezuela has the largest oil reserves in the world, mentioning 303 billion barrels, with Iran having 157 billion and Russia with 89 billion barrels of crude, totaling 45 percent of world reserves.

This represents a huge potential for influencing the world market, IRNA said, calling for cooperation between the three countries.

But facts on the ground are somewhat different than what the Iranian government seems to suggest.

Venezuela’s reserves at this moment do not count for much because it was never a large exporter. Before the US sanctions, Caracas exported around 750,000 barrels per day, a small quantity compared with Russia’s and Saudi Arabia’s daily shipments, easily reaching 15 million barrels.

Saudi Arabia alone can easily add two million barrels a day to world oil supply if it decides the move to be in its political or economic interests.

Iran’s spare production capacity is higher than Venezuela’s, but not detrimental to world supplies. In recent months, Tehran has been shipping just under one million barrels a day and if sanctions are lifted it can add a maximum of another 1.5 million barrels.

Putting Iran’s and Venezuela’s spare capacities together, they are roughly equal to what Saudi Arabia can add to world supplies in a short period of time, if it decides to do so.

Venezuela’s oil production infrastructure is in serious disrepair and Iran also admits it needs at least $160 billion in investments to revitalize production that has suffered through successive international and US sanctions.

Meanwhile, as Iran dreams about a ‘cartel’ with Russia and Venezuela, Moscow is going its separate way since the invasion of Ukraine.

Multiple reports in May and June show that Russia is selling its spare crude to China and India at the expense of Iran. A report in May said that around 40 million barrels of Iranian crude is sitting in tankers in Asian waters unable to find customers. Another report on June 13 said Tehran’s oil exports dropped by 50 percent in May, which confirmed earlier news about Russia taking market share from Iran.

Since 2020, Iran has tried to help Venezuela revive its oil and refining industries, by sending technical help and shipping gasoline and oil. Many agreements were also signed during the recent visit of President Nicolas Maduro to Iran, but any serious project needs financing, which is a challenge for both countries.