On second thought, maybe we won't help Iran after all: Russia

An oil tanker is seen off the port of Bandar Abbas, southern Iran.
Atta Kenare | AFP | Getty Images

Months of oil talks between Russia and Iran, both heavily sanctioned by the West, took an unexpected twist on Tuesday when Moscow first announced it had agreed with Tehran to help it sell its crude—only to withdraw the statement shortly afterwards.

In January, sources told Reuters Iran and Russia were negotiating an oil-for-goods swap worth $1.5 billion a month that would enable Iran to lift oil exports substantially, undermining Western sanctions.

Under the proposed deal Russia would buy up to 500,000 barrels a day or a third of Iranian oil exports in exchange for Russian equipment and goods, sources have said.

Russian and Iranian officials later acknowledged such talks were taking place but said the deal was uneasy as both Russia and Iran are large oil exporters and lack infrastructure to easily swap crude to help each other make sales.

Since January, Moscow itself came under heavy Western sanctions for the annexation of Ukraine's Crimea and what the West sees as funding and weapon supplies to rebels in eastern Ukraine who fight pro-Western government forces.

Iran has meanwhile continued talks with major powers on the ways to curb its nuclear programme, which were extended by four months in July.

On Tuesday, Russian Energy Minister Alexander Novak and his Iranian counterpart Bijan Zanganeh signed a five-year memorandum of understanding in Moscow, which included cooperation in the oil sector.

"Based on Iran's proposal, we will participate in arranging shipments of crude oil, including to the Russian market," Novak was quoted as saying.

Neither Novak nor the memorandum gave any details on timing or possible volumes. Novak said the deal would not violate international sanctions.

However, several minutes later the energy ministry said it was withdrawing the statement and would issue a new one on Wednesday.

It gave no reason for the withdrawal and could not say what the new statement would say about oil cooperation.

Sanctions have reduced Iranian oil exports to around 1.0-1.5 million bpd from as much as 2.5 million bpd before the sanctions were imposed two years ago, drastically reducing the country's export revenues.

Russia, the world's second largest oil exporter after Saudi Arabia with supplies amount to up to 5 million bpd, relies on energy for half its budget revenues.

--By Reuters