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Russia to Help Iran Reboot Oil Industry

A deal would see Russians help Iranians build oil rigs

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Originally appeared at OilPrice.com


Now that Iran appears on the verge of resuming prodigious oil production, it’s becoming clear that it plans to do so by forming ever-closer ties with Russia, one of six world powers that persuaded it to restrict its nuclear program in exchange for the removal of Western sanctions. Relations with the United States, though, remain strained.

The nuclear deal certainly does not mean that Iran is on good terms with the U.S., recently, Iran imprisoned at least three men with ties to the United States. Its supreme leader, Ayatollah Ali Khameini, while approving the agreement that is expected to lift the sanctions, has stressed that the sanctions agreement doesn’t mean his country is ready to strike any big business deals with American companies, which might open the door to more liberal influences in a religiously conservative state.

Iran’s approach to Russia is different. First it hosted President Vladimir Putin as a special guest during the Nov. 23 Tehran summit of gas-exporting countries. Other signs of cordial ties is that Moscow has been mulling two loans to the Iranian government worth $7 billion together, and the Russian financial newspaper Kommersant reports that Russia will equip Iran with modern air-defense systems.

And most recently, Iran Shipbuilding & Offshore Industries Complex Co. (ISOICO) has reached a tentative deal with the Russian shipyard Krasnye Barrikady, or Red Barricades, to cooperate in the construction of oil rigs and share technology.

Red Barricades Managing Director Alexander Ilyichev said that under the countries’ memorandum of understanding (MoU), his company is prepared to send shipbuilding equipment to Iran. “Considering the current level of relations between the two countries, we are ready to provide ISOICO with the necessary equipment thanks to the financial and insurance support of the Russian government” he said.

Beyond that, the agreement involves “engineering discussions, exchange of technology as well as taking advantage of the Russian company’s international rating agency, which will resolve our need to produce certain equipment,” according to ISOICO Managing Director Hamid Rezaian.

The MoU was signed earlier in December in Tehran during an exposition in which representatives of 80 leading Russian companies displayed their products in the biggest such event ever held in the country. Under the agreement, the two sides will jointly build rigs for exploration and extraction of oil and gas from beneath the Persian Gulf.

And Ilyichev stressed that the deal will be for the long term. “The construction cycle is planned not for one year but for decades,” he said. He added that Iran also has expressed interest in ordering new oil tankers to operate in the Caspian Sea.

In November, Rezaian said ISOICO was anticipating the lifting of the sanctions so it could announce several major projects it intends to undertake in collaboration with foreign shipbuilders. He said his company is negotiations with companies from China, Germany, Italy, South Korea and Turkmenistan.

Already, Rezaian said, ISOICO has reached preliminary agreements on these enterprises with the Hyundai Heavy Industries Co. of South Korea and with Nordic Yards Wismar, Germany’s largest shipbuilder.

This is not to say Iran needs much help building ships. It has an enormous shipbuilding industry that’s focused mostly on oil tankers, container ships and offshore structures such as oil and gas rigs. And already it possesses the world’s largest array of oil supertankers, including 42 VLCCs (“very large crude carriers”), each with a capacity of 2 million barrels of oil.

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