Posted on Oct 23, 2017
Moscow began to play an active part in shaping the image of Iran as a terrorist country and a supplier of weapons & technologies to terrorist organizations and countries under sanctions. In this way the Kremlin seeks to divert attention away from itself and its own actions. It will also help to moderate Iranian ambitions in the Middle East and to return Tehran to the era of oil sanctions, writes Ukrainian journalist Andrii Starostyn.
The advantages to this scenario are, that firstly Russian oil companies will no longer be alone in the club of rogue states.
Secondly, under all the noise, Moscow will try to regain its lost markets. It is highly that in this game of intrigue, Moscow will also find a role for Ukraine.
British journalist Anthony Lloyd of The Times recently reported that Russia has been supplying oil products to the Taliban in Afghanistan for more than 18 months.
This investigation has lifted the veil over the rapidly growing oil activity of Moscow in Central Asia.
According to the British newspaper, the Taliban, which threatens the Afghan authorities, is receiving fuel supplies worth at least $2.5 million a month from Russian companies through the "Uzbek server". A few hundred million dollars a year from Russian oil companies operating in Uzbekistan and Kyrgyzstan looks like a very substantial support.
Where is the Siberian oil in barchans coming from?
The largest gasoline sellers in Kyrgyzstan are Gazprom Neft and Rosneft. In Uzbekistan, the leading state network of gas stations was connected, before the beginning of 2017, with the company Zeromax, which belonged to the daughter of former president Gulnara Karimova. Now this network was transferred to the main seller of raw materials for local refineries, Russia's "Lukoil".
Until recently, it received raw materials on substitution schemes from Iran, and Zeromax fed on Iranian oil condensate, which came from the Gazprom group.
These schemes of supply substitution between Russia and Iran during the sanctions period exceeded 20-22 million tons of oil and condensate per year and more.
In general, schemes to circumvent sanctions against Iran were the strongest and long-term means to protect Russian oil revenue. Iranians sold to Russians in Asia, and Russians to Iranian agents in Europe. It is obvious that the prices were the lowest in Asia.
The sanctions, which hindered the development of Iran, helped many to make fortunes.
During the 18 months, as mentioned by the The Times, everything has radically changed. Most of the credit and personal restrictions against Iran were lifted in the summer of 2016.
At the same time, the international sanctions against Russia have been on the rise since 2014. To put it in Washington's official language, these sanctions are being expanded sectorally. Moreover, they grow because of several formally unconnected issues - Ukraine, Syria, North Korea and several others.
The Chinese factor.
Against the background of a twofold drop in world prices, Russian oil exporters began to feel increasingly uncomfortable. They are now more and more often forced to cede export rights to intermediaries, such as traders Glencore and Trafigura.
Except for a direct oil embargo and blocking of payment systems, Russian exporters must be feel themselves, in most world markets, almost as the Iranians once felt.
Under such new conditions, the Central Asian oil market, which is very isolated from the world, continues to retain its attractiveness. For Moscow, it has the same charm that it once had in Tehran's eyes. Here, no one will limit loans unlike in the US, Canada, the EU or Japan, freeze bank accounts, or impose fines.
In these parallels between Moscow and Tehran, there is one very subtle nuance that is associated with the oil and gas corporations in China. During the period of Iran sanctions, Beijing was expanding its oil interests in Central Asia very slowly.
Chinese companies seemed to have been evaluating the US positions in Kazakhstan's oil production, and they saw no threat from the domination of Iranian oil raw materials in the imports of the countries of the region. The prices of oil raw materials were high and there was a place for everyone on the market.
Now that Russia is weakened by the sanctions, and the centre of profitability in the oil sector has shifted from extraction to logistics and refineries, Chinese expansion in Central Asia is developing at a rapid pace.
For example, Chinese investors had taken control of at least 40% of Kazakhstan's oil reserves by 2014. In 2016, one of the Chinese companies bought half of the shares of the international division of the main Kazakhstani state oil company KazMunaуGas International. It owns oil terminals of Batumi and Constanta. This purchase meant that the Chinese investor extended his interests to include the transit route from Kazakhstan, which goes to the European Union bypassing the territory of the Russian Federation and the Ukrainian Kerch Strait, which is now occupied by Russia.
In the summer of 2017, the same company bought an option for several thousand Russian gas stations from Rosneft. Then in early autumn, the same Chinese CEFC bought a minority stake in Rosneft from the Emirate of Qatar, which was cornered by a Saudi Arabia’s boycott. According to rumours, the attention of this Chinese investor is now focused on Slovakia - another important point of transit of Asian oil to the EU countries.
How will Moscow exert pressure on Beijing and Tehran?
Without looking at China's expansion into Kazakhstan and the growth of Russian-Kazakhstan oil competition, Russia nevertheless aims to take the place of Iran in the free Middle Eastern market.
This is evidenced by the fact that at the beginning of the year a multilateral agreement was concluded on the annual supply of 1.5 million tons of oil to Uzbekistan. The agreement presupposes the reopening of the Omsk-Pavlodar- Shymkent oil pipeline. It was stopped in the last century, as part of the implementation of the Iran-Soviet trade and other agreements.
Delivering long-distance Russian oil to this region is not profitable. There is enough oil which is located closer. In the west of Kazakhstan, it is produced by the US and EU corporations, and in the east and the north of the country by the Chinese corporations.
But to allow competitors to access this pipeline without any concessions, is clearly not in Russian interest, nor is it the Kremlin's style. Therefore, in the near future, one should expect the following two scenarios.
Firstly, Beijing may well pressure Moscow to adopt a freer Russian transit oil policy which is necessary for the further development of Chinese investments in Kazakhstan.
In this case, fear of Chinese pressure will lead the Kremlin to take protective "active anti-crisis measures". Threats of palace coups, civil conflicts, cross- border disputes, and interstate conflicts over water supply will allow Russia to impose a partnership on Beijing along with an offer to help solve the artificially created problems of Central Asia. These political measures will be able to weaken Chinese oil pressure. This partnership will be framed as a "union of the two giants" against the pernicious West and the like.
The second option is to force Iran to the barter era, that is, to the period of sanctions. This will help to form a stable front of the two sanctioned states. To do this, Russia will have to involve Iran to the maximum in the updated "Arc of Tension" in Asia. This arc of military conflicts can now be seen very clearly. It extends from Syria to the west, Yemen to the south, and Afghanistan to the east.
Beginning and end in Ukraine.
The overwhelming majority of international sanctions, now rapidly changing Russian oil policy in Central Asia, were imposed as a punishment for an aggressive Russian policy towards Ukraine.
Accordingly, any form of involvement of Ukraine in the Asian "Arc of Instability" will necessarily create an illusion in Moscow about the possibility of returning to the starting point of the sanctions crisis.
The temptation to start everything from a clean slate is growing every year as Russia plunders the occupied territories of Ukraine. With every attempt to freeze armed confrontation in several Ukrainian border areas, Kyiv’s value in Moscow's external oil manoeuvres is growing.
Today, Russia's desire to go back to the era of Iranian sanctions is so great that Ukraine is tied up in a mirror-like manner by Moscow to every key event that takes place around the perimeter of the entire Asian "Arc of Tension" where Moscow, and not Kyiv, is a player.
For example, if Secretary of State Rex Tillerson and later Donald Trump have recently made statements that the Russian Federation and Iran are providing military or logistic support to the Afghan Taliban, then we should wait for information about alleged "traces of Ukraine", which Russia alone can uncover in this affair.
Or, if the Russian Foreign Ministry has refrained from condemning the separatism of Iraqi Kurdistan - it means one should be expecting accusations of Ukrainian arms deliveries to Kurdish extremists.
A similar mirror approach was observed, for example, when the Kremlin, firmly set out on the path of Iran's return to the era of sanctions, began to push this country to support the Yemeni Hussites. Russian media blamed Ukraine for supplying weapons to these groups. These allegations turned out to be false, as with all other times.
Until now this info noise coming from Moscow does not bring visible political dividends. However, it allows the Kremlin to achieve quite specific goals. For example, to appoint a new "main terrorist" in the world (something that has already been announced by the leaders of various countries, including the US), thus in this way to cover the charges directed specifically at Moscow.
It also allows Russia to mask the long-term plan. They seem to be preparing to use the next crisis around Iran (in which Moscow will play an important role) to receive exclusively Russian pleasure: either oil or gas. And it is better to get more of each.
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