As Russia faces unprecedented sanctions in virtually every sector of its economy, it may have to turn to a trusted ally with more than four decades of experience with Western embargoes.
Until the Ukraine war, Iran was the most sanctioned country in the world, according to Castellum.AI – a global risk database that tracks sanctions. Russia now holds that record and the two countries are in what analysts call “a marriage of convenience” that is likely to strengthen as the war in Ukraine intensifies.
“Common interests in helping others avoid sanctions are important to this dynamic in Russia-Iran relations,” said Giorgio Cafiero, CEO of Gulf State Analytics in Washington DC.
Amid air blockades between Moscow and the West last month, Russian Transport Minister Vitaly Savelyev said his country is “studying the case of Iran” to help it deal with sanctions on maintenance and spare parts. Iran still operates some planes purchased before the 1979 Islamic Revolution that severed its ties to the West.
“This bilateral relationship is likely to get stronger as the war in Ukraine continues, especially if the Vienna talks fail to revive the JCPOA,” Cafiero added, referring to the 2015 agreement that placed verifiable limits on Iran’s nuclear program, designed to prevent the country from obtaining a nuclear weapon.
He noted that Iran’s isolation will put even more pressure on Tehran to make itself useful to the Kremlin.
After decades of Western economic restrictions, the Islamic Republic has become a master of evasion, using illicit markets and manipulating ship tracking to circumvent sanctions. Today, Russia is experiencing a similar crisis as the West clamps down on Moscow in an effort to undermine its war effort.
Can Russia follow Iran’s lead to circumvent Western sanctions? Some analysts say it already is.
The US, the G7 group of rich nations and the European Union have imposed an unprecedented series of sanctions on Russia since the February 24 invasion of Ukraine.
The biggest blow, however, would be to Russian energy, which in 2020 accounted for more than half of Russia’s exports. The US and Britain have already banned Russian oil. Today, the EU – which remains highly dependent on supplies from Russia – is considering a similar move, but has yet to reach a consensus on the matter.
One way Russia can learn to survive potential sanctions on its oil is to change ships and rename its blend, a tactic that has been used by Iran.
Iran has in the past stashed millions of barrels of oil in little-known ports in Asia to evade Western sanctions, Reuters reported in 2012. Transfers of barrels in the dead of night from ship to ship have allowed Iran to disguise itself under different flags, selling its oil to interested Asian buyers without attracting the attention of Western monitors. Iran did not respond to a request for comment, Reuters added.
“About 8% of the world’s largest oil tankers are now involved in sanctioned oil smuggling, largely made up of Iranian and Venezuelan products,” said Cormac Mc Garry, a security expert at Control Risks in London.
“Ghosting” is the most commonly used mechanism, Mc Garry told CNNwhereby ships turn off their automatic identification systems when shifting cargo from one ship to another.
Windward, an Israeli maritime intelligence firm, said that last month it identified Russian oil trading under the radar, where there were ship-to-ship operations between tankers departing Russian ports with other tankers. Oil tankers involved in this activity have arrived in North America, Asia, Russia and Europe, according to Windward.
“While the new restrictions are changing vessel behaviors it appears that some companies are going about business as usual, hiding their actions and trying to keep regulators in the dark,” Windward wrote in a blog post.
In the case of Iran, remote territories of Malaysia were used as “blending” or “re-branding” points, where Iranian oil would be mixed with others and sold as a non-Iranian product to international buyers. The “Malaysian blends” have been a well-known gateway to evading oil sanctions, with Asian buyers – specifically Chinese – making use of the renamed blend to buy sanctioned oil.
Russia is already following a similar route, its oil now renamed “Latvian blend” – a 49.99% Russian blend that is blended with another oil and labeled Latvian. The crude was purchased by UK-based oil and gas company Shell, Bloomberg reported.
Dealing with sanctioned oil risks reputational and financial damage, but demand for oil could still drive some buyers to the bottom of the black market, analysts say.
“Commodity markets are already under pressure due to supply concerns and so it is unclear whether Russian supplies can be replaced,” said Esfandyar Batmanghelidj, founder and CEO of think tank Bourse & Bazaar Foundation in London.
Financially, Iran has built a shadowy network that uses shell companies and indirect transactions to launder money and avoid sanctions, analysts say, which some believe could be offered for Russian use.
These companies are used to give the impression that there is no connection to Iran, said Richard Nephew, a scholar at Columbia’s Center for Global Energy Policy in New York who previously served as the State Department’s deputy head of sanctions and director. of Iranian Affairs at the US National Security Council.
Shell companies are a tactic Sobrinho believes Russia would like to learn from.
“I think Iran would be prepared to help Russia with some sanctions evasion tools,” Sobrinho said, “but, of course, that presupposes that Iran itself has access that it can readily make available.”
Evading sanctions is no easy task, said Batmanghelidj. And while finding complicit partners delays economic collapse in the short term, it still reduces the chances of profit in the long term.
“The main lesson the Russians should learn from the Iran experience is that it is difficult to evade sanctions and resist sanctions,” Batmanghelidj said. “At best, Russia may aim to demonstrate resilience to sanctions, but that just means avoiding a runaway economic collapse,” he told the BBC. CNN.
“That’s why the real cost of sanctions is an opportunity cost of lost growth.”
Source: CNN Brasil
I’m James Harper, a highly experienced and accomplished news writer for World Stock Market. I have been writing in the Politics section of the website for over five years, providing readers with up-to-date and insightful information about current events in politics. My work is widely read and respected by many industry professionals as well as laymen.
