Gazprom, Iran Sign Tentative $40BN Energy Deal As Russia Threatens Europe Gas Supply

Russian state energy giant Gazprom has signed a major deal with Iran worth billions at a moment President Putin is in Tehran to meet with President Ebrahim Raisi and Turkish President Recep Tayyip Erdogan. The agreement comes also at a tense moment that Gazprom has said it cannot guarantee gas supplies to Europe, and as the IMF is warning European governments and populations to begin rationing gas usage for a coming supply “emergency”. 

Additionally, there are far-reaching US-led sanctions in place on both countries. And yet President Vladimir Putin confidently arrived in the Iranian capital Tuesday in his second foreign trip abroad since the Ukraine war began. One regional report concludes of the optics: “The company [Gazprom] has declared force majeure [in Europe], which enables it to cut supplies during extreme conditions. This means even as Gazprom is at the center of controversy in Europe, it is making deals in Iran.”

Putin in Teheran for talks with Erdogan pic.twitter.com/4qD4v9oZNM

— Russian Market (@russian_market) July 19, 2022

Though as yet unconfirmed, The Jerusalem Post and other outlets are noting estimates suggesting the multi-year deal could eventually be worth some $40 billion. “The National Iranian Oil Company (NIOC) and Russian state-controlled energy giant Gazprom have signed a memorandum of understanding worth around $40 billion, according to the Iranian Oil Ministry’s news service, SHANA,” Reuters is also reporting.

“This MoU [Memorandum of Understanding] will be the largest foreign investment in the history of Iran’s oil industry, as it will lead to an investment of several tens of billions of dollars of Russian investment in Iran’s oil and gas fields,” Iran’s Tansim news agency said. And further: 

Iran’s pro-government Tasnim news said that the CEO of Iran’s National Oil Company had told reporters that there would be a signing ceremony of an MOU with Gazprom and images on Tuesday showed the lead-up to the ceremony.

The reports identified that Gazprom will assist the NIOC in developing the offshore gas fields of the Kish and North Pars regions, in addition to six oil fields. Liquefied natural gas (LNG) projects and construction of gas-export pipelines are included under the development plans.

Putin is on the ground. Like Erdogan, #Iran‘s oil minister welcomed him at the airport. pic.twitter.com/Odyr8kZNcD

— Jason Brodsky (@JasonMBrodsky) July 19, 2022

And just as Putin is posing alongside Erdogan and Raisi, the IMF is warning Europe: 

Governments must… plan to share supplies in an emergency across the EU, act decisively to encourage energy savings while protecting vulnerable households, and prepare smart gas rationing programs.

On the question of whether the crucial Nord Stream 1 natural gas pipeline to Germany will come back online by July 22 – when scheduled maintenance is slated to end but remains anything put certain – a Tuesday Reuters report injected some rare fresh optimism…

Reuters’ “sources, speaking on condition of anonymity because of the sensitivity of the issue, told Reuters the pipeline was expected to resume operation on time, but at less than its capacity of some 160 million cubic metres (mcm) per day.”

But as we earlier noted, there is no official confirmation and this is just following Gazprom declaring force majeure retroactively… and the whereabouts of the turbine (initially held up by sanctions in Canada) that is at the center of the debacle remains unknown. Initial reaction in NatGas was modest  – perhaps due to the constrained capacity.

IMF to Europe: “Governments must […] plan to share supplies in an emergency across the EU, act decisively to encourage energy savings while protecting vulnerable households, and prepare smart gas rationing programs.” https://t.co/gw6qBDF1Mq

— Javier Blas (@JavierBlas) July 19, 2022

It should also be noted that the leader of NATO’s second largest military in the alliance, Erdogan, will without doubt cause some consternation among Western allies given he’s right there shoulder to shoulder with Putin in Iran even as Europe is set to possibly enter its worst energy crisis in recent history.

High on the agenda for the three leaders is Syria, with heavy discussions expected to center on the prior Astana peace accords which go back to 2019 and seek to uphold security and a status quo ‘counter terror’ arrangement in northern Syria.