Putin has far better hand than Obama in Iran

While western nations are still hesitant to rekindle ties with Tehran, Russia is open to big energy deals immediately

It is much easier to explain why Russian President Vladimir Putin wants a multilateral deal with Iran than US President Barack Obama. The political and economic gains from the removal of United Nations-imposed sanctions are palpable for Russia, while iffy at best for the US.

Putin’s moves, since a framework deal on Iran’s nuclear programme was agreed upon on April 2, clearly indicate how he plans to develop Russia’s partnership with Iran. One is arms sales, as indicated by the recent decision to permit the stalled shipment of S-300 anti-aircraft missiles, and the other is oil deals, as exemplified by a purported oil-for-goods swap. Neither decision required the lifting of international sanctions against Iran — these were voluntary restrictions Putin could have ended even without the prospect of a multilateral deal. What he is trying to do is to get a foot in the door first, before his western adversaries start making inroads into the Iranian market and focusing on areas where Russia is competitive. The potential gains are significant.

Between 1989 and 1991, the Soviet Union signed arms supply deals with Iran worth $5.1 billion (Dh18.75 billion). That made Iran one of the Soviet defence industry’s biggest clients.

In 1995, Putin’s predecessor, Boris Yeltsin, agreed with US president Bill Clinton that Russia would wrap up all military cooperation with Iran by 1999, in exchange for US promises of defence technology cooperation. The agreement was sealed with a secret protocol signed by Russian prime minister Viktor Chernomyrdin and US Vice-President Al Gore. Russia, however, was never comfortable with the deal, not least because the US was not really interested in helping Moscow to develop its defence industry. After Putin came to power, Russia repudiated the Gore-Chernomyrdin protocol in November 2000.

That did not result in a return to full-scale cooperation with Iran, though. Iran bought some Russian helicopters and warplanes and used Russia’s services in launching satellites, but it no longer saw Russia as a reliable partner and feared it would again be susceptible to US pressure. Those fears were confirmed when, in 2010, Russia went back on a 2007 deal to supply $800 million (Dh2.9 billion) worth of S-300 missile systems. Although United Nations sanctions did not ban the sale of these defensive weapons, my Bloomberg View colleagues Eli Lake and Josh Rogin report that then-president Dmitry Medvedev promised Obama the missiles would not be shipped. Iran sued Russia for damages and defence cooperation between the two countries stalled again.

By reneging on Medvedev’s alleged promise, Putin is signalling that the days when Russia listened to the US in arms export matters are over. Iranian leaders now have reason to believe relations between Moscow and Washington are colder than at any time since the late 1980s.

Then there’s the oil-for-goods deal, which has been under discussion for about a year and may already have started. It would involve supplies of about 500,000 barrels a day of Iranian oil in exchange for Russian food and industrial goods, bringing back about half of the export volume that Iran lost because of international sanctions. Such a deal wouldn’t violate the UN sanctions against Iran, and can circumvent financial sector restrictions imposed by the US and the European Union by using barter. In recent days, Russian officials have said the swap is taking place.

Debt-laden US shale producers

Iran will not confirm or deny the arrangement, possibly because the US is worried about it and stepping up cooperation The benefits to Russia are clear. True, if the oil-for-goods swap takes place, the global supply of oil would increase putting downward pressure prices, a negative for a major oil exporter such as Russia. But Putin already has contingency plans in place to survive an oil price of $40 a barrel — debt-laden US shale producers would suffer more from a further price dip. Their output is already beginning to drop because the current price (just under $60 for a barrel of Brent crude oil) is too low for them to continue investing in new drilling. For Putin, a shale crisis in the US is as desirable as it is for the rulers of Saudi Arabia and Iran.

The Russian leader is building on a tactical advantage he has over the US in talks with Iran: He can be the first to begin rapprochement with Iran’s leaders, without worrying too much about its compliance with any nuclear deal’s requirements. Unlike the US, Russia has no obligations to Israel, no domestic opposition trying to disrupt cooperation with Iran and no risk that without a deal he might be forced into waging a war he doesn’t want.

With the capacity of a multilateral deal to stop Iran’s nuclear progress so unclear, though, its benefits for Obama are far less obvious than for Putin.

Leonid Bershidsky, a Bloomberg View contributor, is a Berlin-based writer.