Whereas we earlier reported on how Russia was giving the Western countries the finger by starting a closer relationship with China, the situation seems to have aggravated more recently. The country has been negotiating a goods-for-oil deal [10] with Iran whereby Russia would export grain and equipment to Iran in exchange for oil. As the relationship between Iran and the West (and predominantly the USA) is still quite bad, this seems to be another provocation of the European Union and the USA.
This deal could be the apotheosis of a very long negotiation, as press agency Reuters already announced in January that both countries were discussing some kind of partnership. Back then, the number which circulated was $20B of Russian manufactured goods in exchange for half a million barrels of oil per day being delivered to Russia. These obviously aren’t hard facts yet, but the Russian minister of Economy, Alexey Ulyukayev has confirmed the talks are ongoing.
If there’s one thing Russia doesn’t need to import, it’s oil and gas. The country exported a large chunk of of its fossil fuels and this accounted for a whopping 68% [11] of Russia’s total exports in 2013. So why is the country trying to secure more oil then?
We are pretty sure Russia is only trying to provoke the Western countries once again. There still is a trading embargo in place preventing western companies and countries to deal with Iran. The most effective way to tease the Western nations to lift the trading ban with Russia is to deal with their ‘worst’ enemy. This will have a double effect. First of all, Russia will be able to use Iran as a new market to sell their factory output and grains to now that it has become impossible to sell its goods in the European Union. Secondly, by dealing with Iran, Russia is basically increasing the pressure on the West which now has the choice between implicitly lifting the embargo with Iran (as it would silently allow Russia to trade with Iran) or enforcing the trade embargo against Iran by trying to smooth things over with the Russians.
There are only a few things you can be sure of, and it should be clear that this is merely a strategic political move. Russia is trying to force the hands of the West by taking it one step further every time. Nobody really seemed to care about the new close relationship with China, but if Russia would enter into a strategic agreement with Iran, a lot of people in the West might be ticked off, even though they were the causal link for this to happen by implementing trading bans with Russia. Russians have always been very independent people and with this move to find an ally in Iran, Putin is once again showing he’s a very clever strategist.
Just like in Ukraine where he exactly knew where the line he could not cross was, he probably has a pretty good idea how he can push the buttons of the western countries without going too far. We’ll be looking out for some announcements from Russia stating it will support Venezuela and Cuba once again, as increasing the trade flow with the latter country would really make the USA quite cross.
>>> Check Out Our Latest Gold Report! [12]
Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report [13] and the Technology Report [14].
Follow us on Twitter @SproutMoney [15]