Russia Gains Stranglehold Over Persian Gulf

Authored by Simon Watkins via OilPrice.com,

In a potentially catastrophic escalation of tensions in the Persian Gulf, Russia plans to use Iran’s ports in Bandar-e-Bushehr and Chabahar as forward military bases for warships and nuclear submarines, guarded by hundreds of Special Forces troops under the guise of ‘military advisers’, and an airbase near Bandar-e-Bushehr as a hub for 35 Sukhoi Su-57 fighter planes OilPrice.com has exclusively been told by senior sources close to the Iranian regime. The next round of joint military exercises in the Indian Ocean and the Strait of Hormuz will mark the onset of this in-situ military expansion in Iran, as the Russian ships involved will be allowed by Iran to use the facilities in Bandar-e-Bushehr and Chabahar. Depending on the practical strength of domestic and international reaction to this, these ships and Spetsntaz will remain in place and will be expanded in numbers over the next 50 years.

This gradual roll-out of Russian capability in a country is the Kremlin’s tried and tested operating procedure for leveraging economic and/or political support for a country into that country allowing itself to be used as, effectively, one large multi-level forward military base for Russia. Exactly the same plan was used, and remains in place, in Syria, with Russia maintaining a massive army presence in and around Latakia, Syria, despite having repeatedly made assurances that it was to withdraw from this military theatre. In the early stages, these troops – again, in reality all Spetsnatz foreign operatives – appeared in the guise of military advisers and to provide ‘security staff’ for the huge Russian Khmeimim Air Base and the S-400 Triumf missile system in place in and around Latakia. This Russian presence was later duly expanded and formalised under an agreement signed with Syria in January 2017, which allowed Russia to continue its operations in Latakia and also to utilise the naval facility at Tartus for the next 49 years. This is precisely the format of agreement that has been agreed by Iran’s Islamic Revolutionary Guards Corp (IRGC) and Supreme Leader Ali Khamenei in the last few days, despite muted protest from the broadly pro-JCPOA (Joint Comprehensive Plan of Action) nuclear deal allies of President Hassan Rouhani.

Given how poorly Iran has fared in its recent dealings with Russia – most notably over its Caspian Sea oil and gas rights– Iran’s decision to go ahead with this latest deal may seem surprising to many but is the product of two key reasons.

First, Iran has no other choice of a potential geopolitical ally in its current fight against sanction-induced economic austerity and political marginalisation. There are only five Permanent Members on the United Nations Security Council: the U.S. (the prime mover against Iran), the U.K. and France (both toeing the U.S. line), China (whose support ebbs and flows according to its own agenda), and Russia. “If you have no means of getting food from the supermarket ten miles away then you have no choice but to shop at the store around the corner, no matter how crappy it is,” one senior Iran source told OilPrice.com last week.

The second reason is that President Rouhani and his broadly moderate pro-West, pro-JCPOA supporters have lost the confidence of many who voted for him due to his inability to deliver the economic prosperity that he promised would result from the nuclear deal agreed in 2015 and implemented on 16 January 2016. “This includes [Supreme Leader, Ali] Khamenei, who supported Rouhani for the first few years but now has no choice but to go along with the IRGC’s recommendations, and this Russia deal is at the forefront of these,” said a senior Iran source.

Why is the IRGC backing this deal with Russia, given that its senior personnel are extremely capable people and hardened military officers, well aware of the trouble that the deal could create on a global scale?

“Firstly, they [the IRGC] honestly believe that a corollary financial deal agreed with Russia last year is the only economic lifeline that Iran has that will stop it from falling into a popular revolutionary scenario, and the second reason is that some of the most senior figures in the IRGC also stand to gain monetarily by co-operating with Russia,” an Iran source told OilPrice.com last week.

The cornerstone deal in question was part of a wide-ranging 22-point memorandum of understanding signed by Iran’s deputy petroleum minister, Amir-Hossein Zamaninia, and Russia’s deputy energy minister, Kirill Molodtsov, at the time covering closer co-operation between the two countries across the board.

For the oil and gas sector, specifically, it involved Russia giving US$50 billion per year every year for at least five years so it could complete its top priority oil and gas projects to Western standards, which was estimated to cost around US$250 billion. Another US$250 billion would then be available for the following five years for Iran to build-out the remainder of its economy. In exchange for this, Iran would give Russian companies preference in all future oil and gas field exploration and development deals, to add to the seven already agreed at that time. These included: Zarubezhneft for Aban and Paydar-e Gharb, Lukoil for Ab Teymour and Mansouri, GazpromNeft for Changouleh and Cheshmeh-Khosh, and Tatneft for Dehloran. In addition – and crucial for what is now in view militarily – Iran also agreed to buy Russia’s S-400 missile defence system, to allow Russia to expand its number of listening posts in Iran, and to double the number of senior ranking IRGC officers that are seconded in Moscow for ongoing training, to between 120 and 130.

The deal also ensured that there was a clause not allowing Iran to impose any penalties on any Russian development firm for slow progress on any field for 10 years, including not being able to re-offer these fields in new bidding rounds even if no progress at all was being made. Over the 10-year period the Russians would have the right to dictate exactly how much oil was produced from each field (to the barrel), when it was sold (to the day), to whom it was sold (by company), and for how much it was sold (to the cent). “Added to this is the fact that within the contracts there was another killer clause: Russia had the right to be able to buy all of the oil – or gas – being produced from fields that their companies were supposedly developing at 55 to 72 per cent of its open market value, for the next 10 years,” said one of the Iran sources. In just the last week as well, Russia – despite it swindling Iran out of its arguably rightful share of Caspian Sea resources – has offered to extract oil and gas from Iran’s sector in the Caspian and sell supplies on in the international markets.

The other reason that has prompted the IRGC into allowing Russia to use Iran as a forward operating military base is that at least two of the most senior commanders have been given monetary inducements to champion Russia’s cause. This was also the reason why Iran ended up buying the inferior capability 28-year old S-300 missile system from Russia rather than the cutting edge new S-400 system.

“Russia told Iran that it didn’t actually need the S-400 system and that the S-300 system would be adequate for its needs, despite the S-300 system still costing in total US$7 billion – US$4 billion up front and US$3 billion when it was actually delivered – which was three times the cost that Russia charged Egypt for the better S-400 system,” said one of the Iran sources.

“At the same time, two of the key IRGC commanders who had allowed this deal to go ahead pocketed US$105 million each just from that one deal, and they and others get another cut of the US$50 billion per year deal if that fully re-emerges and of the newly-agreed Caspian deal,” he added.

As it stands, then, Russia not only has unfettered access to all of Iran’s onshore, offshore and Caspian Sea oil and gas reserves to sell on as it wishes, however it wishes, but also is set to secure two of the most strategically well-placed ports and surrounding areas in the world’s most sensitive oil and gas hotspot, giving it effective control over the Strait of Hormuz. The Strait, of course, remains the world’s most important oil transit chokepoint – and the key route from the Arabian Gulf to the Far East via the Indian Ocean - with roughly 35% of all seaborne oil and about a third of global liquefied natural gas supplies passing through it.

“Bandar-e-Bushehr and Chabahar will give Russia a potential stranglehold over the entire Persian Gulf area and into the Indian Ocean, which will allow it as well to conduct joint naval operations with China with more ease in the U.S. sphere of influence in the East, including around Japan, South Korea, and the Philippines,” a London-based intelligence analyst told OilPrice.com last week.

“The fact that Russia also intends to use these two ports not just for warships but for nuclear submarines as well when the waters in its more northern ports are frozen is significantly upping the Russian ante on the West in general and on the U.S. in particular,” he concluded.