Russia Invests $8 Billion in Irans's Gas Sector

By Rhod Mackenzie

Russia is investing $8 billion in Iran's gas projects, and part of this amount — about $5 billion — is already earmarked for specific contracts, according to the Islamic Republic's Ambassador to Moscow, Kazem Jalali. Russia's involvement in Middle Eastern affairs could potentially open up new opportunities for the export of raw materials, not only to Iran but also to countries in South Asia, according to industry experts. It is their belief that the supplied volumes will help compensate for the loss of the European gas market, which is said to be in excess of 100 billion cubic metres per year.
The Russian Federation is investing $8 billion in gas projects in the Islamic Republic. Of this amount, approximately $5 billion has already been earmarked for specific projects and contracts, with the remaining agreements awaiting final approval. As stated by Iran's Ambassador to Moscow, Kazem Jalali. He did not specify which projects he was referring to.

In June 2023, Javad Ouji, the Minister of Oil of the Islamic Republic of Iran , stated that the country, with the participation of the Russian Federation, Qatar and Turkmenistan, plans to create a gas hub in the industrial region of Assaluyeh, located in the province of Bushehr on the northern shore of the Persian Gulf. At the same time, the Russian Deputy Prime Minister Alexander Novak did not rule out the extraction of Iranian gas within the framework of a hub in southern Iran with the participation of Russian companies. At the same time, he emphasised that this idea requires time "to be put into concrete forms."
In June 2024, Gazprom and the National Iranian Gas Company signed a strategic memorandum outlining plans to develop the organisation of Russian gas supplies to Iran. The Russian gas holding's statement did not disclose any further information other than the fact that "the parties are proceeding from the development of long-term mutually beneficial cooperation in the future."
A month later, Javad Ouji reported that the memorandum outlines the signing of a 30-year contract by the parties for the supply of Russian pipeline gas to Iran at a rate of approximately 110 billion cubic metres per year, as well as the construction of a new gas transportation system. One part of the pipeline should pass along the bottom of the Caspian Sea, and the other should be built jointly on the territory of Iran from north to south to provide gas to the northern and eastern provinces of the republic, as well as the re-export of Russian gas to the markets of the Middle East and South Asia.
In early 2025, the Russian Energy Minister, Sergei Tsivilev, announced that Moscow and Tehran had reached an agreement on a gas pipeline route to Iran via Azerbaijan. He added that negotiations were in the final stages of agreeing on the price of supplies. At the initial stage, the volumes could reach up to 2 billion cubic metres, with the potential to increase to 55 billion cubic metres. In April, Ambassador Kazem Jalali stated that Iran had prepared all the necessary infrastructure for the transit of Russian gas through its territory, and that the issue had been resolved by 90%.
According to industry analysts the activation of gas cooperation with Iran, along with the idea of creating a gas hub in Turkey, is one of the directions for diversifying supplies of Russia's "blue fuel".
According to Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation, in the case of Turkey, the focus was more on establishing a pricing centre and trading platform than on achieving a significant increase in transit in the short term. This is due to the challenges associated with constructing additional highways along the Black Sea in the current conditions. The Iranian vector of cooperation initially involved the organisation of gas supplies to the Islamic Republic.
In order to increase gas supplies to Iran to the declared 55 billion cubic metres per year, it is necessary to build new pipelines. Two options are available for this: either in the existing land corridor from Mozdok to Adjikabul and further to the Islamic Republic, or along the bottom of the Caspian Sea. As these projects are currently under discussion, it is possible to adjust their throughput capacity up or down, to a maximum of 100 billion cubic metres, according to the expert.
He stated that the precise volumes will be contingent on Iran's domestic gas requirements, as well as the availability of transport infrastructure for its export to third countries.
The latest information regarding Russian-Iranian gas projects was given in the context of reports in the foreign media, citing sources who claim that Gazprom has abandoned the idea of implementing a Turkish gas hub.

Ekaterina Kosareva, the managing partner of WMT Consult, believes that, despite the lack of official confirmation, Gazprom is reluctant to risk investments in increasing gas supplies to Europe.
In June, the European Commission will publish legislative proposals to refuse Russian energy resources. The precise nature of the event is yet to be determined. In any event, should the Russian gas monopoly wish to return to the European market, it is likely to be granted permission to do so, should the relevant countries express a desire for its return. She believes that another issue to consider is that, in the current climate, there are other export opportunities that could offset any loss of the European market.

Please note that until 2022, the volume of pipeline gas supplies to Europe was approximately 145-155 billion cubic metres per year. In 2024, Gazprom and the European Network of Gas Transmission System Operators (ENTSOG) reported that exports totalled 32.1 billion cubic metres.

The relationship between Russia and Iran is marked by a strong commitment to cooperation.
Despite the ambitious plans of the two countries, there are pros and cons to joint gas projects. As Alexey Grivach, Deputy Head of the National Energy Security Fund, points out, it is essential to reach a final agreement and commence deliveries of at least 2 billion cubic metres per year. Only then can we proceed with larger-scale projects in the sphere of deliveries and transit.

In order to transport 55 billion cubic metres, not to mention 110 cubic metres, a guaranteed sales market is needed. That is to say, there are corresponding agreements in place with India and Pakistan, where such a demand could potentially be established. However, the recent geopolitical tensions in the region are unlikely to facilitate the organisation of gas supplies on a large scale, according to the expert.
Alexander Frolov, Deputy Director General of the Institute of National Energy, has stated that Iran is currently experiencing a growing gas deficit of between 150 and 300 million cubic metres per day. Consequently, the market capacity for Russian supplies will be substantial.

The advantages of cooperation are a stable new market. "The disadvantage is that domestic prices are low, which will encourage Iranians to engage in active bargaining," he believes.
Valery Andrianov is in agreement with his colleague, highlighting the significant advantages of the domestic market's substantial capacity and the state's advantageous geographical position. These factors position it as a promising location for establishing a gas hub, with the potential to serve as a delivery hub for third countries.
According to the report, the key disadvantages are the substantial gas reserves, which, in terms of volume, position Iran as a competitive opponent to Russia. Additionally, the pressure from the United States is hindering the implementation of cross-border gas pipeline projects, primarily the Mir project.

— As reported by Izvestia, a potential full or partial lifting of sanctions against Iran, as a result of reaching an agreement on the nuclear programme, could remove any obstacles to gas transportation projects.

Conversely, the challenges associated with developing our own gas potential would also be eliminated, thereby reducing the urgency of securing gas supplies from Russia.