Russia starts fuel supplies to Iran by rail, sources say

Russia started fuel exports to Iran by rail this year for the first time after traditional buyers refused to do business with Moscow, according to three industry sources and exports data.

Russia and Iran, who have both been hit with sanctions by the west, are developing closer ties in order to support their economies and to undermine Western sanctions which both Moscow and Tehran say are harsh.

Western sanctions on Russian oil products over what Moscow calls its “special military operation” in Ukraine have reshaped global fuel markets with tankers taking longer routes and suppliers choosing exotic destinations and ways of transportation.

Iran has been under Western sanctions for years with limited access to global markets.

The oil ministries of Russia and Iran did not reply to requests for comment.

Last autumn Russia’s Deputy Prime Minister Alexander Novak announced the start of swap supplies of oil products with Iran, but actual shipments only started this year, Reuters sources said.

In February and March Russia supplied up to 30,000 tonnes of gasoline and diesel to Iran, two sources familiar with the export data told Reuters.

A third source confirmed the trade but was not able to confirm the volumes.

Russia had supplied small volumes of fuel to Iran by tanker via the Caspian Sea, as was the case in 2018, two traders familiar with the matter said.

Russian oil companies are currently interested in exporting diesel and gasoline to Iran by rail as exports by sea face high freight rates and a price cap imposed by the G7 countries.

Sources said that rail exports have encountered delays and snags enroute.

“We expect fuel supplies to Iran to rise this year, but we already see several issues with logistics due to rail congestion. That may keep exports from booming,” one of the sources familiar with supplies to Iran said.