Russia Begins Rail Fuel Supply to Iran

In 2023, Russia has started exporting fuel to Iran via rail for the first time after its regular customers backed out of contracts. This was reported by Reuters, citing three sources from the industry and exports.

The agency indicates that Russia and Iran, both under Western sanctions, are strengthening bilateral relations to mutually support each other's economies and partially mitigate sanctions that Moscow and Tehran consider unjustified.

Due to sanctions applied against Russian oil products, global fuel markets have undergone significant changes, including logistics challenges; tankers are required to take longer routes, and suppliers must seek "exotic directions and transportation routes" for their goods, according to Reuters.

Russia's Deputy Prime Minister Alexander Novak announced the start of swap supplies of oil products to Iran in autumn 2022, but these supplies actually began only in 2023, sources from the agency noted.

The data indicates that in February and March, Russia delivered approximately 30,000 tons of gasoline and diesel to Iran by transporting it through Kazakhstan and Turkmenistan via rail.

A source from Reuters claims that some batches of Russian fuel have been trucked from Iran to neighboring countries, including Iraq.

Iran possesses its own oil refining facilities; however, recently, domestic fuel consumption has surpassed its production capacity, particularly in the northern provinces, a trader in the Central Asian oil market informed the agency.

Two other traders say that Russia is supplying small quantities of fuel to Iran by tankers across the Caspian Sea.

Sources for Reuters mention that Russian oil companies are interested in exporting diesel fuel and gasoline to Iran by rail due to challenges in maritime transport with high freight rates and price caps imposed by G7 countries. Nonetheless, Iran’s rail exports of Russian fuel face certain "bottlenecks in logistics," according to the sources.

One source concluded, "We expect that fuel supplies to Iran will increase this year, but we are already seeing a number of logistical issues related to rail congestion. This could hamper the export boom."