CNN: The Iran conflict is a boon for Russia – and it’s not just about oil

The Iran war has handed Russia’s beleaguered economy a much-needed lifeline, CNN stresses.

“The biggest winner of the (Iran) conflict is Russia,” said Ben Cahill, a senior associate at the Center for Strategic and International Studies (CSIS), a think tank in Washington, DC. The Kremlin can now sell previously discounted Russian crude “at full market prices,” marking “a pretty big turnaround” for the economy, he added.

Quite how much time depends on how long the Iran war lasts, but higher oil prices have already brought some relief. Russia’s finance ministry signaled that spending cuts previously expected for this year will now be pushed out to 2027, Prokopenko added.

By mid-March, the price of Russian Urals crude stood at $90 a barrel, twice as high as in February. Even a smaller increase, of $30 a barrel, seen earlier in March, meant $8.5 billion of additional revenue per month.

A dramatic turnaround

Before the Iran war, the pool of buyers for Russian oil was shrinking and customers were demanding steep discounts, thanks to stricter sanctions from the European Union and Washington. The White House also penalized India, one of the biggest buyers of Russian crude in recent years.

The Iran war has since brought about drastic change, thanks in part to a stark reversal of the Trump administration’s previous position on Russian oil. Earlier this month, the United States temporarily eased sanctions on seaborne Russian crude to “enable oil to keep flowing into the global market.”

Russian shipments to India are on course to nearly double in March, compared with February, as Indian refiners ramp up purchases to offset a fall in oil supply from the Middle East, according to Kpler, a real-time data and analytics provider.

In recent days, Indian buyers have paid more for Urals crude than for Brent crude oil, the global benchmark, said Sumit Ritolia, a senior analyst at Kpler, citing “pricing indications” from Argus, which provides data on the energy and commodity markets.

The sharp rise in the Urals price will help counteract any disruption to Moscow’s oil exports from attacks on Russia’s energy infrastructure, usually claimed by Ukraine.

Natural gas and fertilizers

The Middle East conflict could also deliver other financial and strategic gains to the Kremlin.

The Strait of Hormuz is a critical transit route not just for oil, but also liquefied natural gas, fertilizers, helim and aluminum – all of which Russia produces in vast quantities.

As the world’s second-largest fertilizer exporter, Russia is already getting “more and more” orders, with importers in Nigeria and Ghana pre-purchasing shipments for the third quarter of this year.

Russia is also the world’s second-largest producer of natural gas, behind only the United States. Already, there is some speculation that the European Union could delay the timeline for phasing out Russian natural gas. Some imports are due to be prohibited as early as next month, with November 2027 currently set as the deadline to stop all Russian imports.

India, China rethink Gulf imports

If India and China reduce their dependence on fossil fuels from the Middle East, they may increasingly turn to Russian imports instead. And that could strengthen the case for some large-scale infrastructure projects, which would deliver another boost to the Russian economy.

A major expansion of the Eastern Siberia-Pacific Ocean pipeline, currently capable of transporting 1.6 million barrels of oil per day from Russia to Asia, suddenly also “starts to make a lot of sense” for both Russia and China.

Commodity windfalls are rolling into Russia

Tehran’s stranglehold on the Strait of Hormuz has choked off Persian Gulf crude flows, boosting the price of Russia’s flagship Urals grade. But the waterway is also an important conduit for shipments of aluminum, liquefied natural gas and some fertilizers. As supplies have been squeezed, prices have surged — aluminum by 12% and urea by almost three-quarters since the start of the conflict, Bloomberg notes.

There are also signs that some Russian commodities are losing the pariah status that’s weighed on them since the Kremlin’s invasion of Ukraine four years ago. Washington has eased sanctions on Moscow’s barrels at sea, but western customers are also starting to show interest in the Russian metals they long shunned. And the nation may also benefit as competition intensifies between Asian and European LNG buyers.

“The windfall for the Russian economy has been real,” said Bota Iliyas, a geopolitical and risk analyst at London-based risk assessment firm Schillings.

While oil remains an important source of revenue for the Kremlin’s coffers, other commodities are also benefiting from the Middle East conflict.

Benchmark prices for aluminum are heading toward a four-year high after Iranian drones and missiles hit two major plants in Bahrain and the United Arab Emirates. That’s improved the outlook for Russian metal, which has been largely shunned by Western buyers since 2022.

United Co. Rusal International PJSC is receiving inquiries from the US and Europe about spare capacity, according to people familiar with the matter. In recent years, the Russian company that accounts for more than 5% of global output has been forced to redirect about half of its sales to China due to western restrictions.