U.S. sanctions on Iran’s oil industry are unproductive and there will be consequences to such a move, Russian Energy Minister Alexander Novak told CNBC.
“Our position remains that this is unproductive, this is wrong,” Novak said when asked about the possible impact U.S. sanctions on Iran’s oil industry could have.
“It is better to continue working in the market, Iran being just another exporter that provides stable supplies to the market,” Novak said, speaking to CNBC’s Geoff Cutmore at the Eastern Economic Forum (EEF) last week in Vladivostok, Russia.
“It is one of the richest in resources and has a solid standing in terms of its energy capability both in the OPEC, and in the energy markets as a whole. So, I think there will be consequences, I am sure, but we could only comment once they are in place,” he said.
Sanctions are due to be re-imposed on Iran’s oil industry on November 4. The move comes after President Donald Trump decided to withdraw the U.S. from an international nuclear deal in May. The U.S. has said that any countries or companies that conduct transactions with Iran are liable to face secondary sanctions.
Needless to say, the move is expected to severely impact Iran’s oil industry and exports, with a production decline of over a million barrels a day — and likely upward pressures on oil prices — a distinct possibility, according to analysts.
Novak told CNBC that it was difficult to comment on the consequences of Iranian sanctions as he was still waiting to “learn the legal particulars” and effects of the sanctions.
“We do not know how companies will react, how countries that engage with Iran will react. We will have to see the actual adopted documents/sanctions,” he said.
The U.S. is keen to see oil-producing countries like Saudi Arabia and Russia increase oil production to ensure the shortfall created by its Iran sanctions does not push up global oil market prices too high. U.S. Secretary of Energy Rick Perry met Novak in Moscow on Thursday but it’s not been disclosed whether Iranian sanctions, and how to prevent those measures negatively impacting the market, was discussed.
Instead, the U.S. Energy Department released a statement last week detailing the meeting in which it said the ministers had “discussed ways in which America and Russia, two of the world’s top producers of natural gas and leading producers of oil can work together to ensure world energy market stability, transparency, and sustainability.”
The U.S. and Russia are entering an era of competition to provide energy to Europe, in particular. The U.S. opposes a gas pipeline project, called Nord Stream 2, to supply Russian gas to Germany and hinted that it was an alternative source of energy for the region.
“Secretary Perry made clear that while the United States welcomes competition with Russia in energy markets across Europe, Asia and elsewhere, Moscow can no longer use energy as an economic weapon,” the U.S. Energy Department said in its statement. “The United States is now in a position to offer these nations an alternative source of supply.”