Visit of the President of Iran to Venezuela.. Do you support energy relations? (article)

Iran and Venezuela have important bilateral relations, especially in the energy sector, and the two countries, under pressure from Western countries, have sought to deepen their ties to overcome common problems and achieve their individual geopolitical goals.

President Ebrahim Raisi’s recent visit to Venezuela is an important event in assessing the dynamics and complexities of their energy cooperation between the two oil-rich countries, which share a turbulent history with the United States and have much in common.

The two countries began to converge in the early 2000s, mainly driven by their anti-American sentiments and the desire to provide a balance with the Western country in the energy industry.

As a result, many contracts were signed covering various aspects of the energy sector, including joint ventures, technology transfer, and investment initiatives.

It is alleged that cooperation in the oil industry between Iran and Venezuela witnessed a remarkable boom, which is attributed to the active diplomacy of the Ministry of Oil in Tehran, and the serious initiatives of the 13th government. The trade volume in this field has reportedly reached $4 billion over the past 20 months.

Iranian energy diplomacy

Iranian President Ebrahim Raisi confirmed that his country’s energy diplomacy has intensified since assuming office, referring to Tehran’s active diplomacy in the energy field in Latin America, especially the efforts of the Ministry of Oil to establish relations with Latin American countries.

These programs can be considered innovations in the field of energy diplomacy, which made it easier for Iranian oil companies to gain access to the large energy market in Latin America.

The government’s efforts over the past 20 months have yielded positive results, giving private and semi-government companies in Tehran a great opportunity to enter a lucrative market.

During this period, the volume of trade in the oil sector between Iran and Venezuela rose to about 3.5 to 4 billion dollars, which is a significant development after a long-term hiatus.

Tehran and Caracas want to increase the volume of their current $3 billion economic and trade cooperation to $20 billion, according to Iranian President Ebrahim Raisi, who was in Venezuela on an official visit.

Energy relations between Iran and Venezuela

To enhance bilateral relations in the energy industry, Iran and Venezuela are involved in a number of trade initiatives. These operations include exporting oil and gas condensate, providing technical and engineering services, exporting oil commodities and equipment, renovating and maintaining refineries, and increasing production capacity.

For its part, Iran wants to actively participate in the development of oil fields, the expansion of oil stations, the use of existing petrochemical capacities, the rehabilitation of petrochemical facilities, and the sharing of profits related to production. The Iranian Ministry of Oil has developed these proposals to strengthen close relations with Venezuela.

It is worth noting that the 13th government has successfully completed the signing of the first contract for the renovation of the Venezuelan ammonia manufacturing facility. This deal aims to rebuild and develop offshore petrochemical complexes.

Petrochemical relations between Iran and Latin America have improved, especially since President Ebrahim Raisi’s recent visit to the continent.

Only 2 million tons of the installed petrochemical plant capacity in Venezuela, which currently stands at 12 million tons, is used.

For Iranian investors, this capacity represents rich potential, and by providing technical and engineering services and exporting required equipment to the petrochemical industry in Latin America, the Iranian private sector will benefit greatly.

Rebuilding and increasing the capacity of these petrochemical facilities has made it easier for the private sector to enter the petrochemical market in Latin America.

He ensured that Iranian private companies could gain a competitive advantage in regulating the petrochemical market in Latin America and then regional markets, including the Americas, by producing petrochemical products from Iranian oil and gas condensate in the refurbished and developed refineries in Venezuela. The pressure imposed by economic sanctions on Iran.

Iranian President’s visit to Venezuela

On the day of Iranian President Ebrahim Raisi’s visit to Venezuela, located in Latin America, Monday, June 12, it was expected that production operations would begin at the Venezuelan El Palito refinery, which had been suspended for more than a year.

According to a report published by Reuters, the Islamic Republic of Iran will cooperate and participate in the reactivation of the El Palito refinery in the Venezuelan state of Carabobo.

El Palito, Venezuela’s smallest refinery, is undergoing major repairs and expansion projects after signing a 100 million euro ($109.64 million) agreement with the state-owned National Iranian Oil Refining and Distribution Company.

The visit of Iranian President Ibrahim Raisi to Venezuela is an important occasion to study the dynamics and effects of cooperation in the field of energy, despite the great challenges facing the future of the energy relationship between the two countries.

Energy relations between Iran and Venezuela face difficulties due to economic constraints, technological constraints, political dynamics, and geopolitical complexities.

Despite this, there are many opportunities for cooperation and mutual gains, and Iran and Venezuela can improve their relationship in the field of energy, enhance their security, and help in their economic development, by seizing these opportunities and overcoming challenges.

Economic sanctions and international pressure

The implementation of economic sanctions by the United States and other countries is one of the most important obstacles to the development of energy relations between Iran and Venezuela.

Iran and Venezuela’s access to international markets has been severely hampered by these sanctions, making it more difficult for them to use energy resources effectively and attract foreign investment.

Both countries face enormous obstacles in lifting these sanctions and identifying new channels for energy cooperation.

Technology and infrastructure limitations pose a problem for both Iran and Venezuela, which have influence in the energy sector. Their ability to maximize production efficiency, develop new fields, and improve their refining and processing capabilities is hindered by outdated infrastructure and a lack of advanced technologies.

Political and Geopolitical Considerations: Both Iran and Venezuela face difficulties in their energy relations due to political instability and geopolitical dynamics.

The stability and continuity of their cooperative energy policy may be affected by internal political conflicts, regime shifts, and regional power dynamics. Long-term energy cooperation requires managing these political difficulties and creating a favorable geopolitical environment.

Diversify cooperation in the field of energy: Iran and Venezuela have focused mostly on cooperation in the field of oil and gas, but there is potential to expand this area of ​​cooperation.

Research into renewable energy options, such as solar and wind energy, can create new opportunities for cooperation and reduce dependence on traditional hydrocarbon supplies.

In addition, joint ventures in infrastructure development, petrochemicals and refining can enhance their general cooperation in the field of energy.

Iran’s energy diplomacy is fraught with suspicion. Although many energy experts believe that Tehran and Caracas may cooperate on energy issues, in order to realize this potential, sanctions on both countries must be lifted.

On the other hand, Iran’s participation in the energy infrastructure in Venezuela is one of the achievements of the Iranian engineering services sector in the oil industry.

On the other hand, cooperation between the two countries in the energy sector is unable to meet all the technological and equipment requirements of the energy industries, and Iran’s influence in the oil market has gradually declined as a result of the continued sanctions.

production and export capabilities

The oil production and export capabilities of Iran and Venezuela decreased due to the lack of Western financial resources and technology, which caused a number of problems in the refinery industry in Venezuela.

The idea of ​​having offshore oil refineries for Iran can only be seen as a guarantee of energy security in the current situation, despite claims that Iran might overcome sanctions faster by establishing an offshore refinery.

If the sanctions continue, Iran can safely export a percentage of its oil production and enter international markets, provided it has a distribution network in a European country.

Iran can currently only start operating its offshore refineries in countries such as Venezuela, which are under sanctions.

This situation is similar to the Iranian refinery in South Africa under the Shah, which was eventually forced to sell its properties due to apartheid sanctions.

* Dr. Omod Shoukry, senior advisor on foreign policy and energy geopolitics, is the author of “US Energy Diplomacy in the Caspian Basin: Changing Trends Since 2001.”

*This article represents the opinion of the author, and does not necessarily reflect the opinion of the energy platform.