Russia's President Vladimir Putin chairs a meeting
Russia's President Vladimir Putin chairs a meeting at the Novo-Ogaryovo state residence outside Moscow July 17, 2014. REUTERS

Russian President Vladimir Putin has roped in sanctions-hit Iran as a friend in need with a huge oil deal to side step the pressure of Western sanctions. The Telegraph reported that Russia signed a 5 year oil deal with Iran.

The deal will give Putin the relief of $20 billion to beat the stress of Western sanctions on the energy sector. Iran was also looking for a supporter as it is facing sanctions for the controversial nuclear programme. Iran set an ambitious target of 5.7m barrels per day of crude by 2018.

Russia also denied allegations that the deal violated international obligations. Alexander Novak, Russia's energy minister said the agreement with Iran does not violate any international obligations.

Under the accord, Russia would help Iran to organise oil sales and expand cooperation in the oil-gas industry, power plants, grids, machinery, consumer goods and agriculture products. This was stated in the statement issued by the Energy Ministry in Moscow.

EU Sanctions

The US and EU are jointly targeting Russia for its support to Ukraine rebels. The issue reached a flashpoint in July with the downing of the Malaysia Airlines Flight MH17 killing all 298 people on board.

The White House spokeswoman Caitlin Hayden had taken exception to the reports of the talks between Russia and Iran for an oil deal and warned that such a deal would be inconsistent with the terms set for Iran.

Deal implications

The deal will see Russia buying 500,000 barrels of Iranian oil a day, reported the Kommersant newspaper in Moscow. This will constitute about one fifth of Iran's monthly output and half of its exports. Richard Mallinson, analyst in the energy sector, expressed skepticism that the functioning of the deal can be strained considering the current production capacity of Iran and problems like geography, shipping logistics and ongoing US sanctions.

RT. Com reports that Russia-Iran trade is around $5 billion a year. Iran's oil reserves are one of the largest in the world after Venezuela, Saudi Arabia, and Canada. The country is also home to 18 per cent of the total natural gas reserves in the world.