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A hidden strategy

Russia to fund new Iranian nuclear plant in major energy deal

Russia and Iran have significantly expanded their energy partnership with a new agreement to finance additional nuclear facilities and boost gas cooperation. Strengthening economic ties amid Western sanctions, both countries are laying the groundwork for deeper strategic alliances.

Iranian nuclear plant. Illustration. background
Photo: SkazovD/Shutterstock

Russia has officially committed to financing a new nuclear power plant in Iran, marking a significant expansion of the two countries’ growing energy partnership. The agreement was announced at the conclusion of the 18th Joint Economic Cooperation Commission held Friday in Moscow, where Iranian Oil Minister Mohsen Paknejad confirmed the major development.

“Iran and Russia will continue their cooperation in the peaceful use of nuclear energy and the construction of new nuclear energy facilities, as well as the completion of phases two and three of the Bushehr power plant using Moscow’s credit line,” Paknejad stated during the closing ceremony.

Russia, which previously helped construct Iran’s first nuclear reactor at Bushehr in 2011, will now finance both the continued development of that facility and an entirely new plant. Iranian state media reported that initial gas deliveries from Russia could begin as early as this year. Russian Energy Minister Sergey Tsivilev noted that Russia could supply up to 1.8 billion cubic meters of gas to Iran in 2025, although final pricing details are still under negotiation. President Vladimir Putin had earlier indicated that gas deliveries would start at lower volumes, potentially ramping up to an annual target of 55 billion cubic meters.

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In addition to nuclear collaboration, Paknejad revealed that Iran is close to finalizing a $4 billion agreement with Russian companies to develop seven Iranian oilfields. He indicated that “one or two issues remain” before reaching a full agreement regarding gas import volumes. There are also future plans for gas swaps and transit agreements to other countries, expanding Iran’s role in regional energy networks.

Despite holding the world’s second-largest natural gas reserves after Russia, Iran continues to face significant challenges due to chronic underinvestment in its energy sector. This has forced Tehran to rely increasingly on gas imports from neighbouring countries such as Turkmenistan. Russian energy giant Gazprom had previously signed a memorandum of understanding with Iran’s National Iranian Gas Company to supply pipeline gas, although specifics regarding pipeline routes remain undisclosed.

Paknejad emphasized, “One of the areas of interest for both sides, in the first phase, is the import of gas from Russia, and in the second phase, the trade of gas through swap or transit to other countries.”

Amid escalating Western sanctions on both Moscow and Tehran, the two nations have substantially deepened their economic ties. Bilateral trade surged by 16.2% in 2024, reaching $4.8 billion. Both governments expressed optimism that trade could reach $6 billion once current agreements are fully executed. Strengthening this bond further, Russia recently ratified a 20-year strategic partnership agreement with Iran, initially signed by Presidents Vladimir Putin and Masoud Pezeshkian in January.

This sweeping energy collaboration highlights how geopolitical isolation is driving Russia and Iran into an increasingly strategic alliance, one that could reshape energy and political dynamics across the Middle East and Eurasia for years to come.

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