U.S. President Donald Trump’s withdrawal from the Iran deal and his decision to reinstate sanctions on Tehran has been met with strong international criticism, including from Russia. But for Moscow, the U.S. president's decision also presents it with a rare economic opportunity.

Moscow’s support for Joint Comprehensive Plan of Action (JCPA) not only opens the door for communication and cooperation with the West, it gives the Kremlin international credibility in its elusive quest for international stature. The U.S. exit from the Iran deal affords Putin a lot more than being “on the right side of history.” There is now a striking opportunity for Russia to bolster its strategic interests within the Iranian energy sphere.

Iran is second behind Russia in global natural gas reserves and it holds the fourth largest reserves of global oil. In addition to its natural resource wealth, Iran is situated within crucial corridors for global energy trade. Given the superpower ambitions of Russia’s energy sector, it is not surprising that Iran’s energy wealth and geographical position are of paramount interest to the Kremlin. Developing a strategic energy relationship with Tehran, shaped by majority stakes in projects across Iran’s untapped natural gas fields and the planning of pipeline corridors from Iran to Syria and onward to Europe are central drivers for Russia. The U.S. Treasury has already hinted at when it will reinstate sanctions on Iran’s energy industry. The first round is expected to hit Aug. 6. By Nov. 4, energy sector sanctions including the use of Iranian ports, engagement in commercial shipping, buying petrochemical and petroleum products, will be reinstated. (Those sanctions will come into effect after a 180-day grace period.) U.S. National Security Advisor John Bolton has also now confirmed that European energy firms engaged with Iran will be subjected to U.S. sanctions after this 180-day wind-down period. The following day, Nov. 5, U.S. entities will be blocked from engaging in financial transactions with Tehran. In 2016, after easing sanctions from the implementation of the JCPA, Iran flooded the global oil market. By December 2017, Iranian oil exports had jumped to 4 billion barrels per day (bpd). The Asia Pacific served as Tehran’s key customer, importing 1.9 billion bpd. The Chinese and Indian markets imported the vast majority, with Taiwan, Malaysia, South Korea and Japan proving the import balance. By early 2018, Europe was importing up to 550,000 bpd, further accompanied by an array of bilateral energy deals, most of which were across the renewables sector. Efforts to rectify the global oil oversupply are ongoing, with OPEC recently agreeing to continue to stabilize oil production out to December 2018. The reinstatement of sanctions will sideline Iranian oil, and given basic supply-demand dynamics, this will drive oil prices upwards. Compounded by various other geopolitical drivers, including Venezuela, it is reasonable to expect an oil price of $80 by the end of 2018. At $80 per barrel, Arctic oil in the Barents Sea region, the bedrock of Russia’s future economic base, is commercially viable. North of $100 will likely bring much of the shelved offshore Arctic development back online. Prior to the 2016 agreement, sanctions upon Tehran’s energy industry are estimated to have cost Iran $160 billion dollars in lost revenue. Keen to mitigate the impact of the return of US sanctions, Tehran will be looking for durable export markets. China and India are unlikely to adhere to any U.S. curtailment of Iranian oil imports. However, the significant South Korean and Japanese markets are expected to toe the U.S. sanction line and refrain from importing Iranian oil. In that case, Russia will position itself to fill the supply gap.