Jan 10, 2020 - Energy & Environment

How an escalation in the Iran conflict could help Russian oil

Russian President Vladimir Putin and Iranian President Hassan Rouhani

Photo: Kirill Kudryavstev/AFP via Getty Images

Russia would emerge as a winner if the U.S.-Iran conflict — which has cooled off — greatly escalates, argues Anna Mikulska, a senior fellow with UPenn's Kleinman Center for Energy Policy.

The big picture: That could result via the unlikely — but not impossible — event that Iran shut down oil tanker traffic through the Strait of Hormuz, a critical shipping lane for Middle East oil and nearly 20 million barrels per day pass through the narrow channel.

The intrigue: If there's a shutdown, "Russia could become a crucial market stabilizer deriving significant financial, strategic, and diplomatic benefits," she writes.

  • "Not only does Russia produce the 'right' quality of crude (a substitute for the crude potentially locked in by the Strait of Hormuz), but according to a Russian government statement, it holds spare capacity of 500,000 barrels per day."
  • Elsewhere Mikulska notes that an Iranian blockade "could potentially strengthen Russia’s position vis-a-vis energy-hungry Asia since about three-fourths of the crude that passes through the Strait lands there."

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