Iranian and Russian energy, both buckling under foreign sanctions, are facing an uncertain future.
2025 marks a pivotal year in global energy geopolitics, spotlighting the world’s two leading hydrocarbon powers outside the Middle East: the Russian Federation and Iran. Russia holds the world’s largest proven natural gas reserves and significant oil reserves. Specifically, BP estimates Russia’s gas reserves at thirty-three trillion m³ (placing it second behind Iran), while other sources like the OPEC estimate closer to forty-nine trillion m³, which would make Russia the largest holder. In oil, Russia ranks notably, holding around eighty billion barrels, placing it roughly eighth globally.
Iran, meanwhile, ranks third in global oil reserves, with approximately 209 billion barrels, and second in gas, with about fifteen percent of the world’s total. Combined, Iran’s hydrocarbon wealth is immense, reinforcing its status as a key energy power.
In addition to this common natural resource strength, they have other similarities too. Both countries are currently navigating a fraught relationship with the West, especially the United States, and have become the target of successive sanctions. These include both primary sanctions (limiting direct US economic interaction) and secondary sanctions that pressure international trade partners.
Following Russia’s invasion of Ukraine in 2022, Western governments dramatically slashed European imports of Russian oil and gas. Estimates suggest that Russia’s pipeline gas exports to Europe have fallen by roughly eighty percent since February 2022. Germany alone reduced its imports from Russia by about ninety-five percent between 2021 and 2024; across the EU, imports dropped by around seventy-eight percent.
Iran experienced a similar, though earlier, rupture with Western markets. Following the reimposition of US sanctions in 2018 after Washington’s withdrawal from the nuclear deal, Iran’s oil exports to Europe, which had reached nearly 800,000 barrels per day in 2017, collapsed to almost zero by 2019. European refiners, under threat of secondary US sanctions, quickly halted purchases. This left Tehran almost entirely dependent on Asian buyers such as China and, intermittently, India.
In response, both Iran and Russia have reoriented themselves toward Eastern markets, namely those in South and Southeast Asia. They’ve also employed various tactics for evading sanctions. Iran, for example, has used so-called “ghost” tankers and shell companies registered in jurisdictions like the Isle of Man. There are also signs that Iran has shared such tactics with Russia.
This pivot to Asian markets has put Russia and Iran in direct competition. To attract buyers for sanctioned oil and gas, both countries have offered steep discounts and favorable contract terms, creating friction in their otherwise similarly pressured energy strategies.
Yet the landscape began to shift earlier this year with President Trump’s return to office, as energy markets and policymakers in both Moscow and Tehran anticipated potential shifts in US policy. Trump initially signaled a more deescalatory approach toward both Russia and Iran, and there were tentative signs from both governments that they were open to negotiations.
Yet, the White House faced different constraints in dealing with each country. With regard to Russia, Trump confronted strong resistance from European allies and from US domestic political factions opposed to concessions with regard to Ukraine. With Iran, the administration had to contend with opposition from Israel, America’s Persian Gulf partners, and influential voices in Washington advocating for a tougher stance.
Despite all this, for a moment, Iranian-American rapprochement seemed plausible. But the prospects dimmed dramatically after Israel’s June 13 strike and the subsequent US military involvement on June 22. These events made the likelihood of a broad US–Iran de-escalation increasingly remote.
By contrast, Trump’s meeting with President Vladimir Putin in Alaska highlighted the relative viability of US-Russia talks. American officials have spoken more openly about exploring a negotiated de-escalation with Moscow, potentially involving concessions of Ukrainian territory. In Alaska, Putin himself expressed his desire for renewed US-Russia economic ties and Russia’s return to global markets.
This divergence carries major implications for the energy sector. For Iran and Russia, both neighbors on the Caspian Sea, sanctions have forced both to rely on Asian buyers, undercutting one another with steep discounts. The current status quo is frustrating for both: every additional sanction-era discount further erodes revenues. From their perspective, the best outcome would be for at least one of them to break out of the sanctions deadlock with Washington.
At present, Russia appears to have the stronger chance. If Moscow regains access to Western markets, Iran might hope that Russia would no longer need to offer steep discounts in Asia, potentially giving Iran more room to maneuver. However, this is far from guaranteed. Russian strategists may conclude that any thaw with the West is temporary and will continue to compete aggressively in Asian markets to preserve long-term influence.
For Iran, this could spell trouble. If Russia reenters Western markets while still defending its share in Asia, Tehran will remain under pressure, squeezed by limited buyers and forced to maintain discounts. Compounding this risk, Asian importers, especially India and China, may have to recalculate their positions.
Both states are major consumers of Russian and Iranian oil, but they also have significant trade relationships with the United States. If they wish to avoid escalating tensions with Trump, whose administration has already clashed with both over tariffs and trade disputes, they may reduce their reliance on Iranian crude, even if it is cheaper.
The one exception could arise if Trump reignites a trade war with China. In that case, Beijing may view oil imports from Iran not only as an economic calculation but also as a political instrument, a way to channel revenue to Tehran as leverage against Washington.
In the end, it is too early to predict how these dynamics will unfold. Much depends on the uncertain trajectories of both the war in Ukraine and Iran’s internal and external policies. It is not impossible that Tehran, confronted with mounting pressures, could seek a strategic adjustment of its own.
What is clear, however, is that the fates of Russia and Iran in global energy markets are increasingly intertwined. Sanctions on one have consequences for the other, and the lifting of sanctions on either would inevitably reshape the other’s position as well. Yet the direction of this impact will not be determined solely in Moscow, Tehran, or Washington. The choices of major buyers, particularly India and China, will be equally decisive. Their trade ties with the United States, and the way they weigh political risks against economic gains, will ultimately shape whether Iran or Russia gains the upper hand in Asia’s energy markets.
About the Author: Arman Mahmoudian
Dr. Arman Mahmoudian is a research fellow at the Global and National Security Institute and a professional lecturer at the University of South Florida. His research primarily focuses on security dynamics in the Middle East and Russia’s foreign policy. Arman holds a Ph.D. in Government from the University of South Florida, an M.A. in International Affairs from Russia’s Peoples’ Friendship University (Moscow), and a B.A. in Law from Iran’s Islamic Azad University (Tehran). His insights have been featured by Foreign Policy, The National Interest, BBC World, Le Monde, and the Stimson Center, etc. Follow him on X @MahmoudianArman.
Image: Shutterstock/FreshStock
