Russia Could Be the Biggest Winner of the Iran War

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1:40Sarah Holder:Bloomberg Audio Studios. Podcasts. Radio. News. As the war in Iran drags on and draws in more countries, it's had unlikely benefits for one of Iran's key allies, Russia. The U.S. has cleared the way for India to temporarily increase its purchases of Russian oil. With the Strait of Hormuz effectively closed, choking off global oil supplies, the Trump administration has taken the remarkable step of temporarily loosening sanctions on Russia. It started with a limited waiver for India to purchase this oil that was already in transit and for a limited time, for only one month. You know, we've seen the Trump administration widen that waiver, and the European allies have come out and condemned that.

2:31Sarah Holder:Natalia Drozdiak covers U.S. defense and intelligence for Bloomberg. She says that the U.S.'s decision to roll back some sanctions on Russia hasn't done much to move the price of oil, which is still hovering above$100 a barrel. But it has been a symbolic win for Russia as it continues to wage war in Ukraine and forges a closer relationship to Iran. I think the question is also if this drags on longer or if the U.S. decides to issue more waivers. There is a prospect of more benefits coming its way, whereas we don't really see the prospect of more pressure coming its way at the moment. Since President Donald Trump returned to office, he's taken meetings with Russian President Vladimir Putin and scaled back U.S.

3:20Sarah Holder:support for Ukraine. He's also alienated NATO, the military alliance that's been providing key support for Ukraine's war efforts. And after Trump started a war with Iran in February, the relationship with NATO has been under new strings. This weekend, Trump told the Financial Times in a phone call that he expected NATO to assist the U.S. in keeping the Strait of Hormuz open. Trump told the paper, quote,

3:58Sarah Holder:I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, what Russia stands to gain and lose from the war in Iran. How rising oil prices and conflict in the Middle East could impact Russia's war in Ukraine, its economy, and the U.S.'s global alliances.

4:19Sarah Holder:So, Natalia, as the U.S. and Israel's war with Iran widens and continues, I wanted to talk to you about where Russia fits in. Russia and Iran have been allies for a long time. Can you give us a quick overview of that relationship? Yeah. So, you know, Russia and Iran's relationship really deepened, I would say, over the last few years since the start of Russia's full-scale invasion of Ukraine in 2022. And so they reached out to Iran and that resulted in Iran transferring these Shahed drones as well as ballistic missiles later on. They also provided Russia with know-how to produce those drones and build them up themselves.

5:05There has been intelligence sharing already happening with the Russians sharing sensitive military information and know-how, but critically also lessons learned about how those Iranian drones work on the battlefield and how they've been countered. And last year, they even signed a partnership to kind of cement that relationship.

5:31Sarah Holder:Given that deepening relationship, what does Russia have to gain or lose in this war? Well, in some sense, you know, they don't want the U.S. and its allies to succeed. And success from that perspective would look like Iran becoming more moderate or weak. So in that respect, Putin would want to keep hardliners in Tehran to maintain that support, maintain that relationship. But, you know, they also have, I mean, they're benefiting from the war going on and dragging on, as we've been seeing with the price of oil. This is critical to Russia's economy. What has Putin said about the level of coordination between Moscow and Tehran?

6:18Sarah Holder:Has he confirmed that, you know, Russia has been providing this intelligence? According to Steve Witkoff, Trump's envoy, the Russians denied that. And, you know, some of the folks around Trump are ready to believe that denial. Although, you know, we did hear Trump say that it seems like the Russians were helping the Iranians at least a little bit. Do we know if Iran has been acting on that intelligence? Well, we can only assume. I don't think we have specific information tying Iranian strikes to Russian intelligence, for example, but we can only assume that it's at least been somewhat helpful.

7:00You know, in terms of other information, we know that that's also included like targeting and satellite imagery to help them pinpoint where U.S. forces are in the region. One of the key questions going forward will be, you know, how regular and timely that information is transferred to Iran, you know, whether it was just a one-off or if it's kind of a systematic transfer of information. That makes a big difference. Of course, Trump and other administration officials say it hasn't.

7:34Sarah Holder:Beyond intelligence sharing, what tactics do you see Iran taking from Russia's playbook? Well, one of the key tactics that we're seeing over the last few days, which, you know, they either received as direct advice from the Russians or as passive advice, just watching Russian tactics in Ukraine was to target allied oil infrastructure as a way to inflict pain on their enemy. How is the U.S. thinking about this dynamic and Russia's role here? In some senses, they've been more willing to look past the Russian support to Iran, you know, with comments like saying that, you know, whatever support they have been giving has been very limited and not very impactful.

8:25So there seems to be some sort of degree of, you know, willingness to let it slide. And then in addition to that, we're seeing the U.S. roll back some of the sanctions on Russian oil or at least issue these temporary waivers. So, you know, the priority with the Trump administration right now is clearly not to maintain or even increase pressure on Russia. It's fully focused on Iran. But those two are linked.

8:58Sarah Holder:We'll dig into what the easing of those sanctions mean for the global oil market, for Russia, and for Ukraine and its allies after the break.

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12:16Sarah Holder:Since Russia launched its full-scale invasion of Ukraine in 2022, the U.S. has imposed strict sanctions on buying Russian oil. But on March 5th, the U.S. issued a temporary authorization, letting India buy more Russian oil already out at sea on tankers. And last week, the U.S. widened that waiver to create a one-month window for countries to buy more Russian oil. that's already in transit. I asked Bloomberg's Natalia Drozdiak what we know about how the Trump administration came to that decision. So the Trump administration has come under a lot of pressure in recent days because of the spiking price of oil.

12:56And that comes at a time when they've promised the American people that they are laser-focused on affordability and reducing the price of gas and other goods, groceries. or that's what's led them at least to look at these waivers on Russian oil.

13:15Sarah Holder:And how much of an effect could this move actually have on oil prices around the world? Well, we've seen that the waiver that they issued for India had only a relatively limited impact because this really is dealing with a small fraction of the global oil market. And the key issue is really about access through the Strait of Hormuz. And that's what's driving the price of oil. So even as the administration has widened some of those waivers, it's unlikely to have a major impact on the price of oil. But I mean, that measure, you know, temporarily lifting sanctions on Russia, even in a limited way, is a pretty bold move.

14:00Sarah Holder:The president of the European Union, Ursula von der Leyen, has said that this is not the moment for the U.S. to be easing sanctions on Russian oil. So I'm wondering, could this move by the U.S. strain the relationship with Europe? And how does that play for Russia? Yeah, I mean, I think the relationship has already been strained for quite some months. I mean, especially on other issues, trade, but also on threats over Greenland. And so this certainly isn't helping. And then this example of them trying to convince Trump not to roll back these sanctions or at least weaken them and then, you know, them going ahead with it anyway.

14:38I think that's just really adding to the frustration.

14:42Sarah Holder:Well, how big of a win is this, this rolling back of these sanctions for Russia? I think it is a big win because, you know, just a few months ago, there was talk about whether the Trump administration could actually impose more. You know, they've touted these sanctions as examples of them not being soft on Putin and on Russia and the impact that they've had on the Russian economy. And now, you know, rolling these back in a limited way, even if just limited, is just not a great sign. I think the concern is also what if there's more? What if this continues? And the Russians are already benefiting from the spike in the price of oil, which is critical for them because this is the backbone of their economy.

15:33This is how they finance their war on Ukraine. So any relief in addition to that is only going to benefit them, even if it's relatively limited.

15:45Sarah Holder:As you mentioned, one of the open questions is about, you know, how this easing of sanctions could lead to other moves, right? The limited lifting of sanctions is supposed to be temporary. It's set to last till April 11th. But can this genie be put back into the bottle once these sanctions are lifted, even in this limited way? How hard might it be to reinstate them? I think they could manage that because, like I said, this seems to be targeting oil that was already in transit. I think if they went further than that, it could be more complicated. The question is also, as this drags on, how desperate does the U.S.

16:25government become? And do they go further? And then it becomes even harder to reimpose them.

16:34Sarah Holder:I'm curious about some of the other ways this war might end up benefiting Russia or be seen by Russia as beneficial to their aims. For starters, I'm thinking about the way that this might draw attention away from its own war with Ukraine or draw away U.S. munitions that could be sent to Ukraine. Yeah, I think this is a key worry for Ukraine and its European allies. So we've seen the Ukrainians tell the Americans that they'd be willing to share information and specialists that know how to counter those Iranian drones because they've had all this experience over the last few years in dealing with that on the battlefield.

17:17And that seems, you know, to be an effort by the Ukrainians to curry good favor with the U.S. I mean, the one thing I will say about the Ukrainian drone support is, you know, this is something that they've been talking about for months. And even before the outbreak of the war, the U.S. and Trump has been really interested in that because I think there's been a recognition that drones are going to be a critical element of any future warfare. And we've seen that play out on the battlefield in Ukraine. in terms of how that quickly shifted into a battle of drones between Russia and Ukraine. And we've seen that bear out over the last few days in Iran and, you know, how the U.S.

18:04and its allies have been put on their heels to some degree by the vast use of these relatively cheap drones that has forced the U.S. and allies to counter them with more expensive interceptors. But, you know, at the same time, there is a real concern about the weapons stockpiles, because if this drags on for many months, that's going to make it a lot harder for Ukraine and Europe to buy those critical American weapons that they rely on. And, you know, especially if the U.S. decides they want to prioritize the Middle East and supporting the operation there.

18:50Sarah Holder:Does the fact that the U.S. is leaning on Ukraine in some ways for that expertise in drone defense strengthen the relationship between the U.S. and Ukraine moving forward? I think that's what the Ukrainians are hoping for. But, you know, so far we're not seeing that translate into stronger pressure on Russia. I'm wondering, the longer the Iran war drags on, what could this conflict mean for the future of the war between Russia and Ukraine? Well, I think there's a real risk that the U.S. and even European allies become distracted. I think that's something that Putin probably hopes for to some degree, as his major tactic has been stalling for time.

19:42And if, you know, the more that the U.S. and Europe are distracted by what's happening in the Middle East, the less pressure he faces to end the war. So it could mean the longer that the war drags out in Iran, the longer the war drags out in Ukraine as well.

20:08Sarah Holder:This is The Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

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