Russian Oil Industry Set to Capitalize if Embargo Hits Iran Andrey Rudakov/Bloomberg News A petroleum refinery operated by OAO Lukoil in Nizhny Novgorod. Russia stands ready to serve customers willing to pay a premium price - with a grade of oil closely resembling Iran's. MOSCOW - For months, the Russian government has opposed the idea of Western petroleum sanctions against Iran. But new threats to Iranian oil flow could have at least one beneficiary: Russia. The Russian oil industry was already reaping the rewards of higher global oil prices from Iranian tensions, even before Tehran raised the stakes Wednesday by threatening to cut off oil to six European nations. Now, whether Iran carries out that threat immediately or Europe proceeds with its previously planned embargo of Iranian oil this summer, the Russian industry could capitalize more directly. Its pipelines stand ready to serve customers willing to pay a premium price - with a grade of oil closely resembling Iran's. "It's pretty good for Russia right now," Jesse Mercer, a senior oil analyst based in Houston with PFC Energy, said in a telephone interview. Russia is now the world's largest oil producer, pumping about 10 million barrels of oil a day, slightly more than Saudi Arabia. Of this, Russia exports seven million barrels a day. Most of it goes to customers in Europe and Asia, although small amounts from Siberia make it as far as the West Coast of the United States. For Russian oil companies like Rosneft and Lukoil and the Russian-British joint venture TNK-BP, the international tensions that began over Iran's nuclear development program last autumn have meant a windfall. Analysts estimate that Iran jitters have added $5 to $15 a barrel to the global price of oil, which means an extra $35 million to $105 million a day for the Russian industry. And the taxes the Russian government has received from those sales have been a political windfall for Prime Minister Vladimir V. Putin as he campaigns to return as Russia's president. The extra money has helped further subsidize domestic energy consumption, tamping down inflation. "It's good for Putin," Mr. Mercer said. In the United States, when oil prices go up, the president's ratings go down. In Russia, it's the opposite. Rising prices, of course, are a boon for every oil producer, whether in North Dakota, the North Sea or northern Siberia. But Russia has a particular advantage: a pipeline system that can supply Iran's traditional customers in both Europe and Asia. Depending on which way the geopolitical winds are blowing, Russia has the ability to direct more or less of its oil either eastward or westward. Some of its oil to Europe travels by pipeline the entire way; other oil is piped to the Black and Baltic Seas and shipped from there. What's more, the grade of Russia's main export oil, Ural Blend crude, is similar to Iran's and has already been in greater demand as an alternative to Iranian oil for European refineries. That's why the price of Ural Blend has risen even faster than global prices generally. In December, it traded at a $2 discount to Brent oil from the North Sea. That difference is now gone. Both grades are now trading for about $119.50 a barrel, energy analysts say. The six nations Iran threatened to cut off Wednesday were, in descending order of the size of their purchases: Italy, Spain, France, the Netherlands, Greece and Portugal. Tehran did not explain why it selected those countries, while ignoring even bigger oil users like Germany. But all six were already planning to stop buying Iranian oil this summer, anyway, as part of an embargo the 27-nation European Union agreed to last month, to begin in July. At its recent peak, Europe was buying 500,000 to 660,000 barrels of Iranian oil a day, according to PFC Energy. If the European sanctions do take effect then, oil prices could rise further - by as much as $7 to $13 a barrel above where they are now, in the view of Wood Mackenzie, an oil consultancy based in Edinburgh. And even if oil prices later fall, Russia's natural gas monopoly, Gazprom, would continue to benefit for a while. Russian gas prices in Europe, Gazprom's biggest export customer, are linked to the price of oil under long-term contracts that are adjusted twice annually, based on average oil prices over the previous six months. So even if oil prices decline, Gazprom's gas prices would remain high in the second half of the year.