This article was first published on Fair Observer.
After the fourth summit of the Caspian states, held on September 29, 2014, Russian analysts are unanimous in their opinion that relations between Moscow and Tehran are experiencing a renaissance after the substantial cooling down during the last years of Dmitry Medvedev’s presidency. On the sidelines of the summit, Russian President Vladimir Putin held a meeting with his Iranian counterpart, Hassan Rouhani. Both sides confirmed their previously declared intention to further develop bilateral political and economic ties, as well as continue dialogue on regional issues.
Indeed, Russia and Iran are deeply involved in talks about Afghanistan, the Caucasus, Iraq, Syria, and post-Soviet Central Asia. Moscow and Tehran see each other as key players in the negotiation process over the legal status of the Caspian Sea. They also work together to battle drug and human trafficking, cross-border crimes, and terrorist organizations in Asia.
The Kremlin does not conceal the fact that a nuclear agreement between the P5+1 group and Iran may benefit Moscow, and Russia has exerted considerable efforts to settle the problem of the Iranian nuclear program. An agreement would eliminate the sanctions that have hindered Russian economic activity in the Islamic Republic, and guarantee that Iran will not become another “hot spot” on the periphery of the Commonwealth of Independent States (CIS), a regional organization formed by former Soviet republics.
The intensity of Moscow’s dialogue with Tehran in 2013-14 was unprecedented in the history of modern Russia. Within the last 12 months, Putin met Rouhani four times. As for the ministerial level, meetings between the heads of different governmental bodies were taking place almost every month. It is probably no coincidence that the Kremlin is currently advocating for Iran’s involvement in the international discussions on the situation in Afghanistan, Syria, and Iraq. In September 2014, Russian Foreign Minister Sergey Lavrov even called the Islamic Republic “a natural ally” in the struggle against religious extremists in the Middle East. All these gestures were supposed to demonstrate that Iran is, at the moment, something more than simply a “southern neighbor” for Russia.
High-ranking Russian officials also seem to be satisfied with the outcomes of nuclear negotiations between Iran and the P5+1 that took place in Vienna between November 18-24. Following the conclusion of the talks, Lavrov emphasized that the parties had made significant progress toward a deal. He also stressed the active role that Russia has played, arguing that Moscow’s efforts ensured that Iran and the P5+1 were able to move closer to an agreement.
These statements do not appear to be another Kremlin PR maneuver. For the past two years, the Russians have been actively working to secure an effective dialogue between authorities in Tehran and the West on the nuclear issue. Lavrov’s proposals in 2011-12 set the stage for the current round of negotiations. During the Vienna talks, Russian diplomats were noticeably active, as Deputy Minister of Foreign Affairs Sergey Ryabkov held bilateral consultations with almost all sides involved.
These efforts did not go unnoticed, at least not in Tehran. On November 25, President Rouhani personally called Putin to discuss the results of the Vienna negotiations and assure him of Iran’s intentions to continue the dialogue with the P5+1.
Roots of the New Rapprochement
There have also been concerted efforts to foster relations in the economic realm. In 2014, Russian Energy Minister Alexander Novak — who is also the head of the Russian-Iranian Joint Trade and Economic Commission — established good relations with the Iranian oil minister, Bijan Namdar Zanganeh, and the head of the Atomic Energy Organization of Iran, Ali Akbar Salehi. His efforts resulted in the adoption of the comprehensive Memorandum of Understanding (MoU) on the principles of trade and economic relations between the two countries, signed by Novak and Zanganeh in Moscow on August 5, 2014.
The move was welcomed by President Putin, who stated the necessity to fill the legal framework with concrete substance. It also created important groundwork for the 11th meeting of the Joint Trade Commission, which was held in Tehran between September 7-11, 2014. According to some sources, both sides agreed to increase the volume of bilateral trade tenfold, where the overall volume of hypothetical investment contracts that might be signed in the aftermath of this event could potentially reach €70 billion.
As in previous instances, Moscow’s increasing interest in Iran is determined by a number of external factors. For instance, the first steps that were made by the Kremlin toward Tehran were mostly provoked by the events of the Arab Spring. When Russian authorities decided to intensify their contacts with the Islamic Republic in mid-2012, they were seriously concerned with Russia’s rapidly shrinking political and economic presence in the region. As a result, Moscow considered Tehran as one of its last (if not the only) footholds in the Middle East and did its best to secure Russian influence there. The spreading rumors about the forthcoming rapprochement between the United States and Iran after the signing of the joint plan of action in November 2013 was yet another incentive. The Russian government presumably believed in the subsequent reorientation of the Iranian foreign policy toward the West and tried to convince the Iranian leadership of the necessity to maintain a certain level of contact with Moscow.
In 2014, Russian tensions with the U.S. and European Union (EU) over Ukraine became a further reason to strengthen its cooperation with Iran. The unprecedented — since the end of the Cold War, at least — scale of confrontation with the West made Moscow regard the intensification of contacts with Middle Eastern countries as highly important. Russian authorities believe that good relations with Middle Eastern states will ensure the Kremlin avoids international isolation and compensate for the sanctions imposed by the U.S., EU, and their partners.
Iran has become an important regional leader for Moscow, capable of influencing public opinion elsewhere in the Muslim world. A key aim in this regard is to counterbalance the anti-Russian campaign in Arab media, which is supported by Saudi Arabia and Qatar. Moscow also has plans to coordinate efforts with Tehran in the energy market, in order to ensure that Iranian hydrocarbons are not used by the Europeans, thus decreasing their dependence on Russian gas. From an economic point of view, the Islamic Republic has become increasingly important as an agricultural exporter, whose produce (predominantly fruit and vegetables) may replace European products banned under recent sanctions. Finally, tensions with the West compelled Russian companies to look for trade and investment opportunities in Asia.
There are at least several opportunities for cooperation for Russian businessmen: oil and gas, petro-chemistry, nuclear energy, electricity, and railroad infrastructure. On November 11, 2014, Russia and Iran signed an agreement package regarding Moscow’s participation in the construction of up to eight new nuclear power units. The first two reactors are expected to be built at the Busher power plant, in addition to the power generating block that was previously constructed by Russian engineers and handed over to the Iranians in 2013.
It is important that the Iranians are also interested in developing these economic ties. On the one hand, they believe that the current confrontation with the West brings Russia closer to the Islamic Republic and have expressed their readiness to bind Moscow with economic contracts. On the other hand, the strengthening of relations with Russia may be seen in Tehran as “Plan B” in case the nuclear talks fail or do not lead to desired results.
Under these circumstances, it is probably not a coincidence that the visit of Russia’s minister of economic development, Aleksey Ulukaev, to Iran took place immediately after the failure to reach a comprehensive agreement in Vienna. During his trip to Tehran, Ulukaev and Mohammad Reza Nematzadeh, Iran’s minister of industry, signed an MoU that aims at the promotion of trade and investments between the two countries as well as a strategic partnership between the Russian Export Insurance Agency and the Export Guarantee Fund of Iran. These measures are supposed to mitigate the negative effects of the international sanctions on Russian-Iranian economic cooperation.
Despite this potential, there are serious obstacles that may hamper growing cooperation between the two countries or even stop this process. Since 1991, relations between Russia and Iran were mainly determined by external political factors — namely by developments of Russian-American relations such as the “reset” of 2009 and the Gore-Chernomyrdin treaty of 1995 — that were unable to guarantee the stability of bilateral ties. Today’s political situation precipitated political and economic cooperation and this, in turn, can lead to the emergence of a more solid base for dialogue.
However, analysts are convinced that the formation of this solid economic ground requires time and that is the resource that Russia and Iran may lack. There are no guarantees that Moscow’s relations with the West will not change and that these changes, in turn, will not affect Russian interests in Iran. As the experience of the Medvedev era demonstrates, Moscow could be tempted to sacrifice some of its stakes in the Islamic Republic for the sake of another reset with the U.S.
The positions of the two countries in the international arena may also play a role. Certain improvements in Iran’s relations with the EU makes the Islamic Republic less dependent on contacts with Moscow. Russian authorities have already received signals from Tehran that they should forget the times when Moscow dictated conditions for the format of bilateral dialogue. In 2013, Putin’s visit to Iran was canceled, due to Iranian dissatisfaction with Russian conditions for the meeting. Under these circumstances, the Kremlin needs to be inventive in order to keep Tehran interested in bilateral dialogue.
This could be challenging. It is still a big question as to how far Russia is ready to go in its political contacts with Tehran and how much it can offer. The formation of any comprehensive strategic alliances with Tehran is still not in Moscow’s interest, as this may seriously harm Russian dialogue with several other countries, including Israel and the Gulf Cooperation Council (GCC) countries. Thus, the Kremlin is still reluctant to help Iran acquire the status of a full-fledged member in the Shanghai Cooperation Organization. Additionally, Iran’s influence on the ground in Syria, Iraq and Afghanistan often surpasses that of Russia. As a result, the only thing that could be offered by Moscow there is perhaps moral support.
In terms of economic cooperation, the Russian-Iranian dialogue also has its limits. Apart from ferrous metals, wood, and petrochemical products, Russia has a very limited range of goods to offer Iran — and a continually shrinking range at that. As officials from the Russian Chamber of Commerce and Industry state, it is not the international sanctions, the growing economic presence of China in the region or the intractability of the Iranian authorities, but mere technological backwardness that prevents Russian companies from dealing with Iran. Thus, Iran currently lacks engineering and technological support as well as equipment for the upgrade and construction of oil refineries and liquefied natural gas (LNG) producing plants. Russia is unable to provide Iran with all the required assistance, equipment and technologies, and, moreover, is badly in need of them itself.
International sanctions against Iran also severely limit options for Russian cooperation. As a result, in practical terms, there is little substance behind this intense exchange of high-ranking delegations and ideas. Different levels of Russian government officials are regularly visiting Iran, but the number of big deals concluded is almost zero. Moreover, since 2011, the volume of trade between the countries has been constantly falling by more than 30 percent annually and, by 2014, it was at around $1.5 billion.
All in all, in spite of mutual intentions to improve the level of bilateral relations, Russia and Iran have to overcome serious challenges to the practical implementation of their plans. On the one hand, the Russian confrontation with the West makes Moscow extremely interested in developing its relations with Tehran. On the other hand, Iran is gradually becoming disillusioned regarding the possibility of a quick settlement of the nuclear issue and the complete lifting of economic punitive measures adopted by the U.S., EU, and its partners. This, in turn, compels the authorities of the Islamic Republic to be more active in their contacts with the countries that are ready to cooperate with Tehran even under existing sanctions.
Nikolay Kozhanov is a lecturer in Political Economy of the Middle East at the School of Economics of St. Petersburg State University (Russia).
[Photo courtesy of Wikimedia Commons]