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Economic determinants of political cooperation between Iran and Russia
Material posted: Publication date: 14-11-2018

Today the political world is in a state of uncertainty and change. USA bills itself as the only superpower, dictating to all States of a unipolar world order. However, the role of some countries in specific regions and in world politics as a whole increases. The Islamic Republic of Iran and the Russian Federation are among such States.

Iran and Russia have historic diplomatic relations from the XVI century. Both States aspire to be fully sovereign, that brings them at this point in history, and encourages cooperation. Iran is one of the key players in the middle East, seeks to consolidate and expand its position in the region. Russia proceeds from the fact that the interaction with the Islamic Republic is helping to strengthen its positions in the Caucasus and Central Asia, and the middle East.

On the one hand, Iran and Russia are committed to self-development. Countries want to occupy leading positions in their regions and in the global economy, what is their interest in establishing their own unilateralism. However, on the other hand, the mutual desire to expand mutual economic and political ties and built to resist the unipolar world, the United States indicates that States are more inclined to establish a multipolar world order.

Interesting for research is the range of areas in which Iran and Russia have cooperated and intend to cooperate further in the future.

The Russian scientist S. A. Mikheev argues that in the long run, Russia and Iran "are doomed to be, if not allies, then at least like-minded people" [1]. Of course, in the development of political and economic relations between the two countries may be isolated incidents, however, the interests of countries intersect in a great many spheres of activity, thereby opening new areas for cooperation.

One of the key directions of cooperation of Russia and Iran in the sphere of trade relations is the desire of the Islamic Republic of Iran to become member of the Eurasian economic Union. In the spring of 2015 opened the talks on development of trade-economic relations of the EEC and Iran. Three years negotiations were conducted on the possibility of creating a free trade area between the EEC and Iran, and at this stage according to the Decree of the Government of the Russian Federation of April 23, 2018 No. 739-R[2] and the decision of the Supreme Eurasian Economic Council on may 8, 2018 No. 4[3] already signed a provisional agreement from 17.05.2018, which sets the reduction of import customs duties and creates a transparent environment of mutual trade between Iran and member countries of the Union.

The agreement involves the creation of a free trade area in two stages. The first stage implies that the effect of the interim agreement will be extended to three years, after which will enter into force the second stage: full-scale agreement on free trade zone. Within three years, trade cooperation under the agreement will be conducted on a limited range of goods. These products (around 500 articles) are of greatest interest for export of both Iran and the countries-participants of the EAEC. According to the official website of Russia's Foreign trade, the Iranian side will receive preferences on food (vegetables, fruits, dried fruits), non-ferrous metal products, building materials, and the countries of the Union – meat and meat products, confectionery, cosmetics, metals, and certain kinds of mechanical and electronic equipment.

The average level of import duties of Iran's industrial products will decrease from 22.4% to 15.4%, Eurasian economic Union – from 8% to 4.7%. For agricultural products the duties of Iran will be reduced from an average of 32.2% to 13.2%, Union – from 9.6% to 4.6%[4]. This will contribute significantly to the expansion of trade cooperation among countries.

For 2017 Iran occupied the 48th place in Russian trade turnover, which amounted to 0.29 percent of the total trade of the country in foreign trade. Moreover, the share of Iran in Russia's exports accounted for 0.37 percent (47th place), while the share of imports and 0.17%, respectively (60). Today in the 1st half of 2018, Russia's trade with Iran increased by 28.3% compared to the same period in 2017, which amounted to 945 181 332 USD. USA to 208 503 949 USD. The United States last year. So, Russia's exports to Iran increased by 23, 65% and amounted to 629 261 289 USD. USA and imports by 38.71%, which amounted to 315 920 043$. USA. The share of Iran in foreign trade turnover of the Russian Federation in the 1st half of 2018 made 0,2877% vs 0,2746% in the same period of 2017. Share in exports fell 0,0091% (47th place), and the share in imports increased by 0,0485% (50)[5]. Given the development of economic cooperation of Russia and Iran, we should expect further positive growth in trade between the two countries.

Today in the structure of Russia's exports to Iran take precedence in the following categories (tab. 1):

Table 1.

The structure of Russian exports to Iran.

Product

Share of supply of goods (2018)

Share of supply of goods (2017)

Food and agricultural raw materials

56,46%

42,75%

Machinery, equipment, vehicle

14,89%

Of 10.88%

Wood, pulp and paper products

13,42%

19.68%

Metals, metal products

11,62%

20,12%

Products chemical. industry

2.85% of

5,53%

 

The structure of Russian imports from Iran as follows (table. 2):

Table 2.

The structure of Russian imports from Iran.

Product

Share of supply of goods (2018)

Share of supply of goods (2017)

Food and agricultural raw materials

77,37%

67,47%

Metals, metal products

11,60%

Of 19.53%

Products chemical. industry

Of 7.47%

Of 7.67%

Machinery, equipment, vehicle

1.10% of

1,74%

Mineral products

0,61%

Of 1.62%

 

With a favorable political environment on the world stage can be argued that trade relations between the two countries will develop, gain momentum, to grow in the future volumes of trade.

However, as you know, on November 4 against Iran and countries with which it supports commercial relations, came into effect U.S. sanctions. Officially recognized that the sanctions were imposed in connection with the failure of the US nuclear policy of Iran. In may 2018 Washington unilaterally withdrew from the agreement on Iran's nuclear program, signed in 2015, and outlined his position regarding the Islamic Republic of Iran clearly tough: the inadmissibility of the presence of Iran in resolving the Syrian issue, and changes its behavior in the middle East as a whole.

Interesting for understanding of the further development of Iran in the nuclear sphere becomes an analysis of his policy in this matter. It showed the Russian scientist-orientalist E. Ya. Satanovsky, said that the opening of the trump of the nuclear agreement means that Iran in the next ten years will be nuclear power, but the NPT is in principle possible to forget. It is possible to predict the policy of Iran in nuclear development, suggesting that the state become a nuclear power and will strengthen its position, will rise in one number with China, India, and subsequently Russia and the United States.

After the introduction of some sanctions by the USA and Iran are unlikely to seek support on the nuclear issue leading on economic development of countries. In connection with the opening of new large-scale uranium deposits in Brazil and Kyrgyzstan in 2010-ies, be interesting to observe the overlapping interests of Iran with these countries. Possible meeting of the representatives of these States at any existing issues, starting with the summer of 2018, can mean the beginning of cooperation in the field of export of mineral ores. So, in June 2018 Brazil had amended the Mining code in 1976, in part by removing government monopoly in mining mineral resources, open to foreign capital the way in this industry. In the beginning of September took place the meeting of representatives of chambers of Commerce of Iran and Brazil and other representatives of these countries, including the mining industry[6]. The sides expressed readiness to expand trade relations, improving banking relationships and developing strategies for the protection of the bilateral relations.

Principles the imposition of sanctions by the United States is expressed in several aspects. Iran is one of the key figures in the middle East. In the Syrian settlement of Iran along with Russia and Turkey is the guarantor of the truce. In October 2018, a meeting of representatives of the three countries and the UN special envoy Staffan de Mistura on the Syrian issue of forming a constitutional Committee, which would be designed to prepare the constitutional reform in Syria[7]. The draft rules and procedures for future fee is negotiated and improved.

Iran's position in Syria may expand and be strengthened, and may shift the influence of Russia. At the moment in Syria is present and conducts military operations a large number of Iranian experts and soldiers. Iran plays a significant sponsor of Hezbollah, which in the Western world consider a terrorist. However, in the Syrian war, Iran is cooperating with Hezbollah, speaking together at the front. The Islamic Republic of Iran is the only country in the middle East, headed by members of the Shiite Islam, and that the Shiite world is sponsoring Hezbollah.

Iran works to become the most powerful country in the middle East, wanting to create a "Shiite Crescent" (Fig.1), which is at odds with the visions of the US structures in the Middle East. In Iran and Bahrain, the percentage of Shiites among the Muslim population prevails, In Lebanon half of the population, while Lebanon created the Hezbollah, which is Shiite. However, the Lebanese authorities are opposed to the paramilitary groups, their sponsors it has around the world. Iraq and Yemen – States, where the share of the Shiites close to 50%. In Syria, where Iran supports the Shiite promotion missions to power, their share is 10-15%, as in Saudi Arabia where the Sunni government, as ardent opponents of the Shiite regime in Iran, severely suppressed these minority within their own country. It is in the confrontation between Saudi Arabia and Iran manifests the attitude of States to the regime of the Islamic Republic, which was established after the Islamic revolution of 1979. It is in the course of this revolution, Iran came out on their own path of development, rejecting the influence of the West. In the UAE, Qatar and Oman, the proportion of Shiites is less than 10%.

Fig.1. The Shiite Crescent.

E. Ya very clearly described the position of the Islamic Republic of Iran in the middle East: "Iran is a separate player, which operates without partners, with the exception of the Shiite militias in Iraq, Lebanon (Hezbollah), and are now trying to create a similar militia in Syria, and attempts by the army"[8]. Today it is impossible to say whether Iran to expand its influence in Syria. Cooperation with Russia gives the Islamic Republic a lot of advantages in the solution of the Syrian issue, but also inhibits the desire of Iran to fulfill their own installations.

At the moment, Syria's ruling elite belong to the Alawite sect of Islam (about 12% of the population of the state). The Orthodox Shiites, and the Sunnis of Syria do not recognize the Alawite minority, thus fueling the cauldron of contradictions. Iran is present in the settlement of the Syrian conflict pursuing specific goals. First, a significant role for the Islamic Republic of Syrian play resources, such as phosphate field. For a long time they were captured by the banned terrorist organization ISIS. The Syrian government was extremely important to regain control of the area, what came to the aid of Iran. Today the development in these fields is the Russian company "Stroytransgaz", which emphasizes how cooperation between Iran and Russia in Syria, and their competition. Second, Iran seeks to expand influence in terms of military action, working with the Iraqi Shiite militia "brigades of al-Imam Ali" (part of the Shiite militias of the people's mobilization forces) and Hezbollah in Lebanon. Third, Iran's presence in Syria though, and brings liberation, but also destabilizie environment within the state of ethno-confessional confrontation. It is possible that, when all the terrorist groups in Syria will be destroyed and the United States thus lose their power, Iran will expand Shiite influence in Syria, strengthening its position in the middle East.

In addition to the cooperation of Iran and Russia in the settlement of the Syrian conflict and terrorism, countries have many other points of contact. Despite U.S. sanctions, Russia is not going to cease cooperation with the Islamic Republic. On the contrary, countries will conduct a joint business to develop many areas of cooperation.

Great attention is given to the cooperation of the Central banks of Russia and the Islamic Republic. We are talking about the possibility to use national currencies in trade transactions and transactions, as well as on cooperation in the banking sector as a whole. Future cooperation involves the expansion of brokerage relationships, the creation of a payment system of our state to make payments to Iran, the mutual financing of development projects, and civil projects. This interaction may contribute to the transition States for the payment of commercial transactions in national currencies, weakening the influence of the us dollar.

Energy is one of the most important areas in cooperation between Russia and Iran. 2017 is the construction of a thermal power plant Sirik in the South of Iran. For this project, in the framework of the intergovernmental agreement of two countries, Russia gave the Islamic Republic a five-year state loan of € 1.2 billion. The installation of four units, the project is scheduled for completion by 2021[9]. Cooperation in this sphere between the two countries will develop in spite of US sanctions.

Another important element of economic cooperation between the two countries is to resume the construction of nuclear power plant "Busher". It Rosato Iran entrusted the construction of new nuclear units on its territory[10]. Bushehr NPP has a complicated history: its construction began in 1975 with the participation of Germany, however after the Islamic revolution of 1979 and the introduction of US sanctions against Iran, the construction stopped. During the Iran-Iraq war in 1980, nuclear power plants were subjected to air strikes, and in 1990-ies to the call of Iran to restore the Bushehr responded only Russia. By the end of 2011 earned first block. Construction of unit # 2 will start in June 2019 and will be completed according to plan, in 2024, the Project is very promising and advantageous as for each country separately and for mutual networking and cooperation.

Energy development and the improvement of the technology today plays a crucial role, therefore, becomes important inter-state cooperation in this field. Russian politician Vyacheslav Nikonov at the annual meeting of experts of Russia, Iran and India said: "the cooperation between Iran and Russia is growing every day, and it has become commonplace in the relations between the two countries"[11]. Tehran and Moscow are closely cooperating in resolving the Syrian crisis, the development of the energy sector, trade and the issue of the Caspian sea.

Hence it becomes interesting to consider the tripartite cooperation of Iran, Russia and India in the creation of a transport corridor "North-South", as well as their interaction within the Shanghai Cooperation Organization (SCO). In 2019, it is planned to have the first trial deliveries of electricity from Russia to Iran through the "North-South"[12]. November 23, the state will hold a trilateral meeting, where they will discuss ways to enter the transport corridor into operation as early as possible. Its potential is huge: the capacity of the corridor from 20 to 30 million tons of cargo per year, it will be the shortest multi-modal transport route, which connects North Europe, the Persian Gulf and the Indian ocean through Russia and Iran. An important element in the development of the transport corridor was the signing of an agreement determining the legal status of the Caspian sea in August 2018[13].

The combination of these factors determines the possibility of future economic cooperation of Russia and Iran in large number of fields. Will continue cooperation in the fight against terrorism, enhanced interaction of States in the resolution of the Syrian conflict. Joint projects in the fuel and energy sector, the agreement in trade in agricultural products, work on the creation of transport trade routes, and military-technical cooperation and other spheres of interaction determine the strength and prospects of Iranian-Russian relations. Pressure from the United States will not be able to undermine the stability of the economic relations of States that will expand and develop in new directions. Current trends indicate that Iran and Russia are committed to establishing a multipolar world order. States will not be subject to unilateralism of the United States. Economic and political cooperation between the two countries will continue to grow, involving other States in joint areas of cooperation. Thus, the influence of the US on the economic interests of countries and their economies will gradually decline, and the unipolar world will cease to be sustainable.

The list of references.

[1] S. Mikheev. Russia and Iran in the face of challenges of a new era.

URL:http://miheev-politolog.ru/rossiya-i-iran-pered-licom-vyzovov-novoj-epoxi/

[2] the Decree of the RF Government from 23.04.2018 No. 739-R "About signing of an Interim agreement leading to the formation of a free trade zone between Eurasian economic Union and its member States, on the one hand, and the Islamic Republic of Iran, on the other hand".

URL:http://www.consultant.ru/cons/cgi/online.cgi?req=doc;base=EXP;n=514471#07055142014524007

[3] Decision No. 4 of the Supreme Eurasian economic Council "On the issues of signing an Interim agreement leading to the formation of a free trade zone between Eurasian economic Union and its member States, on the one hand, and the Islamic Republic of Iran, on the other hand".

URL:http://www.consultant.ru/cons/cgi/online.cgi?req=doc;base=INT;n=3334#07648254338984601

[4] Signed an Interim agreement leading to the formation of the FTA between the EEC and Iran. 17.05.2018. URL:http://russian-trade.com/news/2018-05/podpisano-vremennoe-soglashenie-veduschee-k-obrazovaniyu-zst-mezhdu-eaes-i-iranom/

[5] Foreign trade of Russia with Iran in the 1st half of 2018 17.08.2018. URL:http://russian-trade.com/reports-and-reviews/2018-08/vneshnyaya-torgovlya-rossii-s-iranom-v-1-polugodii-2018-g/

[6] Brazil plans to open a credit line for $1.2 billion for trading with Iran. Time loan-to 03.09.2018.

URL:https://www.iran.ru/news/economics/110796/Braziliya_planiruet_otkryt_kreditnuyu_liniyu_na_1_2_mlrd_dlya_torgovli_s_Iranom

[7] R. Sitdikov. Russia, Turkey and Iran will coordinate the work of the constitutional Commission and de Mistura. 08.10.2018.

URL:https://ria.ru/syria/20181008/1530199244.html

[8] Speech of Yevgeny Satanovsky, the Federation Council of the Russian Federation. 06.11.2017. URL:https://topwar.ru/128965-vystuplenie-evgeniya-satanovskogo-v-sovete-federacii-rf.html

[9] Russia has begun construction in southern Iran power plant Sirik for 1.2 billion euros. 20.02.2017. URL:https://energybase.ru/news/industry/rossia-pristupila-k-vozvedeniu-na-uge-irana-elektrostancii-sirik-za-12-2017-02-20

[10] V. Melnikov. Iran and Russia begin a new history of the Bushehr nuclear power plant. 12.09.2016. URL: https://ria.ru/atomtec/20160909/1476497856.html

[11] Russia seeks to develop cooperation between Iran and SCO. 21.10.2018. URL:http://www.irna.ir/ru/News/3652772

[12] India, Russia and Iran will hold a meeting on international transport corridor North-South. 31.10.2018.

URL:https://www.iran.ru/news/economics/111467/Indiya_Rossiya_i_Iran_provedut_vstrechu_po_mezhdunarodnomu_transportnomu_koridoru_Sever_Yug

[13] A. Nikolsky. Signed the Convention on the legal status of the Caspian sea. 12.08.2018. URL:https://ria.ru/world/20180812/1526398222.html

Lugovsky V. A.


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