Iran – Russia: policy revised but outlook still positive

The lifting of the anti-Iranian sanctions has not caused any breakthrough in Iran’s relations with either the West or Russia. In any case, no significant progress has been observed so far. Quite the contrary, the sides have recently been showing growing displeasure with one another.

Iran is still pragmatic on whatever concerns its regional and international statuses. And this pragmatism has affected Russia. We can’t say that the Russians were not ready for new turns in their trade and economic relations with Iran. But once again the Iranians have proved themselves to be tough partners.

When in mid-Feb 2016 Russia, Saudi Arabia, Qatar and Venezuela decided to freeze their oil outputs at the level of Jan 11, 2016, Iran first supported that initiative but latter it turned out that it was just words. In reality, since then the Iranians have enlarged their oil output and exports to 3 million and 1.8 million barrels a day respectively.

Russia has undertaken the role of a coordinator for OPEC members. This is especially important now that Saudi Arabia and Iran are on bad terms and are no longer ready for a dialogue.

On Mar 14, Russia’s Energy Minister Alexander Novak visited Iran. Even though the key goal of his meeting was to chair a meeting of the Russian-Iranian intergovernmental commission, he also met with Iranian Petroleum Minister Bijan Namdar Zangeneh so as to try to convince Iran to join the output freeze initiative. But he failed. “Let them leave us alone until we start producing 4 million barrels a day. As soon as we do this, we will join them,” this is what Zangeneh said.

And this all despite the fact that Russia was ready to offer quite exclusive terms. Now we have to wait till the next meeting of oil producers in Doha on Apr 17. But here too we have no guarantees that Iran will change its mind.

Oil is not the only moot point between Russia and Iran. The Iranians are going to revise the contracts concerning TPP and railway projects. Russia was supposed to lend $2.2bn for the projects. This is quite a big sum for this crisis-stricken country but the Russians are strongly committed to enlarge their foothold in Iran.

Iran's Minister of Communications and Information Technology, Co-Chair of the Russian-Iranian Intergovernmental Commission Mahmoud Vaezi stressed the need to review the price of the contract to build a thermal power plant in Bander Abbas (a project to be implemented by Russian Technopromexport) and the contract to electrify the Garmsar-Inceburun railway (to be operated by the Russian Railways). The contracts were signed during President Putin’s visit to Iran in Nov 2015 and seemed to be the most promising. According to Vaezi, the prices of the contracts were good at the moment they were signed but now that the sanctions have been lifted, they must be revised. The Russians think otherwise: they say that the projects need urgent implementation rather than revisions.

One more problem has emerged in the military sphere. The deliveries of Russian S-300 air defense systems are being delayed due to new deficiencies found in the contract. Now the Iranians want a more favorable payment schedule. They also insist on giving them S-300 PMU-1 systems, while the Russians were going to supply more advanced S-300 PMU-2 Favorits.

When in Apr 2015 Russian President Vladimir Putin revived the contract, the goal was to supply four divisions of Favorits worth $1bn by the end of 2017. The Iranians’ wish to get lower version of S-300 comes not only from politics but also economics. PMU-1 system will cost them much less. Besides, the Russians will have to find them, so, the Iranians will have more time to find money. Initially, the Iranians were supposed to pay in five stages ($200mn each time), but now they suggest paying once. The Russians are not satisfied. As a result, one of the pillars of Russian-Iranian partnership may prove to be shaky.

Problems in the Russian-Iranian relations have suggested some experts an idea that the key cause of all this is Syria. Russia and Iran are unanimous on the strategy in Syria but have contradictions on the tactics. The Iranians see no future for Syria without Bashar al-Assad, while the Russians are not so unyielding here.

While recently quoting the opinion of Mohammad Ali Jafari, the commander of the Iranian Revolutionary Guard Corps, that the Russian came to Syria for pushing their own interest rather than protecting Assad, the Lebanese pro-Iranian As-Safir newspaper came to an interesting conclusion: though having similar positions on Syria, Russia and Iran have different goals there.

The Russian air campaign in Syria was launched on the request of the country’s legal President Bashar al-Assad but this does not mean that Russia sees no other constructive forces in that country. As Syria’s neighbor Iran is inclined to believe that it is better aware of the peculiarities of this problem. The Iranians were informed of the Russians’ decision to leave Syria beforehand, which does not mean that they had no objections.

But Assad is not the only problem where Iran has a different opinion. There is also the problem of the Syrian Kurds. They in Iran are hardly pleased with their autonomy claims. Unlike compassionate Moscow, Tehran was very critical with respect to their plans to create a Federation of Northern Syria. Here the Iranians’ attitude coincided with what we have heard from Ankara and Washington. In contrast, Moscow’s position coincided with the position of Tel Aviv, which is very annoying for Tehran as one of the key points of the Israelis’ Kurdish policy is to fuel separatist moods among Kurds living in Iran. And they already have some interim results here. (1)

But in long-term strategic future the Iranians have no other strong partner but Russia. They have certain hopes concerning China but the Chinese are very meditative for the time being. The recent statements by Ayatollah Khamenei have shown that the Iranians are beginning to realize that their hopes for quick reconciliation with the West were much too high.

While congratulating his people on the Iranian New Year (Norooz), Khamenei slated the Americans. He did not call them the “Great Satan” but confirmed the impossibility of direct talks with them in view of continuing contradictions. He said that the Americans were not meeting their obligations under the nuclear treaty. Nor are they letting Iran enjoy the opportunities it has now that the sanctions are lifted. The Americans are using lots of back-ways that are creating new problems for Iran. According to Khamenei, they are freezing assets in certain financial institutions for them to be unable to lend money to Iran. Their goal is to bow the Iranians down.

When analyzing the Russian-Iranian relations, one should keep in mind one important factor. Iran’s political elite is not homogenous. Here we have a group of people advocating peace with the West even through concessions. This group has become much stronger after the last parliamentary elections and is now pushing a policy of economic reconciliation with the West. One of the economic priorities of President Rouhani’s Cabinet is to attract foreign investments. Their opponents are the conservatives, who have lost the last parliamentary elections but still have enough influence to resist the reformists’ pro-western moves.

Before Norooz, Rouhani said that now that the sanctions have been lifted, Iran has good prospects for attracting foreign investments, creating new jobs and boosting its economy. In the meantime, Ayatollah Khamenei sticks to the “resistance economy.” He wants to see Iran self-sufficient and independent from foreign factors, first of all, from the United States.

Iran and the United States are far from the “Cuban scenario.” Barack Obama simply has no time for applying to Iran the diplomatic initiatives he has applied to Cuba. And even if he had, the situation in the Middle East would hardly let him do it. Here Iran has not only Israel but also a number of other opponents.

So, we see that the discord between Russia and Iran is situational and relative. If asked to comment on this, economists would say that even though the rate has been revised, the long-term outlook is positive.

(1) The exiled leader of the Iranian Kurds has already urged the Kurds to transfer their struggle to the territory of Iran. Parti Demokirati Kurdistani Iran (PDKI) is going to send its fighters back to Iran for continuing its struggle for the rights of Iranian Kurds. Recently, Rudaw quoted PDKI leader Mustafa Hijri as saying that almost 2,000 Kurdish fighters will go back to Iran for fighting in cities and mountains.

EADaily’s Middle East Bureau