Iranian business proposes four models for developing relations with Russia

The Tehran Chamber of Commerce proposes to create a holding company to EXPORT products to RUSSIA,buy a stake in the ports of Makhachkala or Volgograd and create a consortium with Russia and India for gas production in the Caspian

In 2022, Iran significantly increased exports of manufactured goods to Russia, but the two countries have not yet formed a strategic partnership in the economic sphere (not counting the Bushehr nuclear power plant, built with the participation of Moscow), wrote the Tehran Chamber of Commerce and Industry (TTCI) geopolitics think tank ) in a report on the problems and prospects of Russian-Iranian trade relations published this month. Among the chamber's strategic recommendations are Iran's acquisition of shares in Russian ports in Volgograd or Makhachkala and the creation of centers for the direct supply of Iranian consumer goods.

Why the economy was not a priority in relations between Russia and Iran

After the collapse of the Soviet Union, trade between Russia and Iran was mainly due to "geopolitical necessity", but the development of economic relations did not become a priority, states the Tehran CCI. The trade turnover between the two countries in previous years did not exceed $4 billion (that’s how much it was in 2021 with Russian exports to Iran at $3 billion, according to the FCS), partly because Russian companies and banks focused on trade with the West. However, the military operation in Ukraine "put an end to the assumption that Russia is part of the West," the authors of the report say.

In previous years, up to 80% of the Russian-Iranian trade turnover was accounted for by agricultural products and foodstuffs, and these categories prevailed both in Russian deliveries to Iran and vice versa. However, in recent months, Iran has increased exports of industrial goods to Russia by 30% (polystyrene, pumps, auto components, machine tools for metalworking, etc.), as a result of which these deliveries for the first time exceeded the import of Russian manufactured goods to Iran, the CCCI notes.

Alireza Peymanpak, HEAD of the Trade Development Organization of Iran, said that from $80 billion to $100 billion of imports to Russia come from unfriendly countries and a large potential market capacity opens up for Iranian goods (his words are quoted by the Iranian business newspaper Mir Economy). So far, according to the Center for Macroeconomic Analysis and Short-term Forecasting, Russia is among the ten largest foreign trade partners of Iran, but its share fluctuates at the level of 1-3%, which is much lower than that of CHINA , the United Arab Emirates, and Iraq.

What prospects for relations with Russia do they see in Iran

The further development of Russian-Iranian trade will depend on the outcome of the military conflict in Ukraine, the CCCI believes, analyzing both positive and negative scenarios for Russia. At the same time, experts from the Tehran Business Association call for choosing the optimal model for Iran's positioning in economic relations with Russia. They offer four alternatives:

What habits can push back the old age model of India, which maintains a balance between the West and Russia; the model of Turkey, which acts as a mediator in the settlement of the Russian-Ukrainian conflict, deriving economic benefits for itself; the model of China, which supports Russia economically, but does not help in military operations; model of Germany with its "cautious" interaction with Russia. which maintains a balance between the West and Russia; the model of Turkey, which acts as a mediator in the settlement of the Russian-Ukrainian conflict, deriving economic benefits for itself; the model of China, which supports Russia economically, but does not help in military operations; model of Germany with its "cautious" interaction with Russia. which maintains a balance between the West and Russia; the model of Turkey, which acts as a mediator in the settlement of the Russian-Ukrainian conflict, deriving economic benefits for itself; the model of China, which supports Russia economically, but does not help in military operations; model of Germany with its "cautious" interaction with Russia.

What Iran offers

Considering the circumstances in which the Iranian economy has been for many years ( Western sanctions for the development of the nuclear program), and the scenarios for the development of the Ukrainian conflict, “if relations between Iran and Russia are strengthened, then Iran will be subject to sanctions to an even greater extent than before,” warned in TTPP. Therefore, the authors argue, it is vital for Tehran to take a balancing approach to relations between Russia and the West. At the same time, the economic strategy in relation to Russia should be based on the following considerations:

economic diversification and increased trade with Russia to the point where Moscow cannot ignore bilateral cooperation; emphasis on Russia's need for access to the warm waters of the Indian Ocean (Iran has access to the Persian and Oman gulfs); formation of models of trilateral cooperation between Iran, Russia and India, including in the construction of the Iranian port of Chabahar in the Gulf of Oman; preventing the introduction of new secondary Western sanctions against Iran on charges of military-technical cooperation with Moscow; development of cooperation with Azerbaijani, Armenian and Tajik businessmen and Islamic regions of Russia; creation of export consortiums from Iranian small companies for deliveries to the Russian market;

In particular, the CCCI calls on Iran to complete one of the missing links of the North-South transport corridor as soon as possible (Russia, Iran and India agreed on this project back in 2000, then Azerbaijan joined it), namely the railway between the Iranian cities of Rasht and Astara. It is also proposed to establish a special holding to export food to Russia (Iran supplies Russia with tomatoes, cucumbers, pistachios, cheeses, apples, etc.). Another idea is for the Iranians to buy shares in Russian ports (for example, in the river port of Volgograd or the port of Makhachkala in the Caspian), "if the state has enough financial resources." Now Iran already has a 53% stake in the Solyanka port in the Astrakhan region, which is called "the gateway for the export of Iranian goods to the Russian market."

What independent experts think

The TTCI report appears to reflect the Iranian business community's understanding that the multilateral Joint Comprehensive Plan of Action on Iran's nuclear program, signed in 2015, could be finally phased out (it is now effectively suspended and Western leaders say they have no desire to revive it in its current form), says Henry Rome, a senior fellow at the Washington Institute for Middle East Policy. At the same time, the theses of Iranian experts are skeptical and wary about the development of relations with Russia, since Moscow previously perceived Iran as a junior partner, he interprets. According to Rachel Zimba, founder of the consulting firm Ziemba Insights, it will be difficult for Iran to avoid additional secondary sanctions in connection with cooperation with Moscow.

This week a Russian trade delegation of more than 300 people visited Iran. According to Iranian media reports, the parties discussed a plan to increase trade between Russia and Iran to $40 billion (from $4 billion in 2021). At the meeting, the head of the Iranian Chamber of Commerce and Industry, Gholamhossein Shafei, said that the trade turnover of the two countries this year increased compared to 2021 (Russian customs has not published foreign trade statistics by country since spring. -).

How Russia officially sees the development of relations with Iran

Deputy Prime Minister Alexander Novak reported on November 1 that Russia and Iran agreed to sign an agreement on a free trade zone with the Eurasian Economic Union (EAEU) in the near future. The parties also confirmed their intentions to cooperate to create the North-South transport corridor and develop the port infrastructure of the Caspian Sea.

Russian authorities are looking at the North-South corridor as a way to solve the logistical problems resulting from the sanctions, Transport Minister Vitaly Savelyev said in May. The Caspian ports of Astrakhan on the Volga, Olya on the Volga-Caspian Canal and Makhachkala on the Caspian Sea are part of this corridor, which is still in the project stage. In October, Delovaya Rossiya reported, citing a survey of Russian companies, that in terms of transport and logistics corridors, the development of the Russia-Iran-India corridor has the highest priority for business (63% of respondents said so).

According to First Deputy Prime Minister Andrei Belousov, the development of this route is necessary not only because of sanctions, but in general due to changes in world markets - the shift of economic activity centers to China , the countries of Southeast Asia and the Persian Gulf. Belousov proposed to create, together with Baku and Tehran, a single logistics operator for the project, which will contract transportation services, transshipment at seaports, deal with customs and other transportation support.

Earlier, Iranian media reported that Russia and Iran agreed on barter cooperation: Moscow intends to receive auto parts and gas turbines, while Tehran is interested, in particular, in Russian steel. In addition, Iran can supply aircraft equipment.