Economy takes center stage in budding Iran-Russia relationship

Iran and Russia are opening multiple new areas of cooperation, with Iranian Foreign Minister Hossein Amir-Abdollahian saying last month that the two sides are finalizing a “long-term strategic cooperation agreement”.

Russia’s newly released Foreign Policy Concept calls for “developing the full-scale and trustful cooperation with the Islamic Republic of Iran,” naming Iran first among the countries of the Muslim world.

“If they’ve always been hand-in-glove politically, they’re putting way more emphasis into their economic relationship now,” said Gabriel Noronha, an expert with the Jewish Institute for National Security of America think tank and former US State Department official who worked on Iran issues during former US President Donald Trump’s administration.

According to Iranian officials, trade between the two countries doubled in 2022 and Russia invested $2.76 billion during the Persian year that ended on March 20, becoming Iran’s largest foreign investor.

Moscow and Tehran are working together on multiple fronts, facilitating bilateral trade and business, expediting the completion of transit routes including the North-South Transit Corridor and its Caspian Sea component, and linking their banking systems to facilitate financial transactions.

“All of these measures are aimed at circumventing Western sanctions and strengthening multilateral frameworks outside of Western institutions,” Washington-based Middle East Institute wrote.

At the core of this new cooperation lies the two states’ perception that Western powers are limiting their freedom of action on the international stage and their ability to defend their core security interests by isolating and excluding them, the center said. 

In July 2022, when President Vladimir Putin visited Tehran, the National Iranian Oil Company (NIOC) and Russia's Gazprom signed a $40 billion agreement to upgrade Iran’s oil and gas sectors. According to Iranian energy sources, the agreement is designed to cover development projects at a number of oil and gas fields in Iran.

The list is said to include a $10 billion investment in the North Pars gas field, which is due to deliver gas by 2026. This field, which is close to Iran’s biggest gas field, the South Pars, had previously been a project given to a Chinese firm but that effort is now suspended.  

According to NIOC, the new partnership with Gazprom is planned to focus on completing Iran’s “unfinished liquid natural gas (LNG) plant.” Work on this LNG plant, located in Bushehr Province, began 15 years ago and was suspended as US sanctions prevented its completion.

The Bushehr LNG plant had been given to Gazprom to complete in 2017, but the Russian company withdrew from the project after the Trump administration reimposed sanctions on Iran in 2018.

Geopolitical realities are now driving the new Russian-Iranian cooperation in the energy sector.  

NIOC head Mohsen Khojasteh-Mehr has said that the new Western sanctions on Moscow make it much less likely that Gazprom will once again pull out of the deal

“Western sanctions will not harm this [$40 billion deal] and its subsequent contracts, because Iran and Russia have decided to [pursue] strategic relations under the sanctions,” he said.

Iran expects long-term strategic pact with Russia to be finalized ‘in a month’

Iran

In May 2022 Iran and Russia, having agreed to switch to mutual settlements in national currencies, discussed the connection of their payment systems - Mir and Shetab.

Last week, the director of the Economic Cooperation Department of the Russian Foreign Ministry said Russia and Iran continue to work on the integration of Russia's Mir payment system with Iran's Shetab.

"Russia prioritizes financial and banking cooperation with Iran, given our common focus on ensuring the sustainability of the bilateral payment and settlement infrastructure, independent of intermediaries from third countries. Work on the creation of a sustainable payment and settlement infrastructure is continuing through relevant agencies," Dmitry Birichevsky told RIA Novosti.

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