Russia, Iran and South Caucasus – the main factors and perspectives

The question JAMnews asked was: how is the Russian-Iranian cooperation, now likely to scale up after international sanctions against Iran were lifted in 2016, going to impact the South Caucasus?

Sevak Sarukhanian, director of the Armenian Centre for Society Research and expert on Iran, and Sergei Minasian, deputy director of the Caucasus Institute and political analyst, have answered it.

Factors that may hinder implementation of major Russian-Iranian projects:

1. Economic situation in Russia

Due to the economic crisis in Russia, Russian energy companies are lacking necessary investment funds for investing in the Iranian economy.

2. Iranian legislation

Iranian legislation considerably restricts the presence of foreign capital in the oil and gas sector, which is considered public domain.

3. Iran is aspiring towards Europe

Iran uses its energy capacity in negotiations with the European Union. It will be more interested in the European companies, rather than in Russian ones. This will strengthen Iran's position in Europe and accelerate the process of lifting sanctions against it.

4. Russian-Iranian cooperation failures

Since the '90s until 2006, Russian energy companies’ any attempts to invest in Iran's oil and gas, were crowned with complete failure.

5. Iran’s Protectionism

The EEU (Eurasian Economic Union) and Iran hardly have any prospects, since Iran pursues a protectionist economic policy. It encourages its own producers and its market.

6. Historical memory

Iran has not forgotten either the end of the 18th century, first third of the 19th century, or various stages of the 20th century. In recent decades, Iranians’ perception has deeply ingrained a belief that Russia acted wrong in the 'Gore-Chernomyrdin deal', breaking contracts on supplies of S-300, etc. Therefore, Iran views Russia as a country that cannot be trusted because it can let anyone down any moment.

What can change the situation:

1. Iran's membership in WTO

Iran can become a full-fledged member of the WTO. It can follow a path of partial liberalization of its economic and trading system. Iran may become a partner of the Eurasian Union not because of Russia, but given the economic and trade relations with other countries-members of the EEU, for example, with Kazakhstan.

2. 'The Silk Road'

There is another spectrum of interaction of the Russian-Iranian cooperation as part of the Chinese 'Silk Road' economic project. The cooperation in this case will be implemented in two areas: cooperation between Tehran and the EEU and participation of Iran, China and the EEU in the implementation of the general financial, transport, economic programs for 'Silk Road' development.

3. Geopolitical interests

Unlike energy sphere, where there are factors actually preventing Russia-Iran cooperation, from the geopolitical point of view, there is a tight accord between the two countries on a number of regional issues (Greater Middle East).

4. Security cooperation

Political agreements reached in 2015-2016, including those on supplies of S-300 systems to Iran, have contributed to greater coordination between Moscow and Tehran in the security area. These two countries have a number of common interests:

·      a breakthrough over Iran's nuclear program, in which Russia has played an important role;

·      the prospects for Iran’s further economic and political lead out from isolation,

·       as well as the issues related to Syria, Iraq and the 'Islamic state.'

5. Military cooperation

Moscow and Tehran are seriously getting closer. A situational military-political alliance involving Iran, Iraq, the Assad regime and Moscow, has been formed. A clear demonstration of the aforesaid alliance was the launch of cruise missiles from the southern waters of the Caspian Sea, that passed through the airspace of Iran and Iraq.

What do we have at the moment:

1. Caution

Lifting sanctions against Iran gives the country versatile opportunities for cooperation with different countries, including Russia. However, Iran is skeptical about Russia and carefully accepts co-operation.

2. Conflict of interests

One would think that lifting sanctions against Iran, which was one of the key trading partners of Russia as early as before the revolution, should meet Russia's national interests. However, Russia, in turn, couldn’t be happy about Iran’s appearance as a strong competitor state in the region and emergence of a new major gas and oil supplier at the global market.

3. Competition in the South Caucasus region

It is less likely that there will be any Russian-Iranian joint projects in the South Caucasus region, since both states are pursuing the same goal: to increase its influence and presence in the region. In the period, when NATO was strengthening its positions and the USA’s positions were reinforced, Russia and Iran were in a certain informal unstructured union. Today, the West is gradually withdrawing from the South Caucasus, including from Azerbaijan, which for many years was considered a pillar of the western estimates. In view of the aforesaid, a competition between Russia and Iran increases.

In view of the abovementioned arguments, implementation of serious major joint projects seems unlikely, which minimizes the impact of cooperation between the two countries on the South Caucasus region.

Published: 12.01.2017


Armine Martirosyan, Yerevan 12 January 2017 - 07:43