Russia, Iran Discuss Tehran’s Coming BRICS Membership
Coordination of the North-South Transport Corridor To Lead To Greater Trade & Transit Opportunities
Tehran’s full-scale involvement in BRICS’ activities was the focus of a telephone call between Presidents Vladimir Putin of Russia and Ebrahim Raisi of Iran, the Kremlin press service said on Tuesday (September 26).
“Ebrahim Raisi gave thanks for supporting Iran’s application for BRICS membership. The sides discussed steps to ensure Iran’s smooth integration into the association’s full-format activities taking into account Russia’s presidency in 2024,” it said. The phone call was initiated by the Iranian side.
The decision on admitting Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates was made at the BRICS August summit in Johannesburg. The countries will become official members of the organization effective January 1, 2024.
In the framework of his foreign policy doctrine, Iranian President Ebrahim Raisi has paid close attention to promoting economic diplomacy, the importance of multilateralism, Iran’s active presence in regional economic organizations, and new South-South cooperation. With Iran becoming a permanent member of the Shanghai Cooperation Organization, a permanent presence in BRICS became a logical next step, with Tehran participating in BRICS meetings and summits.
From Tehran’s point of view, participation in BRICS with about 26% of the area, about 42% of the world’s population, strengthening economic and financial cooperation, an increasing role in the future of the world’s economy and geopolitics, would be a ‘new season’, that will increase political and economic power, and will be a “strategic victory” for Iran’s foreign policy.
Due to the efforts of the New Development Bank in granting US$8 -10 billion in loans (30% of this in Iranian Rial) and focusing on the implementation of projects and supporting infrastructure, Iran has also requested to become a member of the NDB.
By becoming a BRICS member and the upcoming trip of the NDB President to Tehran, the process of Iran’s joining the New Development Bank will be easier. Iran’s participation in the bank and obtaining voting power will lead to financial and technical privileges of the bank and the granting of soft loans to support development and investment in Iran.
Despite the small size of the bank compared to Western institutions, the bank’s foreign currency reserves and liquidity facilities are in favor of Iran. This can make difficult financial conditions easier for Tehran.
Tehran can still use the BRICS international position for geopolitical geoeconomic maneuvers. Also, Iran can be a stable partner for the group due to its unique geographical location and transit networks.
Iran is the key part of the International North South Transportation Corridor (INSTC) connecting ECO, ASEAN, EAEU, India, Central Asia, the Middle East, GCC, and Europe. With the help of BRICS and with the operationalization of INSTC, Iran can earn about US$20 billion annually from transit via the INSTC route.
In turn, that means Tehran can place itself at the crossroads of trade with BRICS and play a bigger role through China’s Belt and Road Initiative.
That goes hand in hand with the development of Iranian free trade zones and the creation of new zones as one of the important economic approaches of the Iranian government. Tehran hopes that with BRICS, it will be able to strengthen existing ports and increase exports from Iran’s free trade and special economic zones.
Iran’s entry into BRICS can also be an important factor in helping Tehran in free trade negotiations with the Eurasian Economic Union (EAEU), India, cooperation with economic institutions, and Latin American and African countries.
This approach is a step to develop trade with emerging economies, rapid economic growth, opening new markets, and huge foreign investment (FDI) deals in Tehran.
Although raising the issue of removing the dollar from global financial and banking exchanges is not practical in the short term, by joining BRICS, Iran expects to reduce its dependence on the dollar and diversify its portfolio of foreign currencies. The de-dollarization of the economy completely aligns with Iran’s economic policies in foreign trade.
Forming alternative payment systems and non-dollar financial systems, moving away from reliance on the US dollar, increasing trade with domestic currencies, and creating a common currency can benefit Iran.
Also, in case of overcoming the challenges and the members’ agreement and creating a new currency (similar to the Euro) and structures similar to SWIFT in BRICS, Iran will be one of the biggest winners. In this approach, membership in BRICS can bypass US sanctions to some extent and support efforts to use national currencies and strengthen BRICS mechanisms.
On the other hand, with the BRICS card, Iran can develop alternative routes, promote economic growth, diversify the economy, minimize costs, open new markets for Iran’s exports, develop e-commerce, market integration, and savings.
Expanding Iran’s strategic relations with the main BRICS members and benefiting from the assistance of the member countries will open up geo-economic opportunities and contribute to the idea of a multipolar world in line with Iran’s foreign policy.
In the past few years, Iran has been caught in the economic challenges of devaluing the country’s currency, annual inflation, hosting more than 8 million immigrants. From the point of view of many in Tehran, with BRICS, it will be easier to attract large investments and economic reforms, increase the volume of production, stimulate Iran’s exports, increase trade exchanges, achieve the development goals and vision of Iran, and increase its overall GDP.
Membership in BRICS can improve and increase tourists from the main and new BRICS countries. Iran imports part of its basic food needs, and providing food security and strategic goods, easy supply of raw materials and grains, and reducing supply chain costs will be easier through BRICS.
In addition, Iran’s official joining of the BRICS group increases Iran’s position of economic power in Asia, the Middle East, and the world, the ability to influence important decisions and activities at the global level and to play a role in global trade and the international economy.
Also, BRICS can use Iran’s internal economic capacities, such as cheap labor, rich natural resources of oil and gas, and the consumer market of 88 million people and its geopolitical position to strengthen itself.
Russia – Iran Bilateral Trade
Russia’s new 2023 foreign policy concept calls for the development of relations with various regional trade blocs, the strengthening of comprehensive and mutually beneficial cooperation with Iran, and the increase of trade and investment with Tehran.
Moscow has recently been looking for new partners to promote cooperation and change the global balance in its favor. In 2022, Russia became the largest foreign investor in Iran, investing US$2.76 billion.
Now, more stable geopolitical partnerships, financial connections and bypassing the SWIFT banking network, efforts to facilitate trade with the payment system, growth of goods transportation through the Caspian Sea, and (INSTC), play an important role in the expansion of bilateral trade between Russia and Iran.
Also, the financing of the section of the Rasht-Astara railway, the development of a partnership for the production and maintenance of civilian aircraft, the plan to create a joint shipping company, the effort to create a gas energy center, the exchange for oil and gas supply, Gazprom’s US$40 billion investment in Iran’s oil and gas sector, Russia’s US$5 billion loan, and so on are important steps towards approaching a US$40 billion trade target.
The volume of business between Russia and Iran in 10 months of 2022 increased by 20% and reached about US$4.9 billion. The two countries mainly trade in agricultural products.
Russia supplies Iran with food and agricultural raw materials such as grain, fat, and oil, about 90% of the total exports. Imports from Iran are 60% of food and agricultural raw materials, followed by chemical goods, minerals, construction products, and plastic products.
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