Russia, Iran, Looking At Boosting Bilateral Trade Ties

Posted by

Two Pariah States creating a significant energy powerhouse to defeat Western sanctions

Arguably the two largest ‘pariah states’ in the eyes of the West, Russia and Iran are making serious effects to boost trade and connectivity ties in the wake of Western sanctions and SWIFT disconnection. Given that Iran wants nuclear energy and Russia is in the business of building nuclear power stations, the problems for the United States in particular in dealing with this comradery are significant. In fact, Washington has already made guarantees to Russia’s ability to trade with Tehran as part of ongoing talks to salvage the Joint Comprehensive Plan of Action on the Iranian nuclear program.

That bilateral need is illustrated by Thursday’s (April 7) opening of the Iran-Russia Trade Conference in Moscow with the participation of representatives of more than 350 Iranian and Russian companies.

The West has declared the collapse of the Russian economy as its goal over its offensive in Ukraine. Moscow, however, says the sharp rise in prices of fuel, grain and other goods, as well as record inflation is hitting unfriendly Western countries almost as much.

In the meantime, Russia is reorienting its economy to new markets, with Iran being one of them. Bilateral trade between Russia and Iran hit a new record in 2021, surpassing US$4 billion, with Russian exports to Iran accounting for more than US$3 billion of that figure and Russian imports reaching US$967.3 million, up 21.4 percent more than a year earlier.

During a meeting between government and business circles of the two countries, businessmen and economic experts have discussed readiness from both sides to increase their trade level, including the issue of settlement in Rubles. Entrepreneurs from both countries say they are looking for opportunities to enter the market of the opposite countries.

As western countries are increasing their economic pressure on Russia, the country has focused on rapid import substitution and the markets of other countries that have not imposed sanctions on Moscow. Iran has also announced agreements with Russia on the use of national currencies in trade.

Forum participants note that Russia can use the experience of countries like Iran to foil western sanctions. They also say boosting economic partnership between Moscow and Tehran will help both countries contain western pressure.

Iran signed a Free Trade Agreement with Russia via the Eurasian Economic Union last year. Nine different industrial sectors have been targeted by both countries for future trade development, including

industry, technology, petrochemicals, medicine, food industry, aquaculture, food industry, medical equipment, and pharmaceuticals.

Despite significant US sanctions against it, Iran’s GDP is US$490 billion, similar in size to Belgium or Thailand. GDP per capita is about US$2,300 amongst a population of 84 million. A combination of Chinese and Russian infrastructure development will help replace decaying assets due to the countries sanctions problems and ensure that Iran’s huge mineral oil and gas assets – it owns 12% of global reserves – flow east instead of west. Russian technical expertise is being drafted in to assist – another area where joint projects assist Chinese supplies.

In terms of rebuilding Iranian infrastructure, Iran, China and Russia are in negotiations to rebuild and develop 116 Iranian airports in a project that is expected to last much of the decade. Iran is a key part of the multimodal International North-South Transportation Corridor (INSTC) with its ports at Chabahar on the Arabian Gulf and Anzali on the Caspian Sea, through which products can be shipped to and from Russian and Iranian markets, and for Russian exports from its Caspian Lagan Port, onwards to markets in East Africa, the Middle East, India, and South Asia.

Iran’s FTA with the Eurasian Economic Union should also be taken seriously. Russia is responsible for about 93% of all EAEU trade, with Iran’s non-energy exports to the bloc up 93% in 2021 over 2020. That is additionally reflected in Caspian shipping, where both countries have also agreed to increase maritime volumes and invest in new roll-on, roll-off vessels servicing the Iran-Russia maritime route. Additional discussions are in place concerning the feasibility of the proposed Iran-Afghanistan-China railway, a spur from the INSTC routes that would head East and bisect Afghanistan, linking up with Pakistan’s CPEC and national rail system. Iran also became a full member of the geopolitical Shanghai Cooperation Organisation, which also includes China and Russia in addition to the Central Asian nations and Afghanistan, where its regional expertise and energy can assist in settling the country down. It will also help avoid regional conflicts and promote inter-regional trade: other members include India and Pakistan.

Related Reading

 

About Us

Russia Briefing is written and produced by Dezan Shira & Associates. During these uncertain times and sanctions imposition, our firm assists Russian companies relocate to Asia, and provides financial and sanctions compliance services to foreign companies operating in Russia. We also provide market research and advisory services to foreign exporters interested in Russia as the economy looks to replace Western sourced products. Please contact us at russia@dezshira.com or visit us at www.dezshira.com.