Russia To Agree New 20 Year Cooperation Deal With Iran?

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Just a few months after Tehran achieved some level of trade and economic security with China, with a 25-year cooperation agreement being signed, Iran’s Ambassador to Moscow has said that the text of a 20-year agreement with Russia has been completed, covering political, security, military, defense, and economic cooperation.

Iranian Ambassador to Russia Kazem Jalali has said that that the agreement was prepared with the insistence of Supreme Leader Ali Khamenei and the embassy drafted the text for a final consideration by the foreign ministry in Tehran.

The agreement in fact is the extension of an older pact. Jalali has stated that Iran and Russia had agreed to extend a cooperation treaty Tehran and Moscow signed 20 years ago during a visit to Moscow by then President Mohammad Khatami.

The original treaty was signed in 2001 for ten years and was twice automatically renewed, but Russia so far has not announced a renewal, despite Iranian overtures. In February, Khamenei sent a letter to Russian President Vladimir Putin to be delivered by parliament speaker Mohammad Ghalibaf, which was delivered to Russian officials.

Jalali claimed however, that based on Khamenei’s letter and a reply by Putin it was decided to set a 20-year period for the new agreement. He also claimed that the old agreement has been automatically renewed for five years.

Iran is currently going through some political changes, with President-elect Ebrahim Raisi having won recent elections but not due to take office until August to allow for a handover. He is regarded as a hardliner, however this is more likely to impact Iranian relations with the United States than Moscow.

Nonetheless, Russia will want to establish some trust before engaging on an agreement with a new President so soon after taking office, and it remains to be seen what aspects of the proposed deal will be attractive to Russia. Although the two sides maintain friendly relations there are sticking points, more recently concerning Iran’s nuclear ambitions, the situation in Syria, and covert funding of the Taliban in Afghanistan.

Current bilateral trade volumes are running at about US$1.6 billion (2019), of which US$1.2 billion are Russian exports to Iran and the balance Iranian goods to Russia. However, Iran has recently signed off a longer-term free trade agreement with the Eurasian Economic Union and this will be expected to increase Russia-Iran trade volumes.

Additionally, the International North-South Transportation Corridor (INSTC) runs through Iran and offers multi-modal connectivity for Russia to markets in India, Turkey, and Central Asia. However, in return for increased trade and security, Moscow will be looking more less interference and meddling from Tehran in regional affairs and a reduction in hardline Islamic rhetoric.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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