Context

Recently Iran’s President Ebrahim Raisi visited Moscow for a two-day official visit.

• It was President Raisi’s first bilateral and third foreign visit after coming to power since August 2021.
• Both Iran and Russia have continuously shown growing convergence in their relationship with each other.

Background

• Iran and Russia are strategic allies and form an axis in the Caucasus alongside Armenia.
• Iran and Russia are also military allies in the conflicts in Syria and Iraq and partners in Afghanistan and post-Soviet Central Asia.
• In the past, Hassan Rouhani (president of Iran 2013-21) has been slammed for Trusting the west, but the new president Ebrahim Raisi is trying to reinforce relations with non-western countries, including China and Russia.

Analysis

Contours of Iran-Russia Relations:

• Strengthening Bilateral Trade: The record figure of Iran-Russia bilateral trade exceeded $3.5bn in 2021. But it still falls far short compared with the levels reached between Russia and several other regional actors. Bilateral cooperation in infrastructure, energy, banking and trade are the area of common interest. Raisi has asserted that Iran–Russia ties are on the path to becoming strategic relations.
• Long-Term Cooperation Agreement: On the lines of the Iran-China 25-year Comprehensive Strategic Partnership, Iran is pushing for the implementation of a similar strategic long-term cooperation agreement with Moscow, which indicates how the relations between China and Russia are being deepened under the “Look to the East policy”.
• Maintaining Distance from preceding Nuclear Issue: Raisi administration has linked the revival of Iran’s economy by envisaging Look East policy based on strengthening economic ties with Iran’s neighbours and key non-Western powers as the long-term strategy serving Iran’s geoeconomics and geopolitical interests. This is contrary to the approach adopted by the preceding Rouhani administration.

Geo-economic Opportunities and Challenges:

• Countering Economic sanction levied by the USA: Strengthening of economic ties with Russia has acquired a new significance in countering Washington’s economic pressure and policy of isolating Iran. The bilateral trade between Iran and Russia doubled in the last two years. Iran’s exports to Russia have passed US$ 1 billion for the first time.
• EAEU-Iran preferential trade agreement (PTA): The impressive growth comes after Iran and the Eurasian Economic Union (EAEU) implemented in October 2019, a three-year preferential trade agreement (PTA) which stipulated that during this period, the two parties must accept the conditions for achieving a full free trade plan for tariff-free essential commodities.

Eurasian Economic Union (EAEU) The Eurasian Economic Union (EAEU) includes Armenia, Belarus, Kazakhstan, and Kyrgyzstan as well as Russia. Objectives of EAEU: Increase cooperation and economic competitiveness for the member states Promotion of stable development to raise the standard of living in member states.  Free movement of goods, services, labour, and capital between the states Provide for common policies in the macroeconomic sphere The agreement was designed to be in effect for 3 years, it is to expire on October 5, 2022. For this reason, the parties have recently begun technical and expert negotiations to upgrade the PTA to a free trade agreement (FTA).

• Partnership with non-Western powers: The partnership with non-western powers is crucial to the Raisi administration’s narrative of ‘active resistance’, namely that Western sanctions can be rendered ineffective through a partnership with non-Western powers.
• Synergy Against US unilateralism: President Raisi has called for synergy against US unilateralism. Iran has also made it clear that it is selling its oil and getting its money despite western economic sanctions, therefore the US cannot use its sanctions as leverage anymore.
• Russia as a ‘Eurasian Balancer’: Since the collapse of the Soviet Union in 1990, the emergence of landlocked republics in Central Asia and Russia no longer had a threatening presence on Iran’s northern borders. It has consistently improved Iran’s view of Russia in the region. Unlike the Soviet Union, which was seen by Iran as a hegemonic power, Russia is seen as a ‘Eurasian balancer’ seeking to bring forward a multipolar world with the vision of ‘Greater Eurasia’.

‘Greater Eurasia’: It is a powerful new geopolitical space that could pose a fundamental challenge to the US-led liberal international order”. At the same time, it provides Iran with opportunities to advance its geo-economic position, especially its transit role and trade, by participating in and seeking synergies with various trans-continental connectivity projects in Eurasia.

Limitations:

• Limitations of money transfer Transactions: Since 2019, more than 50 per cent of the total bilateral trade is being conducted through national currencies as both countries seek to break dollar dominance in trade and finance. Despite bearing the brunt of being cutting-off from the Brussels-based Swift since November 2018, Iran’s trade ties with Russia and the member states of EAEU have remained unimpeded as Russia’s alternative financial messaging system called SPFS or the System for Transfer of Financial Messages was introduced to the banks of the EAEU in October 2019.
• Low shipping capacities of Iranian ports in the Caspian Sea: Measures need to be taken to increase the volume of trade between Iran and the EAEU.
• Shortage of Refrigerated Trucks and Wagons: More than 60% of Iran's exports to the EAEU are agricultural and livestock products. Iran imports products such as meat from the Union, which also require refrigerated containers. The cold weather in the winters of Kazakhstan, Armenia and Russia, as well as the very hot weather in Turkmenistan in the summer, have created conditions within which it is not possible to export and import agricultural and livestock products without refrigerated containers.
• Underdeveloped Rail Communication: Another limitation is underdeveloped rail communication between Iran and Russia in the Caucasus region. Unfortunately, due to the non-membership of Turkmenistan and the Republic of Azerbaijan in the EAEU, Iran does not have a direct land connection with the Union. And Armenia, although a neighbour of Iran and a member of the EAEU-does do not share a border with Russia.

It should be noted that Russia accounts for more than 80% of Iran's trade with the EAEU. For this reason, direct rail communication between Iran and Russia can increase the volume of trade between the two countries.

• Developing transit and transport infrastructure: In Shanghai Cooperation Organization (SCO), summit 2021 President Raisi projected Iran as the link between the three key infrastructure projects in Eurasia:

1. 1. The Eurasian Economic Union
   2. China’s Belt and Road Initiative

• The North-South Corridor
• Iran could be the connecting link between South and North Eurasia through the North-South Corridor, connecting Central Asia and Russia to India. The north-south corridor can strengthen the convergence infrastructure in the form of the ‘Great Eurasia’.

Iran has fifteen common land or water borders with neighbouring countries. Numerous Iranian ports in the Caspian Sea in the north and the Sea of ??Oman and the Persian Gulf in the south, as well as an extensive road and rail network, provide a convenient location to transit goods between Iran and the Eurasian Economic Union. In this regard, Iran has a very good position for the North-South corridor, the Persian Gulf-Black Sea corridor, and the One Belt One Road initiative.

• Russia also considers Iran as a geographically, economically and politically important country located at the southern periphery and shares Iran’s interests in promoting north-south connectivity.
• The integration of the three countries (Iran, Azerbaijan and Russia) railways will enhance their transit capacities while promoting trans-continental trade in Eurasia.
• Iran has agreed to Moscow’s 3+3 formulation involving the three Caucasus countries Azerbaijan, Armenia and Georgia plus Turkey, Russia and Iran for unblocking of Soviet-era transportation lines across the Aras River into Iran.
• A full-fledged free trade agreement between Iran and the EAEU, a reliable land transit across the Caucasus is crucial.

Shaping Eurasian Order:

• Russia-centric policy: In the wake of the changes in the post-Cold War international system (when the possibility of balance between superpowers in the bipolar system was suddenly removed) Iran turned to regionalism when the regional cooperation became a geostrategic necessity. It can be exemplified by the pragmatic approach of Iran when it considered Russian ‘counter-terrorism’ operations in Chechnya in the 1990s and 2000s as an ‘internal matter’ of Russia.

The Chechen experience shaped Russian understanding of the threat posed by ‘radical Islam’ to regional stability and territorial integrity of Russia, Iran also feels threatened by the spread of anti-Iranian Sunni ‘radical Islam’. This convergence culminated in Russia–the Iran counter-terrorism partnership in Syria.

• Shared Opposition to the NATO expansion: The Russia–Iran geopolitical convergence is based on their shared opposition to the NATO expansion and their shared belief that regional powers should shape the security architecture in Eurasia. Russia considers Iran’s participation as necessary in settling regional crises in Syria, Iraq and Afghanistan. Both Putin and Raisi have a convergent view- “NATO influence under any kind of cover in the Caucasus and Central Asia threatens the common interests of independent countries.”
• Afghanistan as a source of Regional Instability: Both Iran and Russia have been concerned about Afghanistan becoming a source of regional instability, terrorism and drug trafficking after the US withdrawal and Taliban takeover of the country. Iran and Russia share an interest in denying the security role to the US and its allies.
• Cooperation against Terrorism in Caucasus and Afghanistan: Iran sees its ‘counter-terrorism’ cooperation with Russia in Syria as a ‘model of regional cooperation’ that succeeded in preventing state disintegration against the rise of Sunni-jihadist forces. Iran not only hopes to replicate the success in Afghanistan but also strengthen its position as Russia’s co-operative security partner in Eurasia. President Raisi reiterated that “the successful experience of cooperation against terrorism in Syria can be applied to the Caucasus and Afghanistan as well”.

Geographically, Eurasia is a tectonic plate that lies under much of Europe and Asia. However, when it comes to political boundaries, there is no shared international understanding of what constitutes the region.

Conclusion:

After the withdrawal of the United States from the Joint Comprehensive Plan of Action (JCPOA), the conservatives (Ebrahim Raisi who is a hard-line, ultra-conservative Islamist, principlist politician) have seized the ground by consolidating the Eastern dimension of Iran’s foreign policy. Iran under his leadership is now looking forward to a long-term partnership with Russia to contribute towards stability and security in their shared neighbourhood and bring geo-economic opportunities.

Previous administrations in Iran had tried to evade and circumvent US sanctions, on the contrary, the Raisi administration’s strategy is to neutralize sanctions, which is being realized through good communications with neighbouring countries. Raisi's administration is firm on the “strategy of balancing foreign relations”. Increasing cooperation and interaction with neighbours is Iran’s basic priority to increase its bargaining power, especially at a time when its economy is fragile and its international position uncertain.