EurasiaNet Business & Economics - Russia's Relations With Iran Approach a Reckoning Point

BUSINESS & ECONOMICS

RUSSIA’S RELATIONS WITH IRAN APPROACH A RECKONING POINT

Alex Vatanka 3/26/02

Iranian-Russian relations are approaching a reckoning point. In recent months, Moscow has striven to remain on good terms with both the United States and Iran, two countries whose own bilateral relations have been marked by growing hostility. Russian President Vladimir Putin may soon have to make difficult strategic choices, and he now appears reluctant to do anything that would disrupt the emerging US-Russian partnership. At the same time, the Russian leader seems intent on keeping his options open.

The postponement of Iranian Foreign Minister Kamal Kharrazi’s visit to Moscow, originally scheduled for mid February, was the first sign of discord in Iranian-Russian relations. Kharrazi cited an overcrowded schedule as the reason for the postponement, but some observers suggest the Iranian foreign minister put off the visit after Putin declined to schedule a tete-a-tete meeting. Putin’s cagey approach towards Iran hints at the evolving nature of Russia’s foreign policy.

Putin’s options are based on calculated risks. Iran has been a major purchaser of Russian military hardware for almost a decade. Yet, while Russia surely appreciates the income from Iranian arms sales, Putin evidently believes that the United States has more potentially to offer.

The Russian leader has a number of reasons for not wanting to alienate the United States at present. For one, Washington could play a key role in securing Russian membership in the World Trade Organization. Putin also wants to retain as much Russian leverage as possible over the ongoing NATO expansion debate. Good bilateral relations would also improve the chances for stronger arms control treaties.

Putin has offered unflagging support for the US-led anti-terrorism campaign, in the face of increasingly vocal domestic opposition. [For background see the Eurasia Insight archive]. The Russian president is now eager to see whether his support for the United States since September 11 will pay off with concrete American concessions. Putin’s decisions may be influenced heavily by the outcome of his scheduled May summit with US President George W. Bush.

While Russia is not prepared to surrender its Iranian ambitions entirely, bonding with Iran ranks lower on the Russian list of priorities than pleasing the United States. This dynamic reinforces others that are seriously limiting the bounds of Russo-Iranian alliance.

The gradual improvement in bilateral relations between Iran and Russia over the last decade was largely the result of a complex mix of geopolitical developments. In part it came from Iran’s international isolation in the 1980s, ongoing US-Iranian tension and a Russian desire to secure a larger share of global military trade. Iran, subject to US-led arms embargoes, needs a reliable source of weapons and technology. Meanwhile, Russian authorities candidly assert that arms exports are an economic priority.

Putin has linked arms export revenue to the country’s budget for scientific, engineering and manufacturing jobs and capacity. Indeed, Moscow wants to replace Britain as the world’s second-largest arms exporter by the end of this decade. Iran remains a significant factor in Russian calculations in this regard. Accordingly, Iran has ordered an estimated US$4 billion in Russian hardware, technology and services since 1989 and may soon become the world’s third-largest buyer (after China and India) of Russian military equipment.

Despite this arms trade connection, experts believe Russia and Iran do not make natural diplomatic partners. The two states have interests that overlap in a few areas, including shared disdain for Afghanistan’s deposed Taliban regime, and an inherent suspicion of American, Turkish and Pakistani ambitions in Central Asia.

However, Russian and Iranian objectives are divergent in several key areas, including the development of energy resources and export routes. Russian and Iranian diplomats have argued for months over the territorial division of the Caspian Sea [For background see the Eurasia Insight archives]. In addition, the two countries have competed over proposed pipeline routes. While Russia and Iran might initially appear to have a mutual interest in counterbalancing America’s rising power around the Caspian, their own competition for the same clients will probably block co-ordination of policy between them in the next several years.

Russian geo-strategic aspirations in the Middle East will not necessarily encourage stronger ties. Moscow had stronger ties with Saddam Hussein’s Iraq than with Iran during the Soviet era, and this dynamic still seems intact. Like its relationship with Iran, Russia’s friendliness to Iraq plays out in economic terms. Witness the Iraqi government’s extensive concessions to Russian energy and construction firms. In Iran, Russian participation in the energy sector is minimal and the presence of Russian technicians is mainly limited to those engaged at the construction of the Bushehr nuclear plant.

Russia and Iran also very often clash on crude oil price forecasts, even though both states are major oil exporters dependent on oil revenues. Russia has made it clear that it is interested in gaining more market share, while Iran - seemingly always hawkish in promoting production cuts to sustain prices - is looking to bring crude prices back up to the range of US$22-25 per barrel. Meanwhile, Russian officials have said the country can live with oil prices at US$18 per barrel or lower. (Iran’s state machinery depends more on oil revenues than Russia’s does.) Both states in essence envisage themselves as major global energy players, and to date there has been more rivalry between them than collaboration.

So Moscow’s relationship with Tehran looks opportunistic rather than geopolitical. While US-Iranian hostilities persist, Moscow can continue to pursue its lucrative business dealings with Tehran. However, the flow of Russian military hardware to Iran in exchange for cash constitutes pretty much the only natural symbiosis for the two states. Indeed, in the event that the US and Iran normalize relations, Tehran seems more naturally destined to confront Moscow than to court it.

Editor�s Note: Alex Vatanka is a journalist specializing in Russian and Central Asian affairs.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.