08.08.2007
Problems and Prospects of Iranian-Russian Relations
№3 2007 July/September
Mehdi Sanaei

University of Tehran, Iran
Department of International Relations
Senior Lecturer;
Head of the Center for Iranian and Eurasian Studies;
Senior Advisor to the Foreign Minister of Iran and former Ambassador of Iran to Russia

Russia and Iran, which was officially
called Persia before 1935, established diplomatic relations back in
the 15th century. The two countries have gone through different
periods since then, with better relations giving way to worse ones,
and contentions and animosity replacing cooperation.

Relations between Moscow and Teheran
warmed noticeably in the final years of the Soviet Union. A weighty
contribution to this was made by the 1990 visit to Moscow of the
then speaker of the Iranian parliament, Ali Akbar Hashemi
Rafsanjani. However, the icy relations only melted after the Soviet
Union’s collapse and after Moscow reduced its global claims. There
was more mutual understanding between the two countries and
cooperation unfolded in politics, in culture and in the economy.
This was the most dramatic change to take place in Iranian-Russian
relations over the span of several centuries. The two countries
stopped viewing each other as a threat and recognized some common
dangers facing both of them.

THE FORMAT AND SIGNIFICANCE OF
COOPERATION

Over the past fifteen years the Islamic
Republic of Iran, whose foreign policy has been characterized by a
realistic approach, attached significance to its relations with
Russia. This relationship is acquiring a new quality, since Iran
has begun to see military and economic ties with Russia as an
opportunity to make up for complex relations with the West. Iran is
seeking to regain the position of a powerful state that stands
between Russia and Europe (the West) that it had in the 19th
century. This time, however, the U.S. occupies Europe’s former
place on the political chessboard and Iran is no longer the passive
pawn that it used to be.

Yevgeny Primakov, who became Russian
prime minister in 1998, dispelled the remainder of Moscow’s doubts
as to the importance of working relations with Teheran. Russia
abandoned its exclusively pro-Western orientation, which was
typical of its policies after the Soviet Union’s
collapse.

When Russian President Vladimir Putin
came to power, a vision of the panorama encompassing the West and
the East, including cooperation with Iran, became an indisputable
feature of Russia’s foreign policy. Teheran, with its huge
influence in the Islamic world, can be a valuable partner for
Moscow that shows a willingness for rapprochement with the Islamic
community and has even gained observer status in the Organization
of the Islamic Conference.

Russia and Iran maintain a coordinated
and close eye on global strategic and regional problems. Both
countries believe in the importance of efforts to eradicate the
practice of double standards, to fight terrorism, to resolve
international problems through dialog, and to work together to
stamp out drug trafficking.

Russia’s concept of foreign policy
adopted in 2000 says Moscow supports the establishment of a
multipolar world and does not accept U.S. hegemony. President Putin
explicitly formulated this position in a speech he gave in Munich
in February 2007. Iran has a fully identical vision. Foreign policy
principles that the country’s former President Seyyed Mohammad
Khatami embedded in his concept of a “dialog among civilizations”
and the current policy course of President Mahmoud Ahmadinejad
strongly reject a one-sided approach in the international arena,
both in the geopolitical and cultural/civilization
aspects.

A new political alignment of forces in
the Middle East, Central Asia, the Caucasus, the area around the
Caspian Sea and Afghanistan is exerting a noticeable effect on the
agenda of Iranian-Russian dialog. Interaction between Russia, with
a population of 145 million, and Iran, with a population of 65
million, can play a fruitful role in settling regional conflicts.
Both Moscow and Teheran speak against any outside pressure on the
Caucasus and Central Asia and against the presence of external
forces there.

The Arab-Israeli conflict is another
area where the positions of the two countries are very close. The
approach Russia took toward the Hamas movement that headed the
government of the Palestinian Authority and toward the
Israeli-Lebanese war of 2006, the reluctance to list Hezbollah
among terrorist organizations, and the demand to pull out foreign
military bases from Central Asian countries, which Moscow made
public at the Shanghai Cooperation Organization (SCO), expand the
field for Iranian-Russian political interaction.

Iran hopes to see Moscow as a strategic
partner, but the positions of the two countries diverge in this
aspect, since they seem to look at cooperation from somewhat
different angles. While Iran perceives its relations with Russia
through the prism of international politics and gives secondary
importance to purely bilateral issues, Moscow emphasizes
bilateralism and does not need Teheran as a strong international
partner. The Russian authorities have put an upper limit on
relations with Iran even at the regional level. Evidence of it is
found in their reluctance to consider Iran’s full membership in the
SCO.

Russian leaders keep reiterating that
the ideology of pragmatism forms the backbone of their political
course. An analysis of the Kremlin’s actions shows even more
strongly that there is hardly any other country in the world that
is so focused on getting practical benefits from its policy than
Russia. Moscow has fully shaken off the ideological approach to
international policies, typical of the Cold War era. As it makes
decisions today, the Russian government seeks to avoid excess
obligations and expenses. Although the country tries to fight many
tendencies of global development, it does not have insurmountable
differences with the existing structure of the international
community. In essence, Russia even bids to consolidate it. The
country’s historic routes go deep into the Byzantine civilization,
which means that it belongs to the ‘Western Front’ by virtue of its
cultural and psychological characteristics.

Moscow’s balanced position on the
Iranian nuclear dossier on the UN Security Council and especially
the agreement on sales of Tor M-1 surface-to-air missiles testify
to its productive attitude toward Iran. Yet Russia has a limited
capability to support Iran. The pragmatic Russian government has
indicated that it can cooperate with Teheran only to a degree that
does not impede the promotion of its other interests or
international integration processes.

Such an approach has always made it
impossible for the Russian leaders to regard Iran as a genuine
strategic partner. It is quite noticeable that officials in Moscow
never mention Iran as they expound their ideas about a multipolar
world and the rise of new centers of power. President Putin’s
visits to Egypt, Algeria, Saudi Arabia, Qatar, and Jordan have
attracted worldwide attention in recent years, but he has never
visited Teheran, although President Seyyed Mohammad Khatami made a
visit to Moscow as far back as in 2001.

ECONOMIC COOPERATION

Actively expanding economic and
cultural contacts also facilitate the strengthening of bilateral
cooperation. They embrace a wide variety of sectors from the
nuclear and thermal power industry to the oil and gas industry, and
they also include the manufacturing sector, agriculture, forestry,
fisheries, telecommunications, ecology and science. Farsi
departments have been opened at Russian universities, while Iranian
universities have opened Russian departments. There have been
festivals and exhibitions of the other country’s movies and arts
organized in Moscow, St. Petersburg, Teheran, Isfahan, as well as
in places quite distant from the capital cities.

There has been considerable success in
Iranian-Russian cooperation through Russia’s participation in the
Iranian satellite Zohre-1 project. In October 2005, a Russian
carrier rocket was launched from the Plesetsk space center near
Arkhangelsk to take into orbit the Russian-Iranian satellite
Sina-1, designed to transmit television programs.

Russian-Iranian trade grew to about $2
billion in 2004 from $600 million in the mid-1990s – a growth that
both countries can scarcely be content with. The growth exceeds
Soviet-Iranian trade in 1974, but only by a small margin. There is
a considerable potential for a much greater growth, considering the
volumes of Russia’s trade with Turkey ($10 billion) or with Israel
($6 billion), and even more so because Iranian exports to Russia
make up just one-twentieth of overall bilateral trade. Russian
exports dominate bilateral trade and mostly consist of
metallurgical products, paper, cardboard, defense equipment, as
well as equipment for the nuclear power industry, wharfs and
floating platforms.

Iranian companies sell Russia fruits,
pistachio nuts, processed horticultural products, tobacco, minerals
and some kinds of construction materials. Iran Khodro Industrial
Group, Iran’s biggest carmaker, has designed a Samand sedan
adjusted to the Russian climate. The company exported 3,000 cars in
2006, but Iran Khodro plans to increase sales to 20,000 units in
the next three to five years.

Russian exports to Iran are typically
sent by rail to Astrakhan near the Volga River delta and then
shipped to Iran across the Caspian Sea. Iranian exports are taken
by ship to the port of Makhachkala. Direct rail freight between the
two countries is possible only via the Serahs border crossing in
Turkmenistan, where the wheels of the train have to be changed,
since the railway tracks have a different gauge in the former
Soviet Union. However, the Serahs wheel-changing capacity does not
exceed 200 wagons a day.

These facts have moved the issue of a
North-South transport corridor to the top of Russian-Iranian
agenda. The route is expected to ensure commodity deliveries from
Europe to South and Southeast Asia and the other way round via
Russia and Iran. It will help quadruple the volume of cargo
transits via Iran to about 10 million tons a year. Also, the
project presupposes that a commercial shipping route will be opened
on the Caspian Sea, seaport facilities in both countries will be
overhauled, and the littoral area countries will build new highways
around the Caspian Sea and will upgrade the railway network. An
agreement on the North-South transport corridor has already been
signed by Belarus, India, Iran, Kazakhstan, Oman, Russia, and
Tajikistan. Moreover, more than ten European and Asian countries
have said they would be ready to join it.

Since the possible routes of commodity
transportation between Asian countries and Russia via Iran are 65
to 75 percent shorter than the ones existing today, Moscow finds
them to be quite promising. With the current ratio of
Russian-Iranian exports standing at 20:1, the ships that take
Russian cargoes to Iranian ports have to return empty. Instead,
they could carry transit cargoes from India and Southeast Asia. If
the North-South transport corridor is actually established, the
delivery time from Southeast Asia to Western Europe will be reduced
by at least three to four days, and costs will drop by 15-20
percent.

It has not been ruled out that a
navigable canal might be built in the future between the Caspian
Sea and the Persian Gulf. A project of this kind (incidentally,
Iran has already drafted one) will revamp the geography of
international navigation in much the same way as the construction
of Panama and Suez Canals did in the past.

An inland waterway from Iranian ports
on the Caspian Sea to southern Europe (along the Volga-Don canal),
as well as to Scandinavian countries and Northern Europe via the
Belomorkanal waterway system in northwest Russia and the Baltic
Sea, may have a great future. The commissioning and maintenance of
Caspian navigation lines is an important objective of the NOSTRAC
transport project drafted under the auspices of the United Nations
Industrial Development Organization (UNIDO).

Cooperation in the energy sector can be
found in a number of milestone events like Russian investment in
the South Pars natural gas field, the participation of the Russian
state-controlled company Tekhnopromexport in the construction of
the Shahid Mohammad Montazeri thermal power plant in Isfahan and
the Ramin power plant in Ahvaz, and also the construction of Iran’s
first coal-burning power plant Tabas. Russian energy giant Unified
Energy System (UES) and the Iranian company Tavanir signed a
memorandum of cooperation in the energy industry in 2004. The
document envisions that the sides will synchronize operations of
their energy systems and emphasizes cooperation among Russian,
Iranian and Azerbaijani power plants.

In the meantime, Russia views Iran as a
possible competitor in supplying energy resources, and in this
light, a proposal by Iranian spiritual leader Seyyed Ali Khamenei
to set up a natural gas alliance, which could enhance both
countries’ influence in the world, has special significance. Moscow
has had a mixed reaction to the idea, but if Teheran continues
exerting efforts to explain and promote the project, the gas factor
will turn from a source of contention into a tool of regional and
international cooperation.

COOPERATION IN ATOMIC ENERGY

Iran launched its own nuclear program
as early as during the rule of the shah. It presupposed a broad
development of nuclear power facilities, including the construction
of 23 reactor units and research centers and the training of
personnel. Its authors proposed reaching these goals through
extensive financial and technical assistance from abroad and to
spend some $30 billion on it.

Interest in atomic energy reemerged in
Iran in the early 1980s owing to purely economic considerations.
The plan for the development of the Islamic Republic of Iran from
1989-1994 stipulated a rapid modernization of the economy and its
industrialization with the aid of advanced technologies and an
increase in the exports of manufactured goods, along with energy
resources. Iranian and foreign experts said then that the objective
required an increase in electricity production, which was
impossible to achieve due to the scarcity of water resources in the
country. Atomic energy offered the only clue to the solution of the
problem. It was then that Teheran University’s nuclear research
center went back into operation with a 5 megawatt experimental
reactor unit. Iranian specialists built another nuclear center in
Isfahan in the mid-1980s. Now it has a small experimental reactor
made in China. At the same time, the mining of uranium ore began in
the Yazd province.

Iranian-Russian cooperation in atomic
energy is focused on the construction of the Bushehr nuclear power
plant. The project was produced by Siemens in 1972, and the company
was also the first building contractor in Bushehr. However, its
workers left Iran after the Islamic Revolution in 1979. The
unfinished project was mothballed. Thus, the money allotted for
construction work did not bring any beneficial results for Iran.
Russia expressed its readiness to complete construction on the
nuclear power plant and proposed terms that were acceptable to
Iran.

On January 8, 1995, Moscow and Teheran
signed an $800-million agreement to build the first power unit in
Bushehr and to install a VVER-1000 water-cooled water-moderated
reactor. The event signaled the start of practical cooperation
between the two countries in nuclear power.

Atomic energy is one of the main areas
of bilateral cooperation today. Iranian-Russian activity in nuclear
energy from the viewpoint of international and Russian law fully
conforms to the letter and spirit of the Nuclear Nonproliferation
Treaty, the Charter of the International Atomic Energy Agency
(IAEA) and the trade rules of the Nuclear Suppliers
Group.

Interaction between Moscow and Teheran
in the nuclear sector relies on the following documents:

– The August 17, 1992, Agreement on
Utilization of Atomic Energy for Civilian Purposes;

– A contract for completing
construction of power unit No. 1 in Bushehr that executives of
Russia’s foreign-trade company Zarubezhatomenergostroi and Iran’s
Atomic Energy Organization signed on January 8, 1995;

– A protocol of negotiations between
the Minister of Atomic Energy of the Russian Federation, Dr. V.N.
Mikhailov, and the Vice-President of the Islamic Republic of Iran,
the president of the Atomic Energy Organization, Dr. Reza
Amrollahi, signed on January 8, 1995;

– A supplementary agreement signed in
spring 1998 during a visit by Russian Deputy Prime Minister
Vladimir Bulgak to Teheran.

About 300 Russian companies and 2,000
specialists currently work at Bushehr. Talks between the two
countries on the construction of a second power unit are also
underway.

The deal triggered sharp discontent in
the U.S., which perceived it as a threat to its national interests.
Washington claimed that a nuclear reactor would enable the Iranians
to obtain the materials necessary for making a nuclear bomb and
this, in turn, would break the terms of the nonproliferation
treaty. In response, Teheran assured the international community
that its defense concept does not imply development and/or use of
nuclear weapons but emphasizes totally different means of
deterrence.

The U.S. Administration has issued open
ultimatums and threats regarding Bushehr at times. Washington has
accused Moscow on many occasions of passing missile and nuclear
technology to Iran. And yet the Russians and Iranians never veered
from the path they had chosen.

Russia believes that a mutually
beneficial cooperation in the energy sector meets its long-term
interests. The Russians think that one of the goals of U.S. policy
toward Iran is to squeeze Russia out of Iran and to take over its
position as an exporter of high technologies.

To allay Western fears, Russia pledged
to reaccept all the spent nuclear fuel from Bushehr for
reprocessing on the basis of international rules and under IAEA
supervision. Experts say Moscow issued reliable guarantees this way
that nuclear waste will not be used to obtain enriched radioactive
materials. The Kremlin reiterated afterwards that it does not see
any signs of a situation in which Teheran could produce nuclear
weapons.

At this moment, neither Russia nor Iran
plan to renounce cooperation in atomic energy. However, they have
to consider the fact that cooperation in an area as sensitive as
nuclear power usually comes under the impact of economic, strategic
and political factors. This means that the destiny of
Iranian-Russian cooperation will be contingent on the political and
strategic situation in the region and the world at
large.

OBSTACLES AND CONSTRICTIONS

One of the biggest obstacles is the
absence of working mechanisms of cooperation between the Russian
and Iranian banking systems, which leaves many important agreements
shelved. Another unfavorable factor is the scarce or unreliable
information that businesses can receive about each
other.

The majority of the political,
cultural, economic and trade institutions in Iran have a shortage
of employees that can speak Russian and that have a good knowledge
of Russian culture, although a number of universities and companies
have taken steps to rectify this situation, and the state will
hopefully support them.

However, there are deeper-lying
problems and constrictions too. Even though Iranian-Russian ties
have been growing over the past twenty or so years, both countries
have people who criticize this trend.

For instance, a range of Iranian
observers and politicians (albeit few of them make political
decisions) have voiced doubts about Russia’s reliability as a
long-term partner. They indicate that the Russian Empire and then
the Soviet Union played a deplorable role in Iran in periods in the
past, and that today’s Russia, too, plays the Iranian card in order
to fortify its positions in relations with Europe and America – in
other words, it has turned Iran into an instrument to help it gain
more weight in U.S. opinion.

These people cite arguments like delays
in completing the Bushehr plant. Some of these analysts assert that
Russia may succumb to lucrative dividends or benefits in the future
and turn its back on the Iranians. Developments in recent months
and Moscow’s claims that Teheran has fallen short of meeting its
financial obligations add to their list of evidence. Given the
general mood among the Iranian elite, it would be good if Moscow
realizes that a suspension of contacts in atomic energy would
unavoidably hurt bilateral relations.

On the Russian side, those who oppose
closer cooperation with Teheran claim that bilateral trade,
although small enough in volume, includes some delicate strategic
items that cause a lot of headaches. They say Iran has taken a
selective approach to the Russian market and only buys from Russia
commodities that other countries refuse to sell to it. But if
Teheran’s relations with Washington improve, Russia will cease to
be an important political and trading partner for it.

Russian politics has an extremely
complex structure, where decision-making resembles a chess game
where various political and especially economic players make
crucial moves. Iran will fail to work out a realistic effective
policy toward Russia unless it takes a realistic account of the
variegated interests existing there. Teheran needs strategic
relations with Russia that will help to consolidate the
international positions of the Islamic Republic of Iran.

The prospects for Iranian-Russian
relations look quite favorable despite the current problems. The
situation where the two countries’ economies complement each other
creates a strong base for strengthening bilateral ties. Iran and
Russia have all the necessary prerequisites for boosting trade,
mutual investment and cooperation in the transport and energy
sectors.