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Iran's finance minister trumpets surge in investment from Russia
25 March 2023 04:29
Russia has become the largest foreign investor in Iran over the past year, according to Iranian officials, as the two heavily sanctioned nations have stepped up co-operation since Russian forces invaded Ukraine.
Ehsan Khandouzi, Iran’s finance minister, said Russia had invested $2.76bn in the country during the current financial year that ended this week, citing projects in the industrial, mining and transport sectors, FT reports.
“We define our relations with Russia as strategic and we are working together in many aspects, especially economic relations,” Khandouzi told the Financial Times. “China and Russia are our two main economic partners [and] Iran is going to expand its relations with them through implementing strategic agreements.”
His comments underscore how Tehran and Moscow have ramped up their ties since the west imposed waves of sanctions on Russia after President Vladimir Putin’s invasion of Ukraine a year ago.
Russian business delegations have visited the Islamic republic seeking deals and tips on how to avoid sanctions, while Iran has been keen to develop new trade relationships to bolster its own sanctioned economy.
The US and Europe have accused Tehran of selling armed drones to Moscow that have been deployed against Ukrainian targets. Iran denies its drones are used in the war. Khandouzi said the Ukraine conflict was “unfortunate” for Iran, but did not respond when asked if Tehran received revenues from arms sales to Russia.
The Iranian and Russian central banks signed a deal in January to link their interbank communication systems in a bid to boost bilateral trade. “Russia and some other countries are keen to use mechanisms such as mutual monetary agreements or trade-based swaps. We have negotiated not only with Russia but also with China and other partners, including Turkey, in this regard,” Khandouzi said. “Technically speaking, this financial network is in a better situation between Iran and Russia than others.”
Analysts are sceptical about how far the two can develop trade as both have commodity-based economies producing similar products. But a western diplomat said the fear was that “it’s a dynamic that can become self-sustained”.
Iran has endured decades of sanctions, and has been cut off from the global financial system since former US president Donald Trump withdrew from the 2015 nuclear accord and launched new curbs against the republic.
This has further stymied Tehran’s ability to attract foreign investment — the second-largest foreign investment after Russia was from neighbouring Afghanistan, with £256 million. Chinese investment was just $131 million, behind Iraq and the United Arab Emirates, underscoring how it is not just western companies that are being put off doing business in Iran.
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