Russia and Iran: Partnership amidst contradictions Review by Caliber.Az

There is a widespread belief that the modern world has been divided into blocs, similar to what happened before World Wars I and II. On one side is the United States and its allies, on the other side is China and its partner countries. This view is popular among journalists, but it is actually a serious distortion of reality.

Suffice it to say that China's trade turnover with America and the EU countries is almost 10 times higher than China's trade turnover with Russia and more than 100 times trade with Iran (about $15 billion). Amidst China's continuing critical dependence on Western markets and technologies, the slowdown of the Chinese economy, and also given the presence of a rebellious working class prone to strike fighting, Beijing is very afraid of new sanctions from the West - sanctions that could damage its economy.

Therefore, it is extremely careful about building trade with Moscow and Iran. For example, China has suspended some important investment projects related to Russia, although at the same time, it has increased purchases of Russian energy carriers, which is extremely profitable for it, since they are sold at low prices (due to the impossibility of supplies to Europe) and are a subsidy for its economy. The trade turnover between Russia and China increased last year, amounting to about $200 billion.

And what is going on between Russia and Iran? After February 24, 2022, when Moscow came under severe sanctions, both countries found themselves in a similar situation, subjected to pressure from the West. This was bound to lead to their rapprochement. And so it happened: the trade turnover grew, Russia provides Iran with multibillion-dollar loans for the development of its infrastructure, and, according to some reports, it buys Iranian weapons (Moscow denied reports about the purchase of Iranian drones, but Iran itself later confirmed these reports, stipulating those decisions were made before February 24, 2022). And yet, there are serious problems on the path of developing relations between the countries.

The Russian-Iranian trade turnover increased by 20 per cent in 2022, amounting to $4.9 billion (for comparison: the trade turnover between Russia and Türkiye increased by 100 per cent, exceeding $60 billion). There are various reasons for this. The main one is that both economies focus on the export of raw materials, primarily hydrocarbons. Both countries can do little to help each other in this regard, and at the same time, they need to import engineering and technology sector products. Yes, countries can share their military technologies with each other, in addition, Iran is interested in Russian wheat, and Russia is talking about the possibility of importing products from the Iranian automotive industry. However, this fundamental problem has not disappeared.

Moreover, Moscow and Tehran compete in the Chinese market. After Joe Biden’s administration eased sanctions against Iran in exchange for slowing down the Iranian nuclear programme, Tehran began to increase oil exports. China is rapidly increasing oil purchases in Iran, replacing barrels from Russia, which are becoming more expensive. For example, in August, China imported 1.5 million barrels per day from Iran - a record volume for at least the last 10 years, according to Bloomberg.

Iranian oil, according to the publication, is offered at a discount of $10 per barrel to Brent and is much cheaper than Russian. The prices of Russian oil are not too popular with its other major buyers, for example, India. Therefore, since mid-May, oil exports from Russia to Asia have decreased by a quarter, amounting to 2.6 million barrels per day. This is the lowest figure since January. Because of this state of affairs, Russia is incurring huge losses, and it is the result of Iranian dumping.

There are other economic problems between the countries. The Iranian and Russian markets are bureaucratized, shrouded in a mass of regulatory rules. In addition, Iranian business has adapted to sudden changes and sanctions, and is oriented more towards short-term deals, and some Iranian businessmen in general have acquired the habit of screwing their partners.

It is true that Iran has fairly objective arbitration courts for this case, but in order to defend one's interests there, it is necessary to have representatives in Iran with perfect knowledge of local laws and informal rules. Finally, expanding trade requires infrastructure development, as existing communications are insufficient. To this end, Russia is investing in projects to build transportation routes, including by providing loans to Iranian companies. However, the repayment of these loans may become quite problematic under the current conditions.

Finally, amid the diplomatic successes of Saudi Arabia, which maintains close relations with both the Americans and the Chinese, and recently normalized relations with Iran, doubts have lately been growing in Tehran about the course it has chosen, rigidly focused on confrontation with the United States. For example, according to Iranian political analyst Hamzeh Salehi, the ability of Saudi Arabia to play simultaneously on several platforms, building relations with the Americans, China and Russia, and in this way to achieve serious concessions from all three is a great success.

This tactic, in his opinion, is extremely effective, because it allows you to tell your partner at any time - if you don't give me what I need, I will make a deal with your opponent. Türkiye is also quite successfully using similar tactics. Salehi notes that a tough confrontation with America - the line that Iran has chosen for itself - is ineffective since it binds it to its partners – China and the Russian Federation, which increases its dependence on them. Salehi's analysis is increasingly found in some Iranian media and may be shared by some part of the Islamic Revolutionary Guard Corps (IRGC), which is the core of Iran's political and economic system.

In general, it can be stated that the confrontation between Iran and Russia and the United States has helped expand the partnership between Moscow and Tehran in various areas of political and economic activity, as well as in the military sphere. To some extent, this brings both states closer to China, America's main rival. But there is no talk of a military-political and economic bloc. Theoretically, such an alliance could be formed in the future, and today there are some prerequisites for it. At the same time, the contradictions between the countries are very great.