Iran Middle East Politics & Diplomacy
IranSource August 25, 2022

The Ukraine war has made Iran and Russia allies in economic isolation. Here’s how.

By Alam Saleh and Zakiyeh Yazdanshenas

Russia’s invasion of Ukraine has turned the country into a heavily-ostracized state and opened new opportunities for Iran to build closer relations with the major global power.

The United States, European Union, and the Group of Seven (G7) have imposed severe sanctions on Russia. These punitive multilateral sanctions have put Russia in a situation that is familiar to Iran, which has ample experience circumventing their damaging effects.

From the outset of the war, Iran declared the invasion a legitimate Russian response to security concerns over actions by the United States and NATO. The new administration of Ebrahim Raisi admires Russia’s action-oriented foreign policy. Iranian officials have also grown weary of exerting strategic patience and have become more assertive in light of the long-lasting animosity between Iran and the United States, coupled with the failure of the 2015 nuclear deal to reintegrate Iran into the international community.

On July 22, Ali Akbar Velayati, a veteran foreign policy adviser to Supreme Leader Ayatollah Ali Khamenei, stated that, instead of trying to appease the West, Tehran should turn to Russia for support and strategic alignment. Russia, Velayati remarked, has a strong track record of backing the Islamic Republic..

Iranian leaders and policy officials believe that Russia’s invasion of Ukraine could shake the architecture of the international system in a way that is ultimately conducive to Iran’s national interests. In a high-level meeting with Russian President Vladimir Putin in Tehran on July 19, Ayatollah Khamenei clarified Iran’s position on the war in Ukraine, portraying the motives for Russia’s invasion as similar to Iran’s in the Middle East: “Had [Russia] not taken the initiative, the other side would have taken the initiative and caused the war,” Khamenei said.

A now heavily-sanctioned Russia may seem a weakened strategic partner for Iran; however, the imposition of western sanctions and the demonization of Russia may bring Moscow and Tehran closer as mutual enemies of the United States and NATO-led international framework.

The US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in 2018 by the Donald Trump administration led many Iranian officials—and even a March report by the Parliamentary Research Center—to conclude that it is impossible for economic sanctions on Iran to be lifted in a way that would guarantee long-term normalization of trade relations with other countries. Officials have instead put the neutralization of sanctions at the forefront of their agenda. This entails expanding relations with other sanctioned countries to guarantee resilient foreign trade.

The imposition of severe sanctions against Russia marks the entry of a great power into the club of the internationally excluded, which could unlock major opportunities for Iran’s economy, as demonstrated by Moscow and Tehran’s agreement to replace SWIFT with domestic financial messaging systems. Iran and Russia can now build on their trade to try to compensate for sanctions. According to Iranian Oil Minister and co-chair of the Iran-Russia Joint Economic Commission, Javad Owji, the trade volume between the two countries has already increased significantly in 2022. The goal is to reach as much as $40 billion, while 2021 figures were at $4 billion. Iran and Russia recently signed a Memorandum of Understanding (MoU) to establish two trade centers—in Tehran and St. Petersburg—to facilitate trade. On the sideline of Putin’s recent visit to Tehran, the National Iranian Oil Company and Russian gas producer Gazprom signed a MoU worth around $40 billion. Iranian authorities say that Gazprom will support Iran in developing the Kish and North Pars gas fields.

Recent reports on the expansion of military cooperation between the two countries also indicate that bilateral relations are reaching a new level. According to US national security adviser Jake Sullivan, Iran is set to deliver hundreds of drones to Russia. While Iranian officials have not confirmed this, the expiration of a UN arms embargo against Iran means that Tehran and Moscow have no restrictions on this cooperation. Iranian drones have already been used in the Middle East and Russia’s interest in them demonstrates their efficiency.

In addition, on August 9, Russia launched an Iranian intelligence satellite into orbit from Kazakhstan. Iranian officials said the satellite had been designed by Iranian engineers and constructed by Russian companies and that new generations of the satellite would be jointly built by the two countries. Undoubtedly, this can enhance Iran’s intelligence capabilities and power projection.

Last year, Tehran and Moscow agreed to update a twenty-year cooperation agreement. During a recent visit to Moscow, President Raisi presented a new draft to Putin. Faced with deepening isolation, Russia may be amenable. This would be a hallmark foreign policy achievement for the Raisi administration, as it has prioritized a “Look to the East” policy since its inception. Iran’s long experience in circumventing sanctions can also provide valuable lessons for Moscow, which has been made evident by the recent travel of Russian businessmen to Tehran.

The war in Ukraine is fracturing and reformulating the geopolitical and geo-economic dynamics of the world, and Iran sees these changes as in its favor. Contrary to the West’s advice that Iran should quickly agree to return to compliance with the JCPOA and seek to replace Russia as a major energy supplier to Europe, Iran is aiming for a role beyond the global energy market to position itself as a critical inter-regional hub. Iran seeks influence beyond the Middle East to expand its strategic depth, establishing new economic relationships with states like Russia and broader ties with Asian countries, such as China and Pakistan.

Russia now has new incentives to complete a long-delayed International North-South Transport Corridor (INSTC) project. This is a 7,200-kilometer long network of sea, rail, and land routes that starts from Mumbai in India, goes through Azerbaijan, and reaches Russia after passing through Iran. Only a 164-kilometer stretch between Astara and Rasht in northern Iran remains incomplete. During a visit to Moscow by Iran’s minister of roads and urban development in April, the two countries signed a comprehensive cooperation agreement pertaining to transportation.

According to Owji, the corridor will be operational in the second half of 2022. The project should buttress Iran’s position in Central Asia and offer a competitor route to India’s Arab-Mediterranean Corridor. This corridor—a product of the normalization ties between the United Arab Emirates and Israel in 2020—connects Mumbai to Haifa via an Emirates rail network that passes through Saudi Arabia and Jordan, with only three hundred kilometers still to be built. The International North-South Transport Corridor will enable Iran to compete with Arab states and Israel to attract trade and investment.

Tehran is also seeking to implement the Ashgabat agreement, an international multimodal transport agreement to facilitate the transportation of goods between landlocked Central Asia and the Persian Gulf, to strengthen transport connections between Iran and the Central Asian countries. Ashgabat was among the most important issues raised during President Raisi’s recent visit to Oman.

The extent to which Iran can capitalize on these potential opportunities remains to be seen. Iran still faces critical political obstacles from the West, Israel, and neighboring Arab states. Regional rivals, such as Turkey, are also trying to utilize geopolitical shocks and changes to their advantage. Still, the heightened tensions between the West and Russia give Iran a new opportunity to maximize its interests and advance its political, economic, and military ambitions.

Alam Saleh is a lecturer in Iranian Studies at Australian National University’s Centre for Arab and Islamic Studies.

Zakiyeh Yazdanshenas is a research fellow at the Center for Middle East Strategic Studies in Tehran.

Further reading

Image: Iranian President Ebrahim Raisi and Russian President Vladimir Putin attend a news conference following the Astana Process summit in Tehran, Iran July 19, 2022. Majid Asgaripour/WANA (West Asia News Agency)/Handout via REUTERS