Iran's Trade with Russia: Food for Weapons Exchange?

The recent visit of Sergei Shoigu, the Russian Defense Minister, to Tehran and the announced agreements between the two countries once again demonstrated that security-military dimensions and a sole focus on political motivations remain the main driving force in Tehran-Moscow relations. Meanwhile, the two neighboring countries (in the Caspian Sea) have extensive potential to become complementary economies, a condition that Turkey has previously established with Russia. Shoigu's visit to Tehran, which primarily pursued political objectives related to U.S. sanctions against Russia and aimed at facilitating the Kremlin's active return to nuclear negotiations with Iran and the 5+1 group (mediating with the U.S.), also opened the file regarding the non-delivery of the S-300 missile defense system to Iran and concluded with a military agreement for conducting joint naval exercises in the Caspian Sea. Frequent visits by Bijan Zanganeh, Iran's Minister of Oil, to Russia have focused not on creating the groundwork for developing economic cooperation and technical relations but rather on finding temporary and often impractical solutions to escape the situation resulting from sanctions. The joint sanctions imposed by the U.S. and the European community against Iran and Russia have not opened channels for developing lasting and sustainable relations between the two countries; instead, they have reduced the limited volume of trade exchanges and expanded the dimensions of covert political cooperation between the Islamic Republic and Kremlin leaders. Russia, with a population twice that of Iran and a Gross Domestic Product five times larger (over two trillion dollars last year), along with close geographical proximity (Caspian waters) and an annual per capita income exceeding 15,000 dollars, has high potential to become a major trading partner for Iran. This opportunity has been lost due to the negligence of senior political managers in both countries and the exclusive pursuit of political, security, and military objectives. Last year, Russia's total imports from Iran did not exceed 500 million dollars. According to statistics published by the Islamic Republic's Trade Development Organization, in 2013, Iran exported 160 million dollars of fruits, 115 million dollars of vegetables, 115 million dollars of salt and sulfur, and small amounts of medicine and carpets to Russia, while importing 232 million dollars of heavy metal products, 249 million dollars of wheat and barley, 160 million dollars of wood, and 55 million dollars of corn from that country. Thus, Iran's share in Russia's foreign trade is less than half a percent, and Russia's share in Iran's foreign trade is about 1.5 percent, with military-nuclear exports from Russia to Iran accounting for the largest share. In comparison, neighboring Turkey achieved 45 billion dollars in trade with Russia in the same year, ranking as the sixth largest exporter of goods to Russia. Comparing these figures clearly indicates the negligence of the Islamic Republic's leaders in developing lasting trade relations with neighboring countries and their complacency in maintaining military-security relations while engaging in regional political games. Last month, to counter sanctions and find new models, the 'Gaidar Economic Forum' was held in Moscow with the presence of a prominent Russian economist. The Islamic Republic had neither a significant presence nor motivation to place itself within the proposed models at this forum. Currently, the Russian economy is not complementary to the Iranian economy; however, there is the necessary potential to develop the volume of goods and services exchanges between the two countries. Before the revolution, the balance of foreign trade between Iran and the former Soviet Union (led by Russia) was ten to one in favor of Iran. In addition to exporting natural gas to Russia, Iran used to export a variety of products, including various footwear (machine-made shoes) and washing powders, as well as television heaters. Although the volume of foreign trade between Iran and Russia has decreased due to sanctions against both countries and a consequent reduction in purchasing power, there are still significant potentials for developing Iran's exports to Russia due to insufficient development of trade relations over the past 30 years. Iran is easily capable of exporting over one billion dollars annually in horticultural products, vegetables, and dried fruits, as well as up to 100,000 tons of chicken to Russia in exchange for importing feed grains for birds. If the quality of goods improves and production increases, the Russian consumer market for Iranian-made household goods could also expand. For years, the Islamic Republic has exaggerated the potential of the southern-to-northern waterway (Caspian Sea) for Asian countries (India and Pakistan) but has never taken substantial action to develop this route for increasing healthy and lasting trade relations between Iran and the Caspian coastal countries, especially Russia, which is considered a large market. Iran's port facilities for transporting goods are limited, although this limitation is also observed in Russian ports for Iran. Customs regulations between Iran and Russia are very cumbersome, the banking system between the two countries is not developed at all, and monetary exchanges between them face serious difficulties. The Islamic Republic frequently refers to 'resistance economy' and 'economy without oil exports' under sanctions, while apart from resorting to forgettable slogans, it has not taken fundamental actions to develop communication infrastructures with neighboring countries, deregulate trade-customs, improve quality, increase the volume of exportable products, and market them in other countries. The recent visit of the Russian Defense Minister to Tehran and the outcome of this visit showed that the focus of the Islamic Republic's leaders remains on security issues, thus limiting their relations with neighbors to military or political domains.