Post-JCPOA and the Continued 'Creeping Movement' of Russia in Iran's Economy

Alexander Auzan, head of the Faculty of Economics at Moscow State University and scientific leader of the Institute for National Projects in Russia, states: "Crises in Russia usually end faster than economists' forecasts and politicians' expectations." But aside from the propaganda of Russian state agencies, what do the news indicate? The multiple sanctions from the West against Russia and Russia's sanctions against other countries like Turkey signal a change in Putin's tactics and his government's approach, creating an environment for the Iranian economy that appears attractive but indicates a growing dependency of Iran's economy on the Russian Federation in specific areas. Iran and Russia, in addition to large-scale planning to increase the value of trade relations between the two countries, have included more provincial economic cooperation in their roadmap for developing relations, aiming to increase the volume of trade from the current annual $2 billion to $10 billion in the near future. A slight change in Iran's export basket has been observed, with exports of fruits and vegetables from Iran to Russia accelerating since the beginning of this year. Although no statistics have been released yet, Iranian goods are replacing Turkish products that have been banned from entering due to Moscow's sanctions against Ankara. Russia, with over 17 million square kilometers as the largest country in the world and a population of 146.5 million in the mainland and 22 republics, represents a large market that requires extensive imports of fresh vegetables and fruits due to the cold climate in many regions. According to IRNA, kiwi, fresh vegetables, cabbage, and broccoli are currently among the largest export items from Iran to Russia, distributed not only in local markets but also by large chain stores like "Auchan," which has branches in many cities in Russia and other countries. The Iranian embassy in Moscow also announced the elimination of customs duties on eight products, including cauliflower, broccoli, pistachios, dates, and various types of raisins, since March 22, 2016, to the Eurasian Union, of which Russia is the heart. Accordingly, the development of activities in the northern provinces of Iran and the utilization of their capacities are on the agenda of both countries, with Golestan province having already received permits for five slaughterhouses for meat exports to Russia. Vladimir Putin's visit to Iran in late November 2015 was a significant event in recent years of economic partnership, during which preliminary documents for a $5 billion export credit loan were signed. Recent news indicates that Russia will provide the first two loans amounting to about $2.5 billion to Iran. The Russian government has specific goals in mind for the Iranian economy with such loans, but the biggest priority for Russia is to return to the Iranian oil contract market in terms of investment and technology development. Iran and Russia maintained good relations even during sanctions, and Russian companies actively participated in some infrastructure projects in Iran's energy sector even before the sanctions. During the sanctions, a contract called "oil barter" was established between Iran and Russia, where Iran was supposed to deliver 500,000 barrels of oil to Russia daily, and in exchange, the Russian side would deliver necessary goods to Iran, such as technical and industrial products. However, the need for this contract disappeared after the sanctions were lifted, and the contract was annulled. The loan recently agreed upon to be granted after the official visit of the Russian government delegation to Iran is in this context. Companies like "Lukoil," "Gazprom," and "Rosatom," along with other Russian companies, are looking to return to the Iranian oil, gas, and nuclear energy sectors and are eager to sign contracts. Another area where both Russian and Iranian sides are keen to implement is the development of drilling in the oil sector. The Astrakhan shipbuilding factory "Krasniy Barrikady" is building five jack-up rigs for the industrial company "Sadi" for oil extraction in the Persian Gulf. The related contract was signed by representatives of both countries in the presence of Ali Mohammadi, the consul of the Islamic Republic of Iran in Astrakhan, and Viktor Vinokurov, the head of the Astrakhan Chamber of Commerce and Industry. The price of this contract is about $200 million, with a construction period of two years. Khorramshahr has been designated as the assembly base for these vessels. The Iranian side is also very interested in entering serious discussions regarding gas exports through Iran with Russia and Turkmenistan. The Russian side does not show interest in this matter, but if such a situation occurs, the large gas triangle of Iran, Turkmenistan, and Russia could disrupt political, security, and economic equations for the European Union. The North-South project and Russia's plan for Iran involve creating a corridor from Helsinki to Mumbai, establishing transit connections between Northern European countries and Russia through Iran and Azerbaijan to the Indian Ocean and Southeast Asia, spanning 7,000 kilometers. According to news reflected by "Russia Today," part of this loan is expected to be spent in the rail and railway sector. These sources also indicated that during negotiations, issues related to creating a simpler customs corridor between Russia and Iran would be discussed regarding the "North-South" corridor. According to the public relations office of the Russian customs organization, the main focus of negotiations regarding the first plan is to launch an information system for the exchange of goods and transportation between the two countries, which has now been introduced to Russian and Iranian traders in Moscow and Tehran. A statement released by the public relations office of the Iranian Trade Development Organization quoted Hassan Moratji, the director of the Iran-Russia business conference, as saying that Iran currently has many opportunities to claim a share of the Russian market, stating: "Russia grants significant privileges for imports from Iran, including a 25% discount on customs costs." The Russian government is also keen to pursue Iran's accession to the Shanghai Cooperation Organization more seriously at the upcoming meeting of the organization scheduled for the 23rd and 24th of this month.