Russia and Iran: A new economic alliance brewing?

Russia and Iran signed a mutual trade agreement this week, establishing trade centers in Saint Petersburg and Tehran. The “memorandum of understanding” (MoU) will promote trade between the two countries across various sectors, including energy, agriculture, and pharmaceuticals.

According to Iranian-state media sources, the agreement will accelerate the “North-South Corridor project.” The strategic trade route with India could help Moscow and Tehran circumvent the Egyptian waterway to access the Suez Canal, a significant endeavor for both countries.

While Russian-Iranian ties date back to the Islamic Revolution, the two nations have experienced a surge in cooperation over the last few years. Both countries have been isolated from the international community for different reasons. Moscow’s ongoing invasion of Kyiv and Tehran’s nuclear ambitions have pushed these Western adversaries together.

Russia and Iran Form Partnership

A few days prior to Russia’s initial invasion of Ukraine in February, President Vladimir Putin met with his Iranian counterpart in their first-ever in-person meeting. The two leaders met to re-establish a twenty-year cooperation agreement signed in 2001.

The original contract aimed to strengthen commercial ties between the two nations across various sectors. At the time, Putin was considering the expected international push-back Russia would face from the international community following its impending invasion of Ukraine. Tehran was amidst the ongoing joint U.S.-Iranian nuclear negotiations in Vienna, which served to reinstate a version of the Joint Comprehensive Plan of Action (JCPOA). Prioritizing self-interest, both leaders were seeking to leverage their positions with each other as both Russia and Iran share a mutual contempt for American hegemony.

Ultimately, Moscow would become a critical player in the Vienna negotiations by leveraging Iran for relief from the economic sanctions imposed on the country. The Washington Free Beacon reported that two Russian tankers sanctioned following the Ukraine invasion were illicitly carrying Iranian oil in an attempt to help Tehran evade U.S. sanctions.

Partnership Attempts to Circumvent Sanctions

While the negotiations have recently halted in progress, Tehran and Moscow have proposed trading oil and gas in an attempt for both countries to circumvent Western sanctions. According to Reuters, Russia’s Deputy Prime Minister announced that “Iran could become a key transportation and logistic hub for ensuring mutual transportation of goods,” adding that the two nations have the potential to trade approximately 50 million tons of goods over the next few years if the current pace is maintained.

The memorandum of understanding further pushes Moscow and Tehran together economically. According to Iranian-state media, “Expanding economic and investment cooperation, helping Iranian and Russian entrepreneurs establish direct contact, facilitating financial transactions, accelerating north-south corridor project and holding exhibitions were mentioned among the goals of the MoU.” Trade between Tehran and Moscow has increased significantly in the last few years. In 2019, Russia exported more than $1.5 billion to Iran in goods.

Additionally, Moscow’s cooperation with Tehran extends to the military sphere. Arms sales between the two countries have soared over the last decade, and a litany of Iran’s military equipment and assets have Soviet-era origins.

While the signing of the memorandum of understanding marks the latest sign of Russian-Iranian cooperation, the strengthening of ties between the two countries is expected to only grow in the near future.