by Shahir Shahidsaless
Two simultaneous pieces of economic news in Iran inform us of a trend in the Rouhani administration’s foreign policy.
Firstly, Iranian and Russian press reported last week that Tehran and Moscow signed a trade agreement amounting to 70 billion euros on Sept. 9. Alexander Novak, Russia’s energy minister, and Bijan Namdar Zanganeh, Iran’s oil minister, signed on behalf of Russia and Iran respectively. The details of the agreement have not been revealed but Russia may also invest in Iranian oil, according to Ali Majedi, Iran’s deputy oil minister for international affairs. If implemented as planned, the reported agreement could strike a blow to the American sanctions regime on Iran.
On the same day, Ishaq Jahangiri, President Hassan Rouhani’s first deputy, told reporters that during the upcoming third presidential meeting between Iran and China on the sidelines of the Shanghai Summit, “we will secure billions of dollars from China for private sector projects which top the agenda.” Against the $18 billion that China owes Iran for its imported oil, China will reportedly finance these Iranian projects for up to 2 or 3 times that amount. According to Asadollah Asgaroladi, the chairman of the Iran-China Joint Chamber of Commerce, most of the projects will be industrial or oil-related.
With close ties to the centrist, business-friendly cleric, former President Hashemi Rafsanjani, Rouhani was voted into office with the underlying hope that he would pursue good relations with the West. Rouhani’s nomination of Javad Zarif as his top diplomat strengthened this notion. During his career, Zarif, under the presidencies of Hashemi Rafsanjani, Mohammad Khatami, and even Mahmoud Ahmadinejad relentlessly strived to make peace between Iran and the West, especially with the United States. Yet while Iran continues to negotiate for a final deal over its nuclear program, one of the main points of contention in US-Iran relations, Rouhani’s Iran appears to be looking eastward.
Two theories could explain this trend. First, the gap between Iran and the West on the terms of a final nuclear deal could be so wide that the Iranians have lost hope and are preparing themselves for the worst-case scenario—once again living in a world isolated from the West.
In the lead-up to the resumption of talks in New York next week, the Iranians have been complaining about the P5+1’s “maximalist demands” and insistence on “the old approach”—imposing pressure by updating the US sanctions list. The range of expectations between Iran and the P5+1 (US, UK, France, Russia, China and Germany) does indeed seem substantial.
Based on some reports, major elements of dispute include the number of operating centrifuges and the timeframe for removing sanctions. Iran contends that it will need an enrichment capacity of 190,000 SWU (the number of first-generation centrifuges) in order to supply its Bushehr power plant by 2021 when its fuel supply agreement with Russia expires. The West, however, is demanding that Iran scale back its enrichment capacity from around 10,000 today to around 1,500 SWU.
When it comes to the lifting of sanctions, Iran is reportedly arguing for three years while the West is insisting on 20 years or more. But reaching a final deal is the key to Rouhani’s success in the 2017 presidential election, not to mention the fact that his powerful hardline domestic opponents are hardly patient.
Another explanation for Iran’s focus on the East, especially considering last week’s announcement of the grand economic deals with Russia and China, could be to neutralize the US’s trump card of unilateral sanctions in the negotiations. In other words, Iran could be sending a message that, contrary to the West’s long-held view, it does not feel pressured to reach an agreement out of desperation and under duress.
Yet this viewpoint entails its own problems. Due to a conflicted history of relations, Iran does not consider Russia trustworthy or dependable in the long-term. Zarif reinforces this view in Mr. Ambassador, a book consisting of a collection of interviews with him, by arguing that Iran should not depend on sincerity in its relations with any country, including Russia. However, Zarif adds that countries establish strategic relationships when their long-term interests coincide. Due to recent events, Iranian and Russian interests have certainly converged.
The crisis in Ukraine has become Russia’s most significant conflict with the West since the collapse of the Soviet Union in 1991. In response to the West’s support of the pro-western Ukrainian government, Moscow views its alliance with Tehran as an effective retaliatory mechanism to weaken or threaten the West’s influence (and interests) in the Middle East.
From China’s perspective, Iran is a lucrative business market with its relatively large, overwhelmingly young and educated population. Iran is also China’s third largest supplier of oil. Meanwhile, the financial sanctions on Iran have created an opportunity for China to use the $18 billion it owes for Iranian oil purchases as collateral for financing long-term investment projects in Iran. If all goes according to plan, this arrangement will be extremely beneficial for both countries.
While Iran may be hedging its bets should a final nuclear deal not materialize by the deadline of Nov. 24, the US could still disrupt Tehran’s plans. The Kirk-Menendez-sponsored Iran Nuclear Weapon Free Act of 2013 was taken off the Senate agenda following President Barack Obama’s pledge to veto the bill in his State of the Union address this year. History dictates that if the talks between Iran and the P5+1 fail, the US will move toward even harsher pressure tactics, such as the full oil embargo suggested by the Kirk-Menendez bill. If this occurs, it remains to be seen if Iran, primarily relying on Russia and China (which may or may not go along with US plans) would be able to keep the wheels of its economy turning.
—Shahir Shahidsaless is a political analyst and freelance journalist. He has written extensively about Iranian domestic and foreign affairs for news outlets inside and outside of Iran including, Al-Monitor, Asharq al-Awsat, Gulf News, and BBC Persian. He is the co-author of “Iran and the United States: An Insider’s View on the Failed Past and the Road to Peace, (Bloomsbury Academic)” published in May 2014.