Rouhani Asks Putin for More Russian Investment in Iran’s Energy Sector

Iranian President Hassan Rouhani and his Russian counterpart Vladimir Putin discussed ways to expand bilateral relations between the two countries in a telephone call today, the Iranian and Russia media reported. “I’m confident that relations and cooperation between Iran and Russia during the 12th government will be further expanded,” the Iranian president was quoted as saying to Putin. “Tehran welcomes an active presence of Russian investors and private sector to participate and cooperate in key infrastructural projects, including the industry and energy sectors,” Rouhani added.

The two leaders also exchanged views on regional and international issues, including regarding the implementation of the Iran nuclear agreement and the conflicts in Syria and Yemen. Rouhani emphasized that Iran has complied with the nuclear deal it signed with world powers two years ago and accused Washington of violating the accord. He called on the Russian leader to play an active part in making sure all sides implement the deal vigorously. Rouhani also stressed that Tehran and Moscow should hold consultations more frequently about coordinating their efforts to resolve regional conflicts in Syria, Iraq and Yemen.

A statement released by the Kremlin said the two sides discussed “joint projects in the oil and gas, electricity and transport sectors” as well as international issues.

Comment: Since the lifting of nuclear-related international sanctions on Iran in January 2016, the volume of trade between Russia and Iran has increased by about 80 percent. But the aggregate trade turnover was still a meager $2 billion last year, and Iran does not rank in Russia’s top 15 trading partners. While both Moscow and Tehran have pledged to boost bilateral trade to $10 billion in the next two or three years, the realization of it depends on several factors – particularly the two countries’ relations with the Trump administration. As Washington is ratcheting up sanctions on Tehran, Russian energy giants and arms manufactures may be reluctant to invest in and do business with Iran. A potential U.S. designation of the Islamic Revolution Guards Corps (I.R.G.C.) as a “Foreign Terrorist Organization” will also complicate Iran-Russia trade ambitions. This is because the I.R.G.C. and its front companies dominate the Iranian economy and industrial sector, and it is almost impossible to do business with Iran without the I.R.G.C.’s involvement in some capacity.

Moreover, while Russia and Iran have been cooperating closely in the Syrian conflict, their vital interests and endgame strategy in Syria are different. The Russian military intervention was instrumental in helping the forces of President Bashar al-Assad and the Iran-backed militia groups to prevent the fall of Damascus. But now that the Assad regime is in control of key population centers, Russia is apparently seeking to reduce its military role and find a political solution to end the conflict in Syria as long as its interests are secure. Iran, however, still favors a military victory and seeks to consolidate the presence of its proxies there for its broader regional agenda – mainly against Israel.

Despite cooperation in Syria and a boost in trade relations, the relationship between Russia and Iran remains more a marriage of convenience than a strategic alliance. A history of distrust and divergence of interests continue to hinder the two countries’ tactical cooperation from translating into a strategic relationship. Iranian media often questions Moscow’s sincerity.