Iran and Russia could clash over exports to Europe

Since the collapse of the Soviet Union, its former states in Central Asia have largely adopted policies containing Iranian influence—due to what they collectively see as Tehran’s extremist ideology and potentially destabilizing influence in their internal affairs. With the exception of some projects in Central Asia, Iran has remained largely on the sidelines of the region’s key geo-energy and strategic developments.

Iran has long sought to become a major energy corridor for landlocked Central Asia. by promoting its cultural connections to the region and leveraging its direct access to the Persian Gulf as competitive advantages over Russia, Turkey, and China.

With the prospect of gradual removal of sanctions and better relations with the West, Iran’s foreign policy and geopolitical status vis-à-vis Central Asia are on the brink of major evolution. Iran’s cultural ties to the region and the emergence of a foreign policy more pragmatic relative to its past indicate a potential constructive role in the energy dynamics of Central Asia. This is a development that Russia follows closely as it could impact Moscow’s dominance in Central Asia’s energy markets.

With the goal of joining a formal security alliance, Iran has also sought to become a full member of the Shanghai Cooperation Organization, but it has so far been granted only observer status.
The absence of deep-sea ports has long been Iran’s competitive disadvantage in sea trade. Bandar Abbas port, Iran’s largest in the Persian Gulf, cannot handle many of its needs, necessitating that large portions of Iranian imports are offloaded in Dubai before arriving in Iran.

In 2002 India began construction of Iran’s first and only deep-sea port in Chabahar, the southeastern most part of Iran along the Indian Ocean and Sea of Oman. The project includes construction of roads to Afghanistan and Central Asia. Completion of the Chabahar Port would help elevate Iran’s position in global trade and enable it to export energy and non-energy products from Central Asia to international markets. Development of the port is viewed by Moscow with unease as it could unseat Russia as the key exporter of energy from Central Asia.

The government of President Rouhani appears determined to repair Iran’s international standing and revitalize its economy. Tehran envisions penetration into new energy markets, most importantly in Europe, as an integral part of its economic revival. This could create friction in Iran’s relations with Russia, as Moscow covets its corner on European markets. In this respect, Russia has benefitted from Iran’s international isolation and Tehran’s absence from energy export markets.

Russia’s recent announcement that it will build two additional nuclear power plants for Iran can be interpreted in two ways: First, it reaffirms the Iran-Russia alliance and retaliates against the West’s reactions to Russia’s incursion into Crimea. Secondly, it could be seen as Moscow’s preemptive attempt to convince Iran to drop plans to build natural gas pipelines to Europe in exchange for closer cooperation in mutual energy concerns. The next several months, particularly the completion of a permanent nuclear agreement between Iran and the P5 + 1, will play a significant role in the next stages of Iranian-Russian relations.

With ongoing nuclear negotiations between Iran and the world’s major powers, Russia’s aggressive foreign policy in Eurasia, and Europe’s increasing need to diversify its energy sources, many Western and Iranian strategic interests are inadvertently converging. Iran’s transport of energy to Europe and the use of an Iranian corridor by Central Asian states to reduce dependence on Russia and China are potential areas of bilateral cooperation between the West and Tehran. However, there are those in Iran’s power structure that are reluctant to interfere with Russia’s strategic interests in Iran.