Russia-Iran Convergence

SGGP 30/05/2023 06:26

According to Iran's ISNA news agency, amid political isolation from the West, Iran has increased its exports to Russia.

An Iranian oil refinery on Kharkiv Island, off the coast of the Persian Gulf. Photo: AFP/VNA.

Iran's exports in the past year (up to the end of March 2023) increased by 30% compared to the same period in 2022; the volume of transactions was approximately $744 million. Russia was the 10th largest importer of Iranian products.

Relations between Russia and Iran are becoming increasingly intertwined, from military cooperation to geopolitical ties. During the Ukraine conflict, the two Eurasian nations experienced exponential growth in trade and investment. Moscow hopes bilateral trade will reach $40 billion in the coming years. This is happening against the backdrop of seemingly successful connections between Iran's state-run financial messaging service SEPAM and the Bank of Russia's financial messaging system (SPFS), meaning both countries can bypass the international banking network SWIFT, which Russia is excluded from by the West.

In previous years, up to 80% of Russia-Iran trade consisted of agricultural products and food. However, in recent months, Iran has increased its exports of industrial goods to Russia by 30% (polystyrene, pumps, automotive components, machine tools for metalworking, and similar products), and as a result, these shipments have for the first time exceeded Russian exports to Iran.

A key factor in expanding bilateral trade between Russia and Iran is the development of freight transport across the Caspian Sea. This route is the central branch of the International North-South Transport Corridor (INSTC), which, ideally, would connect Russian ports with the Persian Gulf and Indian ports. The INSTC is crucial for Iran as it opens export markets not only to Russia but also to Turkey and the Middle East. Notably, the recent détente between Iran and Saudi Arabia is also helping to boost the INSTC. The INSTC also links Iran to the Indian and Southeast Asian markets, and is expected to be fully operational by the end of 2023.

The Russia-Iran convergence is becoming increasingly strategic, driven by the ongoing conflict in Ukraine, US-China tensions, the Russia-Western confrontation, and is predicted to grow even closer.

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