Russia-Iran: Memorandums of Understanding or Real Contracts?

March 27 marks the beginning of Iranian President Hassan Rouhani’s two-day visit to Moscow. According to the official agenda, he will discuss "the whole complex of issues of Russian-Iranian cooperation." Since 2013, Russia and Iran signed a large number of memorandums of understanding, which have yet to become real contracts. According to Valdai Club expert Vladimir Sazhin, the summit, which will be held on March 28, should give impetus to turning intentions into real contracts.

"Since 2013, with the election of Hassan Rouhani in Iran, relations between Moscow and Tehran have warmed considerably. Presidents Vladimir Putin and Hassan Rouhani met on several occasions at different venues and conducted telephone conversations on various issues. However, the current meeting is particularly important, as Iran is in a new situation due to changes in Washington [with the resumption of the anti-Iran campaign by the new US administration]," Vladimir Sazhin, Senior Fellow at the Institute of Oriental Studies, Russian Academy of Sciences, told in an interview.

According to Sazhin, the main topic of the talks between the Russian and Iranian heads of state on March 28 will be the strengthening and development of bilateral trade and economic relations. In recent years, many letters of intent have been signed between Russia and Iran, but few have actually been realized.

"The beginning of construction of two new reactors in Bushehr, the issue of modernization and electrification on the Iranian railways and some issues in the oil sector. The other [issues] hung in the air. I think that there are issues to talk about at the highest level," the expert said.

One such strategically important project put on the back burner is planned to be discussed today, during the meeting between Rouhani and Russian Prime Minister Dmitry Medvedev. The issue is regarding the creation of a free trade zone between the Eurasian Economic Union (EurAsEC) and Tehran. The signing of this agreement is expected to take place later in 2017.

"For EurAsEC, the creation of such bilateral alliances on the basis of trade liberalization is a serious step forward. The first agreement was made with Vietnam, and with regard to Iran, we are now talking about a very large market, one of the biggest in the region. Now we have to determine the scope of this agreement, with the options identified: trade liberalization and some aspects of investment cooperation," Yaroslav Lissovolik, Program Director of the Valdai Club and Chief Economist of the Eurasian Development Bank, told in an interview.

According to Lissovolik, the Iranian market for industrial goods, including machinery, is attractive for Russia. "This is one of the markets where products from Russia and other producers in the EurAsEC countries can be quite competitive due to a combination of the price factor and the factor of establishing cooperative ties between economic entities of our countries," Lissovolik said. One of the promising areas for Iran is the export of foodstuffs, but there are also additional opportunities for cooperation in the fuel and energy sector.

According to Vladimir Sazhin, an important issue for both Russia and Iran is an excessively strong bureaucracy. "It hinders the development of actual trade and economic ties. This bureaucracy can only be defeated only at such high-level talks. So let's hope that this happens," Sazhin concluded.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.