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Russia Iran Economic Relations
October 19, 2015 08:11


As soon as JCPA (Joint Comprehensive Plan of Action) comes into force, Iran has to cut its stockpile of low-enriched uranium by 98 % and reduce by about two-thirds the number of its centrifuges for at least 15 years as well as modernize the reactor, while the USA and EU will start to lift the economic sanctions.  Let’s see how these processes may influence Russian economy.

The JCPA provides that imposed on Iran arms embargo remains in effect for the next five years, and sanctions related to missiles - for eight years.

Formally, Russia did not stop trade relations with Iran because of the sanctions imposed by the West. However, in practice, banking restrictions greatly complicated these processes. Russia and Iran have developed the so-called barter deal  - "oil-for-goods".  June 8, 2015 Alexander Novak, Russian Energy Minister, admitted that Russia would participate in the supply of Iranian oil. According to Novak, money received from the sale of Iranian oil, might be used for purchasing of Russian goods. The minister stressed that the oil from Iran will not be sold in Russia. In turn, the assistant to head of Rosselkhoznadzor Alexey Alekseenko said that Russia had started to deliver grain to Iran and shipped the first 100 ths. tons.

In mid-April, Russian Deputy Foreign Minister Sergei Ryabkov announced the launch of the transaction "oil in exchange for goods." Then Ryabkov stressed that the implementation of such a transaction is not restricted by the sanctions regime against Iran. The embargo on Iranian oil was imposed by EU and the US due to the implementation of Iran's nuclear program.

In addition to the deal "oil-for-goods" Russia lifted a ban on the supply to Iran Russian anti-aircraft missile systems S-300. (The order was signed by Russian President Putin in April 2015. The contract for the supply of S-300 was concluded in 2007 and frozen three years later, that has led Iran to sue in international arbitration, demanding payment of the penalty equaling almost four billion dollars.)

Removing all banking sanctions will simplify trade procedures, in particular, bank transfers.

Lifting sanctions against Iran opens new opportunities for Russian companies. The trade turnover between Russia and Iran may be increased. Tehran is particularly interested in increasing supplies of Russian food products, especially grains.  Besides, Iran is interested in buying products of metallurgy, aviation, engineering, agriculture and energy.  Iran already imports Russian heavy trucks and rails. Enhanced cooperation may be very beneficial to Russian Railways Company.  Cooperation in the sphere of space exploration will be developed - Moscow has already agreed to train Iranian astronauts. Rosatom is going to enhance cooperation in the nuclear industry.

Overall, as a result of the lifting of sanctions, trade between the two countries can increase three to four times.

Lifting sanctions against Iran may also have negative impact on Russian economy as the oil prices may fall and Russian rouble will be affected. 


Author: Anna Dorozhkina

Tags: Russia International     

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