Russia-Ukraine Crisis: A Big Boost for Iranian Economy?

16 March 202220 April 2022 Tridivesh Singh Maini

While analysts focus on wrangling between great powers, the economic and geopolitical relevance of countries like Iran often gets relegated to the sidelines. The revival of the JCPOA, and closer economic ties between Tehran and the West, especially the purchase of Iranian oil by the US and other western countries, could actually result in Tehran re-orienting its foreign policy. If Iran and other signatories do manage to come up with an agreement, Iran’s sagging economy could get a big boost.

Russian Foreign Minister Sergei Lavrov met with his Iranian counterpart Hossein Amir-Abdollahian on Tuesday, March 15, 2022. The Russian Foreign Minister said that he had received a written assurance from the US that the sanctions imposed by the US pertaining to Ukraine would have no bearing on Russia’s ties with Iran including nuclear cooperation. Said, Lavrov:

"We received written guarantees. They are included in the text of the agreement itself on the resumption of the Joint Comprehensive Plan of Action on the Iranian nuclear programme."

In a joint press conference after their meeting, the Iranian Foreign Minister on his part said that Moscow would not, in any way, be an obstacle with regard to reaching a deal. He also lauded Russia for its role in the negotiations related to the Iran nuclear deal.

The Russian Foreign Minister had laid down a condition earlier this month, that Russia would only support the revival of the Joint Comprehensive Plan of Action — JCPOA/Iran Nuclear Agreement 2015 if the US gave such an assurance that Moscow’s economic ties with Tehran are delinked from the Ukraine sanctions. The US dismissed this demand, saying that the current sanctions were not linked to Russia’s dealings with Iran in any way. US Secretary of State, Antony Blinken, dismissed these demands as being irrelevant. While Iran did not openly criticize the Russian demand it did express surprise. Many analysts argued that Russia laid down this condition to delay a possible agreement.

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The US, in recent days, has been showing greater urgency towards the revival of the Iran Nuclear Agreement. Iran along with the UAE, Saudi Arabia, and Venezuela were amongst the countries which could produce more oil to make up for the shortfall caused by the ban on Russian oil and energy imports. As of now, the UAE and Saudi Arabia have refused to pump more oil, and given the recent tensions between Washington and these countries, it is highly unlikely that Riyadh and Abu Dhabi are likely to oblige (Saudi Arabia’s Crown Prince Mohammed bin Salman and the UAE’s Sheikh Mohammed bin Zayed al Nahyan have refused to even to take a call from the US President). If one were to look at the instance of Iran in 2021, it pumped 2.4 million barrels a day and if sanctions are lifted it has the capacity to pump 3.8 million barrels a day (Iran has already offered to supply natural gas to Europe if such a situation arose). If Iran and other signatories do manage to come up with an agreement, Iran’s sagging economy could, thus, get a big boost.

Here it would be pertinent to point out that Biden has drawn flak domestically for looking at the option of importing oil from Iran and Venezuela with many Republicans arguing that the US instead of looking to Venezuela or Iran, and in the process patronizing another ‘dictator’, should instead boost domestic production. Kevin Mcarthy, Minority Leader of the US House of Representatives commented:

"President Joe Biden said at the State of the Union, ‘buy America.’ I believe he probably thought that, but no American energy,”

Also Read: Bracing for the Changing Geopolitics: Ukraine Crisis and Energy Security in India

What is important to look at is the impact of the Russia-Ukraine crisis on Iran’s economy and foreign policy. First, as a consequence of the disruptions in the global oil market arising as a result of the Ukraine Crisis (after nearly two weeks, international crude oil prices fell below $100 a barrel on Tuesday, March 15, 2022), the US has shown greater urgency in arriving at an Iran Nuclear agreement which would be acceptable. Before the Ukraine crisis, while negotiations had been going on in Vienna for weeks, the US along with France and UK had repeatedly said that time was running out for the nuclear deal and that Iran was not cooperating, but events in Ukraine have propelled the US and the West to show greater flexibility and pragmatism.

Second, in recent years, Iran has moved closer to China and Russia after the withdrawal of the US from the Iran Nuclear Agreement of 2015. In fact, Iran has signed a 25-year comprehensive cooperation agreement with China in March 2021 and a 20-year agreement along similar lines is being worked out with Russia. However, the revival of the JCPOA, and closer economic ties between Tehran and the West, especially the purchase of Iranian oil by the US and other western countries, could actually result in Tehran re-orienting its foreign policy, where it may be tilted towards Russia and China but also have a reasonable economic relationship with the West. The negotiations pertaining to the revival of the JCPOA 2015 in the midst of the Russia-Ukraine crisis and the back channels between Moscow and Washington DC even in the midst of numerous tensions also highlight the complexities of geopolitics and the pitfalls of viewing international politics from simplistic binaries. While analysts focus on wrangling between great powers, the economic and geopolitical relevance of countries like Iran often gets relegated to the sidelines.

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