20 Years of Leading Analysis
 
  • “Nuclear Spring” in Russian-Iranian Relations

    Posted by: Nikolay Kozhanov November 21, 2014

    On November 11, Russia and Iran signed a package of documents paving the way for Moscow to construct up to eight nuclear power units in the Islamic republic. The first two reactors are expected to be built at the Bushehr Power Plant alongside the power generating block constructed by Russian engineers and transferred to the Iranians in 2013. The media was quick to call this deal a “turning point” in the relations of the two countries and, to a large extent, it was correct in its assessment.

    With this agreement, Russia and Iran have established a solid economic foundation for political dialogue and acquired a tangible symbol of cooperation that they had been lacking since the completion of the first nuclear reactor at Bushehr. This deal brings substance to the comprehensive August 5 Memorandum of Understanding on the principles of the trade and economic relations between the two countries. It also reassures Tehran of Russia’s long-term economic interests in the country. This, in turn, gives  the authorities of the Islamic republic a hope  that to secure its economic gains from the cooperation with them Moscow may become the protector of Iranian interests in Tehran’s confrontation with the West. The agreement has thus been billed as a serious political and diplomatic success in Tehran.

    Moscow also stands to benefit—namely financially—from nuclear cooperation with Iran. As opposed to other Russian partners, Tehran has agreed to pay for the power plant construction from its own pocket and in hard currency. By contrast, in Vietnam, Turkey, and Belarus, Moscow was compelled to provide the authorities with loans to finance the construction of nuclear projects built by Russian specialists.Russian participation in the construction of the new power generating blocks will also increase the volume of Russian-Iranian trade which has been falling by more than 30 percent annually since 2011.

    The importance of this deal is magnified by the November 24 deadline for concluding negotiations with the P5+1 group. The deal is a serious signal that irrespective of the outcomes of the talks, Iran will continue its cooperation with the Russia. The agreement granted Rosatom, the Russian state atomic energy corporation,a monopoly over the implementation of future nuclear projects in Iran. Even if the existing sanctions that prevent Russian rivals from entering this sector of the Iranian economy are lifted, it will be difficult for Rosatom competitors to find their niche in this market. For the Iranian public this agreement is also an important message that sanctions cannot hamper the government’splans to further development its nuclear industry. As a result, in addressing the population of the country,the Islamic republic authorities may feel more comfortable downplaying the vital importance of the P5+1 talks—especially if negotiations fail to reach an agreement.

    Moreover, Russian participation in the construction of the power units can boost the development of Iranian nuclear technology and the corresponding infrastructure. The treaty signed between Moscow and Tehran implies that Rosatom is expected to rely on Iranian economic capacity and to use local subcontractors whenever possible during the construction of the new reactors. Russia is also supposed to train Iranian cadres for the nuclear industry. The sides agreed that in the future, they may even consider deploying elements of the nuclear fuel cycle in the Islamic republic. These provisions of the agreement perfectly suit the Iranian authorities’ goal of turning the Islamic republic into the largest regional energy producer.

    Yet, there are a number of challenges that can put a damper on the future of the Russian-Iranian nuclear cooperation. First of all, in order to be commercially viable, the construction of the new power generating units should take less than four to five years. Otherwise, the costs of the project will outrun the profits. The failure to build the new reactors in Iran within the original timeframe may also have negative implications for Rosatom’s international reputation. Delays could be used by Rosatom’s foreign rivals to dissuade other countries in the region from working with the Russians in implementing their nuclear projects. Under these circumstances, the success of this Russian-Iranian nuclear venture is highly dependent on the future of the sanctions regime. The West’s existing punitive measures may disrupt the supply of the equipment necessary for the implementation of the project (Rosatom purchases some of its parts from abroad). Sanctions can also obstruct financial transactions and prevent the Iranian authorities from paying Russian contractors for their work.

    Unfortunately for Iran, the profitability of the venture does not guarantee Moscow’s political loyalty.
     
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    Unfortunately for Iran, the profitability of the venture does not guarantee Moscow’s political loyalty or its willingness to stick with previously reached agreements. There is no way to insulate the new project from twists in the political dialogue between Moscow and Tehran. It could not have been mere coincidence that some of delays in the construction of first Bushehr power generating unit coincided with dips in Russian-Iranian relations. As demonstrated by the experience of the S-300 complex deal and the Gore-Chernomyrdin agreement of 1995, the opportunity to normalize relations with the European Union and United States may be a serious incentive for Russia to reconsider some of its approaches toward the Islamic republic. Currently, the possibility of such a U-turn in Moscow’s foreign policy is minimal, but anything can change with the passage of time.

    All in all, the Russian-Iranian nuclear deal may have been a definite diplomatic success for both countries but far from being the end of the story, this is only the beginning.

    Nikolay Kozhanov is a senior lecturer in political economy of the Middle East at the St.-Petersburg State University and an expert of the Institute of the Middle East (Moscow).

     
     
     
  • Abkhazia: Deeper With Russia

    Posted by: Thomas de Waal Thursday, November 20, 2014

    With Russia—for better or worse. That is the message society in Abkhazia is receiving now that a new Abkhaz-Russian treaty has been drafted which could be signed as early as next week.

     
     
  • Weak Ruble Exchange Rate Represents Political Bargaining Challenge

    Posted by: Yuval Weber Wednesday, November 19, 2014

    The financial troubles of the ruble represent the most striking and dangerous strategic challenge facing the Russian state since the conflict in Ukraine began.

     
     
  • Turkey’s Strategy for Turkmenistan: What Is Behind Erdoğan’s Last Visit to Ashgabat?

    Posted by: Pavel Shlykov Tuesday, November 18, 2014 1

    Turkey sees the acute energy market competition as an opportunity to establish itself both as an influential energy state and as a central Eurasian power. In this regard, choosing Turkmenistan as the site of one of the first state visits by the new Turkish president was not accidental.

     
     
  • Frozen Donbas?

    Posted by: Balázs Jarábik Monday, November 17, 2014

    Ukraine is in the process of forming a new government. President Putin has a say in the development of this process by threatening an invasion. And now he can be almost certain that the West will not go to war with Russia over Ukraine.

     
     
  • Pax Sinica: China and the New Russia

    Posted by: Akio Kawato Friday, November 14, 2014

    Pax Sinica has come. Countries in China’s orbit will be given security guarantees and trade preferences as long as they remain allegiant. Thus, the pivot to Asia will only drive Russia to unnecessary dependence on China.

     
     
  • Pakistan’s Minorities Under the Shadow of Fear

    Posted by: Petr Topychkanov Thursday, November 13, 2014

    Pakistani religious minorities live in fear. This fear can only abate through the Pakistani government’s consistent and tough policies directed at the softening of the blasphemy law and cracking down on any attempts of vigilante justice.

     
     
  • Limits of Partnership: Russia and Turkey in the Caucasus

    Posted by: Maxim Suchkov Wednesday, November 12, 2014

    In recent years the nature of Russian-Turkish relationship has proved to be nuanced. For Moscow and Ankara it is important to separate cooperative wheat from antagonizing chaff.

     
     
  • Russia Divided

    Posted by: Alexey Malashenko Tuesday, November 11, 2014

    The ethno-religious tensions in Russia have subsided a bit in 2014, because the Ukrainian conflict has shifted the xenophobic sentiments from an internal to an external adversary. However, this shift does not eliminate xenophobia altogether—on the contrary, overall aggressiveness is on the rise.

     
     
  • Why Nations Don’t Fail

    Posted by: Jan Techau Monday, November 10, 2014

    Over the next few years, the European Union will have to revamp its neighborhood policies completely. The ambition is not only to prevent state failure, but to help build functional political systems that can strive economically, provide essential services, guard individual freedoms, and maintain social peace.

     
     

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