IRAN and RUSSIA Neighbors without Borders Abbas Maleki Presented at Polish-Iranian Roundtable IPIS, Tehran April 19, 2005

Iran & Russia, Maleki2 Introduction Iran and Russia: Their relations and its impacts on 4 levels -International -Regional -Bilateral -Provincial Conclusions

Iran and the North, Abbas Maleki3 Russia: The Biggest Country in the World

Iran & Russia, Maleki4 Russia at a glance Population: million (UN, 2003) Capital: Moscow Major language: Russian Major religions: Christianity, Islam Life expectancy: 61 years (men), 73 years (women) (UN) Monetary unit: 1 ruble = 100 kopecks Main exports: Oil and oil products, natural gas, wood and wood products, metals, chemicals, weapons and military equipment GNI per capita: US $2,130 (World Bank, 2002)

Iran & Russia, Maleki5 Iran at a glance Population: 68.9 million (UN, 2003) Capital: Tehran Area: 1.65m sq km (636,313 sq miles) Major language: Persian Major religion: Islam Life expectancy: 69 years (men), 72 years (women) (UN) Monetary unit: 10 Iranian Rials = 1 Toman Main exports: Petroleum, carpets, agricultural products GNI per capita: US $1,720 (World Bank, 2002)

Iran & Russia, Maleki6 International Level World New Order NATO expansion to the East UN Security Council Nuclear Issue Asian Identity North-South Corridor

Iran & Russia, Maleki7 Regional Level Symmetric Interests in Central Asia -Tajik Civil War Asymmetric interests in Caucasia -Nagorno-Karabakh Conflict -Chechnya Bi-polar Roles in Afghanistan -Northern Alliance Caspian Sea Legal Regime ECO

Iran & Russia, Maleki8 Bilateral Level Economic Relations Non-military ties are not more than $800 millions in 2004 Educational and Scientific ties Launching Satellite Assembling airplanes, textiles, heavy industries Pharmaceutical, Biotechnology, Polymers Nuclear Technology Air Space Technology Energy -Electricity -Oil and Gas Defense Cooperation Missile Defense Systems

Iran & Russia, Maleki9 Provincial Level Connections between Iranian provinces and Russian Federation’s Republics: -Gilan and Astrakhan -East Azerbaijan and Dagestan -Kerman and Moscow

Iran & Russia, Maleki10 Soviet’s Foreign Policy Soviet’s Foreign Policy was the conclusion of interaction between national interests and Communism ideology Marx: Proletariat doesn’t have the country. From 1947, Soviet competition with US: -Cold War -Peaceful Coexistence -Detent -Deterrence Gorbachev and Regan meeting in Iceland, 1986: -2 superpowers nuclear weapons reduction -Soviet economic deterioration

Iran & Russia, Maleki11 Russia’s Foreign Policy (1) : Full coordination with US, idealism and democracy : Strategic alliance with China and India, focus to Asia, Middle East 2000-Sep : Eurasianism Sep now: acceptance of unipolar system

Iran & Russia, Maleki12 Russia’s Foreign Policy (2) Schools of Thoughts Westerners (Atlanticism): Andrea Kozyrov (Aug Dec. 1992) Jion to Democratic Club, Cooperation with EU, NATO, IMF, WB, OECD, G7 Reduction of relations with Near Abroad TWO GROUPS: Kozyrov’s Followers: Assertive to the West Liberal Politicians: Civilized dialogue both with the West and CIS

Iran and the North, Abbas Maleki13 Russia’s Foreign Policy (3) Schools of Thoughts Eurasianists Response to the Westerners. Focus on Russian’s Geopolitics TWO GROUPS: -The Democratic Version (Reformists) -The Slavophil Version Derzhavniki (National Power)

Iran & Russia, Maleki14 Countries with Oil Reserves >1 bill. t and Strategic Ellipse

Iran & Russia, Maleki15 Oil Proved Reserves Proved reserves At end 2002At end 2003 R/P ratio Thousands million barrels Share of total Russian Federation %22.2 Iran %92.9 Total World %41

Iran & Russia, Maleki16 US behavior impacts on Iran and Russia United States is the world’s largest energy producer, consumer, and importer as respectively 7.45, 20.07, mbd US various sanctions on Iran like ILSA May 2002 Summit between Bush and Putin: Signing an agreement on “Energy Partnership”.

Iran & Russia, Maleki17 Russia’s Policies after 9/11 -Each country has its specific terrorists -Russian long-term Cooperation with US in energy market -New Terminals in Murmansk, Primorsk,

Iran & Russia, Maleki18 Iran: an OPEC Member Russia: a non-OPEC Iran is obliged to OPEC share and therefore is avoiding flooding the market with its oil. Russia is not obligated to abide by any quota system. Russia as a non-OPEC producer, has produces and export more of its oil since the late 1990s and most of the increase in non-OPEC production has come from Russia This surge in Russia’s share in global oil markets is at the expense of OPEC. But OPEC and Russia have sought Moscow’s cooperation. -To restrain production to a certain level to prevent a collapse of oil prices -The investment in Siberia was very high -Russian oil companies wanted to recover market shares lost since the demise of the Soviet Union. Russia cut only 150,000 bd in the first quarter of 2002.

Iran & Russia, Maleki19 Hurdles of Cooperation between Iran and Russia’s oil and gas sectors: Major oil and gas industries in Russia has been largely privatized. 5 companies have 70% of country’s oil production: Yokus, LUKoil, Surgutneftegaz, TNK and Sibneft. All of Iranian oil and gas companies are SOEs. Mergers like TNK-BP means more barriers for Russian companies for investing in Iran. Production costs are much higher in Russia than in Iran. Iran makes money at $10 per barrel, but production becomes unprofitable for Russian companies at this low price.

Iran & Russia, Maleki20 Caspian importance for US Caspian is not important for US as it was before 11/9 -War against terrorism -The change in US strategy in the region from political-economic to security-military approach -The importance of countries with strong ability to fight against terrorism instead of rich energy countries.

Iran & Russia, Maleki21 Agreements among 5 Littoral States The Convention on Environment was signed in November 2003 in Tehran. Consensus over transportation as 1940 agreement says The different agreement on species of the Caspian, 50% of sturgeon trade is for Iran The next summit will be in Iran in 2006?? 14 round of negotiations among littoral states Several bilateral, trilateral discussions.

Iran & Russia, Maleki22 PIPELINE ROUTES: AN IMPRESSION Bottlenecks and Pipelines  11 oil pipeline projects/ 6 operational  6 natural gas pipeline projects/2 operational.  Of particular notice:  CPC  BTC  TCP

Iran and the North, Abbas Maleki23 Relations with China China’s Asymmetric Deterrence: China with modernized military is ready to fight along its border without permit the third party to intervene. Instability inside China: Socio-economic crisis in Northern part of China causes vast emigration to Russia Islamic Fundamentalism: Xinjiang independence should be a bed for Islamic fundamentalism and a copy for Central Asia. Future of Relations: Russians don’t know Chinese tendency after economic growth and solving Taiwan problem: -Shift to the South, no threats on Russian borders -Shift to the North, tension increases in China-CIS borders.

Iran & Russia, Maleki24 Differences Caspian Sea Legal Affairs Military presence in Caspian Sea Interactions with US, Israel The possibility of Russo-Iranian cooperation in the oil sector is remote.

Iran & Russia, Maleki25 Conclusions (I) 1. Russia wants to have good relations with Islamic countries. Iran is frontier of Islamic countries. 2. Iran is eager to show to the US, Policies such ‘regime change’ is not working. 3. The large hydrocarbon reserves can be used as a basis for either cooperation or rivalry between Russia and Iran. 4. Iran-Russia energy policies should not be seen in zero- sum terms. 5. More cooperation between two countries means enhancing global energy security. 6. Both countries are heavily dependent on oil revenues 7. Both countries are dangerously vulnerable to the fluctuations of oil prices.

Iran & Russia, Maleki26 Conclusions (II) Iran could join to Shanghai Cooperation Organization Two countries benefit from keeping prices at a certain level (roughly between $25-30). OPEC’s policy of reduced production benefits Russia by keeping prices high and enabling Moscow to sell more of its oil. Iran’s share of the world’s proven reserves (11.4%) higher than Russia (6%), encourages Russian companies to invest in Iran. Iran’s Transportation network is complimentary of Russian system and can support more oil production in Russia.

Iran & Russia, Maleki27 Conclusions (III) North–South Corridor should embrace new members Partnership on gas industries between the first and second gas owners: Iran has huge underexplored and unused gas deposits. Russia has the technological skills and expertise to develop them.