Politics

Iran’s Eastern Strategy

Analysis 3 December 2018
Iran’s Eastern Strategy

In response to punitive US policies, Iran is likely to rely more on its Asian partners and Russia to avoid economic collapse and ensure the survival of the Islamic republic.

The Trump administration’s withdrawal of the United States from the Joint Comprehensive Plan of Action (JCPOA) – commonly known as the Iran nuclear deal – and renewal of economic sanctions significantly limits trade between Iran and European countries. The United States’ new policy towards Iran is explicitly designed to provoke change in Iran’s internal, regional and global behaviour, as well as (at least implicitly) regime change in Iran itself. Whatever the endgame, the deep entrenchment of Iran’s revolutionary theocracy and ‘forward defence’ strategy makes the Trump administration’s objectives difficult to achieve. Iran also has options that could ameliorate the effects of punitive US policies. In particular, Iran is likely to rely increasingly on its Asian partners and Russia to avoid economic collapse and ensure the survival of the Islamic republic.

This approach does not represent a radical break with past Iranian strategic thinking. From the outset of the Islamic Revolution of 1979, Iran’s overarching foreign-policy guideline has been ‘neither East nor West’. In reality, however, Iran has always been orientated more East than West, by both necessity and design. Faced with the economic consequences of Western containment policies, in February 2018 Supreme Leader Ayatollah Ali Khamenei and the clerical establishment resurrected Iran’s ‘Look East’ policy, which originated under then-president Mahmoud Ahmadinejad in response to Western sanctions between 2005 and 2013 and is directed at improving ties with Russia, China and India. At the same time, to achieve foreign-policy independence, Tehran has also employed harsh anti-US ideological rhetoric that has impeded Tehran–Washington relations, although the Trump administration’s hostility to the Iranian regime has made the anti-Americanism of Iranian hardline factions seem more understandable. Accordingly, Moscow, Beijing and New Delhi now appear more flexible in balancing their geo-economic interests between the US and Iran.

“Iranian strategy will have to take into account Russia, China and India’s strategic outlooks”
Naturally, Iranian strategy will have to take into account Russia, China and India’s strategic outlooks. The three countries will have to balance their geo-economic interests with the US on one hand and Iran on the other. Russia’s main priority vis-à-vis Iran will be regional stability in the former Soviet space – that is, Central Asia and the South Caucasus – as well as in Syria. India’s chief concerns are the construction of the Chabahar port in southeastern Iran and bilateral energy cooperation with Iran. China will focus on its economic relationship with the US and the integration of Iran into China’s massive Belt and Road Initiative (BRI). The three countries are likely to use their cooperation with Iran as leverage in their respective bilateral relationships with the Trump administration.

The Russian dimension

Since the 1979 revolution, Iran has often been obliged to rely on Russia despite having good reasons to mistrust it. There are competitive aspects of two neighbours’ relationship, particularly in the energy field, but Iran is not and has never been a big gas exporter, and with respect to the European gas market, Russia has more to worry about from Azerbaijan, Turkmenistan and indeed the US. More broadly, each side has concluded that, as near neighbours, they should try to get along. They have common cause regarding the Caspian vis-à-vis perceived Turkic interlopers, and a shared interest in the stability and geopolitical orientation of the South Caucasus. Russia is, additionally, Iran’s best hope for protection in the United Nations Security Council. In September 2016, Russian President Vladimir Putin offered some public support for Iran’s return to the international oil market, and Moscow is now adopting a more cooperative policy vis-à-vis the Organization of Petroleum Exporting Countries (OPEC). Nevertheless, Russia’s support for OPEC’s decision to pump more oil in June 2018 (in order to compensate for the reduction of Iranian oil exports following the return of US energy sanctions) provoked an internal debate in Iran. Reformist factions believe this decision highlights Russia’s unreliability as a partner. Conservatives downplay such divergences between Iran and Russia in the interest of advancing the paramount objective of building a strategic partnership with Russia.

That said, the characterisation of the Iran–Russia relationship as a strategic partnership is something of an exaggeration. For instance, in 2015 the two governments unrealistically set a target for bilateral trade of US$10 billion–15bn per year, when the actual level has been US$1bn–3bn annually since 2011. Even so, economic ties are growing stronger. The provisional free trade agreement signed in April 2018 between Iran and the Eurasian Economic Union could substantially boost Iran–Russia trade. This economic cooperation is politically driven, but also sometimes inhibited by political considerations. A good example is Iran’s reluctance to use the oil-for-goods mechanism established between Iran and Russia. After an initial exchange of at least one million barrels of Iranian oil for Russian goods in 2017, talks to implement another exchange of 5m barrels of oil from Iran have not yet been finalised despite the implementation of a US embargo (effective as of 5 November 2018) against Iranian oil.

Russian multinationals are also sensitive to US economic pressures. The Russian oil company Lukoil abandoned its Iranian projects during the implementation of US sanctions under the Obama administration from 2011–13, and again when the Trump administration decided to re-impose those sanctions. Even so, on the whole Russian companies are less exposed to US market-share pressure than European companies, and some could benefit from the US withdrawal from the JCPOA. For instance, Iran Aseman Airlines signed a deal to buy 20 Sukhoi SuperJet 100 planes, mainly because of the US withdrawal and despite Iran’s general preference for Western technology.

Politically and to some extent militarily, Tehran and Moscow have extended their area of cooperation beyond the former Soviet space towards the Middle East, especially since the outbreak of civil war in Syria, where Russian and Iranian geopolitical and counter-terrorism interests are closely aligned. The Syrian-Iranian-Russian military partnership is still domestically unpopular, as demonstrated by Iranian protests at the end of 2017 and the beginning of 2018, when demonstrators chanted slogans such as ‘leave Syria alone, think about us’ and ‘death to Hizbullah’. Furthermore, the relationship is hardly a strategic alliance, as Russia’s warm relationship with Israel – Putin and Israeli Prime Minister Benjamin Netanyahu met nine times between July 2016 and May 2018 – negates Moscow’s partnership in any larger ‘Shi’ite axis’. But Iran has to an extent been able to cast Russia’s need for partners in the fight against Sunni jihadists as a pretext for maintaining its intervention in Syria.

China’s position

As a signatory, China supports the JCPOA, and is opposed to Iran’s acquisition or development of nuclear weapons and to any moves by Iran that would impede the free transport of oil in the straits of Hormuz or Bab el-Mandeb. Beijing also opposes US sanctions targeting Iran’s oil and financial sectors as well as US military action against Iran. Accordingly, China has clear strategic reasons for helping Iran continue complying with the deal in particular, and for maintaining a serviceable relationship with Iran more generally. Earlier this month, Beijing denounced new US sanctions as an exercise of the United States’ ‘long-arm jurisdiction’ and vowed to continue bilateral trade with Iran.

Beijing has already invested heavily in its relationship with Iran. China is Iran’s largest trading partner, while Iran is China’s fifth-largest supplier of crude oil. China’s commercial ties with Iran – in particular, rail and port links and infrastructure investment – are enhancing the BRI and strengthening its presence in West and Central Asia and in proximity to the Gulf. In July 2017, the Export–Import Bank of China extended a US$1.5bn loan to Iran to electrify the 900-kilometre Tehran–Mashhad rail link; in January 2018, the China Civil Engineering Construction Corporation signed a US$511m contract with the Iranian government for the construction of a 263 km railway line between Kermanshah and Khosravi; and in March the two countries made a US$700m deal whereby China will build a 400 km railway line linking the port of Bushehr with Iran’s other rail networks at Shiraz. In September 2017, China extended a $10bn line of credit to five Iranian banks to finance water, energy and transportation projects. China and Iran are also increasing military-to-military exchanges, joint counter-terrorism training, and joint military exercises, as evidenced by a military cooperation agreement signed in November 2016.

From Iran’s perspective, promoting bilateral arrangements with China is part of a broader effort to become integrated into Asian regional organisations such as the Shanghai Cooperation Organisation (SCO) and the Association of Southeast Asian Nations (ASEAN), and to establish a strategic partnership with China on the basis of shared opposition to what they perceive as a hegemonic US order. But although Iran did sign a friendship treaty with ASEAN earlier this year, the trajectory of its integration project appears modest overall. Internal Iranian opponents and dissidents have criticised Tehran’s attempt to align more closely with Beijing, citing the conflicting economic interests between the two countries, and some conservative clerics regard the tactical silence of Iranian authorities regarding China’s repression of the Muslim Uighur population to be inconsistent with the Islamic ideals of the Iranian revolution. China, for its part, remains wary of transforming the SCO into an anti-US organisation, and as a result Tehran has only been able to secure observer status in that body, which occurred in 2005. Nevertheless, China remains motivated to protect its substantial strategic investment in Iran by maintaining existing arrangements and, in particular, continuing to buy Iranian oil.

India’s limited role

Tehran has never been able to build an alliance with the traditionally non-aligned India despite shared regional geopolitical interests in Afghanistan and the ongoing Chabahar port project in southeastern Iran, which involves India, Iran and Afghanistan. Once constructed, the port will open a new transit route connecting the three participating countries and expand trading opportunities for India and Iran with Central Asia, while bypassing Pakistan.

Despite an initial period of rapprochement between 1997 and 2005 under then Iranian president Mohammad Khatami, two main hurdles curtailing the scope of the partnership between Tehran and New Delhi remain: the Indian-Israeli rapprochement and, especially, US influence. India has voted against Iran in the International Atomic Energy Agency. Although Iran and Russia support the Afghan Taliban as a check on ISIS, India remains strongly opposed to negotiating with the Taliban in view of its links to the Pakistani security establishment. Furthermore, India prioritises strong and stable relations with the Gulf Arab states, which host some eight million expatriate Indian workers and with which India has important oil and gas relationships, as well as growing security and defence links.

Nevertheless, India’s Shia population – arguably the world’s largest after Iran’s – is an important political constituency in India; that consideration has leavened India’s Iran policy. New Delhi has cooperated with Tehran in Afghanistan to subdue the rise of Pakistani influence. Furthermore, India’s perceived geopolitical utility to the Trump administration in checking Pakistan in Afghanistan and balancing China, among other things, affords New Delhi some leverage vis-à-vis Washington. India was able to exploit the scope of future reductions of India’s oil imports from Iran in its negotiations with the Obama administration on civil nuclear cooperation, and likewise (along with seven other countries) used those reductions to obtain a limited waiver of re-imposed sanctions on Iranian oil imports from the Trump administration. The US also refrained from imposing sanctions on the Chabahar project because of its potential to advance the stabilisation and economic reconstruction of Afghanistan and perhaps to deny China an opportunity to take over the port’s development and deepen its roots in Central Asia. On balance, then, New Delhi rejects the notion that Iran is an international pariah, but has limited leeway to treat it as a strategic partner.

Outlook

Iran’s difficulty in building a network of relationships to counterbalance the negative effect of its hostility towards the US is best explained by the revolutionary, and therefore destabilising, elements of Iranian foreign policy. In turn, Russia, China and India’s willingness to enter into conditional partnerships with Iran – and their resistance to unilateral US economic and political pressures aimed at thwarting their cooperation with Iran – do not reflect their anti-Western attitudes so much as their determination to have independent foreign policies. Iran’s revolutionary ideology is still a formidable hurdle to transforming Iran into a truly emerging country, especially insofar as it has antagonised the US.

The Trump administration, however, withdrew from the JCPOA in spite of the fact the Iran was complying with the terms of the agreement. For the time being, Iran is continuing its compliance and retains the sympathy of many external actors – including Russia, China and India, as well as the European Union and many individual European countries – and their qualified cooperation in mitigating the effects of US sanctions on Iran. Iran’s Eastern strategy, then, is a pragmatic imperative in the context of the United States’ policy of confrontation. More broadly, it could also strengthen a positive dynamic in international security. The shared economic benefits accruing to Iran from the three bilateral relationships afford Moscow, Beijing and New Delhi political influence with Tehran. They are likely to use it to pressure the Iranian government to refrain from militarising its nuclear programme, to keep adhering to the JCPOA, and to avoid a military confrontation with the US.

The article was initially published by our partner International Institute for Strategic Studies.

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