Russia-Iran 20-Year Pact: Implications for the Middle East & Beyond

By IndraStra Global Editorial Team

 

On January 18, Iran's Supreme Leader, Ali Khamenei, officially approved a comprehensive cooperation deal between Iran and Russia. This deal, 'The Treaty on the Basis of Mutual Relations and Principles of Cooperation between Iran and Russia, ' will last for 20 years. It replaces the previous 10-year deal signed in 2001, which had already been extended twice. The new agreement covers a wider range of areas, with a particular focus on defense and energy sectors. This is surelya significant development in the geopolitical landscape.

Energy Sector Implications

The energy sector takes center stage in this agreement, granting Russia the first right of extraction in the Iranian section of the Caspian Sea, including the potentially significant Chalous field. The broader Caspian basin area, encompassing both onshore and offshore fields, is estimated to hold approximately 48 billion barrels of oil and 292 trillion cubic feet of natural gas in proven and probable reserves. Russia's instrumental role in adjusting the legal status of the Caspian basin area in 2019 resulted in a reduction of Iran's share from 50 percent to just 11.875 percent, potentially causing substantial revenue loss for Iran.
Recent estimates of the Chalous field reveal a twin-field site, with 'Greater' Chalous having 208 billion cubic feet of gas and 'Lesser' Chalous having 42 billion cubic feet, for a total of 250 billion cubic feet. This deal extends Russia's right of first extraction to Iran's major oil and gas fields in the Khorramshahr and nearby Ilam provinces bordering Iraq, providing Russia with a strategic advantage in the region.

Economic Dynamics

The economic aspects of the agreement formalize the prices of all traded items between Russia and Iran, including military and energy hardware. Iranian goods exported to Russia will be compensated at the cost of production plus 8 percent, held as credit in the Central Bank of Russia (CBR). Russia, in turn, receives payment in advance for its goods at a favorable exchange rate. The base price is determined by the highest price Russia received in the previous 180 days for the specific product.
Payments for goods and services outside the direct finance route between the central banks can now be facilitated through interbank transfers between Iranian and Russian banks, and involving renminbi can be done through China’s Cross-Border Interbank Payment System (CIPS).

Military Cooperation and Strategic Development

The expansion of military cooperation is intricately tied to the energy sector elements of the agreement. Upgrades to key airports and seaports, favored by Russia for dual-use purposes, are expected. The Iranian airports deemed suitable for dual-use include Hamedan, Bandar Abbas, Chabahar, and Abadan. Seaports like Chabahar, Bandar-e-Bushehr, and Bandar Abbas are prioritized for use by the Russian navy.
Russia's first right of extraction in the Iranian section of the Caspian Sea grants it joint command capability over the northern aerospace defense section of Iran’s Caspian area. This strategic move aligns with Iran's plan, supported by Russia, to establish a 'land bridge' to the Mediterranean Sea coast of Syria, facilitating increased weapons delivery into southern Lebanon and the Golan Heights area for potential use against Israel.

Military Technology Transfer

This comprehensive agreement encompasses crucial provisions facilitating the transfer of cutting-edge military technology from Russia to Iran. Specifically, designated personnel from the Islamic Revolutionary Guard Corps (IRGC) will undergo advanced training on a range of sophisticated Russian missiles, including but not limited to the Kh-47M2 Kinzhal, the Iskander M, the RS-26 Rubezh, the BrahMos3, and the Avangard. This transfer of knowledge and weaponry is poised to elevate Iran's military capabilities significantly. A noteworthy aspect of the deal is Iran's strategic objective to domestically manufacture 30 percent of these missiles, a move that not only bolsters its self-sufficiency in military production but also marks a substantial enhancement in its overall military prowess.

Geopolitical Impact

The ramifications of this 20-year deal extend beyond the region, changing the geopolitical landscape of the Middle East, southern Europe, and Asia. Iran's augmented military reach, a direct outcome of this strategic agreement, is poised to endow the nation with increased leverage to assert its political influence across these diverse regions. 
As a consequence, countries situated in these areas may find themselves reassessing their reliance on the United States for security, now viewing it through a different lens in light of Iran's bolstered military capabilities. The geopolitical dynamics are evolving, prompting a recalibration of strategic alliances and geopolitical considerations as nations grapple with the changing power dynamics ushered in by this significant accord.

EDITORIAL NOTE: The 20-year cooperation deal between Russia and Iran is a significant turning point in regional geopolitics. This agreement will profoundly affect energy dynamics, economic relations, military cooperation, and the strategic balance in the Middle East and beyond. The interplay of these elements may have a ripple effect that extends beyond regional boundaries and affects global geopolitics. 
Furthermore, just a month prior, Iran and Russia formalized an agreement to conduct trade using their respective local currencies instead of the U.S. dollar, as reported by Iran's state media. The agreement, solidified during a meeting between the central bank governors of both nations in Russia, assumes significance given Iran and Russia's shared status as subjects of U.S. sanctions. The state media emphasized that banks and economic entities now have the option to utilize infrastructures, including non-SWIFT interbank systems, for transactions conducted in local currencies.
As these events continue to unfold, the repercussions of this strategic alliance are expected to be felt on the international stage, marking a shift in diplomatic and strategic considerations. The world is closely watching as the dynamics of power and influence transform in the wake of this historic collaboration.

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