Russian Pinch of Persian Iran

International obligations have proven more valuable to Russia than arms trade with Iran, but its policy toward the Islamic Republic will never fully align with the West.

Moscow’s veto of the sale of Russian surface-to-air missiles to Iran last week goes beyond the demands of June’s UN Security Council sanctions, and will cheer Washington despite Russia selling Yakhont anti-ship missiles to Syria. Moscow first stepped off the fence on the Iran issue in June, when it backed sanctions against the pariah Islamic republic even though the Kremlin has traditionally avoided angering Tehran due to business interests in the country. As President Dmitry Medvedev tiptoes closer to the international line on Iran, observers will start to tot up the damage done to those interests. But are business interests the most important factor for Russia?

President Dmitry Medvedev on September 22 brought Russian policy on Iran a step closer to the Western mainstream when he issued a decree vetoing the sale of Russian S-300 surface-to-air missiles to Tehran, forfeiting a lucrative arms contract with the Islamic republic. Medvedev’s move not only meets but also surpasses the mandatory UN sanctions on Iran, which were passed in June and in part outlawed the sale of conventional arms to the country.

Tehran hit back with a threat to sue Moscow for breach of contract. “This [delivery ban] has no negative effect on us…but they [Russia] have broken a contract…showing that they cannot be trusted," Iranian Defense Minister Brigadier General Ahmad Vahidi said, RIA Novosti reported. Moscow has remained calm, and Konstantin Kosachev, a State Duma deputy and the chairman of the Duma’s Committee on International Affairs, said the ban was a consequence of Iran’s “flawed foreign policies.”

Medvedev’s move is a boost for President Barack Obama’s administration, which has been scrambling to show tangible returns from the much-touted U.S.-Russian rapprochement. Veto-wielding Russia’s blessing of UN sanctions in July went some way toward this, but last week’s step breaks new ground still and shows that Moscow is willing to concede business interests in the Islamic republic to stay onside with America and the West. “The Russian decree that was signed by the president goes beyond the UN Security Council resolution,” said Anton Khlopkov, director of the Center for Energy and Security Studies. “This is a new step in Russia’s approach to Iran.”

Russia’s continuing role as a major arms supplier in the Middle East, however, still riles Washington, which is now mediating the latest round of peace talks between Israel and the Palestinian Authority. On September 16 Russian Defense Minister Anatoly Serdyukov confirmed the sale of P-800 anti-ship Yakhont cruise missiles to Syria, an ally of Iran. Arms deals with Syria are a recurrent headache for Washington and Jerusalem, who fear that the weapons could end up in the hands of Lebanese militant group Hezbollah and foment further instability in the Middle East. U.S. Secretary of State Hillary Clinton on Monday warned Syria not to destabilize Lebanon or Iraq, from which the United States withdrew a significant portion of its troops last month.

Nonetheless, James Nixey, head of the Russia and Eurasia Program at Chatham House, disagreed that Russia’s deal with Syria seriously antagonizes Washington. “It’s an alternative for Russia,” said Nixey. “Russia wanted to get something, and at the same time to preserve the reset. It shows that ultimately Russia doesn’t care really who it sells weapons to, as long as it does sell its weapons. Therefore if it is presented with a choice and that choice doesn’t aggravate the reset, which is valuable to Moscow for a number of other reasons, then it is willing to give a little as far as Iran is concerned,” said Nixey.

Russia stands to lose at least $1 billion in arms sales from the Iran ban, as well as damages for reneging on its contract, Konstantin Kosachev, told RT yesterday. “Any current or possible commercial losses for Russia should not prevail over the political losses or damages if we are not in line with the nonproliferation regime, with our commitments to the Security Council and the United Nations. This is far more important." The losses anyhow amount to a drop in the ocean for Russia, which is the second largest arms exporter in the world, noted Nixey.

Russia’s business?

Russian business interests in Iran are often cited as a key reason why Russia has dragged its feet on Western–backed sanctions. Apart from weapons, Russia has supplied the Islamic republic with oil and gas, and has also built nuclear power plants in the country. As recently as July Moscow turned heads when it co-drafted an extensive roadmap for energy cooperation with Iran, which appeared to fly in the face of the international sanctions it had backed only the month before.

In a note to investors ahead of Medvedev’s visit to China last weekend, Chris Weafer, chief strategist for the UralSib brokerage, said that Russia continues to fend off Chinese business competition in Iran: “China has a very clear agenda to fill any voids left by Russia and others in Iran, while Russia clearly wants to stay engaged in Iran but doesn’t want to say that too openly.”

China certainly has a key role to play in the resolution of the Iranian question. In a comment for RIA Novosti, military commentator Ilya Kramnik pointed out that Beijing could well become the “loophole” in the weapons sanctions on Iran, as China has consistently supplied weapons to the Islamic republic even if only so that Iran can copy the arms and produce them locally.

Nonetheless, Khlopkin played down the idea that business competition with China is the driver in Russia’s decision to toughen up on Iranian arms trade. “We should recognize that there are not too many areas in Russian-Iranian relations where we cooperate closely. For example, bilateral trade is about $3 billion per year – this is nothing for the current Russian economy. It is far less than trade with the EU, which means that economic and business relations with Iran are not the first priority on the bilateral agenda – I would say security cooperation is much more important. The question therefore is: how will this impact our security relations,” said Khlopkin. The answer to this question, said Khlopkin, is too early to evaluate.

But Russian policy will never be entirely in-step with the Western mainstream, whether business interests play a role or not. “It is certain that this recent Russian decree does not mean that Russia will have the same position as Western countries and the United States, because we are neighbors,” said Khlopkin.

With permission from Russia Beyond the Headlines