Our ties with Russia have been strengthening in recent years and politically we are on good terms and on a strong footing.

They love Iranian deserts. Just ask the caterers at Esteghlal Grand Hotel who had to restock the desert cart by midday. A healthy build, a skin so white it’s actually pink and a wit that is quintessential to Russian diplomatic training, the high-ranking Russian delegation participating in the Joint Iran and Russia Economic Commission could be spotted from a mile away. The Iranian decision to host the fourth round of this commission was made when Igor Ivanov, Russia’s Minister of Foreign Affairs, was visiting Tehran.

Farit Gazizullin, Russia’s Minister of State Property Relations, headed the Russian delegation and after negotiations with Bijan Namdar Zangeneh, Iran’s Minister of Oil and Commission Chairman, signed a Memorandum of Understanding that addressed water and power, establishing hydro plants and utilizing renewable energies, establishing the international transit "North-South" corridor, industries and mines, post and telecommunications, health, commerce, aerospace industries, aviation, nuclear science and technology and a major part of the MoU addressed the oil and gas exchanges between the two energy-rich countries.

In 2002, Iran’s non-oil exports to Russia saw a 40% to 50% boost.

Iran’s cooperation with Russia is still based on the "10-year long-term cooperation contract" that was signed between Ali Hashemi Rafsanjani and Mikhail Gorbachev’s Soviet Union, on the verge of its collapse. Post-Soviet Russia has been of great assistance to Iran in the field of transfer of inexpensive and advanced technologies, but Russia still remains an uncharted sea of opportunity.

That is why the two time minister, Gholamreza Shafeyi, was selected as Tehran’s ambassador to Moscow. He will soon be hosting the Ministry of Oil’s International Deputy, Nejadhosseinian, when he goes to assess the Russian proposal for extending the long-term agreement contract between the two sides. What will follow is an interview with Shafeyi on how Iran has and should navigate the vast sea of opportunity that is Russia.

Our ties with Russia have been strengthening in recent years and politically we are on good terms and a strong footing. Officials of both sides are shuttling back and forth in generous frequency. Last year Kamal Kharrazi, Iran’s Minister of Foreign Affairs visited Moscow, and his Russian counterpart, Igor Ivanov, came to Iran and met with the President, Head of the Expediency Council, Head of Parliament and the Director of the National Security Commission. The Iraqi issue was also a significant point in our political dealings, as Iran shares a border with Iraq, and Russia was an active member in the Coalition for Peace. During Ivanov’s visit we also discussed the ongoing developments in Afghanistan, focusing on confronting terrorism, drug trafficking and issues relating to Central Asia and the Caucasus and their accumulative reserves, and of course, the carve up of the Caspian Sea.

Russian exports constituted over 90% of this exchange, leaving Iran with a share of less than 10%. Even though our exports enjoyed an increase this year, but we are still very far from a trade balance. However, this disparity is understandable as Iran has no choice but to import some of its requirements –for example in its nuclear project and defense technologies– from Russia alone. But this isn’t true for all fields of exchange, as things like iron, wood and paper can be procured from other markets as well, but we prefer to deal with Russia at the moment. Generally speaking, trade balance is not something we can achieve in the short-term, and if we set aside our oil and gas exports, we rarely have a trade balance with any country. But in any case, in 2002, Iran’s non-oil exports to Russia saw a 40% to 50% boost.

After assessing offers from countries such as China, Russia and France, Iran choose to entrust the construction of this satellite to Russia, not only because of its reasonable price, but also because of its technological superiority and after-sales services. Our negotiations finally led to the inking of an initial agreement about six months ago, but due to global turbulence and America’s likely condemnation –as with the Bushehr Nuclear Power Plant– and even though the Zohre Satellite is a non-military communications device, the next steps were taken at a slower pace. However, there is a further complication and that is Russia’s proposal to add a new clause to the contract. Inconsistent with international custom, Russia’s new clause would stipulate that the governments can suspend the project in the event of an emergency. The clause was suggested to leave an escape route for Russia if it were to come under intense pressure from the United States to discontinue the project. Despite Russia’s promise never to rely on the clause, Iran has refused to include such an unreasonable and uneconomical term in the contract. So at the moment we are waiting for a response from Russia –forthcoming in the next couple of months– to see whether they are willing to continue the project within the previously agreed terms.

In 1998 the presidents of Russia and Kazakhstan signed a demarcation agreement, which led many to believe that Russia has changed its stance on the Caspian Sea issue –it had previously agreed to joint ownership or "condominium" on both sea surface and bed. But I believe Russia has always been in pursuit of both policies simultaneously, and even today it restates division in bed and joint ownership on surface. In 1994 Russia participated in Azerbaijan’s consortium that was attempting to recover oil from the Caspian Sea. This shows that Russia recognizes Azerbaijan’s exclusive ownership to a portion of the sea’s reserves, and if Russia believed in joint ownership, Azerbaijan’s exclusive presence would be baseless. In other words, Russian politicians respected the agreements of 1921 and 1940 and Russian businessmen respected the division of resources; even if they constantly emphasized joint ownership in negotiations.

The three countries of Azerbaijan, Kazakhstan and Russia have signed an agreement to divide the northern parts of the Caspian Sea by the principals of equidistant demarcation. Additionally, Russia has announced that Iran, Azerbaijan and Turkmenistan can also negotiate the demarcation of the sea’s southern parts and that any decision they reach will be endorsed by Moscow. We are relying on an agreement that was previously signed by the foreign ministers of all five littoral states, which stipulated that any agreement on the division of the Caspian Sea must be approved by all five states or would otherwise be void. Iran’s overall stance on the issue is that the Caspian Sea should not be divided in bed or surface, but if all the other countries decided to divide the sea bed, Iran’s share must be no less than 20%. However, all the littoral states have their own reasoning, and Kazakhstan –at 29%– enjoys the longest border, while Iran has the smallest. So the general assertions that Iran has acted weakly on the Caspian Sea issue are baseless, as Iran had absolutely no presence in the sea before the collapse of the Soviet Union and anything it gains in these negotiations will be better than what it had before.

Russia is a country with annual exports of around $100 to $110 billion, mainly from oil and gas. This country has a daily export of over three million barrels of oil and Gazprom alone accounts for $14.5 billion dollars worth of exports. It should not go unsaid, however, that Russia’s imports have also been on the increase, rising from $34 billion and reaching $45 billion today. The presence of Turks is completely evident in Russia’s market, with Turkey owning at least ten shopping centers in the country. So if Iranian businessmen want a part of the Russian market as well, they require some sort of negotiation between the governments of Iran and Russia –on tariffs for example. Custom agreements, which have been broadly settled, must be signed and implemented. The prevention of double-taxation agreements that have already been signed remain to be implemented. Our businessmen also need to change their attitude and perspective. Since we have traditionally based our trade on the oil exports and the imports of goods, our businessmen lack the required experience and skill in other forms of exchange. In any case, Russia and its neighbors form a 280 million-strong market, which remains to be exploited by Iranian businessmen.

Edible produce, household appliances and furniture, construction material and medicine to name a few. As for transportation, it is to Iran’s advantage to send its goods via road haulage. But Russia prevents the entry of trucks from the Caucasus due to security concerns. Iranian trucks actually promote the security of the region in a complementing relation between security and trade. The Russians prefer the use of trains or ships that carry trains for their exchanges, as they have relative advantages in those methods. The Russians have even expressed interest in investing in Amir-Abad Port, so it can unload trains unto its tracks and into Iran’s railway network.