Iran needs investments and technology

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Iran needs investments and technology 11.11.2016 12:09

The agreement on nuclear issue signed with Iran in the past year came into force only in January 2016. On the immediate lifting of sanctions no one is talking, this process will continue for at least eight years. If Barack Obama supports it, both US presidential candidates Hillary Clinton and Donald Trump oppose to an agreement on Iran. And yet it is unclear how this agreement will operate when there is a change of administration in the White House.

In fact, the Iranian nuclear issue is politicized. On the technical side, Iran has fulfilled all conditions. It took out low-enriched uranium on the territory of the Russian Federation, in fact brought down the reactor in Arak, it started to work for the conversion of an underground center in Farda, which was previously the subject of uranium enrichment, and now becomes the object of the production of medical isotopes.


Politicized nature of the problem


Nevertheless, the West has a different kind of claims against Iran: allegedly there is some secret agreement, according to which Iran may have more low-enriched uranium to the degree of enrichment of uranium-235, about 20% of which under the agreement should not be. In particular, this uranium contains in the solid uranium (oxide) in the form of tablets for nuclear fuel. And it is not only technically difficult but costly to convert into gaseous form, which can be used for uranium unenrichment to 5%. Obviously, no one will do this. Thus, it appears that there is some amount uranium in Iran enrichment degree of which is about 20%. And the new administration could raise this issue.

There are claims against Iran and on the missile program. Formally, it is irrelevant to that agreement, because it is derived from its scope. However, there are UN Security Council resolutions, in which the missile program is registered. And there is a discrepancy between the agreement that was signed, and the applicable resolutions of the UN Security Council. Much will be determined by whether the new US administration continues the policy of Barack Obama or not. However, it is not so simple to abandon this course, because the United States must comply with its own international commitments. But they can try to provoke Iran to withdraw from the agreement. In Washington, many advocate to take a tougher tone in dialogue with Iran.

In the context of international uncertainty, investors are in no hurry to Iran. Large investments in the country can come no earlier than next summer. In June 2017 presidential elections are to be held in Iran. His candidacy will nominate country's current President Hassan Rouhani, representing the moderate wing of the Iranian political forces. It is possible that his opponent will be the candidate of the conservative political wing, close to Mahmoud Ahmadinejad, who himself is unlikely to run for president. And if in Iran does not happen a substantial improvement in living standards, the chances of Hassan Rouhani to maintain their power is not too large. And if the new US president begins to exert pressure on Iran, it can lead to the fact that Hassan Rouhani will not win. Before the presidential election large investments will not come in Iran, therefore substantially to improve the socio-economic situation in a short time is unlikely. Relying on of the rapid lifting of sanctions, the arrival of the money, the rapid development of the economy failed to materialize. Iran began to produce larger and more oil to sell it, but the international oil prices fell.

The process of lifting sanctions from Tehran will be long. Thus, the removal of restrictions on purchases of heavy weapons will only happen in seven years, and the West does not really want to, because it will lose leverage. For the US, it is desirable to keep the sanctions against Iran. Part of sanctions in general has no relation to Iran's nuclear program. Many of them were brought before the nuclear crisis, and they will even act as if on its nuclear program completely remove sanctions.

But even that part of the sanctions, which will be with Iran finally removed, will not be able to ensure the country socio-economic breakthrough in any case, before the presidential elections in June 2017. Therefore, Iran will have to wait for the presidential elections in conditions of low oil prices and occupied oil markets.


Necessary resources


Meanwhile, Iran has a lot of obligations, in particular by supporting the Shiites in different regions. It is not just about Lebanese "Hezbollah" movement, but also Hazars in Afghanistan, Shiites in Iraq. These obligations also require financial and other resources. But the main thing - it is the obligation within the country. Iran's population is very young, it is necessary to solve the problem with the creation of new jobs, and it is unclear how to do it in practice. And at the same time the level of education in the country is high enough. An important factor is Iran's desire for regional leadership, which also requires resources. It is also necessary to modernize the country's armed forces. There are many challenges, and their solutions need resources. And these resources are partially frozen in the United States and yet remain frozen. In particular, the Shah of Iran had in American banks $20 billion. Now this figure is closer to $100 billion. Of course, in Tehran one counted on them.

Iran is seeking ways out of difficult situation. He wants to take part in the Chinese initiative of One Belt, one way, the implementation of which would make it possible to create on its territory a different kind of production. There is a certain tendency of Iran to participate in the Eurasian Economic Union by creating a free trade zone. Within the framework of the Shanghai Cooperation Organization (SCO) Iran could develop the bilateral relations, including with Russia and India.

Iran is working on all these issues, but focuses on the region, that is, cooperation with the countries with which it borders, or they are in close geographical proximity of it. One of these states is Armenia. In particular, it is important to mention the construction of the railway from Iran to Armenia, with the possible partial financing of the project by China. One discusses the idea of creating a transport corridor through Armenia with access to Georgia.

But all these projects cannot provide a breakthrough for Iran. Iran's well-being is dependent on world oil prices, which are likely to be low, as well as the inflow of foreign investments. Only in the oil and gas sector, Iran needs to invest about $200 billion, the minimum amount - $80 billion investments amounted up to $4 billion.

Iran wants to develop on its own, so modern technologies are needed. So, Iran intends to purchase Russian T-90 tank, but do not just buy, but also to get its production technology. But not all the countries go on technology transfer. Technology could provide, for example, Germany for Iran. With this experience of copying in Iran is less developed than, for example, in China. Some time ago, China bought locomotives manufactured by Siemens technology of the German company, and today manufactures and sells it on world markets. Iran has no such capability.

For Iran, it is important that the process of improving relations with the West has been continued, but this does not mean that Iran is ready to be transformed into a state of the Western type. And there is a certain contradiction - investments of the West are needed, while maintaining the internal structure of the state and its foreign policy. As this compromise will be allowed as long as it is not clear. Will Iran join the SCO or not as a full member? There are arguments and "for" and "against." During Mahmoud Ahmadinejad there was an interest in the SCO, today, it clearly weakened. So, in Tehran, one is asked whether non-Muslims will predominate over Muslims, if the country joins the SCO, will a part of national sovereignty be lost?

In the medium term, Iran's position in the region will increase as the removal of international and unilateral sanctions and strengthening relations with European countries and with Russia. Today in the region there are three main leaders - Iran, Turkey and Saudi Arabia. But the biggest potential possesses Iran, since it is the most stable of all the states from the "inside", in spite of the current difficult situation.


Turn to military cooperation


If one talks about the development of Russian-Iranian relations, an important question - is the transition from military and technical military cooperation. Military-technical cooperation between Russia and Iran involves arms sales and training personnel to work on these weapons. Military cooperation is much broader.

Iran's armed forces need to be modernized. When Russia tried to make temporary use of the Iranian air base, it turned out that it did not have the appropriate infrastructure, and to use it, one needs to equip the technical means of the airfield itself, equip the base of engineering and technical means for the suspension arms and testing of aircraft systems, create warehouses for the storage of ammunition, fuel materials etc. In short, without retrofitting the airfield can only be used as a transit point.

In order to strengthen the Air forces of Iran needs to modernize its entire airfield network, improve the quality of aviation equipment, to create centers of its service, to train Iranian pilots’ new tactics of warfare. And the Russian Federation can do a lot in this regard. Within the framework of such cooperation the question of the joint use of a military airfield can be raised. In this case, Russia might equip the airport, which remains the property of Iran. At the same airfield Russian pilots can train Iranian pilots. And in legal terms, conducting airfield modernization it is not prohibited and cannot be the reason for the introduction of any new sanctions, as well as pilot training, and repair of aviation equipment. These opportunities are not limited to resolutions and international agreements.

Naval forces require upgrade also. The Iranian Navy is coast based. The destroyers, which are now in Iran's arsenal, are actually a frigate with a displacement of 1.5 thousand tons, small ships for coastal waters. Iran has only two relatively modern submarines, which put Russia in the late 1990’s - early 2000’s, as well as small submarines with a displacement of 500 tons, which is good as the sabotage, but they cannot be fitted with serious weapons. Cooperation cannot start with the delivery of new ships to Iran, and on the modernization of those that are available, that is, to equip them with more modern weapons systems, navigation, communications, and command and control. There are a wide range of possibilities of this interaction even within the existing international sanctions.

The same case is with air defense (AD), which is derived from under restrictions. Here one can talk about the supply of additional quantities of systems, an additional amount of army air defense system, which has a promising specimen from Russia.

To improve the combat capability of the Iranian army may hold joint Russian-Iranian doctrine, for example, naval, joint military maneuvers. Extensive military cooperation, which offers Russia to Iran, would promote the rapprochement of the two countries.


Through a strategic dialogue for a strategic partnership


The way of interaction, which outlined the Iranian President Hassan Rouhani and Russian President Vladimir Putin lies through a strategic dialogue for a strategic partnership. To move to the strategic partnership it is needed to start military cooperation. It must be complemented by economic interaction, for example, the creation of a free trade zone with the Eurasian Economic Union, and strengthening political contacts. The Russian side should persuade Iran to the advisability of full participation in the SCO cooperation with the CSTO, for example, the establishment of contacts between the CSTO Secretariat and the Iranian Ministry of Defense. In the context of these capabilities the relationship between Iran and Armenia will be developed.

Military cooperation - this is the sphere of relations between Russia and Iran, in which a breakthrough could be achieved. This breakthrough is hardly possible today in the area of economic. Trade turnover between the two countries amounts to $2 billion. For comparison, Russia's trade with Israel reached $3 billion. This rapprochement between Moscow and Tehran does not rule out its rapprochement with Tel Aviv. Israel, for example, applied in the SCO, knowing that Iran is involved in the organization as an observer. Moreover, Israel is discussing the creation of a free trade zone with the Eurasian Economic Union.


Vladimir Evseev, Deputy Director, Head of the Department of Eurasian integration and development of the SCO CIS Institute, a military expert, Ph.D.