Alexander Karavayev: Baku may become a mediator for Iran

Mon 31 August 2015 06:30 GMT | 11:30 Local Time

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Oxu.Az interviews Russian political scientist, research worker of the Institute of Economy of the Russian Academy of Science Alexander Karavayev.

How may lifting anti-Iranian sanctions influence its neighbor South Caucasus region?

This will primarily influence the large-scale intensification of full-pledged trade and economic relations of Iran with the South Caucasus countries. These ties existed in period of sanctions too but lifting serious banking restrictions, for example for conduction of dollar transactions and the use of different systems of payment of Visa-type, will have visible results.

In particular, the issue in active discussion is defreezing of $200mln, which are mainly the assets of Bank Melli Iran that were blocked by the Central Bank of Azerbaijan in period of the last wave of international sanctions in 2011 when the ban on banking operations was toughened and EU refused to purchase Iranian oil. Now this page has seemingly been turned over. 

In addition, intensification on projects that were outlined a decade ago and are related to transport infrastructure, electric and energy communications should be expected. In this sense, I would like to note the recent visit of Azerbaijan’s Minister of Economy and Industry to Tehran with a representative delegation of several ministries, which itself is an example of such an  intensification.

Iranian work groups have resumed their activities on other countries of the South Caucasus, which, surely, give Iran an opportunity to restore their presence on the regional markets.

For example, Iran is discussing five-fold increase in gas supplies with Armenia to 10mln cubic meters daily. By the way, to compare, this is 10-fold higher as planned by the swap to Nakhchivan. In fact Armenia was most actively developing its Iranian ties, considering the absence of any other regional alternatives. It has the biggest trade of nearly $500mln with Iran among the three South Caucasus countries. Georgia also intends to intensify its projects. 

The direct air flight between Tbilisi and Tehran was restored in period of sanctions and an agreement to cancel visa for citizens’ 45-day trips was signed in 2010.

The negative balance of trade remains a serious problem for all Caucasus neighbors of Iran. This is a situation when    import exceeds export. Import from Iran to South Caucasus dominates in both industrial and food sector. It is clear that the economies are not equal and for Armenia and Georgia it seems impossible to improve the situation in the future.

But Azerbaijan can try. First of all, SOCAR can make oil and gas investments into Persian fields. There is a good potential in ship building and repair. And second, Baku may become a mediator for Iran in a number of western technologies, for example, offer its technologies in alternative energy, adapted for the region.

Do you think Iran returns to our region with stronger positions or on the level that was before the sanctions?

It depends on which period of sanctions is taken for the starting point. I think it will be very difficult for Iran to gain back the capacities that it had in 2003. Iranian niche in a  number of spheres was ‘divided’ by other economies, influencing the South Caucasus. I will cite an example.

An automobile plant for production of Chinese cars Lifan has been built in Nakhchivan. They will sell their cars to Georgia and Central Asia soon. In fact, this is the niche of Iran Khordo, sedan Samand, which is famous for its low budget even in Russia.  Not to mention that the economic segment of car assembly in the South Caucasus is almost occupied by Russian brands, assembled in Georgia. 

Thus, Iran will hardly be able to enter this market, though it had the potential. The same can be said about many consumer goods, which have been predominantly Chinese over the past decade. Some two decades ago these were mainly supplies either from Turkey or Iran.

All the same, it is quite possible to achieve the pre-crisis level in trade, I mean the indicators in period of 2009-2010-2011. In addition, it will probably be increased. In this aspect, it is necessary to take into account the attractiveness of the Iranian sector of services, public health and education. It is still popular and remain popular for Armenia and Azerbaijan, especially in the regions, bordering Iran. 

How will the intensification of Russian-Iranian relations influence our region?

This will have a favorable influence on implementation of regional transport projects. This primarily relates to Azerbaijan. After resolution of a number of known infrastructural issues on North-South project, Azerbaijan may become a full-pledged transit country for the motor road and railway flow from Persian Gulf to the Baltic and Black Sea.

This will further bring additional revenues to Azerbaijani budget, support middle and small business of your country in the roadside service sector. Cooperation between Moscow and Tehran in line with the memo signed last year as part of a deal under which Iranian oil is exchanged for Russian goods will be especially useful here. This mechanism is not working yet, but nevertheless… 

Does Russia not see the threat of growing Iranian presence in the region after weakening of sanctions? 

You are right, Iran has always led an independent game. Growing cooperation with Russia was rather due to circumstances in connection with sanctions. Experts express various opinions about the way the new post-sanction situation may influence Russia’s interests in the region. As it usually happens in  such cases, the opinions can be divided into two camps. 

One of the sides considers that the concerns about negative impact are substantiated, while others say there is nothing bad in it, because Moscow and Tehran maintain quite close cooperation and existing problems will be settled. 

I think the most important is how Kremlin views Iran in the current global power outlook. And they see it primarily against the backdrop of the various phases of US-Russian confrontation over the past two decades. Now Russian geopolitical and macroeconomic problems, perceived by Kremlin via the ‘US prism’ are as if refracting the perception of reality, reducing the sharpness of other issues for the Kremlin, or, just the other way round, making them even more expressive than they really are.

The picture we get is: the relations between Moscow and Tehran would seem as a certain plus projected to Russian-US ties. That is, regardless of our problems in trade and economic relations, regardless of the features and even complexities in political relations with Iran, they would be a plus, because they played on confrontations with Washington and as if added the Iranian vector in Russian policy to the positive sides of this confrontation with the United States.

Based on this, the possible growth of Iran’s influence in the South Caucasus does not seem dangerous for the Kremlin. This situation may establish in several years, regardless of what will be going on in other directions of Iran’s foreign policy.

The cancellation of sanctions may certainly help Iran gain back its former political positional in the region, increasing competition in Moscow, which is already facing the Turkish influence. But it is not such a dangerous moment for Moscow. Anyway, this is what Kremlin likely thinks. 

For already several years Iran has been speaking about readiness to play the most active role in Karabakh settlement, considering the good relations with both parties to the conflict. What is the peacekeeping potential of this country now, when it is opening to the world again?

In fact, Iran’s role may be big only on the definite stage of the process of demilitarization in the future. Iran may be a guarantor of security along Azerbaijani border on the borderline sections of the occupied lands along Araz. For example, during the opening of the railway section connecting Nakhchivan with the rest of Azerbaijan. Before that its participation in the established format of talks – in the format of the Minsk Group – is not interesting either to Russia or the United States.

These countries play the major role. But despite this I am sure that Iran will continue making some loud statement regarding its participation in the negotiation process, but this should be perceived as a simple claim for possibility rather than a real factor.

And only when some practical actions on demilitarization, withdrawal of Armenian forces from the part of the occupied regions begin, Iran’s role may be quite big in relation to the borderline southern regions of the conflict area. Possibly, even the participation of Iranian observers in provision of guarantees of security of this part of Azerbaijani regions. But this will all be in the future. 

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