Iran nuke deal gives Russia a boost – for now

After years of supporting Iran in its efforts to reach a deal on its nuclear program, Russia comes away as a big winner in last week's accord. But that isn't likely to continue if and when Iran rejoins the global economy.

Leonhard Foeger/Reuters
Iranian Foreign Minister Mohammad Javad Zarif (l.) gestures next to Iranian ambassador to IAEA Ali Akbar Salehi (c.) and Russian Foreign Minister Sergey Lavrov as they pose for a photo in Vienna last week.

After years of hard lobbying for a nuclear deal between Iran and the big powers, Russia looks at first glance like one of the big winners from the agreement finally reached last week. And in the short run, Moscow may indeed benefit greatly, experts say.

But in the longer haul, assuming the accord holds, Russia is likely to see only limited economic gains as Iran emerges from years of harsh sanctions and begins doing business with the world once again.

In immediate political terms, the deal looks like a major win for Russian diplomacy. In his remarks about the agreement, President Obama went out of his way to praise the constructive role played by Russia as negotiations came down to the wire last week. In a phone conversation between Mr. Obama and Vladimir Putin, the two reportedly stressed the desirability of extending such cooperation to other vexing problems such as Ukraine and Syria.

"There is a strong feeling in Moscow that we can capitalize on this," says Sergei Strokan, foreign affairs columnist for the pro-business Moscow daily Kommersant. "It's not just about Iran, but it could be a turning point in our whole relationship with the West. At the very least, those rare words of praise from Obama demonstrate that we are not a pariah state; it must have meant a great deal to Putin to hear that.

"But there's also a belief that we can turn the positive energy generated from working together on Iran into real progress in other areas," he adds.

Some observers say they can already detect signs of new US-Russian cooperation in efforts to implement the Minsk-II cease-fire accord in Ukraine.

In the economic gold rush that's expected when Iran's frozen assets are released and the oil-and-gas rich country resumes full-scale exports to the world, Russia appears poised to try and take advantage of its (largely rhetorical) support for Iran during its long and acrimonious standoff with the West.

Russia has already tentatively contracted to sell up to eight new civilian atomic reactors to Iran, and recently announced that it will go ahead with a long-stalled sale of sophisticated S-300 air defense systems.

Russian oil and gas companies are rushing to get in on the  expected development boom as Iran starts to ramp up its hydrocarbon exports after years of sanctions-induced slump.

But the potential benefits for Russia probably end there.

Iran's expected return to global hydrocarbon markets will likely depress prices, and deliver another blow to the oil-and-gas dependent Russian economy. Iran, which has the world's  second-largest reserves of natural gas, might even threaten Russia's place as the biggest exporter of gas to the European market.

Other than nuclear technology, arms, and some engineering expertise, Russia has little to offer a country whose appetite for just about everything is bound to be voracious as it emerges from the deep-freeze of sanctions.

"The Iranian market is potentially very big. And we can already see German, French, and Japanese businesses gearing up to jump in. There are few areas in which we can compete with any of them," says Mr. Strokan.

"So, we may bask in the feeling that we won the diplomatic battle, and earned some leverage. But, if we speak about the economic race that's about to be launched, it's already ordained that others are going to come out on top."

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