Russia And Iran Bolster Economic Ties, From Cars To Planes To Energy

Russian and Iranian companies have held talks on the joint production of cars, in the latest sign of commercial cooperation between the two countries as they try to deal with international sanctions.

Russia’s economy has been hit by wide-ranging sanctions this year following its invasion of Ukraine in February, while Iran has many more years of experience with trade restrictions due to international concerns about its nuclear program and other activities.

There has been mounting evidence of close cooperation between the two countries in the military domain this year, with Iran accused by the U.S. and others of supplying hundreds of drones to Russia for use in the war in Ukraine. Iran has only admitted to providing a small number before the war began.

However, Iranian officials have been more willing to acknowledge growing ties in other areas.

Iran’s Ambassador to Russia Kazem Jalali told reporters in Moscow this week that the two countries have held discussions over the joint production of automobiles, with Iran’s two biggest car makers, Iran Khodro and Saipa, both involved in the talks.

The Russian auto sector has been particularly hard hit by international sanctions, with imports of essential parts grinding to a halt. Iranian media have reported that Russian companies have been enquiring this year about sourcing parts for its vehicles from Iran. It seems such discussions may now have progressed to Iranian companies helping with full-scale production.

Growing commercial ties

Cooperation in car manufacturing is just one of several business areas where the two countries have been drawing closer together.

On Monday, Russian state-owned bank VTB said it would start providing cross-border money transfer services between Russia and Iran.

In July, the National Iranian Oil Company (NIOC) and Russian energy giant Gazprom signed a memorandum of understanding worth an estimated $40 billion to develop oil and gas fields in Iran and to work on a liquefied natural gas (LNG) project.

This week, Iran’s energy minister Ali Akbar Mehrabian was due to fly to Russia to discuss further cooperation with his counterpart in Moscow.

Less than a week ago, Iran’s deputy industry, mining and trade minister Manochehr Manteghi said there had also been discussions with Russia over the joint production of passenger planes.

Manteghi made the comments at the opening of the 11th Iran International Airshow & Aerospace Exhibition which ran from Decemebr 13-16 on the Gulf island of Kish. He did not provide many details of the plans, other than to say it would be for an aircraft with between 70 and 150 seats.

It is not clear if this replaces previously-announced plans to produce passenger planes domestically in Iran.

In June, President Ebrahim Raisi ordered the Iran Aircraft Manufacturing Industrial Company (Hesa) to produce a passenger plane with at least 72 seats “in the near future”.

There have been other recent efforts to manufacture passenger aircraft in the country which have failed to progress. In early 2021, Iran’s Civil Aviation Organization (CAO) said there were plans to produce a 100-seater passenger aircraft.

Under an earlier scheme dating back to 2017, the Iranian Aviation Technology Development Headquarters (IATDH) was lined up to develop a 72-seat plane which was due to be ready by 2021.