Iran and Russia Are Cementing an Alliance With Grain, Drones and Satellites

Iran and Russia are forging tighter ties than ever, as their international isolation drives the two staunch American foes toward more trade and military cooperation, alarming Washington.

In July, Iran became the world’s largest buyer of Russian wheat. This month, Russia launched an Iranian satellite into space in a rare success for Tehran’s space program. And last week, Iran’s military hosted joint drone exercises with Russian forces, as the U.S. warns Moscow is preparing to receive Iranian drones for use in the war in Ukraine.

The flurry of activity shows how the Ukraine war has accelerated efforts to bring together Russia and Iran, which have often talked of closer ties but with few results. The two states share an opposition to a U.S.-led world order and both suffer from tough U.S. sanctions. But until this year, their relations had been weighed down by ​opposing agendas in Syria, by Iran’s historic suspicion of foreign interference and by Russia’s historical role as the dominant power in Central Asia and the Caucasus.

A closer Russia-Iran alliance would help both countries mitigate the impact of Western sanctions by finding new markets for their products and boosting military cooperation that could help Moscow’s war in Ukraine and Tehran’s regional activities in the Middle East. U.S. national security adviser Jake Sullivan recently called the burgeoning Russia-Iran ties a “profound threat.”

The growing ties were punctuated by Russian President Vladimir Putin’s visit to Tehran in July, in his second foreign trip since he ordered the invasion of Ukraine on Feb. 24. Iranian President Ebrahim Raisi traveled to Moscow in January, when the two countries pledged more economic and military cooperation.

Overall, bilateral trade is up 10% between Russia and Iran this year. In 2021, trade between the two countries surged 80% higher to $4 billion, according to Russia.

Some observers say that apart from food and military cooperation, the relationship still has a long way to go. China traded $14.8 billion worth of non-oil goods and services with Tehran last year, according to Beijing’s customs statistics, and the two countries have a 25-year, $400 billion trade agreement. China is also major consumer of Russian oil that is being shunned in much of the Western world.

Esfandyar Batmanghelidj, chief executive of the Bourse & Bazaar Foundation, a think tank focused on economic diplomacy, said a revived nuclear deal—which Washington and Tehran appear on the cusp of clinching—could spark more Russian investment in Iran.

Russians have been flocking to the Islamic Republic in recent months, often to discuss ways to circumvent sanctions, say Iranian businessmen. Russian is often heard in Tehran’s shops and hotels these days, as Iran remains open to Russian travelers who have been cut off from much of the West.

At the city’s grand bazaar, Hossein, a carpet seller, said the number of Russian customers has doubled since February and now make up half its customer base. In the lobby of a luxury hotel in Tehran, the only Europeans were Russians who brought their laptops for a business meeting with Iranians in black suits.

Deals on the table include Iran selling clothing to Russian buyers to replace Western brands and automotive spare parts to embattled Russian car makers. Discussions have been held of an export corridor running from Russia to India through Iran and to set up a banking system totally insulated from U.S. sanctions.

Tehran’s state-run National Iranian Oil Co. has also signed a deal with Russia’s energy giant Gazprom PJSC to invest $40 billion in Iran’s natural-gas industry.

Both countries need trade partners badly, even if they are limited in their ability to help each other. The International Monetary Fund forecasts that Russian gross domestic product will contract 6% this year. The IMF expects Iran’s GDP to grow by 3% this year but the country is struggling with 50% inflation and a currency that hit a record low against the U.S. dollar this year.

Iran offers Russia expertise in avoiding Western sanctions while Moscow appears to have given Iran preference for agricultural exports amid fears of food shortages.

Iran and Russia have both struggled to find banks to handle their commodities transactions, trade experts say. Their blossoming trade is a marriage of convenience at a time when European traders shun new contracts in Russian grain and other commodities.

“Iran can only buy wheat from a limited number of sources,” said Masha Belikova, a grains analyst at commodity price reporting agency Fastmarkets in London. “When the war started, Russia was targeted by sanctions and faced payments issues. Iran was one of the few countries ready to accept” such political risk.

The increased military cooperation between Iran and Russia has alarmed U.S. officials.

Iran’s hard-line Islamic Revolutionary Guard Corps is hosting a competition of military unmanned aerial vehicles, or UAVs, with the Russian army at their air base in Kashan, south of Tehran. Iranian state television showed IRGC members flying Russian flags as they led a parade of Moscow’s soldiers.

The White House has alleged Iran hosted a Russian delegation in Kashan in June to showcase its attack drones. It says Iran is training Russian soldiers to potentially use the weapons in Ukraine.

Drone technologies designed by Tehran have emerged as a key instrument of asymmetrical attacks carried by the Islamic Republic against Saudi oil fields and by allies in the Gaza Strip, Iraq and Yemen.

Tehran denies plans to assist Russia’s war in Ukraine. Brig. Gen. Ali Balali, a top IRGC air-force officer, said last week the drone drills were aimed at fighting global terrorism. The military UAV competition, which also involves Russian allies Armenia and Belarus, was first launched in 2015 but is normally hosted in the former Soviet Union rather than Iran.

On Aug. 9, Russia launched an Iranian satellite from a facility it controls in Kazakhstan. Iran says the satellite will help bolster “management and planning capacities” in agriculture, water resources, disaster management or border monitoring.

The U.S. suspects the satellite could be used by Tehran to help monitor Ukrainian troop movements.