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Russia And Iran Are Trading Places

"OK, now you go rogue..."
"OK, now you go rogue..."

After decades as an isolated rogue state, Iran appears to be finally coming in from the cold. And after decades of pretending to be a partner to the West, Russia has gone rogue.

Tehran and Moscow are essentially swapping places.

The symmetry is hard to miss. And so are the geopolitical implications of the agreement reached in Vienna to curb Iran's nuclear program in exchange for the lifting of crippling international sanctions.

Vladimir Putin said Moscow "welcomes" the agreement, adding that "the world can breathe a sigh of relief."

The Kremlin, however, may soon be heaving a sigh of despair. Despite being a party to the marathon talks that produced the deal, Moscow has a lot to lose from it.

I'm A Rogue, You're A Rogue

The first casualty will be Russia's special relationship with Iran.Moscow has maintained close ties with Tehran, playing up their mutual resentment of the Western-dominated world order. But this will be much harder to do with an Iran that is eager to re-engage with the West.

In a recent commentary for Reuters, Agnia Grigas, author of Beyond Crimea: The New Russian Empire, and Amir Handjani, a Middle East expert, argued that the West now has an opportunity to "decouple the unnatural Iranian-Russian alliance to rein in Moscow’s hegemonic ambitions, as well as bring Iran back into the global economic fold."

It was indeed Iran's isolation from the West that drove Tehran into Moscow's arms. When Russia was in good standing as a member of the G8 group of industrialized nations and had constructive relations with the West, it was able to act as Iran's principal interlocutor and defender in the international community.

But with Iran about to emerge from its isolation, and Russia quickly becoming an international pariah due to its intervention in Ukraine, the foundation of their relationship looks increasingly shaky.

"The recent Russo-Iranian alliance has been more a marriage of convenience than a genuine partnership," Grigas and Handjani wrote, noting that Moscow and Tehran have historically had complicated and contentious relations.

"An Iran that is engaged with the West in areas such as energy, trade, and peaceful nuclear power generation would no longer see Russia as protector of its interests."

The Gas Game

And then, of course, there's the oil and gas. If Iran and Russia's changing roles in the international community remove the basis for their partnership, the energy markets will provide plenty of room for rivalry.

"Iran is going to be competing in Europe head-on with Russia," said Ed Morse, head of commodities research at Citigroup told Bloomberg News.

WATCH: The Daily Vertical – Why The Iran Bad Is Bad For Moscow

The Daily Vertical: A Bad Deal For Moscow
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Russia has benefited mightily from Iran's exclusion from the world energy market.

Iran is the world's third leading natural gas producer, but -- largely due to sanctions -- only the 25th leading exporter. And once sanctions are lifted and all that Iranian gas comes online, it will cut dramatically into Russia's dominance of the European market.

European energy companies are reportedly champing at the bit to sign deals with Iran. Soon they will get their chance.

And Brussels' new get-tough policy with Gazprom, which has long flouted the EU's antitrust legislation, will get a boost with the alternative of Iranian gas on the market.

Oil, Atoms, And Weapons

Russia also stands to lose on the oil markets. Since the European Union banned oil imports from Iran in 2012, and U.S. sanctions made it difficult to purchase Iranian oil in dollars, Russia moved quickly to gobble up Tehran's market share in both Europe and Asia.

That trend will likely be reversed.

Moreover, according to the U.S. Energy Information Administration, world oil prices could fall by as much as $15 a barrel next year, dealing another blow to Russia's energy-dependent economy -- which is already in recession.

Russia will, no doubt, reap some benefits from the Iran deal, such as agreements to develop Iran's civilian nuclear energy program. But even there, it will need to compete with top Western firms.

And Moscow's last minute insistence that a 2007 UN arms embargo on Iran be removed as part the agreement reflected the Kremlin's desire to resume its lucrative weapons trade with Tehran. The arms embargo, however, will remain in place for five years.

Iran and Russia are moving in opposite directions in their relations with the West. And the fallout from this trend will be profound and far-reaching.

About This Blog

The Power Vertical
The Power Vertical

The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It offers Brian's personal take on emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or


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