Prof: Iran Will Not Turn Its Back on Russia and Trust US to Be Disappointed Again

Dr. Alexander Azadgan, professor of business studies and international political economy in Southern California, explains why President Putin's trip to Tehran was so significant and reflects on skyrocketing energy prices as well as the future of the Iran nuclear deal.

Dr Alexander Azadgan: Very, very effective. We are witnesses of Gazprom and NIOC, which stands for National Iranian Oil Company, signing a $40 billion contract for Russia to develop six Iranian oilfields in the Persian Gulf. Notably, the Pars field, which is shared between Iran and Qatar. The Qataris call it the North field, Iranians call it the South Pars field. It's one of the biggest underwater natural gas reserves in the world, if not the biggest itself. Qatar and Iran have been sharing it. Iran, of course, has not had the technology to extract as much as the Qataris. Around one-fifth of it is in the Iranian territorial water, four-fifths in Qatari water.

There will also be a product swap exchange between Iran and Russia, completion of LNG projects, liquid natural gas plus construction of gas export pipelines and other scientific and technological cooperation. This oil and gas deal is reportedly the largest in Iran's history, $40 billion. Before the Joint Comprehensive Plan of Action (JCPOA) was reneged, French company Total was interested in excavating and helping the Iranians. Of course, they reneged, like so many other things, and Russia has stepped in right now. It's a win-win for both countries, but it has its own complications as well.

Dr Azadgan: Iranian relations right now are better than with the previous administration, the Rouhani administration. The conservatives are in charge right now. President Raisi visited Moscow not too long ago. And the conservatives have had the tendency in the past several years to lean more towards Russia, especially with IRGC and all the advancements that that body of military is making. We cannot leave out Iranian internal politics when it comes to the overall Russo-Iranian relations.

Keep in mind that US invasion and occupation of Iraq, Iraq being one of the top five exporters of oil at that time and one of the top five exporters of oil to United States now, was a catastrophic mistake in a sense that the neocons at that time were delusional to think that by causing havoc in the region, especially obviously toward Iraq, there will be less export of Iraq's oil to the Far East, the growing economies of China, in particular, followed by South Korea and Japan. All that is part of what we are seeing today when it comes to inflation.

Now the supply and demand has not changed in the world - the reason the price of oil has increased is because of the perception of the conflict between Ukraine and Russia to continue. There is no logical reason for this change. I think, unfortunately, with Washington really triggering Russia over NATO's expansion during the past many years, most people think this conflict just started. If you want to go back, it depends on what your frame of reference is. You can go back to 2004 in Ukraine, followed by the Orange Revolution. There's been a lot of political intrusion by Washington and Brussels. And unfortunately, we find ourselves in the current situation, which could affect the entire global economy in a very hyper-inflationary hell, really. This is what economists are most scared of - a hyper inflationary situation.

Dr Azadgan: With the whole environmental movement, which obviously is of an urgency, we need to realize that green energy is not going to provide the energy demand of 8 billion people. It's just simply not possible. I think we need to be more realistic that obviously oil is going to be with us for a long time. Natural gas is the transitioning method of energy. We will have that for many years, it is cleaner, but both of them are going to be along for a long time. And to start making the change now in such a naive, extreme, erratic way is going to have major economic backlashes.

Not to mention the political turmoil and the geopolitical uncertainty in that part of the world. We need more realism from our policymakers - of course, with Democrats in the White House and Chancellor [Olaf] Scholz in Germany, unfortunately, we are being a little bit too naive and unrealistic when it comes to planning energy resources for the next 60 years.

Dr Azadgan: Before we even talk about the Iranian rial and the Russian ruble exchange, this is a major breakaway from the past, I would say, 80 years where petroleum was only supposed to be traded in the US dollar given the US dollar’s tremendous power. And unfortunately, we've seen the weaponization of the dollar in the past few decades - this is the problem. Yes, this is a clear and present danger to United States national interests.

Several years ago, China and Russia exchanged an oil contract where the Russians provided oil and natural gas to China and the whole thing was around $400 billion when it was exchanged in rubles and yuan. At that time, US policymakers took notice. And now we are in this situation where because of the US' rash reaction into pushing for a war, believe it or not, between Russia and Ukraine, more countries as a result of that are leaning toward the East. And by east, I mean the shifting of power to China and Russia.

China has tremendous manufacturing capabilities. Russia - the same in addition to tremendous amounts of all sorts of natural resources and rare minerals. In the decades to come, we will see the weakening of the dollar, which would result in the US national debt, which is $28 trillion, more or less. That's going to be a problem that will contribute into inflation. And we saw how Mr Biden had to go to Saudi Arabia and lobby Mohammed bin Salman to open up the coffers of oil so that prices go down. That would have been never possible in the past.

The US president had to go to Saudi Arabia and beg for oil. Usually that was done through a phone call. And if the answer was ‘No’ by the Saudis, guess what? That would have been a coup in the palace. So, unfortunately, we have put ourselves in a situation where we have lost our leverage or are in the way of losing more leverage.

Dr Azadgan: That's where we're going: from this point on, because of all the miscalculations and the weaponization of the dollar, countries are eventually going to do that. They're not going to peg their currency against the dollar, which has been the case. Don't forget, the Iranian economy has been in shambles during the past 15 years. When it comes to this $40 billion oil contract, the Iranian currency lost 9/10th of its value since 2013, when President Ahmadinejad left office - they went from 3500 tomans to over 30,000 tomans [1 toman = 10,000 rials].

This has been a disaster. Because they decided to peg their currency even more toward a US dollar. And this is an Iranian liberal policy leaning more toward the West, whereas the Iranian conservatives have a tendency to lean more toward the growing economies of the east. There's demand for the Iranian currency that would hopefully have an impact on the Iranian rial currency to stop hemorrhaging. It's at a point where we could possibly face a major economic collapse in Iran, which would even make the prices of oil higher. I think Russia is stepping in at the right time, in the right place, especially in the context of the Russia-Ukraine conflict, and we'll see where that will go.

Dr Azadgan: Washington has no one to blame but the previous administration. In 2018, President [Donald] Trump reneged from the P5+1 [the UN Security Council’s five permanent members (China, France, Russia, the UK and the US) plus Germany]. Iran was single-handedly negotiating with six superpowers, with one stroke of the pen President Trump got us out of that, and Iranians have lost all hopes in US in terms of their liberal persuasion within the Iranian political power structure. That's why we had Mr. Raisi coming in, the Conservatives coming in, and President Putin's visit to Iran, many visits to Iran during the liberal administration of President Rouhani, in my estimation, was an economic, political, geopolitical and military persuasion of Iranians to lean more towards the East.

Had the JCPOA been successful under the Rouhani administration, the country would have leaned westward for decades to come. Those policies failed, and as a result, we have conservatives in the Iranian executive branch, and there's a shift in power in that country. The JCPOA, I'm afraid, won't be going anywhere. It's just for keeping up appearances. Having said that, let us not forget that at the very beginning of the Russia-Ukraine conflict, Washington was very concerned to get reassurances from Russia that there is no nuclear non-proliferation going on by the Iranians.

That's their number one concern in the Middle East right now because of the terrible relationship between Iran and Israel. But the fact that this topic came up in the first place shows how much Washington is worried, the Biden administration is worried that Iranians could be very close to having weapon-grade bomb, even though they clearly have denied it, for decades to come they claim they just want to enrich uranium and they want peaceful use of the technology. But Washington is not buying that.

Dr Azadgan: It's a very difficult situation. On the one hand, President Biden is desperate. His poll numbers are so low in this country because of inflation, because of the high price of oil. So if somehow the US and Iran decide, especially the US decides to bring Iran's oil production online - as you know, Iran is capable of exporting around 2,5 to 3 million barrels per day; under US sanctions it's not even 500,000. And the rest of it, let's just say they use creative methods of exporting the oil. If that supply comes online, the price of oil will come down. But I don't think Biden wants to negotiate at all with the Iranians, and the Iranians don't trust them. I think the Iranians really negotiated in good faith. If you ask me very naively that liberal Rouhani administration. And look at what they got for it, in 2018, just with a push of a pen, the whole thing was reneged. There's really not much to salvage out of JCPOA because I don't see any policy changes from the Biden administration at all.

They see Iran right now in the grips of conservatives. The conservatives are hawks just like any other nation. They negotiate more realistically, shall we say. And Iran is at a point where they have enriched uranium up to 60 percent. And militarily, they are very powerful. I think that for the time being, they have the upper hand, minus their economy, which is in shambles. But in other areas, they have the upper hand. It really depends on what kind of signals we get from the Biden administration and knowing how, unfortunately, the Israeli lobby plays such a crucial role in US foreign policy in the Middle East, we have also to keep in mind how willing Israel will be in back-channel communications possibly taking place. We do know, however, that under the Rouhani administration, this is a matter of fact, there were very covert back-channel conversations between Iran and Israel, and that was not to the liking of the IRGC and the conservatives. So it's very, very convoluted.

There's a massive deficit of trust between the US and Iran. And just because Russia is in a difficult position right now, I don't see Iranians turning their back toward the Russians and trust Washington and be disappointed again. The Iranians really have no one to trust, if you ask me. They're petrified of being of any superpower’s pawn. This is very important. There is no good history between some of Iran's new allies now. I think it's a battle of persuading the Iranian public on the policies that the Iranian government is suggesting. There's a lot of persuasion that needs to be done because they’re looking at decades to come. Literally the Russo-Iranian relations, which go further, they're looking at a change in policy for decades to come. I think Washington is very much petrified of that.

Dr Azadgan: We have to. We could be at the threshold of a famine in the world. Don't forget that the biggest importers of Russia's grain are some of the poorest countries in the world. The top five are Egypt at $3.2 billion; Turkey, since they are part of this negotiation in Tehran, at $1.7 billion a year, buying Russian wheat; Nigeria, one of the poorest countries in the world, but one of the richest in terms of natural resources, they import $566 million; Bangladesh, practically an economic disastrous country.

I'm afraid they will be next after Sri Lanka, they aim for $409 billion, followed by another very poor but powerful country, Pakistan, which imports close to $400 billion a year of Russian wheat. And then Egypt, Pakistan and Turkey are the fastest growing export markets for Russia. So it's extremely, extremely important because you're talking about the food supply chain security. The top five exporters of wheat in the world are first and foremost Russia, followed by the US, Australia, Canada and Ukraine at the fifth place. And after Ukraine it is France, Argentina and Germany. And the fastest export market for Ukraine is Pakistan, Lebanon and Vietnam.

So Russia and Ukraine are finding themselves in a difficult competitive position for the Pakistani market. And everyone knows how Lebanon is on the verge of economic and social and political collapse. The only one that is somehow unscathed is Vietnam. So they just have to find a way to negotiate the export exit of Ukrainian wheat through the Black Sea, through the Turkish Strait and into the Middle Eastern and African markets, they are very much at risk.