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CIAO DATE: 06/01
The Business of Russian Cooperation with Iran
Alexander Pikayev
Proliferation Brief
Volume 4, Number 6
April 6, 2001
The following excerpts are from an article by Carnegie Scholar Alexander Pikayev, published in the Winter 2001 edition of the The Monitor, a publication of the University of Georgia's Center for International Trade and Security. Mr. Pikayev directs the Non-Proliferation Project's activities in Russia from the Carnegie Moscow Center. For the entire article and for comprehensive resources on Russia and Iran nuclear and missile programs please visit the Project web site at www.ceip.org/npp
Nuclear Cooperation
Cash-starved Russian industry depends significantly on foreign consumers. Russia's defense industry cannot survive on domestic procurement which, over the last decade, provided for the purchase of a maximum of ten armored vehicles, aircraft and helicopters annually. Russia's primary source of income is foreign arms sales. These sales are a source of ambivalence in Moscow for two reasons.
First, China is the leading market for Russian conventional arms export, yet many decision-makers in Moscow still consider Beijing the primary source of potential traditional aggression against Russian Siberia and the Far East. Second, arms sales generate only an estimated $3 billion per year, clearly insufficient for maintaining and converting the fast-decaying remains of the once mighty Soviet military industrial complex.
The Russian nuclear industry, like Russian arms producers, faces incentives to export. Minatom complains that Western markets remain closed to its goods and services. Moreover, it has recently been squeezed out of its traditional market niche in Central Europe and even Ukraine. The only significant project with the United States - the HEU deal - is of limited duration and not substantial enough to entice Russia to forego the Bushehr reactor project and subsequent deals with Iran.
Iran is a member of the NPT, and accepts IAEA safeguards of its nuclear related facilities. Therefore, Tehran sees itself as having a legitimate claim to the benefits in Article IV of the NPT, which explicitly obliges nuclear powers to assist non-nuclear NPT members in developing peaceful nuclear energy. Although Moscow generally shares this view, in 1995 the Kremlin, under U.S. pressure, withdrew from some of the most controversial aspects of the Bushehr contract.
The United States may be able to increase its influence over subsequent Russo-Iranian nuclear power projects. Minatom is currently seeking to amend Russia's domestic legislation to remove obstacles to the import and storage of spent nuclear fuel within Russian borders. If it succeeds, the nuclear industry stands to make up to $20 billion during the first decade from spent fuel imports. However, since a significant portion of inter-nationally available spent fuel contains U.S.-made components, Washington could, if it so wished, make trade with Iran again an issue and legislate against deliveries to Russia, thus halving Moscow's projected benefits.
Missile Cooperation
The portfolio of existing Russo-Iranian conventional arms sales contracts is estimated at $5 billion. The issue of Russian missile exports is, by far, the most complicated of the lot. The Kremlin consistently denies that there have been any officially approved missile exports to Iran that
violate Russia's obligations under the Missile Technology Control Regime (MTCR). In response to U.S. demarches, Moscow has instigated criminal investigations against suspected violators of the national missile export control system, but these investigations have thus far yielded no prosecutions.
Although Moscow entered into consultations with the United States in 1998 to discuss perceived leaks of missile technologies to Iran, these meetings have not resulted in any significant changes in Russian policy.
U.S. observers complain that the Russian missile industry continues its cooperation with Iran despite the significant benefits it has received from cooperation with the United States. The Russians note that the scale of the cooperation has been much more limited than expected and has failed to offset the losses of Russian missile producers caused by the MTCR restrictions. Many enterprises in the missile/aerospace sector have reaped no benefit from U.S./Russian cooperation, and have had to contract with Third World countries in order to survive. Sanctions, imposed by the United States on a few Russian enterprises in 1998 and 1999, have fomented the trend of establishing an 'archipelago' of Russian missile enterprises and universities oriented exclusively toward non-Western markets.
Improving Russia's national law enforcement legislation and execution and clarifying some vague MTCR guidelines may help matters significantly. Another possible solution may be the establishment of an independent international body to monitor MTCR compliance by member countries and mediate the existing disagreements.
Although Moscow insists that it is doing nothing that clearly violates its international nuclear and missile non-proliferation obligations, Russian officials have demonstrated their willingness to at least discuss Washington's security concerns. Wide-spread opinion in Moscow's policy community is that these talks have failed to progress because the United States is not offering adequately attractive incentives to compensate the losses Russian industry would suffer as a result of decreased cooperation with Iran.
Russian exports to Iran are facilitated by the continuing political isolation of that country which makes its conventional arms and nuclear power markets noncompetitive and dependent on few available suppliers. As long as the economic fortunes and national security of these two nations remain intertwined, Western ability to significantly influence Russian-Iranian decisions and activities will be limited.
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