Russia And Iran: A Joint Shield Against Western Sanctions

A five-year economic agreement in the works between Russia and Iran signals efforts by both countries to protect themselves from global isolation. Of course, it's mostly about oil.

Presidents Rouhani and Putin
Yuri Barsukov, Kirill Melnikov, Egor Polov and Elena Chernenko

MOSCOW — Russian Energy Minister Alexander Novak announced last week that he and Iran's oil minister have signed a memo of understanding and are hammering out a five-year, multi-billion-dollar trade deal between Tehran and Moscow.

The agreement includes expansion of cooperation and business in construction, electrical infrastructure, as well as the delivery of cars and equipment and goods for everyday use, the Russian Ministry of Energy's spokesperson said.

The agency said that the specific contracts would be officially negotiated between the two countries in September.

Russian government sources say President Vladimir Putin and Iranian President Hassan Rouhani discussed an economic partnership during their first meeting last September in Bishkek, Kyrgyzstan. The two presidents then ironed out the details during a meeting in China last May.

Above all, the agreement is about oil, though it also proposes growing the economic partnership in a number of other areas. The first draft of the document suggested that Russia would buy 25 million tons of Iranian oil per year, about one-fourth of total Iranian production. The final version lowered that sum to a maximum of three million tons per year, which would be purchased by government-controlled traders created specifically for this purpose.

The arrangement is an effort to minimize the effects of possible sanctions by the West. Iran will sell oil to Russian companies and will use the money to buy Russian goods. Sources say Iran has also agreed to sell the oil at a small discount from market prices.

The most important obstacle to an oil partnership between Iran and Russia is delivery. In light of the oil embargo on Iran, the two countries must first make sure it's possible and, if so, determine whether it is economically viable. At one time, delivery to Belarus or Ukraine, where Russian companies already have refineries, was considered a possibility, but that idea has since been abandoned because of the obvious political conflict.

In addition to crude oil, Iran would also provide Russia with cement, carpets and agricultural products, says Levan Dzhagaryan, Russia's ambassador in Tehran. Meanwhile, Iran is interested in purchasing Russian machinery, metals, trucks and grains.

A file photo of Iran's Abadan refinery — Wikimedia Commons

According to Mehdi Sanai, the Iranian ambassador in Moscow, part of the proceeds from oil sales to Russia would be used to hire Russian companies to build a second nuclear energy plant. Iran also hopes that Russian companies could help electrify Iran's railroads and reconstruct electrical stations and infrastructure. Iran is also considering buying electrical energy from Russia. In addition, the ambassador says Iran would welcome a joint project to establish a small oil refinery on Iranian territory.

Washington’s response

The United States has tried to prevent this deal, threatening both Russian and Iranian companies with sanctions, say Russian government sources. Washington insists that a stronger economic relationship between Moscow and Tehran would undermine its sanctions against Iran and would violate the temporary agreement on Iran's nuclear program (Under which U.S. sanctions against Iran have been weakened but not removed.)

Russian officials believe President Barack Obama's administration is worried that income from trade with Russia would weaken Iran's interest in a long-term compromise. U.S. embassy officials were not available for comment.

Experts say the agreement has been signed now primarily because of Russia's increasingly deteriorating relationship with the West.

"Moscow invested a lot of effort in the diplomatic resolution of Iran's nuclear issue, and it was willing to refrain from doing anything that would have caused a negative reaction from the U.S.," says Andrei Baklitski, an expert at the Russian Center for Policy Studies (PIR).

"Now Russia is less willing to listen to U.S. recommendations, and Iran — whose importance for the West has increased immensely, both in relation to the situation in Iraq and in the search for an alternative to Russian fossil fuels — has more room to maneuver," he continues. "In addition, in the past Moscow had to weigh a potential deal with Iran against the possibility of sanctions from the U.S. for violating Iran's oil embargo. But now that there are sanctions anyway, that factor is less important.”

Moscow’s eagerness to work with Iran is also explained by the fight for the Iranian marketplace. Since the end of last year, when the process for ending sanctions against Iran began, business delegations from China and a whole list of European countries have appeared in Tehran.

Reuters and The Wall Street Journal reported recently that German businesses were considering moving away from the Russian market to focus on Iran instead, a reaction to the situation in Ukraine. The German Chamber of Commerce predicts that once the sanctions are relaxed further, the annual export market from Germany to Iran will be worth 10 billion euros.

As one German business executive puts it, “As soon as the sanctions against Iran are lifted, the market with explode.”

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Why Chinese Cities Waste Millions On Vanity Building Projects

The so-called "White Elephants," or massive building projects that go unused, keep going up across China as local officials mix vanity and a misdirected attempt to attract business and tourists. A perfect example the 58-meter, $230 million statue of Guan Yu, a beloved military figure from the Third Century, that nobody seems interested in visiting.

Statue of Guan Yu in Jingzhou Park, China

Chen Zhe

BEIJING — The Chinese Ministry of Housing and Urban-Rural Development recently ordered the relocation of a giant statue in Jingzhou, in the central province of Hubei. The 58-meter, 1,200-ton statue depicts Guan Yu, a widely worshipped military figure from the Eastern Han Dynasty in the Third century A.D.

The government said it ordered the removal because the towering presence "ruins the character and culture of Jingzhou as a historic city," and is "vain and wasteful." The relocation project wound up costing the taxpayers approximately ¥300 million ($46 million).

Huge monuments as "intellectual property" for a city

In recent years local authorities in China have often raced to create what is euphemistically dubbed IP (intellectual property), in the form of a signature building in their city. But by now, we have often seen negative consequences of such projects, which evolved from luxurious government offices to skyscrapers for businesses and residences. And now, it is the construction of cultural landmarks. Some of these "white elephant" projects, even if they reach the scale of the Guan Yu statue, or do not necessarily violate any regulations, are a real problem for society.

It doesn't take much to be able to differentiate between a project constructed to score political points and a project destined for the people's benefit. You can see right away when construction projects neglect the physical conditions of their location. The over the top government buildings, which for numerous years mushroomed in many corners of China, even in the poorest regional cities, are the most obvious examples.

Homebuyers looking at models of apartment buildings in Shanghai, China — Photo: Imaginechina/ZUMA

Guan Yu transformed into White Elephant

A project truly catering to people's benefit would address their most urgent needs and would be systematically conceived of and designed to play a practical role. Unfortunately, due to a dearth of true creativity, too many cities' expression of their rich cultural heritage is reduced to just building peculiar cultural landmarks. The statue of Guan Yu in Jingzhou is a perfect example.

Long ago Jinzhou was a strategic hub linking the North and the South of China. But its development has lagged behind coastal cities since the launch of economic reform a generation ago.

This is why the city's policymakers came up with the idea of using the place's most popular and glorified personality, Guan Yu (who some refer to as Guan Gong). He is portrayed in the 14th-century Chinese classic "The Romance of the Three Kingdoms" as a righteous and loyal warrior. With the aim of luring tourists, the city leaders decided to use him to create the city's core attraction, their own IP.

Opened in June 2016, the park hosting the statue comprises a surface of 228 acres. In total it cost ¥1.5 billion ($232 million) to build; the statue alone was ¥173 million ($27 million). Alas, since the park opened its doors more than four years ago, the revenue to date is a mere ¥13 million ($2 million). This was definitely not a cost-effective investment and obviously functions neither as a city icon nor a cultural tourism brand as the city authorities had hoped.

China's blind pursuit of skyscrapers

Some may point out the many landmarks hyped on social media precisely because they are peculiar, big or even ugly. However, this kind of attention will not last and is definitely not a responsible or sustainable concept. There is surely no lack of local politicians who will contend for attention by coming up with huge, strange constructions. For those who can't find a representative figure, why not build a 40-meter tall potato in Dingxi, Gansu Province, a 50-meter peony in Luoyang, Shanxi Province, and maybe a 60-meter green onion in Zhangqiu, Shandong Province?

It is to stop this blind pursuit of skyscrapers and useless buildings that, early this month, the Ministry of Housing and Urban-Rural Development issued a new regulation to avoid local authorities' deviation from people's real necessities, ridiculous wasted costs and over-consumption of energy.

I hope those responsible for the creation of a city's attractiveness will not simply go for visual impact, but instead create something that inspires people's intelligence, sustains admiration and keeps them coming back for more.

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