Another in our series of translations of the latest Carnegie Politika articles.
Oil and Reputation: What a New War in the Middle East Means for Russia
Russian leadership tends to value tactical gains over long-term planning, so it may well believe that a new crisis in the Middle East is more likely to play into Russia’s hands. However, this does not change the fact that what is happening looks like the collapse of yet another close ally of Moscow in the region.
The escalation between Israel and Iran has pushed Russia’s invasion of Ukraine off the front pages, but Moscow itself seems to be undecided whether to be sad or happy about a new war in the Middle East. On the one hand, Russia cannot help but worry about the fate of its many projects in Iran, where it has invested a great deal of resources and effort over the past three years. After all, all of this could now go to waste. At the same time, Moscow has good reason to hope it can benefit from Middle Eastern instability, through rising oil prices and declining interest in Ukraine.
Watch and hope
Although Russia was quick to condemn Israel’s attack, its first official reaction was directed more at Tehran. After the inevitable uproar of accusations against the West, the Russian Foreign Ministry in its statement recalled the next round of US-Iranian talks in Oman and the US readiness to participate. In other words, instead of supporting its Iranian ally, Moscow called on it to sit down at the negotiating table with Washington, despite its disadvantageous position.
Russia’s subsequent rhetoric also boils down almost exclusively to calls for de-escalation. Which is not surprising, given that Russia cannot seriously influence the actions of Israel, and it is Israel that is currently setting the tone for events. Therefore, observing and calling remains practically the only option.
Of course, Moscow would not be against trying on the role of mediator in possible negotiations if the parties are ready to move in that direction. However, the course of events rather diminishes the significance of Russia as a tailor-made participant that has something to offer all parties to the conflict.
When it came to the nuclear deal, the Kremlin was indeed the only party willing to take the excess uranium out of Iran. But as the Israeli operation progresses, this requirement disappears organically – the issue of Iran’s nuclear program will be resolved militarily, and most likely nothing will have to be taken out. And as a regular mediator, Russia can offer no more than Oman or Qatar.
There is also no point in talking about any military assistance to Iran from the Russian side. It so happened that during the days of the Israeli strikes, the Iranian Majlis ratified the Treaty on Strategic Partnership with Russia. When the presidents of the two countries signed this agreement six months ago, it was presented as a fundamentally new level of cooperation, including in the defense sphere. But the events of recent days have once again confirmed that Russia and Iran have not become military allies. As the Russians have already explained, the treaty does not provide for military assistance in the event of aggression.
By and large, today in Iran, Russia is doing only what a state should stereotypically do in such cases. The Russian embassy is evacuating Russian citizens from the Islamic Republic, and Moscow is simply observing what is happening, calling for de-escalation, without the ability to somehow influence the course of events.
Gains and losses
The main problem that Russia may face in connection with what is happening is the risk of failure of numerous projects in Iran, in which it has been actively investing resources and efforts since 2022. A few days before the start of the Israeli operation, the Iranian ambassador to Moscow said that by the end of 2024, Russia had become the largest foreign investor in the Islamic Republic. The ambassador did not specify the amount of Russian investments, but the situation was about the same in the previous year, when the volume of Russian investments was estimated at $2.76 billion. Moscow was planning to invest about $8 billion in oil and gas projects alone in the near future.
The future of these projects is bound to worry the Russian leadership. Of course, no one in Moscow expected Tehran to become Russia’s leading trade and economic partner, on par with China, India, or Turkey. The scale of cooperation has always been and will remain much more modest. But the Iranian sector had its advantages – Tehran was perceived as a reliable partner, since it itself was under sanctions and, unlike Beijing, Delhi, and Istanbul, it did not pay attention to Western sanctions against Russia.
Moreover, the significance of Iranian projects gradually increased. First, Moscow used Iran as a testing ground for integration models – the unification of payment systems, a free trade zone with the Eurasian Economic Union, and entry into common international organizations like the SCO and BRICS. The success of this experience largely determined how interested other countries would be in developing similar cooperation with Russia.
Second, Iran was an important logistical alternative for Russia for the transit of goods along the North-South corridor. After Moscow, having invaded Ukraine, lost its usual transport routes through Europe, the Kremlin understood well that there are never too many transit routes.
Finally, Iran was even ready to accept those Russian projects whose implementation had failed in other countries. This primarily concerned Moscow’s plans to create a gas hub in Turkey. After lengthy negotiations, this idea had to be abandoned because Ankara demanded control over gas flows, and Europe, whose market was the main target of the project, was firmly set on a green transition and a reduction in gas consumption.
Then the alternative was the Iranian gas hub project, from where Russian gas – in liquefied form through the ports of the Persian Gulf – would go to promising Asian markets. The payback of such investments raises many questions, but Moscow has already announced plans to build a gas pipeline to this hub through the territory of Azerbaijan and Iran.
However, if the Islamic Republic turns into a zone of permanent instability as a result of the current escalation, then both the gas hub and other, more realistic projects will disappear along with the investments already made. And such a scenario cannot be ruled out, given that Israel is already striking not only military targets, but also Iran’s basic civilian infrastructure, including the country’s oil and gas system.
Hope for the best
However, Iran’s troubling future does not deprive Russia of the hopes of benefiting from a new war – at least in the short term. Oil prices have already risen on news of Israeli strikes, and it is clear that instability in the Middle East will push them up further. And the further the escalation goes, the stronger. Especially if the fighting spreads to the Persian Gulf or Tehran decides to close the Strait of Hormuz.
Another advantageous consequence for Russia could be that a clash between Israel and Iran would divert Western attention and resources from Ukraine. And if Israeli bombings escalate to the point that civilian deaths become a regular occurrence, Russia would be happy to point to the West’s “double standards” and use them to justify its actions in the Ukrainian direction.
Finally, if the conflict drags on, the US will have to increase aid to Israel, which will inevitably reduce its ability to continue supporting Kyiv. There is little doubt that for Donald Trump, relations with Israel are much more important than relations with Ukraine.
Russian leadership generally values tactical gains over long-term planning, so it may well believe that a new crisis in the Middle East is more likely to play into Russia’s hands. However, this does not change the fact that what is happening looks like the collapse of another close ally of Moscow in the region. Just six months ago, Russia had to come to terms with the fall of Bashar al-Assad’s regime in Syria, from where it is now being squeezed out by the new authorities, nullifying years of investment. The same could become a reality in Iran. The escalation between Israel and Iran will likely help Russia balance this year’s budget without a major deficit, thanks to soaring oil prices. But the reputational damage will be far more long-term. Russia’s partners are being defeated one after another, and Moscow itself is losing influence with them.
Translating History 