PSCRP-BESA Reports No 88 (Oct 13, 2024)
The war in Ukraine has substantially weakened Russia’s position in Central Asia and the Southern Caucasus, requiring an increasing amount of resources to sustain. Iran is endeavoring to fill the power vacuum that Russia left in these post-Soviet regions while simultaneously exercising caution to prevent conflict. Tehran is committed to the economic integration of the post-Soviet republics in these regions, with an emphasis on fortifying its relationships with the Eurasian Economic Union (EAEU) and its member states (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Uzbekistan) as well as the Economic Cooperation Organization (ECO). Nevertheless, Iran’s success is inconsistent, and its underlying objectives are a source of debate.
The following is an examination of the situation regarding Iran’s relations with key countries in both aforementioned regions: Kazakhstan, Uzbekistan, Azerbaijan, and Armenia. Three of these nations are Turkic, meaning Tehran also competes with Ankara for influence over them.
Kazakhstan
This Central Asian republic is perhaps among the richest in natural resources in the entire world, maintaining vast mines of many different metals, chiefly uranium, as well as oil. Being a Muslim country and geographically positioned in Central Asia, Kazakhstan has three regional superpowers around it, all eyeing its resources curiously: China, Russia, and Iran. Lately, Iran has been playing the Muslim affinity card more than ever in order to strengthen its ties with Kazakhstan.
Previously, Kazakh trade would go either to China through other neighbors or would utilize Russia as a gateway to the markets of the West, such as Europe. However, the outbreak of the war in Ukraine led to Russia’s exclusion from most European markets, preventing Kazakh products from reaching their intended consumers. Naturally, Kazakhstan would have to look elsewhere in order to ensure it can generate wealth through trade as well as import goods.
Local media highlight that the main areas of cooperation between Tehran and Astana are energy and agriculture, but despite Iran’s efforts, there has been little progress in both sectors.
“Tehran used to serve as a conduit for Kazakhstan to the Persian Gulf for oil exports to northern Iran. It was the fastest route to global markets, but sanctions have now closed this access,” reports Eurasia Today. “Iran is not a significant trading partner for us, although it is of interest for diversifying export routes,” says Meruert Makhmutova, director of the Public Policy Research Center.
In the agriculture sphere, Kazakhstan’s Majilis began ratifying a free trade agreement between the Eurasian Economic Union and Iran in early October, but this is not seen as a major milestone, as the initial agreement was signed in Russia in December 2023.
Iran is interested in obtaining EAEU observer state status. The decision to grant such status to a foreign partner must be adopted by the heads of the EAEU member states at the Supreme Eurasian Economic Council’s meeting. The closest one will take place in May 2025, and its agenda is not published yet.
Local media report that Kazakhstan is preparing to sign a free trade agreement with Iran, with a potential trade volume of up to $3 billion, primarily focusing on agricultural products, particularly grain. However, this agreement might only materialize in 2025 and will depend on crop yields. In mid-2024, Iran declined to purchase Kazakh grain due to a very high domestic harvest.
In the political sphere, Iran failed to influence Kazakhstan’s stance on the Gaza and Lebanon conflicts. In early October, Kazakhstan’s Foreign Ministry urged all parties to take immediate steps to restrain violence, emphasizing the inadmissibility of force to prevent civilian casualties and avoid further escalation into a full-scale military conflict.
Despite pressure from Iran, Qatar, and other Muslim countries, Kazakhstan seeks to maintain favorable relations with Israel, adopting a neutral stance on the conflicts in Gaza and Lebanon. This is driven by both strong economic ties—Kazakhstan is a major oil supplier to Israel—and political interests. Kazakhstan, through its connections with Israel and major Jewish organizations, is engaged in a legal battle in the U.S. to recover billions of dollars laundered through BTA Bank.
Uzbekistan
Similarly to Iran’s attempt to warm ties and cooperate with Kazakhstan, Tehran also seeks to push up trade and joint projects with Uzbekistan, one of the largest countries in the region in terms of population. Uzbekistan’s population is third in the region, behind Pakistan and Afghanistan. Iran already maintains strong ties with Pakistan, while Taliban-ruled Afghanistan is somewhat hostile to it.
The substantial Uzbek population provides Tehran with a significant market for exporting goods, including construction materials, tea, and various food products, while importing energy resources, metals in considerable volumes, and cotton. Uzbekistan is the fourth largest producer of cotton.
Being a landlocked nation, Uzbekistan is prioritizing its involvement in transit initiatives and communication corridors, notably the Iran-Afghanistan-Uzbekistan transit project via the Chabahar port. The southern ports of Iran—Chabahar and Bandar Abbas—are strategic for Uzbekistan, with priority given to transportation and utilizing these capacities in economic relations with Iran.
However, these cooperation initiatives are not going well. Throughout the first 7 months of 2024, Uzbekistan and Iran experienced over 17% decline in trade turnover to nearly $256 million, while during the same period in 2023 trade turnover was almost $300 million. Uzbek exports have declined almost 30%.
A year ago, in June, during the 15th Iran-Uzbekistan Joint Economic Cooperation Committee, the sides signed a memorandum of understanding aiming to increase bilateral trade to $1 billion within the next two years. As of now, it seems they will not be reaching that benchmark. However, this issue does not stem from the Uzbek side, as their total foreign trade turnover increased by 5.4% in the first 7 months of 2024 compared to the same period in 2023.
The stalling of the Uzbekistan-Turkmenistan-Iran-India transport corridor, as envisioned in the Ashgabat Agreement of 2016, could be the reason for this. Alternatively, quoting PSCRP expert Vladimir Mesamed, “despite the solid groundwork for integration, Uzbek-Iranian relations still have a distinct smell of confrontation… In the sphere of bilateral relations, there is still a chill of mutual distrust, which is explained by the religious factor. The creation of independent Uzbekistan was accompanied by a kind of Islamic boom, which naturally emerged after decades of dictate of official state atheism. The authorities tried to forcefully curb the manifestations of fundamentalism without eradicating its causes. Under these circumstances, the development of bilateral interaction between the Republic of Uzbekistan and the Islamic Republic of Iran, where the principle of governance is based on Islamic laws, was destined if not for harsh rejection by the Uzbek leadership, then certainly not for the most favorable treatment.”
On October 12th, Uzbek President Shavkat Mirziyoyev and Iranian President Masoud Pezeshkian met during an international forum in Ashgabat, Turkmenistan. However, no significant joint statements were made following their meeting.
Like in the case of Kazakhstan, Uzbekistan is not exactly siding with Iran in its current conflict with Israel. Boycotting Israel is not a viable option. This September, Israeli authorities signed a grain agreement with Azerbaijan and Uzbekistan that will guarantee all of Israel’s wheat needs against the backdrop of the global food crisis and the ongoing war in Ukraine. In exchange for wheat, Uzbekistan will receive advanced agricultural technologies from Israel.
Azerbaijan
The nearly year-long attempt at demonstrative rapprochement with Baku was effectively nullified by a series of statements from Tehran, which hinted at the possibility of strikes on Azerbaijani energy facilities as an act of revenge aimed at Israel.
“Top generals within the Islamic Revolutionary Guard Corps (IRGC) are insisting on a direct strike on Tel Aviv and other Israeli cities, focusing on military bases to avoid civilian casualties. But Masoud Pezeshkian, the newly elected president, has suggested targeting secret Israeli bases in Iran’s neighboring countries,” the British Telegraph reported in August. In October, the threat was reiterated: IRGC-linked social media accounts have already spread reports that Tehran has warned the United States that in the event of action against Iranian oil refineries, the Islamic Republic will target oil facilities in Azerbaijan and in Arab states.
The reopening of the Azerbaijani embassy in Tehran after the terrorist act (Baku succumbed to Iranian pressure) and the visit of the late President Raisi to Azerbaijan to improve bilateral ties still did not matter. Despite everything, Tehran considers Baku first and foremost an ally of Israel. “Azerbaijan supplies 40% of Israel’s energy needs, and Azerbaijan’s oil and gas infrastructure is the backbone of its independence in the geopolitically tense region. Not only does Azerbaijan meet nearly 40% of Israel’s demand for crude oil, Azerbaijan’s state energy giant SOCAR, alongside British Petroleum and Israel’s NewMed, was awarded a license to explore an area to the north of Israel’s Leviathan gas field in the Eastern Mediterranean,” notes the Modern Diplomacy project.
The strategic relations between Israel and Azerbaijan, particularly in defense and intelligence, have long been a point of concern for Iran. In recent developments, Iranian media outlets have repeated unfounded claims about the presence of Israeli military bases in Azerbaijan. These allegations have been heightened in the context of possible Israeli retaliation for Iran’s missile strikes. Iran’s diplomat Abbas Mousavi has also falsely accused Israel of deploying military planes and other assets in Azerbaijan as part of sabotage efforts against the Islamic Republic, fueling further tension in the region. Iranian media also resumed their demonization of Azerbaijan, accusing it of attempting to instigate unrest among the Southern Azerbaijani minority, a group that has endured decades of discrimination. They also present the alleged instigation as a component of the “Zionist scheme.”
But Israel is not the only problem for Iran. Recently, Iran and Russia have found themselves at odds over the Zangezur Corridor Project, a proposed transit route through Armenia that would link Azerbaijan to Turkey. Iran opposes this plan as it threatens its geopolitical influence in the South Caucasus and potentially isolates Iran by reducing its role in regional transit routes. Russia, on the other hand, sees the corridor as a strategic opportunity to bolster its influence in the region and maintain leverage over Armenia and Azerbaijan. For the time being, Tehran and Moscow managed to quell this disagreement by considering their alliance in the war against Ukraine, but the issue persisted.
Thus, the relations between Baku and Tehran are stumbling, as the latter almost always finds the reason for escalation.
Armenia
Despite Armenia being a Russian satellite for three decades since the fall of the USSR, Iran has long used Armenia as a transit point for the sale of weapons, money laundering, and the procurement of sanctioned materials, including for its nuclear program. IRGC agents have reportedly been active in Armenia for at least two decades. The importance of Armenia for Iran is rising today, as it serves as a key transit country for Iranian goods, particularly as international sanctions limit Iran’s access to global markets.
Tehran evidently does not take statements of the Armenian leadership about leaving Russia for the West at their face value. The Iranian state news agency Mehr reported on the inauguration of Iran’s Trade Center in Yerevan on October 1st, calling it Tehran’s “gateway to the Eurasian Economic Union (EAEU).
“This could mark a new chapter and a fresh start for the further development of economic relations between Armenia and Iran. The cooperation formed in this center will create a bright future and opportunities for business representatives,” said Iran’s Minister of Industry, Mines, and Trade, Seyed Mohammad Atabak. This year, Armenia chairs the Eurasian Economic Union (EAEU), and on October 1, Yerevan hosted the III Eurasian Economic Forum, coinciding with the Eurasian Intergovernmental Council meeting. A special EAEU-Iran business dialogue honored Iran’s representatives, including First Vice President Mohammad-Reza Aref.
Less than a month before that, Iran announced collaboration with Armenia amounting to approximately $3 billion. Iran’s Ambassador to Armenia, Mehdi Sobhani, said that foresees “great potential for cooperation between our countries. The fields in which we already collaborate can serve as a strong foundation for the further development of commercial, political, and economic relations between Armenia and Iran,” adding, “We are determined to utilize all available potential”.
At the end of July, it became known that Iran and Armenia had signed a major arms deal worth $500 million. Iran plans to supply Armenia with drones like Shahed 136, Shahed 129, Shahed 197, Mohajer, and air defense missile systems like 3rd Khordad, Majid, 15th Khordad, and Arman.
Armenia has set its defense budget for 2024 at $1.4 billion, potentially allocating $500 million—more than a third—for purchases from Iran. Given Armenia’s limited financial capacity, this substantial allocation suggests the possibility of alternative arrangements as part of a broader secret agreement—Armenia has agreed to the establishment of Iranian bases on its soil.
Despite the heavily publicized pivot to the West, the Russian military (over 3500 soldiers) remains stationed in Armenia, with no clear dates set for their departure. Therefore, Armenia could potentially host both the Russian and Iranian military simultaneously.
Thus, Iran has failed to strengthen its position in both Central Asia and the South Caucasus, particularly in energy-rich countries such as Kazakhstan and Azerbaijan, which have multivector policies. Uzbekistan is ready to cooperate, but it is not as much like Armenia, which sees in Iran not just an economic partner but an ally. Armenia provides Iran with a crucial partner in the South Caucasus, especially as Tehran seeks to counterbalance Turkish and Azerbaijani influence in the region, which plays into Yerevan’s hands.