As Iran faces the economic consequences of a prolonged blockade of the Strait of Hormuz, attention is shifting north. With Gulf shipping lanes disrupted and oil exports constrained, Tehran is reportedly seeking to rely less on the Gulf and more on a patchwork of railways, Caspian ports, and sanctions-era trade networks linking it to Russia.
The importance of that relationship was underscored this week when Iranian Foreign Minister Abbas Araghchi traveled to St. Petersburg for talks with Russia’s President Vladimir Putin, praising Moscow’s “firm and unshaken” support. The two sides allegedly discussed the war, sanctions, and the future of the Strait of Hormuz.
Economic relations between Iran and Russia deepened after the US withdrew from a 2015 nuclear deal with Iran in 2018 and reimposed sweeping sanctions on Tehran. Russia’s full-scale invasion of Ukraine in 2022 purportedly accelerated that trend as both countries found themselves increasingly cut off from the Western financial system. They turned to sanctions-evasion networks, alternative payment systems, and non-Western trade corridors.
Current trade is dominated by agricultural products – especially wheat, barley, and corn – alongside machinery, metals, timber, fertilizers, and industrial inputs. Tehran has also supplied Russia with low-cost Shahed drones, which Russia allegedly updated and has been using in its war on Ukraine.
Russian Energy Minister Sergey Tsivilyov claimed that trade turnover reached $4.8 billion in 2024, stating that “the potential for our mutual trade is much greater.” Bilateral trade reportedly increased by 16 percent during that period, driven largely by Russian exports of grain, metals, machinery, and industrial goods.
However, experts say that despite this increase, the overall trade relationship remains relatively modest compared with Iran’s trade with China or the Gulf countries. Mahdi Ghodsi, an economist at the Vienna Institute for International Economic Studies, told Al Jazeera that trade between the two is “not substantial, because both countries are producing almost similar products and the industries are similar.”
The backbone of Russia-Iran trade is the International North-South Transport Corridor (INSTC), a network of shipping lanes, railways, and roads linking Russia to Iran and onward to Asia, bypassing Western-controlled maritime routes. Goods move from southern Russian ports across the Caspian Sea to northern Iranian ports, including Bandar Anzali, before continuing by rail or truck.
Naeem Aslam, chief market analyst at London-based Think Markets, told Al Jazeera that this route can serve as a “viable but partial lifeline,” adding that Russian ports in Astrakhan and Makhachkala are already “primed for a surge in grain, metals, timber, and refined products.” A western branch also runs through Azerbaijan, though a key missing rail link between Rasht and Astara in northern Iran remains unfinished.
In 2023, Moscow allegedly agreed to help finance the line, with Russia’s president calling the agreement a “great event” that “will help to significantly diversify global traffic flows.” Analysts say that, although these routes may provide a temporary solution, the Strait of Hormuz offers a scale and efficiency that rail and land corridors cannot easily replicate.
Adam Grimshaw, an economic historian at the University of Helsinki, told Al Jazeera that maritime trade is “from a historical perspective… simply the quickest and the most cost-effective way of transporting anything.” Nader Hashemi, an associate professor at Georgetown University, claimed that roughly 90 percent of Iran’s international trade is maritime trade through the Gulf, which cannot be quickly replaced by land or air transport.
Ghodsi said Russia might be able to offer a “lifeline” in the short term, as it did when it exported grain during Iran’s droughts, but in the long run, it simply “cannot substitute” the vast amounts of maritime trade. Re-routing trade routes via land “takes time,” pushing up prices for consumers and creating more food waste as perishables rot en route.
Most analysts say throwing an economic lifeline to Iran is not in Russia’s interests. John Lough, head of foreign policy at the New Eurasian Strategies Centre, told Al Jazeera that Russia has its own economic problems, pointing to signs of stagnation, pressure on reserves, and growing frustration over the prolonged war in Ukraine. While Moscow could offer symbolic support or limited humanitarian assistance, “now is not a good time” to invest in Iran, he said.
Replacing maritime trade with overland routes would be extremely difficult, despite years of discussion about alternative corridors. It also won’t necessarily help Iran’s economy, which needs all the export revenue it can get. Hashemi said that “much of Iran’s economy revolves around the sale of oil, and with that blocked or prevented by the American blockade, Russia really can’t help in that regard.”
Others are more optimistic, however. Aslam argued that “propping [up] Iran locks in higher global oil prices that buoy Russia’s war economy, cements INSTC dominance for Asian trade, and keeps a key anti-Western ally alive – no downside for Moscow in a fragmented Gulf.”
Source: www.aljazeera.com