Iran–Russia strategic economic partnership

"They will come before the end of the year." Who will take the place of European auto giants in Russia, by Elena Popova for RIANOVOSTI. 08.18.2022.

The Iranian auto industry intends to return to Russia. The large automaker Iran Khodro tried several times to gain a foothold in the Russian market, but to no avail - the models were much inferior to their European counterparts. Now Western companies are gone, and Tehran has a chance. The first deliveries are expected before the end of the year. What kind of cars are these and whether there will be a demand for them - RIA Novosti understood.

"Stove - hurricane"

Iran Khordo top manager Mehdi Khatibi said the company plans to export to Oman, Iraq and Azerbaijan. But priority will be given to Russia.

Russians are already familiar with the Iranian brand. The Samand sedan, built on the basis of the Peugeot 405, was sold in the country in the mid-2000s. Outwardly, he was almost not inferior to the "Frenchman", but it was much cheaper. Nevertheless, it did not gain popularity: the model was considered obsolete, in a few years only about 12 thousand copies were sold.

Several advertisements for the sale of Samand can be found on the Avto and Avto.ru sites. Prices for used cars - from 90 to 200 thousand rubles. Motorists describe the ownership experience as follows: “The stove is a hurricane, the main thing is to change the filters, and everything will be fine. The air conditioner is super, I have never refueled in six years. parts from 306".

In addition to Samand, the Tara sedan, which was presented at the Interauto 2021 exhibition in Moscow, can be brought to Russia. This is nothing more than a copy of the Peugeot 301. The competitor of the Iranian model is Lada Vesta - they have similar characteristics and dimensions, but the "Iranian" has a more spacious trunk. A year ago, the cost of a car was estimated at 1.1 million rubles for the maximum configuration with an "automatic", but now the price may be higher.

Tatyana Sveshnikova, head of the RusIranExpo group, lived in Iran for several months and noted that on local roads, cars of the early 2000s are mostly found. “They are not equipped with all sorts of options, but they are quite high-quality. However, this year I have already seen new models with an interesting, cute design. Therefore, I admit their successful entry into the Russian market,” she says.

The Iranians themselves prefer to drive cars made in their country, since you have to pay a 100% duty for foreign cars.

We have to fight for the Russians

Today, a favorable situation has formed for the sales of Iranian cars in Russia, emphasizes independent expert Dmitry Popov in an interview with RIA Novosti. “They were presented even before the imposition of sanctions. Even if not in large numbers, they found their buyer. It is difficult to say how it will go on, but now there are good conditions for cooperation,” he notes.

According to Popov, there is no need to worry about spare parts and service, since "all cars in the world are made on unified platforms."

“There may be analogues of good or not very good manufacturers, but there will be enough spare parts. I recently changed wheel bearings on my car, and they offered me a choice of six or seven options. Yes, they cost 20-25 percent more expensive, but they are. And there will be no problems with logistics. Moreover, the Iranians themselves should take care of this,” the expert argues.

As for service, Russian entrepreneurs should be interested in this, which means that good car advertising is needed. In any case, all this can be gradually adjusted, Popov is convinced.

Auto expert Yegor Vasiliev looks at the appearance of Iranian cars with less enthusiasm: “They can claim some demand if prices are at the AvtoVAZ level or slightly lower. Buyers need confidence in the availability of normal long-term service support, and for this they need to live on market not for a year or two, but at least three or five. You will have to suffer losses, but after that they are able to become a significant player."

Experts agree that the main problem for Iran is Chinese cars, which have been successfully sold in Russia for several years.

"In terms of technology, engineering and design, China has surpassed even some Europeans. They are not bound by stylistic conventions and have long outbid a huge number of specialists from Europe who effectively implement their ideas and technologies. In addition, compared to Western ones, these are relatively cheap cars,” Vasiliev says.

To compete with China, Iran will have to introduce a fundamentally different model range, new types of bodies, special options are needed, Popov points out. “So far, Chinese manufacturers still have problems and strange design solutions. They often copy not the latest models that do not have the best characteristics,” he explains.

Therefore, if the Iranians cover these shortcomings of the Chinese, they will be able to quite successfully present themselves on the Russian market, the expert concludes.

There is room to grow

In July, Vladimir Putin met with his Iranian counterpart Seyid Ibrahim Raisi. The visit was fruitful: the parties agreed on multilateral cooperation from light industry to aviation and the automotive sector. Iran has long been living under various sanctions, which have been weakened, then again strengthened. And this experience can be useful to Russia.

"Last year, our trade turnover grew by 81 percent, and in the first months of this year - by another 31 percent. Our relations are really deep, strategic," the Russian leader said.

Tehran is ready to export parts and equipment for aircraft produced in Iran to Russia, as well as to repair Russian airliners. It can replace the departed Western manufacturers of household chemicals, hygiene products and medicine. Moreover, Iranian medicines are already entering the country through Pfizer and Sanofi - sales amount to about $82 million.
Moscow and Tehran have agreed to introduce barter to facilitate trade: Iran will import steel and export auto parts and gas turbines. Several Iranian companies have already signed relevant contracts, Minister of Trade and Industry Seyyed Reza Fatemi Amin said.

Cooperation is also developing in the financial sector. Deputy Foreign Minister for Economic Affairs Mehdi Safari allowed Iran to connect to the Mir payment system. Now trade operations of the two countries are conducted in national currencies.

Thus, many Iranian brands may appear in Russia in the near future. Previously, they had serious competition, but now the direction has become more promising. Russians need cars, medicines, building materials and technology. Therefore, demand is expected to be high.

https://ria.ru/20220818/avtogiganty-1810275799.html

Cars from Iran are returning to Russia. What you need to know about Iran Khodro, by Mikhail Kononchuk for Autonews. 08.19.2022.

French engineering, Iranian design and an ambitious new crossover. What to expect from the second coming of IKCO to our market.

The forecasts that we voiced back in the first weeks of the current crisis are coming true. Following the scattering of new Chinese brands , a manufacturer from a country that has been living under sanctions for 40 years has rushed to Russia. The head of the Iran Khodro company , Mehdi Khatibi, said that negotiations with the Russian side had been held, and deliveries of cars should begin as early as 2022. What is Iran Khodro?

The history of the company is rich. It was founded already 60 years ago, in 1962, and they didn’t bother much with the name. Until 1979, the manufacturer existed as Iran National, and then was renamed Iran Khodro, where khodro is simply “car” in Persian. There is a spelling IKCO, denoting the automotive division of the concern. Because there is also IPCO (engines and transmissions), ISACO (spare parts), IRICO (railway transport) and so on.

The company is huge and rightfully calls itself the largest in the Middle East. According to official data, the production capacity of IKCO's six sites exceeds one million vehicles a year, more than AvtoVAZ, with the parent plant in Tehran capable of producing up to 700,000 vehicles. However, Iran Khodro still does not have completely independent developments.

The first car to be assembled in Tehran was the Paykan, a licensed Hillman Hunter from the forgotten British band Rootes. The unpretentious sedan made a revolution in Iran, allowing residents to transfer to four wheels. Paykan lasted in production from 1966 to 2005 (!) year, and even at the end of his career, two-year queues remained for him. In total, almost 1.5 million of these machines were produced.

In the early 90s, the French from Peugeot appeared in Iran Khodro. The step turned out to be symbolic, because the same Rootes group back in 1978 went to the PSA concern, and the Peugeot 405 sedan, among other things, was produced at a factory in British Rayton. They set up the assembly of "four hundred and fifths" in Iran - and it continues to this day.

Subsequently, the Peugeot 206 sedan and hatchback settled down on the conveyors of Iran Khodro, and their own varieties of French cars appeared. For example, under the name Peugeot 207i, the same “two hundred and sixth” is produced there, only with a more modern appearance, and Peugeot Pars is an “elderly” 405 after restyling. Finally, there is an almost modern product in the line - the Peugeot 2008 crossover of the previous generation.

Production is fully localized, including engines and transmissions. The old French TU5 and XU7 engines of 1.6 and 1.8 liters respectively are mainly used, although in 2008 Iran Khodro introduced its own line of engines called EF, developed jointly with the German company FEV.

There are many varieties of these engines: gasoline and diesel, with a volume of 1.4 to 1.6 liters, even turbocharged ones, they develop from 100 to 163 hp, fit into Euro-5 standards, and most gasoline models are accustomed to working on natural gas.

In addition to licensed Peugeot, the Iranians also mastered the assembly of the “Chinese” - the Haima S5 and S7 crossovers, as well as the old Dongfeng H30 Cross hatchback, which was also sold in Russia for some time. But the most interesting thing for us is the models under our own brand Iran Khodro, one of which is familiar to domestic motorists with experience.

We are talking about the Samand sedan: it was present on the Russian market from 2006 to 2009, but never gained popularity. This car was let down by poor build quality, relatively high prices and a rusting body - things were even worse than the Chinese products of those years. But Samand is still in service, and it is possible that the Iranians will again try to sell it to us. For reference: in the homeland Samand costs $ 6-8 thousand, that is, 350-500 thousand rubles. at the current rate.

Despite the original design, technically this is a variation on the theme of the same immortal Peugeot 405. Moreover, Samand is produced in parallel with its own heir - the Soren sedan, introduced back in 2007. In fact, Soren is not a very deep restyling of Samanda. It was planned that he would replace the ancestor on the conveyor, but something went wrong.

The funny thing is that in 2015 IKCO also introduced the Dena model, which is ... That's right, another restyling of Samanda! On the move, kinship may not be suspected, but the shape of the body still betrays the genealogy. Realizing this, the Iranians built another version - Dena + with modified side panels.

So, bend your fingers: Peugeot 405, Peugeot Pars, Samand, Soren, Dena, Dena + - as many as six cars built on the same base from the mid-eighties. It reminds me of something, doesn't it? 2108, 2110, Priora, Kalina, Granta… To be fair, AvtoVAZ at least designed the platform on its own, but the parallels are still interesting.

Moreover, the Iranians also have an Arisun passenger pickup truck with body panels from Peugeot 405, stretched over ... units from Paykan! Yes, yes, the same one from the sixties.

But not everything in Iran is so archaic. For example, IKCO Runna is produced there - this is a slightly turned Peugeot 206 sedan, which was very popular in Russia. The design has not yet knocked for 25 years! There is also a completely new one - IKCO Tara, that is, a converted "state employee" Peugeot 301 / Citroen C-Elysee. The source was presented only in 2012, and since 2021, the Iranians have also received access to it. True, you will have to pay a lot for such luxury - 800 million rials, that is, about $19 thousand. or 1.2 million rubles.

Finally, soon Iran Khodro should have its first crossover named Rira. There is little information about it: the start of production is scheduled for 2023, and only a pre-production prototype was shown to the local public. Despite the design of the front end in the style of Hyundai Santa Fe, the body contours hint at a close relationship with the Peugeot 2008, and the platform is still the same - the French PF1, which the Iranians renamed IKP1 and call their own development.

Let's forgive them such cunning and note that at least they really worked on the interior: through the glass of the prototype, you can see the original architecture with dual digital displays, generally unlike Peugeot or Citroen. The management of Iran Khodro says that the Rira is being created with a big eye on export, so the crossover can be safely expected in Russia, perhaps as early as 2023.

https://www.autonews.ru/news/62fcc4ec9a7947395bb51e34

https://parstoday.com/en/news/iran-i190830-'iran_russia_discuss_joint_production_of_passenger_planes'

Iran and Russia are discussing joint production of passenger planes with a capacity of 70-150 seats, Deputy Minister of Industry, Mining and Trade Manochehr Manteghi says.

(...)

In August, the head of the Civil Aviation Organization unveiled plans to produce a 50-seat passenger plane as part of efforts to counter the West which he said is waging a full-scale war against Iran’s aviation sector.

“The idea and plan to build a passenger plane has been around for years. It is an order and strategy that the Islamic Republic is following,” Mohammad Mohammadi-Bakhsh said.

According to Mohammadi-Bakhsh, three platforms of 50-,72- and 150-seat passenger planes have been prepared, wherein the country’s needs have been taken into account.

The production will start with a 50-seat model at the Iran Aircraft Manufacturing Industries Corporation based in the central city of Shahin Shahr, he said.

The civil aviation program includes a 10-year roadmap charting out the direction which it has to take according to the needs of the regional and extra-regional markets. 

What is not clear if they will be iranian projects and Russia will help with the Internal systems and engines or if they will be Russian planes assembled in Iran (similar to what was done for the An-140, which kits were sent from Kharkov to Iran for final assembly).

The size is also a bit strange as at the moment Russia has not planes of those capacities:
TVRS-44 Ladoga has 44 seats, the il-114 has 68 seats.

Maybe the shortened version of the SSJ100, but it is not even in the process of getting certified,  as the priority is the certification of the Russianised 95 seats version.

As far as the 150 seats plane, it could be the MC-21-200 (the shortened version of the MC-21-300, more or less comparable to the airbus A319)but probably that one will be certified only after the bigger brother is first in serial production

To have a reference the A319 neo was certified in December 2018, much later than the other versions.

Certification of the A319neo with LEAP-1A engines follows these previous variant Type Certifications:

A320neo/P&W – 24 November 2015;

A320neo/CFM – 31 May 2016;

A321neo/P&W – 15 December 2016;

A321neo/CFM – 1 March 2017.

Isos wrote:Just look at that Ladoga plane. It is based on czech design from Let acquired by russia but it seems they sold that company in 2022 probably because of sanctions.

Does it means this plane is a dead project ? It doesn't look bad.

This is a bit off topic, but anyway, as far as I understand the design of the Ladoga is partially derived from the let L-610 prototype and with some parts from the An140 and from the An172. I do not believe it should create big problems for Russia. Another matter whatsoever is the Let L-410, unless they have found some sort of agreement when selling the firm

GarryB wrote:

Does Iran have hot and high airfields?

Did it operate the An-32?

They have some international airports above 1500metres, including one at just above 2000 metres.
I do not know about the an32, I just know that in 2017 several iranian airlines were interested in the french/Italian ATR-42 and ATR-72, which are of comparable size (just slightly bigger) than the Ladoga and the Il-114.

The Big Stiff: Russia-Iran Dump the Dollar and Bust US Sanctions, by Pepe Escobar for The Cradle. 02.09.2023.

The agreement between the Central Banks of Russia and Iran formally signed on 29 January connecting their interbank transfer systems is a game-changer in more ways than one.

Technically, from now on 52 Iranian banks already using SEPAM, Iran’s interbank telecom system, are connecting with 106 banks using SPFS, Russia’s equivalent to the western banking messaging system SWIFT.

Less than a week before the deal, State Duma Chairman Vyachslav Volodin was in Tehran overseeing the last-minute details, part of a meeting of the Russia-Iran Inter-Parliamentary Commission on Cooperation: he was adamant both nations should quickly increase trade in their own currencies.

Ruble-rial trade

Confirming that the share of ruble and rial in mutual settlements already exceeds 60 percent, Volodin ratified the success of “joint use of the Mir and Shetab national payment systems.” Not only does this bypass western sanctions, but it is able to “solve issues related to mutually beneficial cooperation, and increasing trade.”

It is quite possible that the ruble will eventually become the main currency in bilateral trade, according to Iran’s ambassador in Moscow, Kazem Jalali: “Now more than 40 percent of trade between our countries is in rubles.”

Jalali also confirmed, crucially, that Tehran is in favor of the ruble as the main currency in all regional integration mechanisms. He was referring particularly to the Russian-led Eurasian Economic Union (EAEU), with which Iran is clinching a free trade deal.

The SEPAM-SPFS agreement starts with a pilot program supervised by Iran’s Shahr Bank and Russia’s VTB Bank. Other lenders will step in once the pilot program gets rid of any possible bugs.

The key advantage is that SEPAM and SPFS are immune to the US and western sanctions ruthlessly imposed on Tehran and Moscow. Once the full deal is up and running, all Iranian and Russian banks can be interconnected.

It is no wonder the Global South is paying very close attention. This is likely to become a landmark case in bypassing Belgium-based SWIFT – which is essentially controlled by Washington, and on a minor scale, the EU. The success of SEPAM-SPFS will certainly encourage other bilateral or even multilateral deals between states.

It’s all about the INSTC

The Central Banks of Iran and Russia are also working to establish a stable coin for foreign trade, replacing the US dollar, the ruble, and the rial. This would be a digital currency backed by gold, to be used mostly in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea, already very busy moving plenty of Iranian cargo.

Astrakhan happens to be the key Russian hub of the International North-South Transportation Corridor (INSTC), a vast network of ship, rail, and road routes which will drastically increase trade from Russia – but also parts of Europe – across Iran to West Asia and South Asia, and vice-versa.

And that reflects the full geoconomic dimension of the SEPAM-SPFS deal. The Russian Central Bank moved early to set up SPFS in 2014, when Washington began threatening Moscow with expulsion from SWIFT. Merging it with the Iranian SEPAM opens up a whole new horizon, especially given Iran’s ratification as a full member of the Shanghai Cooperation Organization (SCO), and now a leading candidate to join the extended BRICS+ club.

Already three months before the SEPAM-SPFS agreement, the Russian Trade Representative in Iran, Rustam Zhiganshin, was hinting that the decision “to create an analog of the SWIFT system” was a done deal.

Tehran had been preparing the infrastructure to join Russia’s Mir payment system since last summer. But after Moscow was hit with extremely harsh western sanctions and Russian banks were cut off from SWIFT, Tehran and Moscow decided, strategically, to focus on creating their own non-SWIFT for cross-border payments.

All that relates to the immensely strategic geoeconomic role of the INSTC, which is a much cheaper and faster trade corridor than the old Suez Canal route.

Russia is Iran’s largest foreign investor

Moreover, Russia has become Iran’s largest foreign investor, according to Iranian Deputy Finance Minister Ali Fekri: this includes “$2.7 billion worth of investment to two petroleum projects in Iran’s western province of Ilam in the past 15 months.” That’s about 45 percent of the total foreign investment in Iran over the October 2021 – January 2023 period.

Of course the whole process is in its initial stages – as Russia-Iran bilateral trade amounts to only US$3 billion annually. But a boom is inevitable, due to the accumulated effect of SEPAM-SPFS, INSTC, and EAEU interactions, and especially further moves to develop Iran’s energy capacity, logistics, and transport networks, via the INSTC.

Russian projects in Iran are multi-faceted: energy, railways, auto manufacturing, and agriculture. In parallel, Iran supplies Russia with food and automotive products.

Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, is fond of reminding anyone that Russia and Iran “play complementary roles in global energy and cargo transit.” The Iran-EAEU free agreement (FTA) is nearly finalized – including zero tariffs for over 7,500 commodities.

In 2022, the EAEU traded more than $800 billion worth of goods. Iran’s full access to the EAEU will be inestimable in terms of providing a market gateway to large swathes of Eurasia – and bypassing US sanctions as a sweet perk. A realistic projection is that Tehran can expect $15 billion annual trade with the five members of the EAEU in five years, as soon as Iran becomes the sixth member.

The legacy of Samarkand

Everything we are tracking now is in many ways a direct consequence of the SCO summit in Samarkand last September, when Russian President Vladimir Putin and his Chinese counterpart Xi Jinping, in person, placed their bet on strengthening the multipolar world as Iran signed a memorandum to join the SCO.

Putin’s private talks with Iranian President Ebrahim Raisi in Samarkand were all about deep strategy.

The INSTC is absolutely crucial in this overall equation. Both Russia and Iran are investing at least $25 billion to boost its capabilities.

Ships sailing the Don and Volga Rivers have always traded energy and agricultural commodities. Now Iran’s Maritime News Agency has confirmed that Russia will grant their ships the right of passage along the inland waterways on the Don and Volga.

Meanwhile, Iran is already established as the third largest importer of Russian grain. From now on, trade on turbines, polymers, medical supplies, and automotive parts will be on a roll.

Tehran and Moscow have signed a contract to build a large cargo vessel for Iran to be used at the Caspian port of Solyanka. And RZD logistics, a subsidiary of Russian railway RZD, operates container cargo trains regularly from Moscow to Iran. The Russian Journal for Economics predicts that just the freight traffic on INTSC could reach 25 million tons by 2030 – no less than a 20-fold increase compared to 2022.

Inside Iran, new terminals are nearly ready for cargo to be rolled off ships to railroads crisscrossing the country from the Caspian to the Persian Gulf. Sergey Katrin, head of Russia’s Chamber of Commerce and Industry, is confident that once the FTA with the EAEU is on, bilateral trade can soon reach $40 billion a year.

Tehran’s plans are extremely ambitious, inserted in an “Eastern Axis” framework that privileges regional states Russia, China, India, and Central Asia.

Geostrategically and geoeconomically, that implies a seamless interconnection of INSTC, EAEU, SCO, and BRICS+. And all of this is coordinated by the one Quad that really matters: Russia, China, India, and Iran.

Of course there will be problems. The intractable Armenia-Azerbaijan conflict might be able to derail the INSTC: but note that Russia-Iran connections via the Caspian can easily bypass Baku if the need arises.

BRICS+ will cement the dollar’s descent

Apart from Russia and Iran, Russia and China have also been trying to interface their banking messaging systems for years now. The Chinese CBIBPS (Cross-Border Inter-Bank Payments System) is considered top class. The problem is that Washington has directly threatened to expel Chinese banks from SWIFT if they interconnect with Russian banks.

The success of SEPAM-SPFS may allow Beijing to go for broke – especially now, after the extremely harsh semiconductor war and the appalling balloon farce. In terms of sovereignty, it is clear that China will not accept US restrictions on how to move its own funds.

In parallel, the BRICS in 2023 will delve deeper into developing their mutual financial payments system and their own reserve currency. There are no less than 13 confirmed candidates eager to join BRICS+ – including Asian middle powers like Iran, Saudi Arabia, and Indonesia.

All eyes will be on whether – and how – the $30 trillion-plus indebted US will threaten to expel BRICS+ from SWIFT.

It’s enlightening to remember that Russia’s debt to GDP ratio stands at only 17 percent. China’s is 77 percent. The current BRICS without Russia are at 78 percent. BRICS+ including Russia may average only 55 percent. Strong productivity ahead will come from a BRICS+ supported by a gold and/or commodities-backed currency and a different payment system that bypasses the US dollar. Strong productivity definitely will not come from the collective west whose economies are entering recessionary times.

Amid so many intertwined developments, and so many challenges, one thing is certain. The SEPAM-SPFS deal between Russia and Iran may be just the first sign of the tectonic plates movement in global banking and payment systems.

Welcome to one, two, one thousand payment messaging systems. And welcome to their unification in a global network. Of course that will take time. But this high-speed financial train has already left the station.

https://www.unz.com/pescobar/the-big-stiff-russia-iran-dump-the-dollar-and-bust-us-sanctions/