Survive under sanctions: what experience of Iran will suit Russia

Victoria Pavlova

There are not many countries in the world that have known sanctions: North Korea, Cuba, Syria and Iran. There is no point in comparing Russia with North Korea or Cuba. Different levels of economic and technological development. With Syria, too (besides, there were hostilities for several years). But with Iran, the comparison will be more correct. Moreover, according to last year's IMF estimate, Iran overtakes Russia in terms of GDP per capita. The country is in 57th place in the world ranking with $12,725 per capita, and Russia is in 63rd place with $11,273 per capita. Until 1979, when the Islamic Revolution took place, Iran actively developed in the pro-American direction, and in the 90s cooperated with Europe, especially with France.

For decades, it was believed that anti-Iranian sanctions are the toughest in the world. The West has effectively imposed a trade embargo and isolated Iran from global finance. But the state has not collapsed, people have not gone away. We understand how Iran copes with sanctions, what we, looking at our comrades in misfortune, should prepare for, and what we can learn from this example.

"Almost a Signature Dish"

When sanctions intensify, people do not think about how Rosneft will sell raw materials, and how NOVATEK will develop Arctic LNG production. The people think about how they will live, what they can buy, what familiar things they will have to give up. Ideology alone won't get you far; the concern about consumer goods is much stronger so far. Both in Russia and in Iran, officials understand that it is more expensive for themselves to fight the consumption of familiar goods. In this matter, the Russian authorities act strictly in accordance with the Iranian experience and make similar decisions, guided by the principle that, ironically, was voiced by the symbol of Western technocracy Steve Jobs: “Why serve in the navy if you can be a pirate?”

This means that the wishes of the copyright holders mean nothing. Take what you want, sell where you want. In Iran, despite all the restrictions, you can easily buy foreign products, household chemicals, clothes and cosmetics from fashion brands, electronics from leading companies Apple and Samsung. And all this can be done in the "branded" stores. Well, almost branded... There is hope that over time, China, India and Turkey will provide Russia with a stable "parallel" import of goods, that is, deliveries without the permission of the copyright holders. It is these countries, according to the Chamber of Commerce and Industry of the Russian Federation , that are the main trading partners of Iran.

Rajab Safarov , Director General of the Center for the Study of Modern Iran, believes that while being under sanctions, one should pin hopes on China and India:

- Iran's relations with China are super good as they are Iran's first partners in many industries. Chinese participation has already become dominant in the Iranian economy. We have good and even relations with India. There are quite serious projects, for example, a port in the Gulf of Oman, which will soon become an international hub. Chabahar port has been leased to India by Iran for many decades, and the Indians are investing hundreds of millions of dollars in its development. It is already becoming a very important economic hub in the movement of Chinese and Indian goods in the country, towards Europe and beyond. India has always been and is a serious buyer of Iranian oil. Iranian-Indian, Iranian-Chinese relations are quite cloudless, predictable, friendly and calm.

Sanctions will allow Russia to get off the needle of Western goods and technologies very quickly, but will make it hooked on dependence on China and India. Full self-sufficiency was possible in the 20th century, but not in the era of super-expensive and science-intensive high technologies. Even the draft version of the national electronics project assumes that by 2030 only 30% of households will use domestic electronics, and the country will start producing processors similar to the chips in the 2013 iPhone 5s. We are already planning to lag behind developed countries by 17 years.

The dollar was, is and will be even in Iran

To get high-quality branded items, Iranians arrange shopping tours to the UAE, Turkey and Azerbaijan. Those who cannot afford a trip resort to the services of intermediaries. Novye Izvestia recently reported on how to get around the sanctions and buy goods abroad. In any case, foreign purchases require a freely convertible currency. That is dollars or euros. Here is a lesson that Russia can learn from the Iranian experience: as long as we have not blocked the export of energy resources, the country will have a currency, since the volume of exports significantly exceeds the volume of imports. And in such quantities that the question arises, what to do with it then? The Central Bank has already attended to this issue and is preparing to soften the requirement for exporters to change at least 80% of foreign exchange earnings into rubles. In Iran, there is a formal restriction on the purchase by one person of no more than 2,200 dollars or 2,000 euros per year, which everyone successfully circumvents using the black market, or with the involvement of numerous relatives and friends. There is enough currency - it makes no sense now to worry about how to bring and put more paper dollars under the pillow.

But there is a big difference: there are two different rates of the local rial in Iran. Importers of strategically important goods that are not produced in Iran in the proper volume can buy the currency they need at the official rate. Ordinary people are forced to buy dollars at the "market rate". A similar system was in effect in Russia from the beginning of March to April 11: only companies engaged in foreign economic activity could purchase foreign currency on the stock exchange without an additional commission of 12%. It is likely that Russia will be able to avoid a bifurcation of courses in the future, says Adlan Margoev, a researcher at the Center for Middle East Studies:

- In Russia, it will be possible to do without a multiple exchange rate - in any case, the Central Bank does not give any signals that such measures could be taken in the country. In Iran, support for such a course creates an additional burden on the central bank and additional risks. Part of the business can use this privilege and change the currency at a favorable rate in their own interests, and not just to import priority goods and technologies. When regulation reaches such a scale, it is difficult to avoid local corruption.

How will we transport ourselves and other goods

Millions are wondering what we will now ride, what to fly, and what to carry cargo. The prospect of being content with UAZ and Lada Granta in the simplest configurations for personal use and KAMAZ of the K3 series (the same old Soviet KAMAZ) attracts few. And the experience of Iran here, alas, will not inspire.

Although the automotive industry in Iran creates about 10% of GDP, and the volume of the car market in 2020 amounted to a decent $26.43 billion (at that time cars were sold in Russia for $34.7 billion), there is nothing much to brag about. The streets are mostly filled with Chinese cars, used French cars, and local models (Iran Khodro and SAIPA), which are also mostly outdated French cars with a new face. The export geography of Iranian cars is also limited by far from the most prosperous countries: Syria, Iraq, Algeria, Egypt, Sudan, Venezuela, Pakistan, Cameroon, Ghana, Senegal and Azerbaijan.

The bulk of the truck fleet is represented by American vehicles that entered the country before 1979, used European tractors that gradually seeped into Iran from different countries, and of course Chinese models - some are assembled in Iran. And so that the cargo transportation industry would not be completely bent under the yoke of sanctions, technical supervision was minimized in Iran, and environmental standards appeared only in 2010. Russia repeats the path: the technical regulations allow the production of Euro-2 smoky trucks, KAMAZ began production of the Chinese JAC truck under its own brand.

Aviation is much worse. Between 2015 and 2017, Boeing signed a contract with an Iranian airline, but did not manage to deliver a single aircraft. Only a few brand new ATR-72s for regional transportation got into the country then. Iran was left without new mainline aircraft, and without spare parts. The solution to the problem has not yet been found - in order to maintain the performance of old aircraft, it is necessary to disassemble the liners remaining on the ground for spare parts. So in Russia, the Pobeda airline stopped operating 16 aircraft out of 41 available.

The main difference is total "cancelling"

The development of freight transport in Iran turned out to be a strategically important task, because the West did not go for the "cancelling" of the entire Islamic Republic. For example, transport sanctions in 2010 primarily affected air and maritime transport, but did not affect land transport. Since the imposition of sanctions, the volume of cargo crossing land borders has increased markedly. In the case of Russia, everything is much worse: foreign logistics companies take containers out of the country, and the EU countries have banned the work of Russian transport companies and the entry of trucks with Russian numbers. European ports are closed for ships flying the Russian flag with the majority of cargo, the arrival of foreign ships is complicated by the fact that the Joint Military Committee (the union of insurance companies) has recognized Russia's internal waters as a high-risk area. Now insurance for calling at Russian ports is very expensive. And air traffic was broken in general by all unfriendly countries. There really is no point in worrying about compliance with environmental standards in transport - anyway, our trucks will not be allowed into Europe.

The difference of approaches can be traced even in culture and sports. The Russian national football team was simply suspended from participation in the World Championship, the Russian national volleyball team was also suspended from participation in the World Championship and replaced by the Ukrainian team. Iranian football players at the same time participate in the World Cup and the Asian Cup. Even with all its sanctions, the Iranian national football team is 15 lines higher than the Russian team in the FIFA rankings. And the film of the Iranian director Babak Nabizadeh "The Ocean Outside the Window" got to the international film festival in San Francisco even without any criticism of the Iranian authorities in the plot.

People have only one hope - the help of the state. Moreover, the Russians have not yet forgotten the social policy of the USSR. Polls conducted in 2016 showed that 72% of Russians count on state assistance in an emergency. In the covid 2020, already 75% believed that the state should help them during self-isolation.

Whether the government will be able to provide support in the current conditions, and whether there will be enough resources for this, we will understand in the next material, which will be released in the coming days.