RUSSIA AND IRAN: AFTER THE SANCTIONS RESOLUTION

C O N F I D E N T I A L SECTION 01 OF 05 MOSCOW 013171

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/29/2016
TAGS: PREL PARM ETRD KNNP MASS IR RS
SUBJECT: RUSSIA AND IRAN: AFTER THE SANCTIONS RESOLUTION

REF: A. MOSCOW 12914

B. MOSCOW 10956

Classified By: Ambassador William J. Burns. Reasons: 1.4(B/D).


1. (C) Summary: Russia has repeatedly told us that when it
comes to preventing Iran from developing nuclear weapons, it
shares our strategic goal but differs with us over tactics.
Moscow's reluctance to agree to coercive measures was on full
display during consideration of UNSCR 1737, but in the end
Russia accepted a sanctions regime that it perceived as
protecting its national, as well as commercial interests.
Russia's efforts to insulate the Bushehr reactor contract and
previously concluded arms sales from sanctions were aimed at
demonstrating to other potential customers that Moscow is a
reliable supplier. While politically significant elites have
a stake in arms sales and energy cooperation with Iran, for
now, Russia's commercial interests in Iran are more
prospective than real.


2. (C) Russia sees no immediate threat to its interests
from Iran's increasingly assertive role in the Middle East
and, in fact, some view this as a positive development that
introduces another, "independent" actor in a region that had
been dominated by the United States. Nor is Moscow
particularly concerned about Iran's more ideological politics
at home, which have yet to be translated into support for
radical Islamist force in Moscow's neighborhood or Russia
itself. While Russian officials see a nuclear-armed Iran as
a threat to Russian interests, they do not believe it is
imminent. However, the prospect of U.S. military
intervention is seen as immediately destabilizing. While
Russia has now accepted the logic of a sanctions regime after
much resistance, we can expect continued efforts to delay the
imposition of more coercive measures. Russia hopes Tehran
will be willing to negotiate, but in the meantime it will
maneuver to always remain closer to Tehran than its other
EU-3 Plus 3 partners. End Summary.
.
PROTECTING RUSSIAN INTERESTS
--------------


3. (SBU) FM Lavrov's public statements immediately
following the adoption of UNSCR 1737 encapsulated Russia's
dilemma regarding Iran's nuclear program. In comments made
to a meeting of ministers chaired by President Putin, Lavrov
said that Russia had to balance three "targets" in the
Security Council -- preventing WMD proliferation, leaving
room for further negotiations with Tehran, and avoiding
damage to Russia's "legitimate ties" with Iran. The Foreign
Minister was satisfied that the resolution met all three
goals, but underlined in a response to a question from Putin
that Russian economic interests in the Bushehr plant and arms
sales to Tehran had specifically been protected. Left unsaid
by Lavrov was how Russia could continue to maintain this
tenuous balance in the event Iran did not comply with the
resolution. We asked government officials and think tankers
during the time UNSCR 1737 was being considered how Russia
weighed these interests, whether changes in Iran's domestic
politics and regional role affected this calculus, and how
difficult Moscow will prove in achieving our shared goal of a
non-nuclear Iran.
.
NUCLEAR COOPERATION
--------------


4. (C) Lavrov's emphasis on protecting the Bushehr contract
reflects the importance Moscow attaches to being viewed as a
reliable nuclear supplier. The head of the Russian Federal
Agency for Nuclear Energy (Rosatom) Sergey Kiriyenko told the
Ambassador in mid-December after returning from Tehran (ref
A) that Russia was still planning to deliver fuel for Bushehr
in March 2007. Kiriyenko commented that he is fully aware of
the "serious question" posed by Tehran's noncompliance with
IAEA requirements. Still, he said, Russia does not want the
reputation of a country that fulfills or does not fulfill its
contracts based on political issues. Under the supplemental
agreement agreed to September, the physical launch of Bushehr
will take place in September 2007, with generation of
electrical power commencing in November (ref B).


5. (C) While Kiriyenko reiterated publicly the day before
passage of the resolution that plant completion was on track,
he added that this schedule was dependent on Iran supplying
"proper financing" and the timely delivery of required
equipment from third countries. A Japanese diplomat told us
that his contacts in the Foreign Ministry had suggested that
Iran was balking at providing further financing because of
cost overruns and that this might lead to further
time-consuming negotiations. Technical problems might also
lead to delays. MFA Second Asia Director Aleksandr Maryasov

MOSCOW 00013171 002 OF 005


noted that the Iranians continued to make few allowances for
the difficulties faced by Russian contractors, who were
trying to mesh German equipment already in place with Russian
gear.


6. (C) Russian concerns about exempting Bushehr from the
effects of UNSCR 1737 aside, Security Council Secretary
Ivanov has repeatedly underscored to the Ambassador that
commercial factors do not determine Russia's policy towards
Iran. Other experts also discounted the weight that nuclear
cooperation with Iran had in Russia's policy toward Tehran.
Aleksandr Pikayev, head of the disarmament department of the
Institute of World Economics and International Relations
(IMEMO) said that Bushehr no longer had the same significance
to Russian interests that it did in the Yelstin years.
Bushehr itself was almost completed, and while there were
hopes of building other reactors in Iran, Rosatom was now
more interested in the expansion of nuclear energy plants in
Russia and in other countries which did not pose the same
challenges to work in that Iran did. Ivan Safranchuk of the
World Security Institute noted that Russia's concerns about
civil nuclear sales worldwide meant it was likely Russia
would try to fulfill the Bushehr contract, but that Moscow
would think twice before pushing further contracts in a
country that was increasingly becoming a nuclear pariah.
Still, there are others in the GOR who are keen to compete
for lucrative nuclear power plant contracts in Iran -- at
almost USD 1 billion each.
.
ARMS SALES AND PIPELINE POLITICS
--------------


7. (C) Next to nuclear energy cooperation, arms sales to
Tehran constitute one of the largest elements in the
relatively modest USD 1.8 billion in bilateral trade in 2005.
Pikayev argued that the "minuscule" level of trade between
Russia and Iran argued against economic interests being a
driver of policy, but acknowledged that the healthy trade in
arms created a strong lobby for Iran in the Kremlin, among
whom he included DPM/Defense Minister Sergey Ivanov. Ivanov,
who is a leading contender to succeed Putin in 2008, argued
publicly in late-August that Iran's nuclear program did not
constitute the type of threat to international peace and
security that should be subject to UN Security Council
sanction. While Ivanov has been quiet since then, Nina
Mamedova, Head of the Iran Section in the Oriental Institute,
cautioned against underestimating the importance of arms
sales to Iran for the Russian military-industrial complex
because it was a "protected" market due to restrictions on
Western sales.


8. (C) Few experts placed much importance on the gas factor
in weighing Russia's interests. Mamedova highlighted
Gazprom's interest not only in developing the Pars field, but
in working with Iran to encourage the construction of the
Iran-Pakistan-India pipeline. However, Pikayev argued that
Iran and Russia were competitors more than collaborators in
the energy field, because Russia wanted to wall off its
European markets from any potential Iranian gas sales; in
addition, the two countries would eventually compete for
sales to South Asia. While Gazprom was interested in
developing the gigantic Pars field in Iran, Pikayev doubted
that Iran would let the Russian company in because of fears
that this would provide Moscow unwanted leverage.
.
IS IRAN DIFFERENT NOW?
--------------


9. (C) While Russian interests in nuclear cooperation, arms
sales, and energy are longstanding fixtures in bilateral
relations, the reconsolidation of conservative Islamic forces
in Iran has led some to publicly question Russia's close
ties. However, the MFA does not view on-going political
change in Iran as requiring a rethink of the relationship.
Maryasov, who has served 18 years in Iran, the last several
as Ambassador, explained Ahmadinejad's success as a reaction
to the failure of reformists, unable to implement the
promises they made. Russia should not be concerned by the
changes in Iran, according to Russian Institute for Strategic
Studies Director Yevgeniy Kozhokin, since it could count on a
slow process of internal transformation that would eventually
lead to liberalization by elites interested in integration
with the rest of the world.


10. (C) Maryasov saw the nuclear question as one of few
where there was full consensus among Iranian elites. He
judged there were some tactical differences between
pragmatists who favor a path of negotiations and more radical
elements who believed that two years of negotiations with the
EU-3 had produced no concrete results. The radicals argued
that Iran's nuclear program provided Tehran with leverage

MOSCOW 00013171 003 OF 005


against the West and bolstered aspirations to regional
hegemony. Maryasov said that in the end, the Iranian
leadership approached the nuclear issue with a mix of
ideological and religious values and a healthy sense of
realpolitik that took note of the differing outcomes for Iraq
and the DPRK once they tried to acquire WMD. Local elections
in Iran that were widely viewed as a setback to conservatives
were unlikely to change either Iran's nuclear policies or its
relations with the outside world, according to Rajab Safarov,
General Director of the Iran Studies Center.
.
A REGIONAL POWER IS (RE)BORN
--------------


11. (C) Iran's increasingly assertive role in the Middle
East was flagged by many Russian experts with whom we spoke
as a significant change in the regional power balance. The
experts were almost unanimous in naming Iran as a "winner"
and Israel as the loser following this past summer's fighting
in Lebanon. Israel and Middle East Studies Institute
Director Yevgeniy Satanovskiy said that a newly emboldened
Iran was posing an increasing challenge to the security
interests of Saudi Arabia and the Gulf states, particularly
given the size of the Shia populations in these neighboring
countries. In his view, Ahmadinejad could transcend the
Sunni-Shia divide and differences between Arabs and Persians
-- witness support for Iran during the war in Lebanon. He
said that Iran posed a different threat than Iraq or the
Taliban in Afghanistan did because it had the veneer of
democracy but had expansionist goals akin to the
post-Stalinist USSR. In this sense, Russia's interests as a
status quo power could eventually be threatened.


12. (C) Not all experts were as concerned about Iran's
growing role. Kozhokin, who is connected with the Russian
security services and the military for whom his Institute
provides consulting services, agreed that after the conflict
in Lebanon, Iran would play an ever greater role in the
Middle East and could pursue regional hegemony as the Shah
did in the seventies. He saw this as a natural result of
Iran's large population and resources. IMEMO's Pikayev and
World Security Institute's Safranchuk argued that Russia
accepted a greater role for Iran in the Middle East. The
Kremlin viewed Iran as the only "independent" state in the
Gulf, which could make its own decisions and did not depend
on the U.S. Iran could eventually become Russia's ally in
the Shanghai Cooperation Organization as part of an "energy
wing."
.
CLOSER TO HOME: KEEPING THE LID ON
--------------


13. (C) It has become a commonplace assumption among some
analysts that Russia has been careful in dealing with Iran
because Tehran could make trouble for Russia among Muslims
inside Russia and in its neighborhood as well as in the
broader Islamic world. The think tankers we spoke to
challenged at least the first half of that assertion.
Khozhokin argued that Iran was simply not powerful enough to
threaten Russia by stimulating radical Islam in Russia.
Unlike Saudi Arabia, Pakistan or Turkey, Iran had not been
involved in supporting Chechen rebels and had no
infrastructure or networks that could be used for this
purpose. Satanovskiy, who has warned in the past about the
potential for radicalization of Russia's Muslims, told us
that if there were a threat, it did not come from Iran; he
pointed the finger instead at students from Russia who were
receiving "extremist indoctrination" when they studied in
Egypt's Al Azhar University. The Oriental Institute's
Mamedova added that Iran, as a Shia state, would not gain
much traction in the largely Sunni North Caucasus.


14. (C) Iran has had a more significant role in Russia's
neighborhood and with other Islamic states. In general,
Institute of Europe Director Sergey Karaganov told us, Moscow
views Tehran as a status quo power in the Russian
neighborhood. Mamedova pointed out that Iran had been
influential in helping Russia gain observer status in the
Organization of the Islamic Conference over the objections of
Pakistan and others and had insulated Russia from the most
severe critics of its Chechnya policy. Pikayev noted that
Iran had been helpful to Russia during the civil war in
Tajikistan and with the Taliban, but now there was less
incentive to collaborate with Tehran. The one concern
Pikayev identified was a possible threat to Azerbaijan by
Iran, which Russia would find unacceptable. Mamedova argued
that nationalist differences within Iran between the majority
Persian population and sizable minorities like the Azeris and
Kurds made playing the separatist card against Russia a
dangerous ploy for Tehran.
.

MOSCOW 00013171 004 OF 005


WHAT'S IN IT FOR ME?
--------------


15. (C) While personal financial interests of top level
officials have affected Iran policy in the past -- witness
the MINATOM of the nineties -- ROSATOM officials were now
more interested in building scores of nuclear power plants in
Russia. At the same time, Pikayev argued to us, the personal
interests of Russian officials in arms sales to Iran had an
"unquantifiable" effect on Russia's Iran policy. Satanovskiy
was more blunt. He saw Russia's Middle East policy,
including toward Iran, as driven by the elite's "pragmatic"
commercial interests. "Russia had no friends (in the
region),it had contracts." In his view, military-industrial
interests that had a piece of specific deals would have
greater weight in the Kremlin than those who expressed
concerns about the threat that a nuclear-armed Iran might
eventually pose to Russian interests. Even when the "top"
had decided on a policy, such controls could be easily
skirted, Satanovskiy argued, pointing to a shipment of arms
to Syria even after Putin had decided to suspend such sales
because of concerns about Syrian diversions to Hizbollah. At
the same time, he believed that Russia would never give the
Iranians anything that could cause a real threat to the
United States because in the end the relationship with the
U.S. was more important.
.
IS A NUCLEAR IRAN REALLY A THREAT TO RUSSIA?
--------------


16. (C) Russian officials often argue that they understand
that a nuclear-armed Iran would pose a threat to Russian
interests, but it is not clear how they evaluate the
importance of that threat compared to others Moscow faces nor
how immediate they judge that threat might be. The Russian
Strategic Studies Institute's Kozhokin mirrored conventional
wisdom here in arguing that "no serious person" could want a
nuclear-armed Iran and that Russia participated in
nonproliferation activities related to Iran not only because
of U.S. pressure, but because a nuclear Iran threatened its
interests. On the question of timing, the MFA's Maryasov
asserted that there was no compelling proof yet of a military
research program. His estimate was that Iran's research and
enrichment programs were aimed at providing Tehran the
opportunity to make a decision on a military program sometime
in the future as the political cycle developed. Rosatom's
Kiriyenko reflected longstanding views among GOR officials
that the Iranians lacked the technical capacity to pursue a
full-fledged program. He told the Ambassador that Iran's
claims of progress on enrichment were "comical" and that his
staff had noticed a virtual collapse in the Iranian nuclear
energy agency because of the loss of skilled professionals
(ref A).


17. (C) Reiterating views shared by other experts, Pikayev
argued that it was "impossible" to imagine that a
nuclear-armed Iran would act aggressively against Russia
because of Moscow's ability to deter Iran. At the same time,
there was little likelihood that Russia would want to project
power into areas of Iranian interest. For Russia, the "worst
had already happened" when Pakistan went nuclear, given
Islamabad's ties to the Taliban and the safe haven and
support it allegedly offered to Chechen separatists.
However, there were continuing concerns about the leak of
nuclear materials to non-state actors, which Iran might
facilitate, and which merited careful attention. The
Carnegie Center's Aleksandr Arbatov was more direct: in the
short term, the biggest threat to Russia's interests was the
prospect of U.S. military intervention in Iran.
.
FINDING A BALANCE
--------------


18. (C) FM Lavrov's "report" to Putin about the sanctions
resolution was long on describing how Russian contracts would
be protected, but short on next steps. Lavrov stressed that
the sanctions could be suspended if Iran met the demands of
the international community, but offered no judgment on how
likely this was or what would happen if it did not take
place. The MFA's Maryasov explained Russian hesitancy on the
resolution as the result of Moscow's concerns about the
consequences of imposing a sanctions regime; "these things
can take on a life of their own" which could injure Russian
interests more than the West, he said. Pikayev suggested
that Russia would likely follow France's position closely
because Moscow judged that Paris shared Russian views that a
diplomatic solution was still possible that would protect
European (and Russian) commercial interests. However,
following the EU-3 lead posed risks for Russia's freedom of
maneuver and there were some in the Kremlin who rejected it
for that reason. He suggested that the Security Council also

MOSCOW 00013171 005 OF 005


saw a more "independent" line as bolstering Russia's
interests, which explained why Igor Ivanov continued to take
an "unusual level of interest" in the Iranian nuclear file.



19. (C) In addition to Russia's specific strategic and
commercial interests in Iran, other, more intangible factors
are likely to come into play in Russia's Iran diplomacy.
Pikayev suggested that we not discount the influence of
personal relationships in examining Russia's policies toward
Iran. He suggested that the Russian elite had felt betrayed
by what he termed the cynical use by Iran of the proposal for
a uranium enrichment joint venture to shield Iran from
international pressure as well as Ahmadinejad's failure to
respond promptly and constructively to the EU-3 Plus 3
proposal as the Iranian leader had promised to Putin in
Shanghai last summer.
.
COMMENT
--------------


20. (C) In some sense, Russia already made its choice to
support a more coercive policy toward Iran when it agreed to
the EU-3 Plus 3 strategy of negotiations with Iran coupled
with deadlines for an Iranian response in UNSCR 1696. Russia
wanted above all to avoid the "Iraqi example" -- where a
Russian partner was isolated and the U.S. was able to build a
record of non-compliance which could be used to justify
further coercive measures -- but it has now ended up with
exactly that. Continuing Iranian intransigence over
negotiations gave Russian diplomats nothing to push back with
in discussions with the West. Moscow supported Iran's slow
rolling the process in hopes that it would allow time for a
deal to be reached, but Russia miscalculated Iran's
willingness to deal.


21. (C) Now that a sanctions regime has been adopted, we
need to pay close attention to Moscow's implementation of the
resolution, which will begin with a presidential decree, to
be followed by implementing regulations. If Iran does not
meet the terms of UNSCR 1737, Russia will undoubtedly attempt
to slow down the imposition of any further sanctions and will
argue for only the most incremental of steps. Russia is
likely to watch the EU-3 closely to determine how far the
Europeans are willing to go in pushing Iran and then adjust
accordingly, always keeping closest to Tehran in order to
protect its interests.
BURNS