RUSSIA-IRAN RELATIONS DRIVEN BY REGIONAL POLITICAL

1. (Summary): MFA Iran desk chief Maksim Ganzey provided us
with an overview of Russian relations with Iran that he
argued went beyond the nuclear issue and were based largely
upon the GOR's need to work effectively with a country that
had considerable ability to impact political and economic
issues of concern to Russia. Ganzey organized Russian ties
with Iran into several key policy areas, the most important
of which were maintaining relations with an influential
neighbor and engaging in a dialogue on regional issues such
as the Caspian and Caucasus. The necessity of Russia doing
so helped explain some of the differences Moscow had with
Washington over Iran. Russia's Iran policy also depended
upon increasing trade and energy cooperation, and, to a
lesser degree, military sales. Russia saw Iran as an
important consumer of Russian goods and, owing to the
country's location, transit route for expanded trade with
India and other Asian nations. End summary.

Regional Ties and Dialogue


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2. (C) The MFA's Maksim Ganzey, a longtime participant in
Russia-Iran relations, explained to us that Russia viewed
Iran as an important neighbor despite the fact that the
countries did not have a common border. Between them was the
Caspian and the Caucasus, two regions that were important to
Moscow politically and economically. The basic necessity for
Moscow to maintain "good neighborhood relations" was an
essential part of its approach toward Tehran, with which
Russia has had diplomatic relations for 450 years.



3. (C) Russia maintained regular dialogue on international
and regional issues with Iran, whose influence extended from
its immediate neighborhood to the Middle East and South Asia.
Moscow and Tehran typically discussed the appropriate role
of the UN and other international organizations in diplomatic
affairs, and were "very close" on Caspian-related issues such
as energy cooperation and security, agreeing more with each
other than with other countries in the region. Both were
opposed, for example, to non-regional countries having a
security presence in the region. When asked, Ganzey said
that this position referred to "anybody" and was not directed
toward the U.S.

Expanding Trade


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4. (C) Russia saw Iran as an important trading partner, with
USD 3 billion in annual trade, 90 percent of which consisted
of Russian exports to Iran. Ganzey admitted that while this
was not a particularly high level of trade, Russia considered
Iran an important opportunity for expanding exports, both to
and through Iran to its neighbors. Iran figured prominently
in Russian plans to increase trade with Asia, particularly
India. In 2001, Russia, Iran, and India agreed to develop an
international transit corridor that would rely upon a rail
link through Iran, providing overland access for Russian
exports to South Asia and connections to sea links to East
Asia. Russia, Iran and Azerbaijan had also agreed to
complete a rail link connecting Russia and Iran through
eastern Azerbaijan, avoiding the problematic Nagorno-Karabakh
region.

Energy Cooperation


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5. (C) Ganzey explained that energy cooperation would be a
key element in the future of Russia-Iran economic ties. The
Bushehr nuclear power plant was an important "symbol of our
cooperation" in this field, leading Medvedev to pledge during
his August meeting with Ahmadinejad to overcome previous
difficulties in completing the reactor (reftel). Ganzey
stressed that the agreement the GOR signed in 1992 to
complete Bushehr was made during a period of serious economic
distress in Russia and was seen as essential to reviving the
country's then failing nuclear industry. Completing the
project, despite problems Iran might have with the
international community on other issues, was important to
demonstrate Russian reliability on such matters.



6. (C) Ganzey noted recent reports of a proposed
Iran-Qatar-Russia gas troika, but added that the media had
made too much of this idea, which was of greater interest to
Tehran and Doha than Moscow. It was imperative for the
Iranians and Qataris to find a way to divide the gas field
they share, while Gazprom had expressed an interest in being

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part of this project. Ganzey added that Russia continued to
meet with Iran and other gas exporting countries to discuss
various aspects of the gas industry, but was not ready to
form a gas OPEC. Moscow could host a meeting of
representatives of gas exporting states at the
vice-ministerial level later in November.

Military Sales


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7. (C) Ganzey said that Russian military sales to Iran were
limited but important, if only because Iran was one of the
few markets where the Russian defense industry did not face
competition from the U.S. He insisted that the Iranians, who
were the "masters of the black market," would develop their
military regardless of attempts by the U.S. or others to
prevent them from doing so. They purchased Russian-made
weapons and spare parts from other sources before Moscow sold
to them directly. Ganzey defended Russian arms sales to Iran
as consisting only of defensive weapons, being conducted with
transparency, and having end user guarantees. While some
Russian weapons were found in Lebanon after the 2006 war with
Israel, so were weapons from the U.S. and Great Britain, all
of which probably came from the black market. High-tech
weapons sold to Iran would not go to Hizbollah or other
non-state actors that did not have the capability to properly
maintain them. Ganzey added that the MFA had limited input
on international weapons sales, the decisions for which were
made by an interagency commission headed by the President.

Comment


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8. (C) Cooperation with the U.S. at the UN on Iranian nuclear
matters notwithstanding, Russia takes the view that
engagement with Iran, including on military issues, is an
important aspect of bilateral relations with a neighbor, in
contrast to U.S. policy focused solely on the Iranian nuclear
program.
BEYRLE