The Russian invasion of Ukraine was a watershed moment on so many levels for so many countries. Existing political, economic, energy and transportation channels are affected in western Eurasia. Nations are maneuvering to minimize the harmful impact of war while new trade synergies are forming at a rapid pace. More recently, Germany and Qatar signed a long-term energy partnership for the delivery of Qatari natural gas as the Germans seek to reduce their dependence on Russian supplies. Qatar’s reserves are located in the world’s largest gas field, which it shares with its northern neighbor Iran.

Iranians, too, have the opportunity to exploit the new economic opportunities emerging from Russia’s international isolation. But unlike Qatar, Tehran’s Islamist ruling class is not guided by commercial common sense. Instead, he is captive to a set of anti-Western ideological priorities that mean Iran is likely to miss the boat yet again. But to be fair, it is not only Iran that is responsible for this situation. Over the past 30 years, the United States and Europe have systematically marginalized the country from all major energy trade and transit projects that linked the Greater Middle East to European markets. Perhaps the severity of Russia’s invasion of Ukraine will give the United States and Europe reason to reconsider Iran’s economic ostracism. Even so, Tehran would have to play along for a new Iranian-European energy and transit symbiosis to have a chance of succeeding.

The last time Iran missed such an opportunity was in the mid-1990s. After the collapse of the Soviet Union, a new big game ensued. Oil and gas producers in the newly independent states of Central Asia and the South Caucasus sought the best routes to European markets while avoiding Russia. Tehran was eager to play a role. A few weeks after the collapse of the Soviet Union, Iran and Ukraine signed an agreement for 4 million tons of oil and 3 billion cubic meters of natural gas per year. They also signed a deal with Azerbaijan for three gas pipelines that would link Iran to Ukraine via a port on Georgia’s Black Sea coast. There was also talk of two separate pipelines that would take the same route. Not only could Ukraine be an end user of Iran’s oil and gas exports, but the country would also be a transit route to European markets.

The Russian invasion of Ukraine was a watershed moment on so many levels for so many countries. Existing political, economic, energy and transportation channels are affected in western Eurasia. Nations are maneuvering to minimize the harmful impact of war while new trade synergies are forming at a rapid pace. More recently, Germany and Qatar signed a long-term energy partnership for the delivery of Qatari natural gas as the Germans seek to reduce their dependence on Russian supplies. Qatar’s reserves are located in the world’s largest gas field, which it shares with its northern neighbor Iran.

Iranians, too, have the opportunity to exploit the new economic opportunities emerging from Russia’s international isolation. But unlike Qatar, Tehran’s Islamist ruling class is not guided by commercial common sense. Instead, he is captive to a set of anti-Western ideological priorities that mean Iran is likely to miss the boat yet again. But to be fair, it is not only Iran that is responsible for this situation. Over the past 30 years, the United States and Europe have systematically marginalized the country from all major energy trade and transit projects that linked the Greater Middle East to European markets. Perhaps the severity of Russia’s invasion of Ukraine will give the United States and Europe reason to reconsider Iran’s economic ostracism. Even so, Tehran would have to play along for a new Iranian-European energy and transit symbiosis to have a chance of succeeding.

The last time Iran missed such an opportunity was in the mid-1990s. After the collapse of the Soviet Union, a new big game ensued. Oil and gas producers in the newly independent states of Central Asia and the South Caucasus sought the best routes to European markets while avoiding Russia. Tehran was eager to play a role. A few weeks after the collapse of the Soviet Union, Iran and Ukraine signed an agreement for 4 million tons of oil and 3 billion cubic meters of natural gas per year. They also signed a deal with Azerbaijan for three gas pipelines that would link Iran to Ukraine via a port on Georgia’s Black Sea coast. There was also talk of two separate pipelines that would take the same route. Not only could Ukraine be an end user of Iran’s oil and gas exports, but the country would also be a transit route to European markets.

Moscow was not happy to be sidelined in such pipeline projects, but it was ultimately Tehran’s rocky relationship with Washington that prevented its pipelines from crossing Black Sea states. Using Iranian territory as a transit corridor for world markets – a commercially sound southern route – was never seriously considered either, again due to US opposition. For Washington, Iran’s foreign policy had to change dramatically before giving the green light to major international oil and gas companies to seriously consider Iran as a trading partner. The United States has led the way and Europe has largely echoed this American position. This reality is not limited to oil and gas either. Iran has been completely excluded from major pan-regional transport projects, such as the Europe-Caucasus-Asia transport corridor project, which was launched in 1993.

The tendency to marginalize Iran continued in the years that followed. The European Union has not considered Iran as an integral part of its plans for future energy and transport projects covering the Caspian and Black Seas. In fact, in a 2015 assessment and policy recommendation report by the European Commission, titled “Black Sea Synergy: A Review of a Regional Cooperation Initiative,” Iran was not mentioned once. , although energy and transport are key elements of the report on how to bring about greater integration in the region.

This lack of European interest in involving Tehran in any pan-regional economic program, together with Washington’s pressure policy against Iran, have effectively made the country an economic pariah. But its geography, which serves as a land bridge between east and west and north and south, combined with the fact that it sits on the largest combined oil and gas reserves of any country, will make it always relevant.

While the United States over the past 30 years has only increased its economic pressure on Iran, including imposing some of the toughest sanctions in history, Iran’s top political leaders have been unrepentant . The course is fixed from the highest level. As Iran’s most powerful political figure, Supreme Leader Ayatollah Ali Khamenei, has said, Tehran should focus on building ties with eastern countries, such as Russia and China. . Placing hopes on the West or Europe would only belittle Iran, as he said.

This view is ultimately Khamenei’s biggest strategic mistake regarding the future of the Iranian economy. Limiting economic relations to a handful of countries poses serious risks. China, in a good year, accounts for a third of Iran’s overall trade and is the largest foreign investor in the country. But Iran’s economy is still operating well below its potential, and Khamenei himself admitted this week that this situation will not improve anytime soon. Expanding its list of economic partners will serve Iran’s national interest.

Khamenei’s highly selective approach to cultivating economic partners is undoubtedly a reflection of the West’s ostracism of Iran in recent decades. But Iran’s leaders know full well that a more balanced foreign and economic policy – something of an aspiration for many in the lower ranks of the Tehran regime – is a prerequisite even for Tehran’s less ambitious plans involving its immediate neighbours. Tehran, for example, is currently struggling to market itself as an energy and mass transit hub. This policy is articulated at the highest level in Tehran. Iran has a history of gas trading, but the track record has been mixed and the trade has focused on Iran’s immediate north. The war in Ukraine and the resulting sanctions imposed on Russia provide Tehran with an opportunity to work with its other gas-exporting neighbors, in this case Turkmenistan and Azerbaijan.

In December 2021, Iran and Azerbaijan began implementing a gas deal with Turkmenistan. Turkmen gas would arrive in Azerbaijan via Iranian territory. Azerbaijan is already well connected to European markets via gas pipelines that cross Turkey. This is the latest effort in various Iranian attempts over the past 30 years to make the country a supplier and hub for trading natural gas in and around the Caspian Sea with the intention of supplying larger markets. far away, especially in Europe. But for this game plan to be realistic, the policy of such a project must be much more in line with its commercial logic.

Two different but overlapping developments may now put some wind in Iran’s sails. The first is pressure from European countries to find alternative energy sources in order to punish Russia for its invasion of Ukraine. Iran has a lot of potential as a major oil and gas exporter. It will take time and require capital, but the Ukrainian crisis is unlikely to subside anytime soon. The second factor is the likely imminent signing of a new nuclear deal between Iran and world powers. Such a new agreement will allow Iran to again promote its potential as an economic partner of Europe.

This does not mean that Iran will deprioritize its preferred economic partners in the East, but simply that it will add to them, providing an economic cushion for Tehran. European countries, perhaps supported by the United States, would have two reasons to be receptive. They need alternative energy suppliers, and this kind of partnership may well prompt Iranian leaders to rethink the aspects of Tehran’s foreign policy that Western powers consider most objectionable. As Khamenei openly admits, Iran’s Achilles’ heel is the state of its economy. The Russian invasion of Ukraine and the possibility of a new nuclear deal offer Tehran – and the West – an opportunity to chart a new course in their relationship.