Almost a year since Russia’s invasion of Ukraine, the Central Asian region continues to grapple with the ripple effects of the changing geopolitical environment.
With Russia’s focus on Ukraine, new opportunities have emerged for engagement in a region that was until recently under Moscow’s sway. China and Turkey, for instance, are consolidating their respective positions as part of a wider reshaping of the regional order.
At the same time, Iran has increased its interactions with Central Asia, particularly regarding connectivity and trade routes. Increasing engagement in the region is a long-term foreign policy priority of President Ebrahim Raisi, as shown by his decision to choose Tajikistan as the destination of his first presidential trip.
The Islamic Republic is increasingly seeking engagement in the region to avoid isolation imposed by international sanctions and to boost its popularity at home at a time of domestic unrest, reads an article authored by Ilayda Nijhar, a global risks analyst.
The full text published by ODI (formerly “Overseas Development Institute”), a London-based global affairs think tank, follows:
Countering Western Sanctions
Iran’s increasing push to create new trade opportunities in Central Asia comes against the backdrop of the hostile international environment the country finds itself. This is largely due to Western sanctions stemming from the country’s nuclear program as well as regional tensions related to ongoing hostilities with Saudi Arabia. In addition, recent predictions that Iran is on the brink of recession amid rising inflation have intensified pressure on the country to insulate itself from economic shocks triggered by sanctions.
At the same time, Iran is making progress to diversify its economy to address these issues. In April 2023, the country will become a permanent member of the Shanghai Cooperation Organization, a Eurasian political, economic and security forum, following the formal signing of membership in Uzbekistan last October.
Membership of the SCO will boost Iran’s trade activity with Central Asia and allow further engagement with SCO’s two major economies, China and India. Iran is also intensifying its engagement with the Eurasian Economic Union following the recent extension of the Free Trade Agreement until 2025, which support Tehran’s efforts to position itself as a leading external partner for the Central Asia region.
Chabahar Port’s Significance
The strategically important Chabahar Port, which connects India with Central Asia and Afghanistan, supports Iran’s ambition to expand its maritime economy and trade.
Launched by Iran in 2017 in partnership with India, the port has evolved into a global trading hub, offering alternative access to Central Asian markets to transport goods while also providing Iran with direct access to international waters that are currently exempt from US sanctions.
The port has taken on additional importance in the context of the Russia-Ukraine war. According to the latest figures, Central Asian economies continue to feel the economic shocks from the war.
Access to regional ports, such as Chabahar Port, offers entryways for the desired economic engagement. Uzbekistan has shown its enthusiasm for the port, calling for additional connections with regional networks, and in 2021, Kazakhstan announced its support for further development of the port, especially in the context of it being India’s largest trading partner in Central Asia.
By virtue of Iran’s geography, Chabahar Port, including Iran’s accession to SCO, has served as a silver lining during a challenging period for the country, as it finds ways to manage increasing international isolation. As a connectivity point across Central, South and Southeast Asia, and the Middle East, Chabahar Port could serve as an attractive alternative to the current favorite transport route, the Middle Corridor.
While Iran knows that it cannot compete with economic heavyweight China, or Turkey with its offer of bringing together the Turkic world in the region, it is increasingly using connectivity via Chabahar Port as a means to project its influence across the region.
While Iran pushes forward for greater engagement in Central Asia, it is likely that the regional economies will view involvement with Iran as a risk due to political uncertainty associated with Iranian cooperation. This is particularly the case at a time when Central Asian countries are seeking stable and reliable external partners following Russia’s secession.
Another key shortfall with Iran’s Central Asia approach is the danger of geoeconomic confrontation with China in relation to competitive trade routes in the region. For these reasons, Iran’s advances in the region are likely being closely monitored by the current regional powers, China and Turkey, and further afield by India, Pakistan and others.
However, as Central Asia goes through a period of regional recalibration, Iran’s position should not be overlooked. While in the short run, Iran provides a challenging context for investment and engagement, for as long as the region remains a top foreign policy priority for Tehran, the country will push for greater engagement and seek a stronger foothold in Central Asia.