Russia, Iran, and China: An alliance shaped by sanctions

Vladimir Putin and Ebrahim Raisi, the presidents of Russia and Iran, find common ground, both being among the few leaders under personal US sanctions. Despite their limited travel, they have both visited China in recent years. Russia, Iran, and China have been rivals for influence in Asia for centuries, but actions by the United States have shifted this dynamic. United by a common adversary, these nations now advocate for a multipolar world where the USA no longer holds dominance, as we learn from an in-depth analysis by The Economist.

The foundation of this new alliance is enhanced economic cooperation. China has offered Russia a partnership without restrictions, and with Iran, they have entered into a 25-year strategic agreement worth around £329 billion. All three countries also participate in the same international groups, like BRICS. Their trade is increasing, with plans for free trade zones, independent payment systems, and trade routes that avoid locations controlled by the West emerging. For America and its allies, a thriving anti-Western axis is one of the worst foreseeable scenarios. But can it become a reality?

The trade of energy resources among Russia, China, and Iran is primarily what's on the rise. However, boosting this trade between the three nations has been the easiest part of their cooperation.

That’s where the trouble begins. China has an informal rule of capping dependency on a single supplier to 15-20 percent of its needs, suggesting they are nearing the limit of what they would like to import from Iran and Russia.

Trade in energy resources only serves as a lifeline for economic survival. The countries aim to integrate more deeply, but they lack shared banking channels and payment systems. Despite government pressures, neither SPFS (Russia's alternative to SWIFT) nor Mir (Russia's response to American credit card networks) is widely adopted by Iranian banks.

The situation with currencies is even more challenging. Efforts to reduce reliance on the dollar led to the establishment of a ruble-rial exchange in August 2022, but transaction volumes have been low.

To withstand sanctions over the long term, Iran and Russia also require investments - which currently represents the weakest area of cooperation. The stock of Chinese foreign direct investments in Iran has remained stable since 2014.

Deals made during the last visit of Iran's president to Beijing, amounting to approximately £8.2 billion, seem insignificant compared with the £41 billion China promised to Saudi Arabia in 2022, Iran's major rival - The Economist notes.

The anti-Western alliance has achieved at least one success: it hasn't disintegrated. But has it reached its full potential?

The Economist highlights that a more significant issue is that the economies of Iran and Russia are too similar to be natural trading partners. Of the 15 most important categories of goods exported by each, 9 are common; similarly, 10 out of the 15 largest imports are also the same.

China, Iran, and Russia remain largely competitors. The alliance serves their purposes in achieving very specific, albeit short-term objectives. More long-term ambitions might be harder to fulfil because each of the three nations harbours its own aspirations. Beijing, Moscow, and Tehran each wish to dominate on the global stage in their respective manners.

Hence, at this stage, the anti-Western axis of these powerhouses can, at most, be viewed as deeply concerning.

The most probable outcome is that the alliance will continue to serve China's interests and will not evolve into an authentic partnership. China will maintain this relationship as long as it provides temporary advantages. This dynamic could shift if America, perhaps during a second Trump presidency, tries to exclude China from Western markets. With nothing more to lose, China might then commit significantly larger investments to establish an alternative bloc and strive to leverage existing relationships and broaden alliances.