Russia and Iran: strategic partners, tough economic relations

Last year, Russia and Iran also moved closer together economically. In May 2025, the free trade agreement signed at the end of 2023 between Iran and the Eurasian Economic Union (EAEU), of which Russia is a member, came into force. This eliminated customs duties on almost 90% of the goods traded between the two sides. As expected, this gave Russian-Iranian trade a boost, but it was short-lived, as the few official figures on trade development suggest. Russian Deputy Prime Minister Alexei Overchuk initially announced that trade volume from mid-May to the end of July 2025 was expected to increase by 35% compared to the same period last year. He later revised the growth figure between mid-May and the end of September to only 18%.

President Vladimir Putin provided information on trade developments since the beginning of 2025 at two meetings with Iranian President Massoud Peseshkian. Putin cited an increase of 11.4% for the first half of 2025 and later only 8% for the first three quarters. The brief surge from May onwards indicates a catch-up effect, as companies are likely to have postponed deliveries until after the customs exemption.

Over the whole of 2025, momentum has slowed compared to the previous year. According to Putin, bilateral trade volume increased by 13% in 2024. The Russian government had previously predicted growth of 16-17% to around $4.8 billion in 2024. This corresponded to a share of only 0.7% of Russia's total foreign trade. For 2025 as a whole, the trade volume is likely to be only slightly above the 2022 level, when it reached its highest level to date at $4.9 billion.

Iran: Economy and trade are shrinking

One reason for the disappointing growth despite the free trade agreement is likely to have been the weak economic situation in both countries. In Russia, growth slowed from 4.1% in 2024 to an estimated maximum of 1% last year. According to the World Bank, the Iranian economy grew by 3.2% in 2024, but analysts expect a decline of 1.7% in 2025, deepening to minus 2.8% in 2026. The Iranian central bank reports a 0.6% decline in economic output for the period from March to September 2025. Iran's total foreign trade fell by as much as 11.4% year-on-year to $94 billion between March 2025 and January 2026. These figures from Iranian customs do not include oil exports. Imports slumped by 15.6% to $49 billion. The high inflation rate, which stood at 60% year-on-year at the end of January according to the Iranian Statistical Office, is also evidence of an economic crisis.

Payment cards and tourism slump

In addition to free trade, the integration of the two national payment systems Mir and Shetab is also intended to lead to more intensive economic relations between the two countries. According to the schedule, payment with Iranian Shetab cards should be introduced in Russian stores by the end of 2025. Russian Mir cards have been accepted for payment in Iran since May 2025. Until now, tourism between the two countries has been at a low level. According to the Russian border guard, 38,057 Russians visited Iran in 2024. In the first quarter of 2025, the number of visitors fell by 46% to 6,336. More recent data was not available at the beginning of 2026. Conversely, around 26,000 Iranian tourists visited Russia last year, according to estimates by the Russian tour operator association ATOR. That would be a 50% decline compared to 2024. Despite the strategic partnership, visa requirements still exist between the two countries. Only groups of travelers have been exempt from this since 2021.

More Iranian students

While instability in Iran is hampering the development of tourism, more and more young Iranians are choosing to study in Russia. The number of Iranian students at Russian universities rose from 6,500 in 2023 to 9,210 last year, according to the Russian Ministry of Education last May. According to Middle East expert Elena Dunayeva of the Russian Academy of Sciences, about half of all Iranian students in Russia are enrolled in medical school. The reason for this, the scientist explains, is the shortage of doctors in Iran and the fact that Western countries hardly accept any students from Iran. It is not known how many Russians are studying in Iran, the Iranian news agency WANA wrote last June.

Further nuclear energy projects planned

Energy is the focus of Russian-Iranian economic relations. The Russian state-owned company Rosatom is currently expanding the Bushehr nuclear power plant, which it built itself, by two blocks, which will increase the output of Iran's only nuclear power plant from one to three gigawatts. Last year, the Iranian Atomic Energy Organization (AEOI) regularly reported progress on the work on the second block. Iran currently expects commissioning to take place in 2029. In addition, both countries agreed last September to build small nuclear reactors developed by Russia in Iran. Overall, Iran wants to increase its nuclear power capacity to 20 gigawatts by 2041.

No Russian gas deliveries yet

There has been little movement in the past twelve months on the issue of Russian gas supplies to Iran. Although both countries agreed in April 2025 to start deliveries, which were originally scheduled to begin by the end of 2025. As previously announced by President Putin, Russia will initially supply 1.8 billion cubic meters per year to Iran, which has been experiencing energy shortages for years. However, the two sides have not yet been able to agree on the price of Russian gas, as Iran's ambassador to Moscow, Kazem Jalali, admitted in the fall. In mid-January 2026, Jalali said that negotiations were in the "final stages" and nearing completion. Almost exactly a year earlier, Russia's Energy Minister Sergei Zivilev had also spoken of a "final stage" in the negotiations.

Progress on transport corridor

Another unresolved issue is the completion of the north-south transport corridor, which is intended to connect Russia with the huge market of India via Iran. The 7,200-kilometer route is not yet continuously passable by rail because it is interrupted by a 162-kilometer gap between the cities of Resht and Astara on the Caspian Sea coast. The acquisition of the expensive building land is progressing, Ambassador Jalali said this January. He promised that 100 kilometers had already been designated as building land, with the rest to follow by the end of March. Russia expects the completion of the Resht-Astara railway line to halve transport time to Iran and reduce logistics costs by up to 30%, as Russia's acting trade representative in Iran, Alexei Yefimov, explained at the beginning of January.

Should the US attack Iran in the coming days and weeks, Russia has a duty to its major partner in the Middle East. A year ago, the two most sanctioned countries in the world entered into a "strategic partnership" that came into force on October 2, 2025. In addition to declarations of intent on diplomatic and economic cooperation, it also contains concrete obligations in the event of aggression against the respective partner, whether military or economic, such as sanctions. However, this is not an obligation to provide assistance, but rather an obligation to refrain from action, which should not be difficult for Moscow to comply with. According to the agreement, it should not join in attacks on Iran or support sanctions against its partner.

This article first appeared in the exclusive newsletter of the German-Russian Chamber of Foreign Trade.

This article first appeared in the exclusive newsletter of the German-Russian Chamber of Foreign Trade.