Blossoming relations: Russia becomes largest foreign investor in Iran

Russia has become the largest foreign investor in Iran over the past year, Iranian officials told Britain's Financial Times on Thursday, amid heavy sanctions imposed by Western countries on the two countries.

Iranian Finance Minister Ehsan Khandozi said, "Russia has invested $2.76 billion in Iran over the past year while opening various projects in the industry and transportation sectors." 

"We define our relations with Russia as strategic and we work together on many aspects, especially on the economic front. China and Russia are two economic partners, and Iran will expand its relations with Russia through the implementation of strategic agreements," he added.

Recently, many Russian delegations have been present in Iran, seeking agreements to circumvent Western-imposed sanctions. According to sources, Iran was eager to develop new trade relations in order to strengthen its economy. Russia was responsible for two-thirds of total foreign investment in Iran, according to data from Tehran's Finance Ministry.

Raisi's delegation has prioritized the development of regional trade relations since taking office in 2021. As a result, Khandozi noted that last month Iran was able to increase its oil exports for the first time in two years to 1.3 million barrels per day, despite U.S. sanctions. 

Iran and Russia have signed an agreement to link interbank communication systems to increase trade between the countries.

"Russia and other countries are interested in using mechanisms such as mutual financial agreements," the Iranian finance minister said. "We have negotiated, not only with Russia but also with China and other partners, such as Turkey."

However, the Iranian government is still struggling to contain the economic weakness that has gripped the Islamic Republic, with inflation soaring to more than 47 percent. Despite the claims of economists, Khandozi defended the government, saying it planned to reform the central bank, which would stop the runaway inflation.

Since the beginning of the war in Ukraine, Russia has begun to purchase Iranian drones. The Wall Street Journal reported that the two countries are advancing plans to establish a new drone production facility on Russian soil. According to the report, the factory will be able to produce at least 6,000 Iranian-designed drones. 

According to sources quoted in the U.S. media, a high-level Iranian delegation landed in Russia in early January to visit the site where the factory is planned to be built, in order to finalize the last details before the project is implemented.