The Blogs: Iran at BRICS tries to revive economy and diplomacy

This week, finance ministers and central bank governors from over 190 countries converged in Washington, DC, for the annual meetings of the International Monetary Fund (IMF) and World Bank. Meanwhile, on the other side of the globe, BRICS leaders held their own summit in Kazan, Russia. Iran’s new president, Masoud Pezeshkian, attended his first BRICS summit following the country’s official induction into the group earlier this year.

Amid rising tensions with Israel after recent hostilities, Iran also faces steep economic challenges, which are central to its BRICS agenda. Iran’s economy, underperforming compared to other BRICS nations, is anticipated to grow at around 2%, while inflation remains high at 34%. Reports from local media highlight sharp price hikes, with bread prices soaring by 200% in the past year, alongside rises in other essentials. While U.S. sanctions are partly responsible for this economic strain, Iran’s outdated energy infrastructure and underfunded industrial sectors exacerbate the situation. Frequent blackouts have led to public outcry, and even state-run industries face significant disruption.

Iran’s energy crisis has also hampered its exports, particularly in steel, which saw a 50% decline last month. Ironically, despite experiencing a severe domestic power shortage, Iran exports electricity at higher rates to generate crucial revenue, especially as state-controlled energy prices keep domestic revenue low. Internationally, trade with major partners such as China, India, and Turkey has slumped in 2023, and China—the primary buyer of Iranian oil—has cut back further due to a domestic economic slowdown.

Through the BRICS summit, Iran aimed to pursue new trade and financial partnerships aligned with its “Look to the East” strategy. Pezeshkian focused on securing investment and technology transfers to tackle Iran’s energy deficit and strengthen sectors like steel production. Iran’s central bank governor has expressed a strong interest in joining the BRICS-led New Development Bank as part of this agenda, aiming for financial independence from Western institutions.

While tensions in the Middle East persist, Pezeshkian’s presence underscored Iran’s bid for both economic and strategic support from its BRICS allies. In addition to military considerations, Iran’s immediate priorities include addressing economic challenges, navigating regional conflicts, and managing long-standing territorial and diplomatic issues with the UAE and Israel. He did not receive as much support as he would have liked from allies. India’s Modi called for a release of all hostages held by the Hamas before his first bilateral with the Iranian President.

Egyptian President Abdel Fattah Al-Sisi met withPezeshkian on the sidelines of the summit.A statement from the Egyptian presidency said the two leaders agreed on the importance of joint efforts to explore avenues for developing bilateral relations. They also exchanged views on regional developments, with President Al-Sisi emphasising the need to de-escalate regional tensions and avoid reckless escalation.

Pezeshkian and UAE leader Sheikh Mohammed bin Zayed Al-Nahyan (MbZ) met for the first time on Wednesday on the sidelines of the BRICS Summit, amid recent tensions over three disputed islands. Tensions around the islands in the Strait of Hormuz—Abu Musa and Greater and Lesser Tunbs—have resurfaced. Iran took control of the islands in 1971, following Britain’s withdrawal from the region. Recently, the EU and Gulf Cooperation Council (GCC) issued a joint statement urging Iran to “end its occupation of the three islands of the UAE.” The statement was met with a lot of hostility in the Iranian media.

The UAE’s normalization with Israel under the Abraham Accords have also added to tensions between the countries. Iranian-backed groups, including Hezbollah and Hamas, have recently attacked Israel, with Iran supporting terror efforts. This, coupled with reports that the UAE may join an international force in Gaza post-conflict, has increased the tension between the countries, which have rarely shared a close bond. The UAE leaders press statements did not mention the meetings with his Iranian counterpart.

While Iran has tried to use the BRICS platform to relaunch its business diplomacy, there didn’t seem to be many takers for Pezeshkian’s strategy in Kazan.