Discovering Russia’s key foreign target through Stavropol’s economic strategy

The flag of the Stavropol Territory (Credits: Hellerick, Public domain, via Wikimedia Commons)

Geopolitical Report ISSN 2785-2598 Volume 25 Issue  6
Author: Giuliano Bifolchi

Stavropol authorities’ desire to open trade offices abroad might underline Russia’s strategic economic goal in the Eurasian geopolitical chessboard, especially in Azerbaijan, Iran, China, and the United Arab Emirates.

Deputy Minister of Economic Development of the Stavropol Territory, Susanna Damir, stated that local authorities are planning to open trading houses in Azerbaijan, China, Iran, and the United Arab Emirates (UAE). Damir noted that, in the next couple of years, the Stavropol Territory would have an active trading house in these countries, which might support local companies to increase their export and overcome difficulties and challenges due to the pandemic and Western sanctions.

Susanna Damir also informed the local journalist that Stavropol Territory’s export had reached pre-pandemic levels. Among the leading exports, there are the chemical industry and agro-industry products. Middle Eastern countries and the nearby Republic of Azerbaijan have demonstrated their increasing interest in the Stavropol market and products.

Regional Scenario

We can assume that the region has a strategic role in Russian foreign and economic policies by monitoring recent events in the North Caucasus. Since 2010, the Kremlin has hugely financed North Caucasus’ socioeconomic development by establishing tourist hubs and investing in logistic and transport infrastructures to attract foreign direct investments (FDIs) and increase the regional living standard conditions.

In October 2022, in the city of Zheleznovodsk of the Stavropol Territory, the North Caucasian Institute of the Russian Presidential Academy of National Economy and Public Administration (RANEPA) organised the forum “Severnyj Kavkaz v menjajushhemsja mire” (The North Caucasus in a Changing World), which attracted political representatives, entrepreneurs and companies from the Middle East and Africa.

In the last few months, due to Western sanctions against Moscow and the Kremlin’s necessity to find alternative trade partners, the Stavropol Territory and the Republic of Dagestan have made the news because of their cultural or trade relations with neighbouring or Middle Eastern countries.

Indeed, Dagestan has strengthened economic relations with Iran thanks to the increasing operativity of the Makhachkala Sea Trade Port. Also, the United Arab Emirates paid attention to the Dagestani market by promoting Emirati cultural and historical value through a specific event organised by the UAE Embassy in Russia.

In this context, we must mention Chechnya’s diplomatic role in the Arab-Muslim world. Indeed, the Chechen leader Ramzan Kadyrov has several times visited Gulf monarchies and Arab countries with the final goal of attracting investors in the Chechen markets and economic projects and, therefore, promoting bilateral relations between the Russian Federation and Middle Eastern states.

Monitoring & Risk Analysis map of the North Caucasus (Credits: SpecialEurasia)

Geopolitical Analysis

It is not a coincidence that the Stavropol territory selected Azerbaijan, Iran, China, and the United Arab Emirates as target countries to open trade offices. Honestly, these countries might be considered the key partners with whom the Russian Federation aims to expand or strengthen economic and diplomatic relations and collaboration.

Azerbaijan has a strategic role in the Caspian Sea region and the South Caucasus. The country has benefited from its natural resources (oil and natural gas) to support economic growth and establish diplomatic relations with regional actors, Russia, and the West. Undoubtedly, Azerbaijan is a key actor in Brussels’ energy security strategy, which aims to diversify the European Union’s energy imports and decrease EU dependence on Russian natural gas. Although Brussels is seeking to increase natural gas imports from Azerbaijan, the deal that Moscow and Baku signed two days before Russia started its military operation in Ukraine did not go unnoticed. The Azerbaijani President Ilham Aliyev signed a 43-point agreement with the Russian President Vladimir Putin covering bilateral cooperation in different spheres, especially in foreign and military policy. In March 2022, Russia and Azerbaijan discussed the “Green Corridor” project, which might become an alternative trade route to counter Western sanctions and strengthen Moscow-Baku relations in the Caucasus and the Caspian Sea region.

Looking at the South Caucasus’ geopolitical dynamics, even though Moscow has often sided with Yerevan and supported Armenia in its struggle against Azerbaijan, it should be noted that Russia has always balanced its position between the two countries by selling weapons to both the parties and playing the major role in Baku-Yerevan controversies. Since Russia shares a part of its border with Azerbaijan through the Republic of Dagestan and the Caspian Sea, considering that the South Caucasus is part of Moscow’s blizhnee zarubezhe (near abroad) and lebensraum (vital space), the Kremlin has always attempted to increase or defence its regional impact by avoiding that Armenia or Azerbaijan could have been fully or partially incorporated into the Western area of influence.

Since the beginning of the Ukraine conflict and the Western sanctions’ adoption against Russia, Moscow has intensified its relations with the People’s Republic of China. At the beginning of February 2022, just a few weeks before the Russian military invasion of Ukraine, during the opening ceremony of the XXIV Olympic Winter Games, Russian President Vladimir Putin and Chinese President Xi Jinping signed a joint statement which stressed Moscow and Beijing’s positions and shared view on several global and regional issues. On this occasion, Russia signed a deal on oil and natural gas export with China worth about 117.5 billion dollars.

Later, after the first months of the Ukraine conflict, Russian and Chinese representatives had several phone talks, meetings, and dialogues because Moscow attempted to guarantee Chinese support or neutrality in the international arena by promising more economical and trade deals. In this framework, to counter Western sanctions and find alternative natural gas export routes, Russia decide to speed up the pipeline project Sila Sibiri 2 (The Power of Siberia – 2), which should export Russian gas to the Chinese market.

Given that Moscow and Beijing share the ‘same enemy’, the United States, and the Chinese territory might become an alternative commercial market for Russian products to (partially) substitute the European market, it is understandable that the Stavropol territory wants to secure its trade opportunities in China.

Together with Russia and China, the Islamic Republic of Iran also shares the same aversion with the West, particularly the United States. Russia and Iran’s economic and political partnership might find roots in the past years, though in the last months, the two countries have evaluated joint efforts to enhance their cooperation in strategic areas like the Caspian Sea, the Caucasus, and the Middle East. Therefore, on the one hand, Russia is Iran’s most essential and most prominent neighbour; on the other hand, Iran is of great importance to Russia due to its natural resources and excellent geographical position that plays the role of a bridge between Asia and Europe. Ongoing talks and meetings between Iranian and Russian officials indicate the two sides’ determination to form a new era of strategic cooperation.

In this context, the North Caucasus, particularly the Stavropol Territory, Dagestan, and North Ossetia-Alania, might become a strategic market to enlarge economic cooperation and trade exchange between Russia and Iran. Indeed, Tehran might play a vital role in supporting North Caucasian economic development through an increasing trade exchange and participation in infrastructural projects. On the other hand, the North Caucasus might become the ‘open door’ for Russia – Iran economic cooperation and support Tehran and Moscow’s strategies in the Caspian Sea, an area where both countries might face Western interests.

In this equation, we cannot forget the United Arab Emirates. In recent years, Abu Dhabi has become extremely enterprising in the post-Soviet space, especially in the Caucasus and Central Asia. Considering that the Russian Federation is attempting to establish Islamic banking and finance in the country through a test project which will begin in 2023, the Emirates might support Moscow to offer more financial shari’a compliant and based services to the Russian Muslim umma (community) and Muslim foreign entrepreneurs interested in investing in Russian projects and economy. The Russian project to test Islamic finance and banking in the country will start in 2023 in Chechnya and Dagestan; therefore, the North Caucasus and the Stavropol territory might become attractive markets for Emirati businesspeople and companies.