Mehdi Sanaei & Jahangir Karami

Iran and Economic Cooperation: From Atlantic to Pacific

Date of publication : December 19, 2018 11:37 am
Iran and Economic Cooperation: From Atlantic to Pacific

Since 1960s, regionalism has gradually turned to a critical and prevailing approach in the international studies and since then, regional integration institutions have been expanded and their effectiveness has helped their ongoing expansion and enlargement. Since 1990s, globalization, however, has provoked global trends more seriously and has created new conditions which has impacted regionalism. In response to new challenges and conditions, the issue of “inter-regionalism” and economic cooperation, beyond bilateral and intraregional arrangements, has become a key intellectual and practical trend in the international economic fields.
In that regard, in the past two decades, embedded relations among various regions of the world were expanded quickly, and today, inter-regionalism becomes one of the vital featuresof the international relations which is prominent both for experts and academics of this field. Interregionalism studies provide a new approach to this issue that how international institution-building affects the emergence of multi-layer system of global governance. Therefore, beyond the region, areas for economic cooperation turn to a prominence for extra-regional areas namely Atlantic to Pacific Ocean which create new arena for economic cooperation.
In between, some states enjoy special importance for various reasons. The Islamic Republic of Iran among states who is of utmost importance thanks to its geopolitical position in the Middle East, the Persian Gulf, South Asia, Central Asia and Caucasus. Iran hasmajor economic, communication and shipping capacities for interregional interactions from East Asia to the Middle East and from North Europe to the Indian Subcontinent which providesignificant possibilities for facilitating extra-regional trade.
One of the key realities on the geostrategic importance of Iran is that this countrycould link the Caspian Sea which is at the core of three international main routes of “Silk Road”, “TRACECA”and “North-South Corridor” to the Persian Gulf, Sea of Oman and Indian Ocean. Iran has 3000-kilometer sea border in its north and south which is very decisive for this issue.
1. Pacific to Atlantic Common Space
In the recent decades, one of the key features of the world affected by technical, structural and overall developments is that the globe is about to small. This phenomenon fulfilled mostly through communication technologies, globalization, global power diffusion and the increase of regional powers’ roles has been led to the expansion of communication, interactions as well as shipping, trade facilities along with bonds and further inter-linkage of geopolitical and geostrategic regions.
In today’s world, communications in the key region of international politics (i.e. space between Atlantic and Pacific) are increased compared to the past and issues such as terrorism, immigration, diseases and insecurity are easily expanding in this regard. The Middle East occurrences in the recent years demonstrate that a phenomenon such as Daesh could swiftly turn to a dangerous quasi-state in the Middle East by recruiting forces from Europe and Eurasia.
The overall engagements and interactions among East Asia, Eurasia, Euro-Atlantic and the Middle East have been increased more than any other course of time and any phenomenon in either region could swiftly impact other areas and become a source of common concern. This issue turns the extra-regional interactions from Pacific Ocean to Atlantic Ocean to a critical issue for all regional nations and states.
2. Iran and the Persian Gulf
One of the key capabilities of Iran is the maintenance of governance and authority over northern coast of the Persian Gulf as the major reservoir of global energy. Enjoying roughly 2000-kilometer joint border with the Persian Gulf and Sea of Oman as the major passage for global energy transit, Iran has important advantage in energy security as well as economic and trade communication. The Persian Gulf is the transit route for oil of Iran, Iraq, Kuwait, Saudi Arabia and the UAE and thus the region is considered as the significant and strategic one. About 30 percent of the world’s oil is supplied by the Persian Gulf. According to the latest assessment, the Persian Gulf’s confirmed oil and natural gas reserveis 730 billion barrel and 70 trillion cubic meters respectively.
As one of the seven geostrategic regions in the world, the Strait of Hormuz is located at furthest eastern part of the Persian Gulf and as developing countries are dependent on oil export from the Persian Gulf and considerable share of oil of the globe should be transited from the Strait of Hormuz, the security of the Strait is internationally significant. It is predicted that by increasing the level of oil and gas export from this Strait, the Persian Gulf remains unchallenged in terms of energy export. Among extra-regional states, the US, the EU member states, Japan, China and South Korea are relying on oil as well as non-oil goods from the Strait of Hurmoz.
Besides the importance of the Persian Gulf and Sea of Oman in terms of energy security, it is of utmost importance for shipping network and international communication within the framework of North-South Corridor as well as the China’s Silk Road. From North to South, all Iran’s rail and road routes are linked to the Iran’s strategic ports namely Bandar Abbas and Chabahar and this extensive communication infrastructures providean important possibility for North-South linkages from North Europe to the Indian Subcontinent and from East Asia to the Middle East.
3. Iran and North-South Corridor
Iran is the major partner in the international communication agreement on North-South Corridor signed by the Transportation Ministers of Iran, India and Russia in Saint Petersburg in 2000. This corridor was established with the goal of promotion of transportation cooperation among member states and is linking the Indian Subcontinent and the Persian Gulf to the Caspian Sea through Iran which then is linking this corridor to North Europe through Russia. The North-South Corridor is the most important route for Asia-Europe trade which compared to the previous traditional routes is more cost-effective in terms of distance and time. The North-South Corridor is one of the main transit routes in the Central Asia and bysetting up union and signing cooperation agreements, each country located in this corridoris seeking to develop and equip ports, routes, terminals and rail road.
This corridor links countries in northern Europe and Russia to the Indian Subcontinent littoral states, the Persian Gulf and South Asia through Iran and the Caspian Sea. In between, a linkage between Sea of Oman and the strategic Chabahar Port in the eastern coast of Arab Sea takes a key role for exchanging goods to the east of Iran as well as eastern neighbors and the Central Asia. In case of full activation of all routes, transfer of container from Mumbai port to Moscow takes about one month.
Proper transit location and locating in this corridor along with Iran’s access to the Persian Gulf coasts, Sea of Oman and Caspian Sea have caused that Iran grabs the attention of big economic manufacturers in the world. Iran, Russia and India are determined to launch and activate this corridor and to that means, they have recently started their negotiations to complete this corridor. It halves the time of cargo shipping from India to Europe and decreases the costs for exporters in East Asia and South East Asia. Since 2000, Iran, Russia and India are leading to complete and launch the corridor with multiple sea, railways and roads routes through the existing roads and by developing the 7200-kilometer railways.
4. Iran and the Economic Cooperation Organization (ECO)
Iran is the co-founder of the ECO and its current members are Turkey, Pakistan, Afghanistan, Azerbaijan and the five Central Asian states. Since the beginning of the ECO establishment, shipping and communication is one of the priority areas for cooperation within the Organization framework and its significance has been increased gradually. The ECO puts the projects and programs for physical connectivity of member states and interaction with markets outside the region in the agenda. One feature of the ECO is that it links the southern part of South Asia, the Persian Gulf, Central Asia and Caucasus. In different meetings, the ECO has considered a scheme for the linkage of the Indian subcontinent to Europe through the rail networks of Iran, Pakistan and turkey and has taken key steps in this regard.
The importance of this issue is more comprehensible when we realize that decades after the independence of the Central Asian states, Iran tried significantly to expand communication and economic infrastructures with the Central Asia and the Caucasus thatthese efforts have been started from the early months after their independence and are now continuing. Shipping and transportation is among economic infrastructure sector of each country. This sector is considered as one of the main indicators for development.In other terms, shipping and transportation is like a rail that the Industrial Revolution is running on itand the transportation industry is the driving engine of the economic and societal growth of each country. The Islamic Republic of Iran could facilitate regional communication and be taken as the pillar of economic cooperation thanks to its long common borders with Central Asia, Afghanistan, Pakistan, Sea of Oman and the Persian Gulf as well as its efficient security. Undoubtedly, this very important issue is unfeasible without communication and linkage infrastructures and in this regard, significant attempts have been carried out in previous years.
5. Iran and international Silk Road
During the course of history, Iran has been one the main country in the Silk Road and in the new Chinese Government plan known as Belt, Road Initiative (BRI), Iran has fundamental role. “One Belt, One Road” is an investment plan in global economic infrastructures as well as development of two trade routes of “Silk Road Economic Belt and “Maritime Silk Road” proposed originally by China in 2013. Iran’s position in this road is so strategic and important to the extent that even Chinese President Xi Jinping called Iran the great transit route of the Silk Road which Beijing could not overlook. China is Iran’s biggest trade partner and the major market for Iran’s exports. Bilateral cooperation under the framework of One Belt-One Road will reach glorious achievements.
Iran is among countries welcoming the renovation of the Silk Road. Iran’s senior officials announced several times that the Islamic Republic would exploit all its capacities and efforts for better and more complete implementation of the initiative. From the Islamic Republic of Iran’s perspective, the enforcement of this initiative will have key role in global development and countries’ arrangements. Moreover, China has greatly focused on Iran and the geostrategic position of Iran makes its position vital for Chinese plan. Locating in the Persian Gulf, Iran has the capacity to impact the Maritime Silk Road as well as Iran’s geographic proximity which makes Iran’s role prominent in the road transit. In this Road, China considers Iran as the key gateway and among vital trade transit routes of the Silk Road. Currently, many Chinese firms are closely engaging with their Iranian counterparts.
In addition to the Chinese Silk Road, we should mention agreements on continuing the Middle East-South/East Asia rail corridor which could link Turkey and Iran to India via Pakistan and link them to South East Asia via Bangladesh. The ongoing international aid to Pakistan is crossing this route.
6. Iran and The Eurasian Economic union (EEU)
Another key capacity for Iran’s economic cooperation is its neighborhood and proximity to the member states of the EEU. Iran has land border with Armenia and sea border with Russia and Kazakhstan. Among Iran’s trade priorities in recent years have been cooperating with the EEU and since 2015, Iran has launched extensive negotiation about establishment of Free Trade Area (FTA) and has reached some results.
Moreover, Iran’s cooperation agreement with the EEU is one of the vital opportunities for Iran and the member states of the EEU. Iran and the Eurasian Union reached agreements on preferential tariffs. Preferential Trade Agreement (PTA) is one of the major achievements on cooperation between Iran and the EEU.
Both sides signed a three-year agreement on the FTA and they decided that during that course of time, both sides must accept requirements for fulfilling full program of free trade on fundamental non-tariff goods. According to the PTA, the customs tariff for 300 items of Iranian goods and 200 items of the EEU member states goods including agricultural products, foods and aquatics is going to decrease.
7. Iran and Energy Security
Iran as one of most secure regional states and its constructive and positive role in the regional stability and security has special position in energy security in the fields of oil and gas and Iran as a pivotal country enjoys an undeniable position in two energy organizations (i.e. OPEC and Gas OPEC).
Having geopolitical and geo-economic position and vast oil and gas reserves in the world as well as having lasting experience on energy in the Persian Gulf and Caspian Sea along its neighborhood to Central Asia, Iran enjoys the likelihood of linkage between its energy resources from south, east and north east and its Asian consumers through pipelines. Iran is a desirable transit country for the land-locked Central Asia and could properly transit the Kazakhstan and Turkmenistan oil and gas to the open sea and even to Europe via Turkey. Despite the US Administration efforts to ignoring this feature and politicizing oil and gas transit route, Iran is yet named as the most secure, cost-effective and shortest route for energy resources transit to open seas. In a world that the security of its members are interlinked to the energy security, maintaining and safeguarding this special position for Iran is strategically significant.
I should mention the Iranian idea of Gas OPEC considered as a growing and evolving institution. The scheme for establishing Gas OPEC was raised by Iran’s Leader in his meeting with former Russian security advisor Igor Ivanov in 2007 and with respect to the Iran’s and Russia’s holding of half gas reservoirs, the Leader proposed that both countries could jointly establish an organization like OPEC which is specifically working on gas field. Then, during Russian’s officials visit to Qatar as another country with vast gas reserves, approved such proposal and joined the gas club. In this regard, we see Ian’s key role in oil and gas security of the world and this capacity could effectively help he regional and global security in strategic interactions among four key regions of East Asia, Eurasia, the Middle East and Europe.
From the arguments which have been raised so far, we could understand that any scheme for cooperation from Atlantic to Pacific Ocean would have important opportunity in the fields of communication, trade and shipping and without considering this vital role, some opportunities would be lost. Iran’s presence in organization such as ECO and its collaboration with the EEU and its pivotal role in the North-South Corridor and the International Silk Road and more importantly, Iran’s role in linkage between the Caspian Sea and the Persian Gulf are reasons which link Eurasia to the Middle East and East Asia to Europe.
Given Iran’s geographic position and its economic and communication role and most importantly, the positive approach of Iran’s Government to the economic, communication and transportation cooperation, along with paying attention to issues of shipping and communication in Iran’s economic development plans and the 20-year strategic vision, Iran’s special position could contribute to the facilitation of extra-regional interactions and cooperation.
Extensive transit infrastructures in the field of railroad transportation and efforts in the past decades for expansion of such transit routes provide key foundation for backing trade interactions of the Eastern and Southern Asia with Eurasia and Europe.
All these economic dimensions along with Iran’s stability and security as well as its role in regional stability and security through cooperation with the Shanghai Cooperation Organization (SCO) and bilateral engagement with regional states to confront radicalism and terrorism grant Iran an undeniable advantage for extra-regional cooperation from Pacific to Atlantic Ocean.
Mehdi Sanaei, is the Ambassador Extraordinary and Plenipotentiary of Islamic Republic of Iran to the Russian Federation and the senior expert at IRAS.
Jahangir Karami, is the associate professor at the University of Tehran and the senior fellow at IRAS.

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ID: 3783
Author : Mehdi Sanaei