Note by Maryam Azish
Bright future ahead of Iran-Eurasia relations
18 Mar 2020 3:51
Eventually, following years of negotiations, the interim deal enabling formation of a free trade area between Iran and the Eurasian Economic Union (EAEU) was clinched on May 17, 2018 and it formally entered into force on October 27, 2019, based on which several commodity items are subject to preferential tariffs.
The EAEU which is a considered as a massive trading bloc in the mold of the European Union, is keen on connecting Europe and the Asia-Pacific and integrating the viable advantages of states located in central and northern Asia and Eastern Europe with a market of more than 170 million people.
Talking to IRAS, Junior research fellow at the Centre for Comprehensive European and International Studies, Higher School of Economics, said since Iran is not a World Trade Organization (WTO) member, the deal gives Iran more opportunities to export more goods especially since the Islamic Republic is under sanctions.
Alexander Korolev, reiterated that the agreement can boost the trade and Tehran will receive benefits for goods such as vegetables, fruits, dried fruits and building materials, dishes, carpets, non-ferrous metal products.
"In addition to saving on the payment of customs duties, the agreement provides additional incentives for the development of trade relations through the provision of transparent and predictable terms of trade based on the rules of the WTO. In particular, between the EAEU and Iran, the most favored nation treatment and national treatment will be ensured for all traded types of goods," Korolev added.
Commenting on the main hindrance on the way of fostering economic ties among the EAEU members, he said: " Of course, the first thing is sanctions. Iran is under harsh sanctions as well as Russia – the major economy of EAEU. Also, the logistic issues. Iran has a border just with one country of the EAEU – Armenia, so it is also a factor which hinders the trade."
In a meantime, according to official reports Iran and the EAEU have traded $1 billion worth of goods since Oct. 27, 2019, when a preferential trade agreement between the two sides came into effect.
During this period, Iran's exports under the preferential trade agreement stands at $87 million while EEU exported goods worth $533 million in return.
According to IRNA, Iran’s total exports and imports to and from the five EEU member states have hit $347 million and $655 million respectively.
The above figures show more than 25.1% of Iran's export to EEU and 81.37% of imports from the bloc into Iran have been carried out under the trade agreement.
The EEU, which emerged first as a customs union in 2011 and then as an economic union in 2015, now includes Armenia, Belarus, Kazakhstan and Kyrgyzstan alongside Russia. In 2016, Vietnam officially became the first non-regional country to join the bloc.
The bloc’s primary objective is to create a single market for goods, services, capital and labor, a first step toward deeper integration of the like-minded nations.
In June 2016, Russian President Vladimir Putin proposed building a “greater Eurasian partnership” that would include the EEU and Commonwealth of Independent States (CIS) countries, in addition to China, India, Pakistan and Iran.
Central to the EEU integration is a 7,200 km trade and transport corridor that presents a cheaper and shorter alternative to the traditional route through the Suez Canal.
On the other hand, the International North-South Transport Corridor (INSTC), a multimode network of sea and rail routes, will link the Indian Ocean and the Persian Gulf via Iran to Russia and North Europe and hook up to China’s trillion-dollar Belt and Road Initiative.
The Islamic Republic of Iran for its part plans to turn out to be a transport pivot in the heart of Eurasia where regional countries have drawn up their own development strategies.
For sure, the interim agreement has created an amicable chance for Iran to enlarge its presence in the regional markets and if the country reaches a permanent agreement with the union, it can grab a foothold in the Eurasia region.
The permanent agreement can also open a new chapter not only for Iran’s trade status but for its transit role in the region; therefore, while creating necessary infrastructure, the country should recognize the requirements and demands of the Eurasian target markets to meet them.
*Maryam Azish is media expert and student of Faculty of World Economy and International Affairs Higher School of Economics in Moscow