Iran’s economic coop. with EAEU to certainly facilitate FTA

Iran’s growing economic integration and interaction with the Eurasian Economic Union (EAEU) will facilitate the Free Trade Agreement (FTA) inked between Iran and member states of the union.

News ID: ۲۰۰۰۶۲۷

14 January 2025

EghtesadOnline: Leaders of the five EAEU member states signed the agreement to endorse Iran's observer membership in the EAEU during a ceremony in Saint Petersburg, attended by Iran's Minister of Industry, Mine and Trade Mohammad Atabak.

Iran's becoming an "observer" member of the Eurasian Economic Union (EAEU) and conducting 80% of trade between Iran and member states of the union without customs tariffs is an outset of economic developments between the union's member states. However, there are obstacles that if not removed would mean Iran's share of the global trade will be decreased.

Although Iran is not yet officially a full member of the Eurasian Economic Union, many efforts have been made in recent years to join the union, and Iran finally succeeded in becoming an observer member of the union after many years. When Iran obtains full membership in the Eurasian Economic Union, it seems to open a new horizon for Iran to start new economic relations with the union's member states.

Iran's membership as an observer in the Eurasian Union allows it to participate in the union's meetings and decisions and also to have access to its data. Moreover, the customs tariffs on many goods have recently been eliminated, and trade between the two sides has become facilitated than before.

As we said above there are many barriers to Iran's trade with the union including international sanctions imposed against the country, differences in production standards, health and safety standards, and political considerations. Nevertheless, if these obstacles are not there, Tehran can fully benefit from the economic opportunities of the union.

However, the previously-approved Free Trade Agreement (FTA) between Iran and Eurasian Economic Union (EAEU) provides Iran with ample opportunities in exporting its high-quality products to the member states of the union.

The Eurasian Economic Union is one of the most important economic organizations. Relations between Iran and the union began in 2015 with the announcement of signing a Free Trade Agreement (FTA) by the Eurasian Economic Commission. The latest move in this regard is to accept Iran's observer membership and the agreement of the union members to a Free Trade Agreement with Iran which provides several opportunities for Iran.

In October 2011, the three countries of Russia, Kazakhstan, and Belarus agreed to establish the Eurasian Economic Union. Three years later, in May 20014, the treaty of establishing the Eurasian Economic Union was signed by the aforementioned three countries, and its implementation was scheduled for January 1, 2015.

Regarding Iran’s exports to the Eurasian Economic Union (EAEU)’s member states, the figures from the Islamic Republic of Iran Customs Administration (IRICA) indicate that Iran exported 3.860 million tons of non-oil goods, valued at $1.5 billion, to the member states of the union in the first nine months of the current Iranian calendar year (March 21 to December 22, 2024), showing a 21 and 22 percent growth in value and weight, respectively compared to the last year’s corresponding period.

It is believed that if trade barriers existing between Iran and EAEU member states are removed, bilateral trade will boom considerably.

Iran and member states of the union have high potentials and capacities to increase bilateral trade. Presently, Iran is exporting agricultural products like nuts, fresh fruits and vegetables, dairy and food products such as types of conserve, fruit juices, tomato pastes, ironware, pipes and profiles, chemical industries like dung, chemical fertilizers, detergents, etc.

In addition, Iran is exporting petrochemical products such as polyethylene, and propylene to the member states of the union.

Statistics indicate that Russia is the largest export target market for Iranian goods with importing 1.96 million tons of goods, Armenia with importing 1.48 million tons of goods, Kazakhstan with importing 360,000 of goods, Kyrgyzstan with importing 44,000 tons of goods, and also Belarus with importing 14,000 tons of goods, were other buyers of Iranian goods.

A look at the advantages of Iran's membership in EAEU

Given Iran's sizeable power in the Eurasian Economic Union and Russia’s strategic partner in the region, the country would help facilitate trade between the two countries, guiding it from energy and security to broader economic levels.

Furthermore, Iran’s presence in the Eurasian Economic Union would be a major blow to US sanctions imposed against the Islamic Republic of Iran.

By joining the union, Iran would automatically be exposed to new trade opportunities with countries whose economies are much more suitable for trade with Iran than Western economies.

If we look at the future plans of the Eurasian Economic Union, it can be grasped out that the union is moving in a direction that is independent from the US dollar (de-dollarization) and reduces its dependence on the dollar, which will give Russia and Iran, which are always under US economic sanctions, more opportunity and freedom of action.

Since Iran is an outstanding country in the International North-South Transport Corridor (INSTC) and Iran, Russia, and India are the main founders of the corridor, and connects the South Asian region to the countries of Central Asia, the Caucasus, Russia, and Turkey, Iran's joining the FTA with EAEU can strengthen Iran's prominent role in International North-South Transport Corridor and contribute to Iran's economic growth.

The EAEU is a regional economic organization that includes the countries of Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan. This union was formed with the aim of facilitating trade, investment, and economic cooperation among its members. In 2018, Iran entered the field of economic cooperation with member countries by signing a preferential trade agreement with Eurasia, as the first step to expand trade relations with this union.

Iran's trade with the Eurasian Economic Union’s member states has grown significantly in the recent years. The agreement, signed in 2018, has paved the way for tariff reductions and facilitated trade between Iran and Eurasian member states, however, there are also challenges along the way that require careful attention and planning.

Iran-Eurasia Preferential Trade Agreement (PTA), signed on May 17, 2018 and came into force on October 27, 2019, is an important step in expanding Iran's trade and economic relations with the member countries of this union. Despite the achievements, paying attention to the challenges and implementing appropriate solutions can help optimally exploit these opportunities and pave the way for the country's sustainable economic development. / Mehr