Stronger Trade With Neighbors Should Take Precedence

EghtesadOnline: Iranian leaders should pursue deeper economic ties with neighboring countries, particularly Iraq, instead of obsessing over a European trade vehicle conceived as a way to avert US sanctions against Tehran, an economic analyst said.

News ID: ۷۴۶۹۶۹

19 March 2019

“The way out of economic problems is not looking to the West and European countries, but rather increasing trade and economic ties, and interacting with neighbors,” Mohammad Kohandel, an expert on international economics, also told the Iranian Diplomacy website in a recent interview.

He said President Hassan Rouhani’s trip to Baghdad, which is Iran’s major neighboring trade partner, can be considered a “great and important step” toward expansion of bilateral economic relations.

Several preliminary trade deals were signed during the president’s first visit to Iraq in early March, which was primarily aimed at bolstering commercial ties despite US efforts to isolate the Islamic Republic, according to Financial Tribune.

They included agreements on oil, trade, health and a railroad linking the southern Iraqi oil city of Basra and the Iranian border town of Shalamcheh.

Iranian and Iraqi officials also agreed that travel visas would now be free of charge and pledged to make it easier for businessmen and investors to obtain visas.

Top Priority

Kohandel says Tehran would be better off giving priority to its neighbors, instead of redoubling efforts to get closer to Europe economically.

“The volume of Iran’s trade with Iraq is close to $10 billion, which can increase to $20 billion,” the expert said, echoing Iranian officials who have said they plan to double the amount of two-way trade in the future.

He questioned Iran’s failure to properly focus on strengthening trade partnership with neighbors, despite the fact that the West has not been able to protect the country’s economic interests under the 2015 nuclear agreement and the future of European financial mechanism for non-dollar trade is in limbo.

The United States withdrew from the multinational nuclear deal with Iran in May last year and imposed financial and industrial sanctions on the country in August, followed by sanctions on its oil and banking sectors in November.

Other signatories to the deal have been trying to salvage the pact. However, new US sanctions have largely succeeded in persuading European companies to abandon business with Iran, and some political observers and diplomats do not expect Europe’s newly established Instrument in Support of Trade Exchanges to change that.

Iran-EU trade turnover declined in the second half of 2018 due to US sanctions on Tehran. According to the European Commission’s official figures, the 28-member union exported €8.9 billion worth of goods to Iran in 2018, about 17.6% less than 2017, while their imports from Iran declined 4% year-on-year to €9.72 billion.

Golden Opportunities

Kohandel noted that closer commercial ties with other countries in the region, besides Iraq, could prove significant for Iran’s sanctions-battered economy.

“Iran is in the vicinity of 15 other countries, which have great potentials to offer to the country in the fields of trade and economy,” he said, underlining the need to devise new economic and foreign policy strategies to use the “golden opportunities”.

Asked how easy it would be to open a new chapter in economic relations with regional countries such as Persian Gulf Arab states who are close allies of Washington, the analyst said there are no permanent friends or enemies for any country, and the only thing that is permanent is a country’s interests.

“Iranian authorities should work toward convincing countries with differing views that deeper ties with Tehran would definitely benefit them in the long run,” Kohandel said, adding that it is still not late for a change of strategy.