Iran: Trade Deal With EEU to Open New Horizons in October

EghtesadOnline: Iran's Energy Minister Reza Ardakanian has underscored that the trade agreement with the Eurasian Economic Union provides Iranian state and private firms with a great opportunities to widen business and trade.

News ID: ۷۴۸۶۱۳

05 October 2019

"Joining this union will open the gates of a very large market, giving the country a great opportunity,” Ardakanian was quoted as saying by Mehr News Agency on Thursday.

Iran and the Eurasian Economic Union are looking to substantially increase trade, as the two sides signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU.

The arrangement is the first step in implementing free trade between Iran and the five members of the union. It lowers or abolishes customs duties, setting off a three-year process for a permanent trade agreement, Financial Tribune reported.

The agreement, which has also been ratified by all five members of the EEU, is expected to come into effect in late October.

On June 27, after the approval of a parliament bill for signing an economic deal between Iran and the five Eurasian countries, the Guardians Council verified the bill.

Iranian President Hassan Rouhani signed into law the interim agreement on establishing a free trade zone between Iran and EEU in July. Subsequently, the president communicated the law to the Ministry of Industries, Mining and Trade.

The Guardians Council is a watchdog that ensures laws are in line with the Iranian Constitution and Islamic principles. It is the last chain in Iran's legislative body that gives the final approval/disapproval to laws passed in the parliament.

President Rouhani at EEU Summit

President Rouhani was in Yerevan along with his EEU counterparts from Armenia, Russia, Belarus, Kazakhstan and Kyrgyzstan for the one-day session of the Supreme Eurasian Economic Council on October 1.

The president said Iran is inclined to diversify its economic relations.

“Iran’s geographical position allows for transit in different directions. We seek to use these opportunities to contribute to the stable development of our economy and integration processes. Various railroad and automobile corridors have been formed with major investments to facilitate the process of transit transportation,” Rouhani was quoted as saying by Armenpress.

“EEU can utilize its opportunities in case of close cooperation in the transportation sector. Iran is ready to propose a broad platform at different directions. I invite EEU investors to use these proposed opportunities. I propose to create a working group to utilize the integration opportunities.”

Before leaving Tehran for Yerevan, Rouhani said that joining Eurasia would help link up with the global economy.

In related remarks on Wednesday, Iranian Foreign Minister Mohammad Javad Zarif lauded the achievements gained by the Iranian delegation led by President Hassan Rouhani at the EEU summit in Yerevan, Armenia.

“With the parallel work on north-south and south-west transit corridors, ground has been paved for the expansion of regional trade and consolidation of Iran’s role as a vital transit hub,” Zarif said.

In addition to attending EEU, President Rouhani held bilateral talks with leaders of EEU member-states, including Russian President Vladimir Putin.

Hailing joint activities toward Iran’s accession to the Eurasian Economic Union, Putin said, "I am confident that our countries will benefit from this work. It is carried out on the basis of fundamental principles of international law and the main provisions of World Trade Organization."

Wide Range of Preferential Tariffs

A total of 862 types of commodities from Iran and EEU will enjoy zero or considerably lower trade tariffs as part of the agreement.

Mehdi Sanaei, Iran’s ambassador to the Russian Federation, which has been in charge of Iran's diplomatic mission for almost six years in Moscow, told IRNA that soon after joining the Eurasian Economic Union, 502 items in the sectors of food, chemical consumables, construction materials and export of techno-engineering services, as well as industrial and agricultural products from Eurasian Economic Union, and 360 items from Iran will enjoy preferential treatment.

According to Sanaei, Iranian state-owned companies, private firms and businessmen can export these goods at much easier terms and with much lower customs duties to the Eurasian Economic Union member states, as EEU businessmen can also trade with Iran with greater convenience.

This is the first time Iran enters into a regional economic agreement actively since the Islamic Revolution in 1979.

As US sanctions imposed against Iran and Russia have created restrictions for economic activities of the two countries, this agreement is of paramount importance for both sides and can help broaden economic relations between Iran and Russia.

Iran traded 4.04 million tons of non-oil commodities worth $2.09 billion with the five EEU member states during the last Iranian year (ended March 20, 2019), registering a 22.96% and 34.08% increase in tonnage and value respectively compared with last year’s corresponding period.

Data released by the Islamic Republic of Iran Customs Administration show Iran’s exports totaled 1.55 million tons worth $607.43 million during the year, indicating a 0.07% and 0.14% decline in tonnage and value respectively year-on-year.

Imports stood at 2.49 million tons worth $1.48 billion, up 0.53% and 0.73% in tonnage and value respectively YOY.

EEU is an international economic union comprising countries located in central and northern Asia and Eastern Europe. The founding member states, Belarus, Kazakhstan and Russia, established the union by treaty and entered into force on Jan. 1, 2015.

The bloc was created in response to the economic and political influence of the European Union and other western countries. Key objectives of the EEU include increasing cooperation and economic competitiveness for the member states and the promotion of stable development to raise the standards of living in member states.

Iran mainly exported pistachios, kiwis, apples, tomatoes, grapes and dates to EEU countries.

In exchange, major commodities imported into Iran from EEU nations included nuclear reactor parts, barley, sunflower oil, field corn, radio navigation devices and sheep.