Iran-Russia Trade at $4 Billion

EghtesadOnline: Russian exports to Iran increased by 27%, while imports hiked by 10% in January-October 2022.

News ID: ۷۵۲۰۷۷

12 December 2022

Trade turnover between Russia and Iran during January-October surpassed trade volumes during the whole of 2021 and totaled $4 billion, Izvestia wrote with reference to figures provided by the Federal Customs Service of Russia.

Russian exports to Iran increased by 27%, while imports hiked by 10%, the deputy head of FCS, Vladimir Ivin, told the publication.

President of the Russian Chamber of Commerce and Industry Sergey Katyrin told Izvestia that mutual trade increased mainly due to Western sanctions against Russia and the related interruptions in traditional ties.

“Iran is of special interest: First, it is a logistic bridge in trade with the Middle East, South and Southeastern Asia, and second, the state has a unique experience of surviving amid sanctions for many years,” the official explained.

Iran’s Ambassador to Russia Kazem Jalali said Russia and Iran intend to sign a long-term comprehensive cooperation agreement in the near future.

The ambassador did not specify the date when this agreement would be signed, RIA Novosti reported.

An agreement has now been signed between the two countries on the foundations of relations and principles of cooperation. It was signed almost 20 years ago. Initially, the contract was signed for 10 years. It is renewed automatically every five years, unless either party were to oppose its extension.

In the first half of this year, trade turnover between Russia and Iran increased almost twice.

Iranian Oil Minister Javad Owji had earlier said the two countries are now experiencing a "golden period" in the development of bilateral relations, stressing that the authorities of the two countries are determined to strengthen cooperation in all sectors.

Plan to Open Trade via Caspian Sea

In a move that reflects increasing ties between Moscow and Tehran and the difficulties both countries have in shipping via the Caucasus land bridge, given instability and political changes there, the two governments have announced plans to conduct trade via the Caspian Sea between Russia’s Astrakhan and Iran’s Bandar Anzali ports, wrote Paul Goble, an author for the Eurasia Daily Monitor of the Jamestown Foundation, in a post published by Eurasia Review.

The two sides have agreed that Russia will be allowed to transfer from ships to rail lines across Iran 12 million tons of cargo a year, which approximately equal 3,000 trainloads. In this way, the Caspian Sea will become for Moscow a trade window to the world.

Earlier this year, Russia and Iran had agreed to trade via Kazakhstan and Turkmenistan, but the sea route is preferable because fewer political and security issues are involved and because Iran is now a member of the Shanghai Cooperation Council and thus is tied more closely to Russia.

Russian analysts say the new Caspian route gives Russia an alternative to complete dependence on China and sends a message to Central Asian and South Caucasus countries that the North-South trade route Russia has long wanted can be more important for them too and that they should cooperate with it rather than pursue east-west ones.

And what is especially important, these analysts say, is that this new Caspian Sea route is “a natural counterweight” to Turkey’s presence and “Turkish ambitions” in the region, as it challenges the networks Ankara and the West have set up to undermine or even exclude Russian influence there.

According to Alphaliner, Russia’s United Shipbuilding Corporation will build four sea-river container/MPP ships of 435 TEU for GTLK, the largest Russian leasing firm.

The ships, due for delivery in 2024 and 2025, will travel between Russian inland ports along the Volga River and the Volga–Baltic Waterway in the north, and Iran’s Caspian Sea ports in the south, steaming distances of up to 4,500 km, Splash 24/7 reported.

Russian President Vladimir Putin and his Iranian counterpart, Ebrahim Raisi, discussed the deepening of political, trade and economic cooperation in a phone call earlier this month.

Iran’s Presidential Office said Raisi welcomed “Russia’s desire to strengthen economic cooperation with the Islamic Republic”, especially the development of transport lines in the Eurasian region.

“This transit route will become an attractive route for the economy and trade in the world,” Raisi concluded.

Free Trade With EEU to Boost Iran-Russia Trade

The president of the Russian Chamber of Commerce and Industry noted that the temporary agreement on free trade between the EEU and Iran, which has been in force since Oct. 17, 2019, facilitates the growth of the volumes of trade transactions.

“In early 2022, a protocol on its extension was signed. The talks on a full-fledged agreement have been launched, with four rounds of consultations held," Katyrin said.

Iran and the EEU have finalized negotiations on free trade of more than 7,500 types of commodities, the head of the Iranian delegation negotiating with the Eurasian bloc said recently.

“After over two years of negotiations, we [Iran and EEU] have agreed on a 150-page deal, which is the most comprehensive trade agreement [Iran has had],” Mirhadi Seyyedi was also quoted as saying by Tasnim News Agency.

Noting that the agreement has the widest range of commodity coverage in terms of duties, he said officials from Iran’s Trade Promotion Organization and the Eurasian side will soon announce the end of talks by signing a memorandum of cooperation in Tehran.

Reports say the deal will be signed in the final days of the ninth month of the current Iranian year (ending Dec. 21).

Iran and the Eurasian Economic Union had signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU. The arrangement, which has lowered or abolished customs duties, is the first step toward implementing free trade between Iran and the five members of the union.

According to Seyyedi, EEU has agreed to include about 95% of its traded goods in the agreement.

“That is almost all types of goods exchanged between the two sides, except for those we are reluctant to import, such as agricultural machinery or dairy products,” he said.

The official noted that since the signing of the preferential trade deal in 2018, bilateral trade has doubled between Iran and EEU from about $2.5 billion to $5 billion a year.

“Never before have we had an agreement as inclusive as this [the prospective free trade deal with EEU]. Clearly, when the provisional agreement is upgraded to a free trade treaty, out foreign trade will get a considerable boost,” he was quoted as saying by IRNA.

Alireza Peymanpak, the head of Trade Promotion Organization of Iran, said recently that with the conclusion of free trade talks between Iran and the Eurasian Economic Union, the two sides will most likely start exchanging goods with zero tariffs as of next Iranian year (starting March 21, 2023).

Once the FTA comes into effect, a market as big as $700 billion will open up to Iranian products and services, he added.

“The Eurasian Economic Union and Iran are expected to arrive at a full-fledged agreement on creating a free trade zone in 2023,” Russian Economic Development Minister Maxim Reshetnikov was also quoted as saying by Interfax recently.

"We will already arrive at a permanent agreement on a free trade zone next year with a fundamentally broader reach and depth, since we understand that right now the conditions, situation and developed potential are really pushing us toward maximally deep cooperation," he said at the Second Caspian Economic Forum.

Latest data released by the Islamic Republic of Iran Customs Administration show trade between Iran and the EEU member states reached 3.86 million tons worth $2.05 billion during the current Iranian year’s first eight months (March 21-Nov. 21).

Russia was Iran’s main trade partner among the countries under review with 2.62 million tons worth $1.48 billion.

Iran’s exports to EEU members stood at 1.91 million tons worth $895.85 million during the period.

Russia with 901,711 tons worth $466.54 million was the top export destination.

Imports hit 1.95 million tons worth $1.15 billion during the period.

Russia was also the main exporter to Iran with 1.72 million tons worth $1.01 billion.

Reports say that in 2021, trade between EEU and Iran increased by 73% compared to 2020, exceeding $5 billion, while exports of EEU member states more than doubled (from $1.65 billion to $3.42 billion), and imports went up by 29% (from $1.25 billion to $1.6 billion).