Iran, EEU to Sign Free Trade Deal on Jan. 18

EghtesadOnline: Iran and EEU have finalized negotiations on free trade of more than 7,500 types of commodities.

News ID: ۷۵۲۱۵۳

28 December 2022

Iran and the Eurasian Economic Union will sign a free trade agreement on Jan. 18, 2023, the spokesman of the Ministry of Industries, Mining and Trade announced on Sunday.

Noting that the two sides currently exchange goods based on a preferential trade agreement, Omid Qalibaf added that EEU has granted tariff concessions to 500 types of Iranian commodities while Iran has listed 400 types.

Asked about the impact of Iran’s import bans on EEU trade deal, he said the ban will not be applied to imports from the Eurasian bloc.

“Prohibition on import of certain types of goods like historical relics, pig’s meat, etc. continue to be enforced but restrictions on imports implemented to maintain foreign exchange reserves will not be applied,” he was quoted as saying by IRIB News.

There is a long list of products in Iran whose imports have been banned for many years. According to Pour-Kazem Shayesteh, the deputy head of Iran’s Headquarters to Combat Smuggling of Goods and Foreign Exchange, the import of more than 2,000 types of goods are prohibited.

The Iranian government aims to economize on its foreign currency reserves by applying import restrictions.

Iran and 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 earlier this month.

“Over the past two years, we have held around 30 rounds of negotiations with representatives of the Eurasian side — some face to face and others online. In the end, we 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 in Tehran.

EEU Agreement to Include 95% of Traded Goods

Iran and EEU 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, Iran’s trade with EEU is mostly focused on agricultural products.

“Our imports mostly constitute cereals and oilseeds. In return, Iran exports apple, vegetable and greenhouse crops at zero tariffs. EEU has agreed to include about 95% of its traded goods in the agreement, which is almost all types of goods exchanged between the two sides, except for those we are reluctant to import for some reasons 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 by IRNA as saying earlier.

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.

EEU is an economic union of some post-Soviet states located in Eurasia. The Treaty on the Eurasian Economic Union was signed on May 24, 2014 by the leaders of Belarus, Kazakhstan, and Russia, and came into force on January 1, 2015. Treaties aiming for Armenia's and Kyrgyzstan's accession to the Eurasian Economic Union were signed on October 9 and December 23, 2014, respectively. Armenia's accession treaty came into force on January 2, 2015. Kyrgyzstan's accession treaty came into effect on August 6 2015. Kyrgyzstan participated in EEU from the day of its establishment as an acceding state.

The union has an integrated single market of 184 million people and a gross domestic product of $1.9 trillion. It encourages the free movement of goods and services, and provides for common policies in the macroeconomic sphere, transport, industry and agriculture, energy, foreign trade and investment, customs, technical regulation, competition, and antitrust regulation.

“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.

Trade During Eight Months Hit $2b

Latest data released by the Islamic Republic of Iran Customs Administration show trade between Iran and the Eurasian Economic Union’s member states stood at 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. It was followed by Armenia with 617,605 tons worth 272.05 million and Kazakhstan with 560,878 tons worth $209.16 million.

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

Russia with 901,711 tons worth $466.54 million, Armenia with 612,782 tons worth $263.05 million and Kazakhstan with 344,787 tons worth $111.92 million were the top export destinations.

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. It was followed by Armenia with 216,090 tons worth $97.23 million and Belarus with 10,937 tons worth $26,549 million.

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