Iran, EEU Could Sign FTA in May

EghtesadOnline: Russia and Iran can sign the document that is expected to become a blueprint for free trade between Iran and the Eurasian Economic Union countries in May.

News ID: ۷۸۲۰۸۲

14 March 2018

This was announced by Russia’s energy minister and co-head of Iran-Russia Intergovernmental Commission, Alexander Novak, at a meeting of the commission on Tuesday, TASS reported.

“The move to enter into a temporary agreement making for a free trade zone to be set up between Iran and the Eurasian Economic Union, which is currently at an advanced stage, will trigger further development of our bilateral trade and expansion of investment cooperation,” he said.

Novak noted that he hopes “the document will be signed in May”.

Earlier, according to Financial Tribune, Iran’s Ambassador to Russia Mehdi Sanaei said in an interview with the Russian news agency that talks on a free trade zone to be established between the EEU and Iran are close to completion.

Iran’s Foreign Minister Mohammad Javad Zarif, speaking in the Iran-Armenia Business Forum in Yerevan in December 2017, announced that Iran and the union have finalized a preferential trade agreement and the presidents of the six countries involved are expected to sign the agreement in the near future.

“The move is expected to ease trade between Iran and EEU members,” Zarif said.

Protracted Process

The work on a free trade zone between Iran and the bloc began in 2015, though the signing has been repeatedly postponed.

Director General of Trade Promotion Organization of Iran’s European and American Affairs Office Behrouz Hassan Olfat said in December that between 200 and 250 categories of products are to be included in a preferential trade agreement between Iran and EEU, adding that the agreement will be in effect for three years.

Deputy minister of industries, mining and trade, Mojtaba Khosrotaj, who also doubles as the chairman of Trade Promotion Organization of Iran, said in July exports to the member states of EEU will either be fully exempt from customs duty or enjoy a duty cut of up to 80%.

Khosrotaj also said Iran has agreed to lower duties for Eurasian exporters in 70 groups of goods, adding that Iranian exports to EEU, on the other hand, can enjoy reduced duties for 51 groups of commodities, including petrochemical products, construction materials, agricultural goods and carpet.

A draft agreement between Iran and the EEU was signed in Yerevan, Armenia, on July 5, 2017, after more than a year of negotiations for levying preferential export tariffs.

The agreement was signed by Khosrotaj, who is also chairman of Trade Promotion Organization of Iran, and EEU Trade Minister Veronica Nikishina.

Noting that the export of construction materials, including tiles and ceramics, to EEU will be subject to 80% customs duty exemption, Khosrotaj said downstream petrochemical products, cables and pipes as well as metal and glass products are to enjoy a range of tax and duty exemptions.

Also based on an agreement between Iran and EEU, Khosrotaj said in early November that exports of Iranian biscuits and chocolates to EEU member states will be exempt from customs duties.

A Russian Agriculture Ministry’s report released late June after negotiations on a temporary agreement for the creation of an Iran-EEU free trade zone said Iran is ready to make tariff concessions on a wide range of agricultural products, excluding wheat and refined oil, as well as mineral water and cigarettes.

The EEU, comprising Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan, is an international organization that encourages regional economic integration through the free movement of goods, services and people within the union.

The bloc was established on Jan. 1, 2015, after it superseded the Eurasian Economic Community that functioned from 2000 to 2014.

The union has an integrated single market of 183 million people and a gross domestic product of over $4 trillion.

Hope to Lift Sinking Trade

Iran and EEU members hope that the trade agreement would help traders overcome the ongoing hurdles and compensate for the recent drops in two-way commercial exchanges.

EEU members have been among Iran’s major trade partners in recent decades, though latest data on two-way commercial exchanges indicate that the union members currently account for barely 2% of Iran’s foreign trade, excluding crude oil sales.

Islamic Republic of Iran Customs Administration’s records indicate a 47% drop in Iran-EEU non-oil trade during the first three quarters of the current Iranian year (March 21-Dec. 21) compared with the corresponding period of last year, as the total volume of trade between the two sides stood at about $995 million. The figure for last year’s similar period stood at $1.88 billion.

Financial Tribune’s data analysis shows that Iran’s trade with Russia, Belarus, Kazakhstan and Armenia experienced significant drops during the period. Notably, there was a 54% drop in Iran-Russia trade and a 73% drop in Iran’s trade with Belarus.

Kyrgyzstan was the only EEU partner of Iran recording growth in trade during the period. The growth was significantly high at 2,293% from $4.3 million last year to $103.3 million in the three quarters.

Iran’s imports from the union amounted to $547.7 million during the period, drastically lower than $1.45 billion in the last year’s corresponding period.

Cathode, sunflower oil, wood, paper, livestock and colza were the main commodities exported to Iran from the Eurasian Economic Union states.

As Russia is Iran’s largest EEU trade partner, it’s no wonder the 64% drop in imports from Russia had the highest impact on the overall drop in the volume of imports from the union.

Iran’s exports to EEU stood at $447.5 million during the period, slightly higher than the $436 million in the same period of last year. Gas condensate, fruit and agricultural products, petrochemical products, copper and cement were the main exported commodities, IRICA data show.

Iran and EEU members are set to be linked through three intra-state transport corridors: International North South Transport Corridor, China-EU corridors (passing through Kazakhstan and Iran), and the new China- Kyrgyzstan-Tajikistan-Afghanistan-Iran Corridor.