What will Iran gain from the free trade agreement with the Eurasian Economic Union?

Negotiations on a comprehensive free trade agreement between Iran and the Eurasian Economic Union (Eurasian) are scheduled for the second half of 2021. Who will benefit?

The success of the current interim agreement with Iran indicates that the conclusion of an appropriate and comprehensive free trade agreement could be promising, and this is taking place amid talk about the possibility of Tehran joining the EEU. Read also The largest gas refinery in the Middle East .. Iran opens the giant Behbehan refinery The Independent: Putin’s economic strategy shows that Russia has not changed much in 100 years Question and answer .. This is what happened to the Iranian economy with Trump, so what about the Biden era?When the knife reached the bone … New US sanctions on Iran

In this report , who published on ” Modern diplomatic ” (Modern Diplomacy) Alomirka- writer Nikita Smaghi said Iran and Russia said more interested parties to conclude such an agreement and are the main motivation for Iran rapprochement with the Eurasian Economic Union (Euro – Asian).

It is noteworthy that the Eurasian Economic Union is an economic union of countries located in Central, North Asia and Eastern Europe, and was established in 2015, and includes Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan.

Unsurprising path

The writer says that the signing of a comprehensive free trade agreement with Iran was not surprising, given the previous agreements concluded between the Eurasian Economic Union and Tehran.

On May 17, 2018, Iran signed a 3-year interim agreement to create a free trade area that came into effect on October 27, 2019. Among other things, the two sides agreed to start talks on making the interim agreement permanent within a maximum deadline of 18 months after Its entry into force, and a settlement was reached within 3 years of the same date.

The writer stated that everything that the parties said and did in this regard falls within the previous agreements. The decision to start negotiations with Iran was taken on December 11, 2020, and the first consultations took place on February 17, 2021, less than 16 months after the entry into force of the Free Trade Agreement.

The writer said, “If we assume that everything is going as planned, the issue of the comprehensive agreement must be settled before the date of October 27, 2021. In order to achieve this goal, more comprehensive negotiations were held in the second half of this year.”

In any case – the writer adds – the two sides still have more than a year to resolve any issues that may arise.

The writer added that all parties are interested in replacing the interim agreement with a permanent one. However, a new round of talks will focus on expanding the range of goods and further reducing the value of duties. The two sides will also try to protect the interests of domestic producers as much as possible, and it would not be surprising if they fail to reach a consensus.

Facing sanctions and boosting Iran’s prestige

The author says in his report that the idea of ​​a rapprochement between Iran and the Eurasian Economic Union per se fits comfortably with Tehran’s strategy centered on Asia and its markets. This step began to take shape in the first decade of the new millennium and was mainly driven by economic trends, that is, the rapidly growing Asian economies – such as China and India – the increasing need for energy resources.

The writer pointed out that cooperation with the Eurasian Economic Union provides Iran with an opportunity to mitigate the effects of the US sanctions policy.

On February 7, 2021 – the writer adds – Belarusian Prime Minister Roman Golovchenko argued that the EEU was looking to develop a mechanism to counter sanctions in order to inspire optimism.

Here, the writer also points out that Iran has sought to abandon its dependence on the US dollar for settlements and switch to national currencies. This desire became even more urgent when Iran was isolated from the global transfer system, “SWIFT”, as a result of US pressure.

The Eurasian Economic Union has repeatedly confirmed that it is moving forward towards this goal. According to the author.

The writer says that Tehran is trying to get out of its political isolation, and that rapprochement with the Eurasian Economic Union would help strengthen its position on the international level. He adds that efforts to convert the temporary free trade agreement into a comprehensive agreement should be seen in the broader context of Iran’s pursuit of strengthening regional orientation and supporting Eurasian cooperation.

What about the interests of the Eurasian Union?

With regard to the interests of the Eurasian Economic Union, the author asserts that Iran has promising potential for the expansion of the union; Among the economies of the member states of the Eurasian Economic Union, observers and partners, the Iranian economy ranks second after Russia.

The writer points out that in terms of economic cooperation, Russia and Kazakhstan will be the most beneficiaries.

However, the writer added that trade cooperation between Iran and the Eurasian Economic Union will not affect the economic situation of the member states significantly.

As for Tehran – which suffers from partial economic isolation – the union can play an important role as a reliable partner with stable commercial relations, according to the writer.

Results of the Free Trade Agreement

The temporary free trade agreement between the Eurasian Economic Union and Iran – which came into effect on October 27, 2019 – provided for the reduction of customs duties on 862 categories of goods (502 for Iranian exports and 360 for Eurasian Economic Union exports). The list of commodities covers about 50% of the volume of trade exchange between the partners.

The agreement came into effect at a time when Iran is facing a crisis due to the US sanctions regime and closures due to the pandemic, but it has managed to boost trade with its partners to $ 2.9 billion in 2020, marking an 18% increase over the previous year.

Exports from the Eurasian Economic Union are witnessing a recovery that reaches the level it was before the re-imposition of US sanctions Union exports for 2020 increased by 2% compared to 2019, but did not exceed $ 1.6 billion.

The writer pointed out that the imports of the Eurasian Economic Union from Iran in 2020 indicate a different situation, as they increased 51.5% compared to 2019, to exceed $ 1.2 billion.

The writer said, it is clear that the Iranian economy benefited from the early stages of the agreement much more than the Eurasian Economic Union, and the improvement did not depend on oil, because most of the Union’s imports of agricultural products.

The writer pointed out that Iran occupies a relatively small position in the trade balance of the EEU countries, as it accounts for only 0.5% of all commercial operations in the Union, while the EU countries account for approximately 3% of the Iranian trade balance.