Iran's Direction of Trade:Turkey, India

Economist, Secretary-General of Iran International Chamber of Commerce
Iran's Direction of Trade:Turkey, IndiaIran's Direction of Trade:Turkey, India

Iran applied to join WTO in 1996, but the process of negotiation did not start because of lack of unanimity which was required for accepting new application. USA was the main party preventing the accession.

Iran's application was made after a long survey on pros and cons in the country, because many academics as well as policy makers were objecting the government to apply. In addition high rank policy makers need to be convinced for such a move, keeping in mind that the tendency toward economic liberalization was not that strong, in those days.

The socio–economic environment was also not ready for such an important shift in policies. Iran had very limited experience in regionalization. She had been member of ECO (Economic Cooperation Organization) and ICO (Islamic Conference Organization), while none of them had prospered toward their aims, so that the ratio of intra-country trade compared to their total trade in both organizations did not significantly change in more than a decade.

The short economic history proves that Iran did not have any experience to open its market even to neighboring countries and hence was not actually ready to join WTO either politically or economically.

Situations are now different in Iran and in the ME (Middle East). American invasion of Iraq and Afghanistan opened their market to Iran's export. In the same direction, newly established countries, called CIS (Commonwealth Independent States), created another opportunity for Iranian export. But she was not very successful, except for Iraq and to a limited extent in Afghanistan.

Unfortunate events in Iraq and Syria, such as the rise of ISIS, are changing the stability of Iran's limited export markets in those countries. We know that ISIS is profiting from the region through growing sectarianism, political vacuum and perhaps the ambivalence of the West.

In such an uncertain situation, Iran has to decide on approaching countries that are economically viable, and politically stable, for having trade with them on a more free basis in order to promote Iran's competitiveness and hence its well being, economic growth and job creation, of course, when sanctions are removed or reduced to a proper level. We know that some Arab countries have their hesitations to accept a progressive non Arab country in the region, which will prevent them from making strategic alliance with Iran. UAE is exception since its harbors are extensively used for transit to or from Iran. But even UAE cannot be a candidate for economic integration with Iran, since she is engaged in many others with Arab countries. In addition, Iraq is not a good partner for that purpose because it seems to remain unstable for years to come. Looking to the north, we have actually lost our opportunities in Caucasia and CIS. Therefore we are left with Turkey as a good partner and those countries such as Afghanistan, Tajikistan, Pakistan and India, in particular, in the east of Iran.

Turkey and Pakistan are great potential for the future of Iran's economy, particularly when we consider Pakistan as a route connecting Iran to India. It is important to remind ourselves that the mentioned countries, that are Iran, Turkey and Pakistan, had extensive experiences by working together in CENTO Pact from 1955. At the beginning of agreement Iraq was also a member of Central Treaty Organization (CENTO), but she dropped out a year later when Abdul karim Qasim came to power. Although CENTO was primarily a political organization but economic cooperation of these three countries expanded relatively, because of natural viability that existed in the geopolitics of the region for connecting them together.

Today situation is much more favorable for their cooperation. Turkey is now more eager to work with Iran while aiming to join EU and Pakistan has a great potential to connect Iran and Turkey to India.

Economic reasoning supports such cooperation. Turkey and India need Iran's oil and Gas, and its by-products, for their own consumption and in the case of Turkey to export to connecting nations. European tendencies to import Gas from Iran (through Turkey) have mounted in recent years, particularly after the tension rose between Russia and the European countries. On the other side, India is a fast developing country by having more than one billion population, with increasing need for hydrocarbons. In return, Turkey and India can export goods and services Iran needs, since both countries are developing very fast.

Political reasons support such cooperation. Neither India, nor Turkey has the rivalry that Iran experiences in Persian Gulf. Also Iran can get along with Indians socially much better than the Arab countries except for Iraq, where their instabilities may limit our trade with them for the time being.

When sanctions are removed, even partially, it seems Indians will become eager for economic cooperation with Iran because of their Hydrocarbon needs, and the fact that our economies are considered to be complements, to a significant extent.

In order to pave the road for joining Iran to WTO, evidences suggest that globalization encourages the creation of regional trading blocs, to practice open market operations, which is very much needed for Iran. Such cooperation can be organized among Turkey, Iran, Pakistan and India. Later on, of course, the Persian-speaking countries, such as Afghanistan and Tajikistan can join the union. I am certain that cooperation of Iran and Turkey plus India can encourage economic activities in the MENA region, what Japan, South Korea and China did for the Far East.

To sum it up, it is important to note that our relation with India is deeply rooted in the history and in addition flexibility of that nation in their behavior and culture can preserve our continued partnership with that large and progressive country. While similar cooperation with Arab countries are subject to fluctuations, if not tensions, the evidence of which is the continued struggle they have within their own organizations such as GCC, AMU, and GAFTA.

What seems important for Iran now is to plan its trade direction in a manner that the problem she has faced with ECO does not prevail again. Iran needs to be convinced that creation of regional cooperation is based on mutual exchange of competitive advantages and hence in a proper partnership Iran will be better off if takes the risk of lowering its tariffs along with removing non-tariff barriers. Such a move is beneficial to Iran's internal economy too, because Iranian business community cannot compete in foreign markets if they do not have the experience of competing among themselves and with the neighbor countries. And the last point, but not the least, oil is going to be an over supplied commodity in the world, in the next decade or so, therefore Iran needs to manage its export markets for oil very carefully. India may be a long term solution for that purpose.

Mehdi Behkish is a former associate economic professor at Allameh Tabatabaie Uinversity.