Domestic Economy

Iran-Russia Trade Turnover to Reach $2-2.5b

Iran-Russia Trade Turnover to Reach $2-2.5bIran-Russia Trade Turnover to Reach $2-2.5b

Trade turnover between Russia and Iran will reach $2-2.5 billion in 2015, the general director of the Russian-Iranian business council Rajab Safarov said on Thursday at RosIranNefterkhim-2015 international conference, Russian news agency Tass reported.

Noting that “current economic cooperation between Russia and Iran is next to nothing,” Safarov said Iranian exports to Russia totaled $260 million last year while Russia exported $600-700 million worth of goods. Total trade turnover between the two nations amounted to $963 million.

“We’ve probably reached the bottom of the turnover decline,” said Safarov, adding: “Iran wants to buy Russian equipment not only because our nations have good neighborly relations but also in view of sanctions.”

Iranian and Russian presidents and government officials have repeatedly expressed interest in expanding mutual trade relations as both countries are under the pressure of western sanctions.

Senior Iranian official Ali Akbar Velayati traveled to Moscow and met President Vladimir Putin as a special envoy for President Hassan Rouhani on Wednesday. The meeting was focused on bilateral political and economic ties as well as expansion of rail transport between the two countries, Fars news agency reported.

But in spite of the enthusiasm shown by Iranian and Russian governments to boost bilateral trade, especially in light of tight economic sanctions imposed by US, EU and other countries against Russia following the 2013 Ukraine crisis which was followed by a total ban imposed by Putin on food imports from many countries, hurdles such as high import duties and the lack of direct trading routes (air, sea or road) have come in the way of achieving this goal.

Relying on imports of food, machinery, pharmaceuticals, textiles and plastics, Russia has no option but to look for alternative markets. In 2013, Russia bought approximately US$350 billion worth of imported products. Yet, Iran accounts for less than 1% of Russia’s imports.

  Lack of Trade Routes

Some traders cite lack of suitable trade routes between the two countries as an obstacle to boosting trade.

According to head of the Iran-Russia Joint Chamber of Commerce, Asadollah Asgaroladi, the chamber has asked the government to establish direct flight routes between three Russian cities and northern Iranian cities such as Rasht and Anzali to facilitate business travels, “but to no avail.”

He also stressed the need for establishing maritime route between Russia’s Astarakhan and Iran’s Anzali ports to enter the Russian markets “before it is too late.”

  Higher Tariffs

Russians imposing higher import duties on Iranian goods compared to other neighboring countries such as Azerbaijan and Armenia is another cause for Iranian commodities’ low competitiveness in the Russian markets. Russia imposes as much as 30% import duties on some Iranian products while the average import duty is 4% for imports from Azerbaijan. This has made some Iranian businessmen export their commodities to Russia through Azerbaijan border, further undermining the need for setting preferential tariffs between Iran and Russia.

  Banking Sanctions

Another factor influencing Moscow-Tehran relations is the banking sanctions imposed against both Iran and Russia. In light of these restrictions, businessmen are now at the mercy of currency exchange offices that charge about 10% for every transaction. Iran and Russia are discussing creation of a joint bank to carry out bilateral trade in national currencies, a move that is expected to minimize western influence on both countries’ economies.

It is evident that both countries are motivated to improve bilateral trade, with both presidents pushing to expand diplomatic and economic relations. Putin is planning to visit Iran soon to consolidate this new era in relations.