Iran exported $800 million worth of commodities to Russia in 2020 to register a 105% increase compared with 2019.
The volume of exports, according to Iran’s Ambassador to Russia Kazem Jalali, is a record high in the two neighbors’ bilateral trade.
“The increase in exports came despite the outbreak of Covid-19 last year as well as the intensification of the unilaterally imposed US sanctions on Iran’s economy,” Jalali was also quoted as saying by IRNA.
Among the reasons for the rise in exports over the period, the envoy explained, is the preferential trade agreement between Iran and the Eurasian Economic Union, which came into effect in October 2019.
Iran and the Eurasian Economic Union – comprisng Russia, Kazakhstan, Armenia, Belarus and Kyrgyzstan – signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU.
The arrangement, which lowers or abolishes customs duties, is the first step toward implementing free trade between Iran and the five members of the union. Key objectives of EEU include increasing cooperation and economic competitiveness for member states, and promoting sustainable development to raise their standards of living.
The average tariff set by EEU on Iranian goods as part of a preferential trade agreement stands at 3.1%, while the figure is 12.9% for EEU goods exported to Iran.
The two sides have listed 862 commodities in their three-year provisional trade agreement. As per the deal, Iran will enjoy easier export terms and lower customs duties on 502 items and the same goes for 360 items from EEU member states.
“Iran’s Embassy in the Russian Federation has recently focused on bilateral economic and commercial ties. Iran and Russia have had high cooperation in security and military affairs for years. Yet less has been done in the field of trade over the years. This is while there is ample potential to boost mutual commerce with proper planning, and do away with restrictions,” Jalili said.
“Russia’s annual imports stand at about $250 billion and Iran has the capacity to get hold of a much larger share in the neighboring country’s market.”
Iran’s main exports to Russia include fruit, pistachio, dates, fig, raisin, shrimp, plastic products, chemicals and carpet.
Noting that Iran has the potential to expand the list of its exports to Russia, the ambassador said, “Yet, we face some limitations here. Our transportation infrastructure, including road, rail and marine routes, is not adequate. There’s a shortage of container vessels ... We are facing banking and transaction restrictions, and many of our traders are not familiar with Russian trade regulations or the Russian language.”
According to Jalili, total Iran-Russia trade in 2020 hit $2.22 billion, indicating a 40% rise compared with $1.59 billion in 2019.
Russia’s $1.6b Caspian Seaport to Boost Trade With Iran
Russia is planning to build a port on the Caspian Sea near the city of Lagan to increase trade in the Caspian region and beyond.
Plans to build the port have been included in official Russian Federation plans for the region, issued on July 29, 2020, Global Construction Review reported.
It will combine a container terminal with facilities for storing and loading a range of agricultural products, including a grain elevator with a storage capacity of 300,000 tons. Other terminals will handle vegetables, fruit and cooking oil.
The grain and container terminals will each have a 5 million-ton capacity, and the liquid cargo terminal will have a capacity of 500,000 tons.
Altogether, the port will have a transshipment capacity of 12.5 million tons. At present, all Russian ports along the Caspian coast have a capacity of 7.5 million tons.
Dredging will also be carried out to deepen the existing port’s seaway to 13 meters.
Much of the cargo carried on the Caspian is not containerized, so its adoption is seen as a way of increasing Russia’s trade with the Persian Gulf countries and India, via Iran. In the reverse direction, the port may improve communications for Chinese goods bound for Europe.
The port will be built in the relatively underdeveloped Buddhist Republic of Kalmykia that has long lobbied for Russian investment in a seaport. Moscow is now more responsive, owing in part to the silting up of its main Caspian port at Astrakhan, which recently forced the Russian Navy to abandon it as a base.
The Kremlin is also considering the possibility of building a ship canal between the Caspian Sea and the Sea of Azov, on the north of the Black Sea to provide a shorter route than the existing Volga–Don Canal.
Vitaly Daginov, general director of the Port of Lagan, said during a press conference in March that the expected cost of the port, together with its road and rail links, was $1.6 billion.
A group of Iranian companies have expressed their interest in investing in the Port of Lagan, as well as China’s Poly Group, which specializes in the sale of artworks and defense systems.
Iran, EEU in Free Trade Talks
Iran and the Eurasian Economic Union are holding talks on abolishing customs duties to reach free trade with zero tariffs.
“Negotiations on free trade with zero tariffs have been going on between Iran and EEU since last week … If this goal is achieved, we will have a reach to an unrivaled market because EEU only has preferential agreements with Vietnam, Singapore and Serbia,” the advisor for international affairs and trade agreements of Trade Promotion Organization, Mirhadi Seyyedi, said recently.
“Such an achievement will bring positive fruits to our economic interaction in the region,” he was quoted as saying by Mehr News Agency.
The official stressed, “Enhancing trade with EEU will facilitate our [overall] trade and financial interactions.”
Trade Balance Improves
Iranian trade balance with EEU improved by $106 million from March 20, 2020, to Jan. 19 compared with the preceding year’s corresponding period, according to a recent report released by Tehran Chamber of Commerce, Industries, Mines and Agriculture.
Bilateral trade, excluding oil, stood at $1.8 billion in the first 10 months of the current Iranian year (started March 20, 2020), which comprises nearly 3% of the total Iranian foreign trade, showing an 8.4% decrease compared to the same preceding period.
Iran exported 2.2 million tons of non-oil goods to EEU member states worth $824 million over the period. The export declined by 18% and 4% in terms of weight and value respectively.
Iran imported around 2.7 million tons of commodities from EEU worth $956 million during the period, which shows a 7% growth in terms of weight and 12% decrease in terms of value.
Iran’s export to Russia and Armenia stood at $387 million and $265 million, showing an increase of 29% and 27% respectively in the 10-month period.
The volume of export of Iranian goods to Belarus and Russia increased by 44% and 26% respectively, but its exports to Armenia, Kyrgyzstan and Kazakhstan decreased in terms of weight. Iranian exports to EEU member states, except Armenia and Kyrgyzstan, increased in terms of value.
From the total export items of Iran to five EEU member states, 610 million tons were agricultural goods and food commodities worth $458 million.
The destinations of Iranian food and agricultural exports were Russia with $327 million, Kazakhstan with $85 million and Kyrgyzstan with $21 million.
Russia exported the highest volume of commodities to Iran among other EEU members with $901 million, showing a decrease of 4% year-on-year.
