Iran-EAEU Free Trade Zone Agreement Likely in 2023

The Eurasian Economic Commission has finalized its substantive discussion of all points of a free trade zone agreement with Iran, and this document may be signed as soon as this year, Eurasian Economic Commission Trade Minister Andrei Slepnev said on Friday, Interfax reported.
"Delicate work is underway to fine-tune the document; we are putting the finishing touches on it. I hope that we will complete this process within a month. And we plan to report the results to the prime ministers in Sochi at the beginning of next month [during a summit of the prime ministers of the countries of the Commonwealth of Independent States and the Eurasian Economic Union]. After that, some formal procedures will be performed. I think there is a very high degree of probability that we will sign the agreement with Iran this year," Slepnev was quoted as saying by the SB. Belarus Segodnya state-run media outlet.
The free trade zone agreement with Iran is able to dramatically increase mutual trade volumes, he added.
The EEC minister expects bilateral trade to rise from $6 billion to $20 billion per year in the mid-term prospect within five to seven years after the agreement is signed, stressing that these figures are realistic.
"Iran is a very serious partner, a large country. It is possible to say that we are Iran's first major free trade partners. This country has quite high entry barriers. Iranian partners are offering us unprecedented conditions for accessing their market, conditions that we need to take advantage of," he said.
Slepnev also announced plans to finalize negotiations on a free trade zone with Egypt this year.
"As far as we understand, the Egyptian side is also willing to do so," he said.

Trade Expansion, Customs Transit Discussed

The Eurasian Economic Union and Iran have discussed trade expansion and the development of a common customs transit system, the press service for EEC said earlier this month.
EEC Minister for Customs Cooperation Eldar Alisherov had a meeting with Iranian Deputy Economy and Finance Minister Mohammad Rezvanifar in Tehran. 
"The sides noted keen interest in developing customs cooperation between the EEU member states and Iran, above all, broadening trade in furtherance of the interim agreement of May 17, 2018, and the future free trade agreement,” Interfax reported on May 3.
"The meeting addressed practical aspects of the implementation of the interim agreement [confirmation of the origin of imported goods, determination of customs value and administrative cooperation], ways of further development of customs infrastructure, including the North-South transport corridor, and the possibility of forming a common customs transit system of the union and a third party," the EEC press service said.
The two countries emphasized the prospect of signing a protocol between central customs authorities of EEU member states and the Islamic Republic of Iran Customs Administration on the procedure of electronic information exchange, it said.
"The Islamic Republic of Iran has historically been a significant partner of the EEU member states, interaction with which we attach particular importance to. Iran's role in the union's trade and economic ties has been steadily growing under the modern circumstances of the changing world, and it is a task of customs services to maximize trade facilitation between our countries while exercising a proper level of customs control," Alisherov said.
"In turn, Mohammad Rezvanifar underlined the role of the EEU in development of international economic cooperation and assumed that the trade turnover between Iran and the union member states would more than double [to $10 billion per year or more] once the free trade agreement is signed," the press service said.

Bilateral Trade at $3.25b in FY 2022-23

Iran traded 6.37 million tons of goods (excluding crude oil exports) worth $3.25 billion with the Eurasian Economic Union’s member states in the fiscal 2022-23, registering a 51.44% and 42.27% decline in terms of weight and value respectively compared to the year before, latest data released by IRICA show.
Russia was the main trade partner among EEU members during the period with 4.04 million tons worth $2.32 billion of exchanged goods. It was followed by Armenia with 1.47 million tons worth $478,274 and Kazakhstan with 750,955 tons worth $320,145.
Iran’s exports to EEU stood at 3.44 million tons worth $1.48 billion, registering a 24.32% and 27.2% rise in terms of weight and value respectively.
Russia with 1.41 million tons (up 24.52%) worth $743.88 million (up 27.45%), Armenia with 1.46 million tons (up 39.98%) worth $464.16 million (up 53.52%) and Kazakhstan with 475,615 tons (down 8.11%) worth $195.34 million (up 3.42%) were the top export destinations.
Imports hit 2.93 million tons worth $1.76 billion to register a 71.73% and 60.45% decline in weight and value respectively.
Russia was also the main exporter to Iran with 2.62 million tons (down 71.16%) worth $1.57 billion (down 61.07%). It was followed by Armenia with 275,340 tons (down 77.79%) worth $124.8 million (down 67.09%) and Belarus with 17,974 tons (up 93.68%) worth $43.66 million (up 52.61%).

Free Trade Memorandum Signed in Tehran

Iran and the Eurasian bloc signed a memorandum on free trade on Jan. 19, 2022, in a ceremony held in Tehran at the International Exhibition Center.
The document was signed by the head of Iran's Trade Promotion Organization, Alireza Peymanpak, and Slepnev, IRNA reported.
“The agreement will come into force after its formal approval by the governments of member states by mid-1402 [fiscal 2023-24],” Peymanpak was quoted as saying.
According to the TPO chief, a list of traded goods was discussed in the final talks, based on which 90% of the traded commodities have been put on the “green” list while 10% were designated as “prohibited”.
The “green” list refers to goods traded by the two sides at zero customs tariffs.
Peymanpak believes that with the operationalization of the Iran-EEU free trade deal, the annual bilateral trade will exceed $10 billion in three years.
"We held very important negotiations to settle a number of important issues. We are confident that the agreement will be signed in the near future," he told Sputnik.
The Russian official indicated that EEU and Iran are seeking to scrap most tariffs and launch joint projects in such spheres as transport, industry, food production and finance, pointing out that this will potentially create jobs in both Iran and EEU, and advance technological innovation.

Almost All Issues Cleared

EEU and Iran have agreed upon virtually all issues in their negotiations on a free trade area, and only a few issues related to the agricultural sector have to be cleared, the Eurasian Economic Commission's trade unit said after Slepnev's visit to Tehran.
"The main purpose of the visit was to consider key aspects of negotiations on concluding a free trade agreement between the Eurasian Economic Union and Iran at the level of delegation heads. The parties reviewed modalities of the understandings needed for finalizing the negotiations and signing an agreement. All issues have been agreed upon, except for mutual access to the market of certain categories of agrarian produce, on which they agreed to continue discussions," it said.
"The prospect of developing long-term and mutually beneficial cooperation in the transport, industry, agriculture, food security and other fields is impressive. A future agreement will help put a solid contractual foundation under these plans," the statement quoted Slepnev as saying.

From Preferential to Free Trade

Iran and EEU had signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU. 
The arrangement, which has lowered or abolished customs duties, is the first step toward implementing free trade between Iran and the five members of the union. 
Noting that the two sides currently exchange goods based on a preferential trade agreement, Spokesman of the Ministry of Industries, Mining and Trade Omid Qalibaf recently said EEU has granted tariff concessions to 500 types of Iranian commodities while Iran reciprocated with 400 types.
Asked about the impact of Iran’s import bans on EEU trade deal, he said the ban will not be applied to imports from the Eurasian bloc.
“The prohibition on the import of certain types of goods like historical relics, pork, etc. continue to be enforced but restrictions on imports implemented to maintain foreign exchange reserves will not be applied,” he was quoted as saying by IRIB News.
There is a long list of products in Iran whose imports have been banned for many years. 
According to the deputy head of Iran’s Headquarters to Combat Smuggling of Goods and Foreign Exchange, Mostafa Pour-Kazem Shayesteh, the import of more than 2,000 types of goods is prohibited.
The Iranian government aims to economize on its foreign currency reserves by applying import restrictions.
Iran and EEU have finalized negotiations on free trade of more than 7,500 types of commodities, the head of the Iranian delegation negotiating with the Eurasian bloc said earlier.
“Over the past two years, we have held around 30 rounds of negotiations with representatives of the Eurasian side — some face to face and others online. In the end, we agreed on a 150-page deal, which is the most comprehensive trade agreement [Iran has had],” Mirhadi Seyyedi was also quoted as saying by Tasnim News Agency.
According to the official, Iran’s trade with EEU is mostly focused on agricultural products.
“Our imports mostly constitute cereals and oilseeds. In return, Iran exports apple, vegetable, and greenhouse crops at zero tariffs,” he said.
“EEU has agreed to include about 95% of its traded goods in the agreement. That is almost all types of goods exchanged between the two sides, except for those we are reluctant to import for some reasons such as agricultural machinery or dairy products.”
Seyyedi noted that since the signing of the preferential trade deal in 2018, bilateral trade has doubled between Iran and EEU from about $2.5 billion to $5 billion a year.
“Never before have we had an agreement as inclusive as this [the prospective free trade deal with EEU]. Clearly, when the provisional agreement is upgraded to a free trade treaty, out foreign trade will get a considerable boost,” he said.
EEU is an economic union of some post-Soviet states located in Eurasia. The Treaty on the Eurasian Economic Union was signed on May 24, 2014, by the leaders of Belarus, Kazakhstan and Russia, and came into force on January 1, 2015. Treaties aiming for Armenia's and Kyrgyzstan's accession to the Eurasian Economic Union were signed on Oct. 9 and Dec. 23, 2014, respectively. Armenia's accession treaty came into force on Jan. 2, 2015. Kyrgyzstan's accession treaty came into effect on Aug. 6 2015. Kyrgyzstan participated in EEU from the day of its establishment as an acceding state.