Russia's State Duma recently endorsed an agreement for the establishment of a free trade zone between Iran and the Eurasian Economic Union.
In a November 15 open session, a majority of State Duma members approved the agreement for the establishment of a free trade zone, which was signed in Kazakhstan's capital city of Astana on May 17.
The deal is expected to substantially increase trade between Iran and EEU.
Iran’s non-oil commercial exchanges with the five member states of EEU totaled 1.94 million tons worth $1.13 billion during the first seven months of the current Iranian year (March 21-Oct. 22) to register a 36.98% and 52.05% growth in tonnage and value respectively compared with last year’s corresponding period, latest data released by the Islamic Republic of Iran Customs Administration shows.
Iran’s free trade with EEU members is especially important, as the US has reinstated sanctions against the Islamic Republic. By implementing the agreement, the two sides are hoping to make up for the loss of global markets as a result of economic restrictions imposed on Iran as well as Russia, the leading member of EEU, by the United States.
Iran’s exports to EEU during the seven months under IRICA's review stood at 871,604 tons worth $325.05 million, indicating a 38.62% rise in tonnage and 16.93% rise in value year-on-year.
Imports amounted to 1.07 million tons worth $807.03 million, up 35.69% and 72.98% in tonnage and value respectively YOY.
Russia Holds Lion's Share of EEU-Iran Trade
Iran’s total commercial exchanges with Russia were the highest in terms of dollar value among the five member states of the bloc at 1.14 million tons worth $862.1 million, up by 20.98% in tonnage and 63.37% in value YOY.
Iran exported 238,395 tons of non-oil commodities worth $138.34 million to Russia, down 1.97% in tonnage and up 17.7% in value YOY, while it imported 906,363 tons of Russian goods worth $723.76 million in return, up 35.69% and 72.98% in tonnage and value respectively YOY.
The interim free trade zone arrangement agreed in Astana in May lowers or abolishes customs duties, setting off a three-year process for a permanent trade agreement.
The Russian Ministry of Industry and Trade has said that a full-fledged agreement will be concluded by early 2022.
According to the ministry, the interim agreement covers 50% of the trade between the parties and will come into force early 2019.
Following Russia, Kazakhstan was Iran’s second biggest trading partner in EEU during the aforesaid period, as bilateral trade amounted to 476,158 tons worth $124.86 million, up 78.03% in tonnage and 26.93% in value compared with last year’s same period.
Iran’s exports to Kazakhstan stood at 321,562 tons worth $76.2 million, up 58.88% and 0.54% in tonnage and value respectively YOY, while imports reached 154,595 tons worth $48.65 million, going up 137.6% in tonnage and 115.5% in value YOY.
Iran-Armenia trade reached 303,266 tons worth $103.77 million, indicating a 69.63% and 34.53% growth in tonnage and value respectively YOY.
Iran exported 300,127 tons of goods worth $88.73 million to Armenia, up 74.61% in tonnage and 38.87% in value YOY, as imports stood at 3,139 tons worth $15.04 million to go down 54.44% in tonnage and up 13.57% in value YOY.
Iran's trade with Kyrgyzstan saw a decrease of 2.66% in tonnage and a rise of 4.89% in value year-on-year, as the two sides’ commercial exchanges stood at 12,334 tons worth $23.15 million. Iran’s exports to Kyrgyzstan went down by 0.76% in tonnage and up 1.06% in value to reach 10,720 tons worth $20.18 million. Imports saw a 13.62% decline in tonnage and a noticeable rise of 41.19% in value YOY to stand at 1,613 tons worth $2.97 million.
Iran-Belarus trade experienced a decline of 39.97% and 5.53% in tonnage and value respectively YOY, standing at 9,122 tons worth $18.17 million. Exports to Belarus had a huge increase of 57.14% in tonnage and 100.76% in value YOY (standing at 798 tons worth $1.58 million), while Imports from the country declined by 43.34% in tonnage and 10.09% in value YOY (standing at 8,323 tons worth $16.58 million).
Free Trade Advantages
According to the Chairman of EEU Economic Commission Board Tigran Sargsyan, there are several major advantages in EEU countries and Iran after the agreement comes into force.
First of all, entrepreneurs will be able to save on customs duties. The list for EEU includes meat and fat-and-oil products, certain types of confectioneries and chocolate, cosmetics, electronic and mechanical equipment.
Iran will enjoy tariff preferences on a wide list of food products, primarily vegetables, fruit and dried fruit, as well as construction materials, crockery, carpets and nonferrous metal products.
With regard to industrial products, Iran will reduce the average rates of import duties for EEU member states by 7% (from 22.4% to 15.4%), EEU member states will decrease duties on these goods for Iran by 3.3% (from 8% to 4.7%).
Iran will cut import duties on farm products by 19% (from 32.2% to 13.2%) and EAEU by 5% (from 9.6% to 4.6%).
The second advantage is a transparent and predictable trade environment. “The provisional agreement provides for compliance by the parties with the fundamental principles of international trade. The document formalizes the scheme similar to WTO [World Trade Organization] rules, which imposes obligations and requirements on Iran though the country is not a WTO member,” Sargsyan said.
The parties also agreed not to apply unreasonable non-tariff measures restricting trade with respect to goods listed in the agreement.
EEU was established in 2015 based on the Customs Union of Russia, Kazakhstan and Belarus, and was later joined by Armenia and Kyrgyzstan. In 2016, Vietnam officially became the first non-regional country to join the bloc’s free trade zone, which is designed to ensure the free movement of goods, services, capital and workers.
Since then, more than 40 countries and international organizations, including China, Indonesia, Israel, South Korea, Egypt and India, as well as some South American countries, have expressed interest in a free-trade deal with EEU.
