Economy, Domestic Economy

Iran, Russia Eye Stronger Ties

Iran, Russia Eye Stronger Ties
Iran, Russia Eye Stronger Ties

During the past two years, reciprocal visits by Iranian and Russian officials and regional consultations have increased in a bid to expand bilateral relations. However, the economic cooperation between the two countries has been considerably affected by the sanctions imposed against Iran – over its nuclear program -- and on Russia -- due to the crisis in Ukraine. The imposed sanctions limit Russian companies’ transactions with Iran. If these companies decide to violate anti-Iran sanctions, Russia will automatically be hit with additional sanctions.

On the one hand, the Western sanctions push Russia toward expanding ties with neighboring nations, including Iran, and on the other hand, encourage Iran to seize new opportunities at the Russian markets, especially the food market, as the national economy struggles to exit from a 2-year recession and control inflation. Both countries are willing to implement joint projects and business ventures to boost their bilateral trade volume.

Iran and Russia cooperate in many sectors, including agriculture and telecommunications. In summer, the two countries inked a major trade agreement details of the deal have not been made public yet.

  Joint Conference

On Wednesday, Tehran hosted Iran-Russia Effective Trade Conference where both countries’ officials made remarks about future relations.

Officials from the ministry of industry, mine, and trade, top Iranian and Russian commercial advisors, officials from the Iranian chamber of commerce, and 800 businessmen from both countries attended the event to discuss and overview the possibilities of increasing bilateral transactions.

Determining preferential tariffs for a certain group of commodities, issuing export guarantee permits as well as visas for businessmen and finding ways of facilitating monetary transactions are among the topics discussed in the conference. Iran and Russia have intensively worked together to remove obstacles such as method of payment of trade exchanges.

Underlining the private sector’s key role in trade exchanges between the two countries, Iran and Russia reached some agreements about examining ways of providing foreign exchange financing, including provision of finances via letters of credit (LC), the deputy minister of industry, mine, and trade, Mojtaba Khosrotaj said in the conference.

According to the latest agreements, Bank Melli of Iran is to provide financing to exporters after receiving a determined fee, Khosrotaj said. Referring to the US-led sanctions, which bar international financial institutions from conducting transactions with Iranian banks, Khosrotaj said that in order to ease the process of export, some Iranian and Russian banks will be tasked with operating the process of monetary transactions and the central banks of the two countries will supervise the procedures.

To reduce exports risk level, Export Guarantee Fund of Iran will sign a memorandum of Understanding (MoU) with its Russian counterpart, he said.

 Russia Needs Iranian Goods

Khosrotaj also pointed to Moscow’s need for agricultural imports from Iran, and said that the existing customs duties for agricultural products should be reconsidered. He said that Russians have been asked to present a list of their preferred commodities.

The deputy industry minister also referred to the visa restrictions as a topic that’s been touched on in the recent trade agreement between the two countries and announced that Tehran and Moscow have agreed to facilitate visa issuance on both sides.

This is a subject that’s been also confirmed by the Russian ambassador to Tehran, Levan Dzhagaryan.

Both sides are trying their best to keep the current exchange level of non-oil commodities. The trade balance  between Iran and Russia is currently in Moscow’s favor, Khosrotaj said.

Khosrotaj pointed to Russia’s 800-billion-dollar foreign trade, and said that Russia’s exports volume exceeded $500 billion in 2013, while imports stood around $300 billion for the country in the same period. “Russia has been a very profitable market for the European and American companies, and this huge potential has come inviting to the Iranian exporters now that sanctions have restricted Moscow’s trade with the West.”

Under the trade deal, Iran and Russia agreed to provide each other with a 5000-square meter area for permanent fairgrounds in the near future. Additionally, Iranian technical and engineering companies have agreed to take a larger share in the Russian market.

Also attending the Iran-Russia conference this week was deputy agriculture minister Hassan Younes Sinki. He said that in addition to dairy products, meat, beans, and nuts, Iran aims to export fisheries to Russia. More than 10 major Iranian fishery companies have already expressed readiness to discuss the supply of their products to Russia. Sinki also referred to the possibility of outsourcing farming jobs and using Russia’s fertile lands in future.  Earlier in September, the head of the Iran-Russia Joint Chamber of Commerce, Asadollah Asgaroladi, said that Tehran and Moscow are studying the possibilities of opening a new chapter in trade relations that could break the domination of Western currencies over bilateral exchanges.

  High-Profile Cooperation

The Iranian Oil Minister Bijan Namdar Zanganeh and Russian Energy Minister Alexander Novak in a meeting in Tehran signed a high-profile economic cooperation agreement late September. During the meeting in the Iranian capital, Zanganeh and Novak also underlined the need for further mutual cooperation between the two countries in economic and energy fields.

Tehran’s Ambassador to Moscow, Mehdi Sanayee underlined Iran and Russia’s readiness to considerably increase the volume of their trade transactions by the next year. “Tehran and Moscow have agreed to increase the volume of their trade exchanges to over $15 billion by 2015,” Sanayee said, addressing a conference at Moscow Transportation University, FNA reported early October.