New Economic Page in Sight as Iran, EEU Sign Free Trade Pact

The pact was signed by the Iranian Minister of Industry, Mine, and Trade Mohammad Shariatmadari and Tigran Sargsyan, the chairman of the Eurasian Commission, Vasily Stanislavovich Matyushevsky, the first deputy prime minister of Belarus, Tigran Avinyan, Armenia’s deputy prime minister, Askar Mamin, first deputy prime minister of Kazakhstan, Zamirbeyk Askarov, Kyrgyzstan’s deputy prime minister, and Dimitry Kozak, the Russian deputy prime minister, whose countries together make up the body of the Eurasian trade bloc.

The document, the first in a series of steps to be taken later to engage in a permanent free trade between the two sides and will see lowering or abolishing the customs duties for a wide range of products exchanged between them, is coming only a week after the American President Donald Trump withdrew from the Iran nuclear deal signed between Tehran and the six world powers— the US, China, Russia, Germany, Britain, and France— in 2015. Immediately after announcing pulling out of the deal, known formally as JCPOA (Joint Comprehensive Plan of Action), the US has set to throttle Iran’s economic and trade exchanges with other parties. It, many analysts agree, intends to spare no efforts to impair the Islamic Republic’s economy.

But the recent agreement with the Russian-led EEU appears to show that Washington’s goal has so far met its failure in materializing its Iran-related dreams. The EEU is, in fact, a regional body working towards economic convergence between the member states, which are Russia, Armenia, Kazakhstan, Kyrgyzstan, and Belarus.

Signing the document of the interim free trade agreement, took place at the Astana Economic Summit, will open a new gate to the Iranian economy, with potentials to effectively help boost Iran’s production volume, exports, and also the goods quality. The accord very well showcased the fact that with the world showing a strong will to do business with Tehran, Washington’s profound struggles to isolate Iran economically are doomed to fail.

A picture of the Iran-EEU free trade pact

The agreement will help the two sides lower or abolish the trade duties on a list of goods exchanged between them. It will allow them to increase their business size several folds compared to the current volume which has been reported $2.7 billion last year. The bloc’s governing body’s head Sargsyan commented on the various aspects of the free business pact saying this is an interim agreement but the parties need to reach a comprehensive and permanent in the next three years. He continued that a finalized pact will reduce or cut the customs tariffs that are now existing on the imported goods and immediately after this deal the sides will enjoy lower imports taxation. Sargsyan added the free-trade list for the EEU will include a range of produces from the meat, candy sweets, and cosmetics to electronic and mechanical products. And the list for Iran will involve various food products—vegetables, as well as fresh and dried fruits—, and building materials.

He also maintained: “The temporary agreement stipulates an effective dispute settlement mechanism, including arbitration. The arbitrators and the arbitration locations both are picked by the member states. It also creates a joint committee of high-ranking officials and establishes a business dialogue. The interim agreement will be three years old and during this period the sides should reach a mechanism for a permanent pact.”

“The Iranian industrial goods will get 7 percent tariff cuts on average. This will be 3.5 percent for the EEU member countries. The Iranian produces will receive a 19-percent duties cut, and the EEU’s will get taxation cuts by 5 percent,” the EEU official told the media.

Member states welcome the pact with the Islamic Republic

In addition to comments made by the EEU’s governing body chief, officials from the five member states voiced their happiness with signing such a free trade accord with Tehran noting that the move is an important step towards them bolstering their trade volume. The Kazakh Economy Minister Timur Suleimenov has made comments on the agreement holding that the Iranian market has the capacity to absorb Kazakhstan exports worth of $8 billion. But at the present time, the whole Iranian trade with the five-member bloc reaches only $2.7 billion.

Moreover, the Belorussian First Deputy PM Vasily Stanislavovich Matyushevsky at the free trade pact signing event told the reporters: “The interim free trade agreement that is signed today in Astana between the Eurasian Economic Union and Iran will contribute to the realization of Belarus exports boost strategy.” He added: “The first experience of holding multi-party relations with Iran bears a very good outlook. We have enjoyed very good mutual outcomes.”

The Belorussian official pointed to the trade ties between Minsk and Tehran that have been actively growing since 1993, two years after Belarus independence.

“The bilateral trade between Iran and Belarus tripled in 2017. In the first three months of 2018, we have seen very positive business dynamic. In addition to trade, the investment cooperation is developing between the two countries. Belarus invests in Iran’s (heavy) machinery industries and Iran carries out large-scale projects in Belarus’s areas of logistics,” he was quoted as saying.

How will the Iranian economy benefit?

One issue of focus in relation to the agreement is its influences on the Iranian economic conditions. Thinking of augmenting its economic bonds with the member states of the EEU—with over 20 million square kilometers of size and a 180-million people market—, Iran has pushed into effect the accord for implementing preferential tariffs. The economists suggest that Tehran’s collective agreement with the EEU members can be a test of how the Iranian products will improve their competitiveness and will result in enhanced quality of the domestic goods. The preferential business will help the home producers with high-quality goods gain a significant share from a 180-million consumer market in Eurasia. The bloc is comprised of countries that are geographically close to Iran or its neighbors. This provides the Iranian products with an ideal market and will give the two sides’ private sectors a huge opportunity for self-strengthening.