Eurasian Economic Union Agrees to US$2 Billion Free Trade Deal With Iran

The Eurasian Economic Union’s (EAEU) prime ministerial council has signed a directive for a temporary agreement on forming an EAEU-Iran free trade agreement. The signing of a full format deal on the free trade area between the member states of the EAEU and Iran will contribute to GDP growth in all EAEU member states, and will boost trade and economic relations, according to the Eurasian Economic Commission.
“According to the results of the EEC econometric analysis, conducted within the framework of the joint research with Iran on the expediency of free trade zone establishment, a sufficient potential of GDP growth for all EAEU member states was deduced (plus US$27 million for Armenia, US$78.6 million for Belarus, US$508.6 million for Kazakhstan, US$12 million for Kyrgyzstan, US$1.3 billion for Russia)” the commission said. The prognosis was based on the scenario of the EAEU adopting a full FTA with Iran, but the transition to such a type of agreement can take time.

The main sector beneficiaries are expected to be in the energy, oil and gas industries, in addition to fruits, related consumables, and cotton.

Trade between the EAEU and Iran can be expected to increase following the completion of the International North-South Transport Corridor. The INSTC is a 7,200km road, rail, and sea route that connects India with Iran and Russia for the purpose of promoting transportation cooperation among the Member States. This corridor connects the Indian Ocean and Persian Gulf to the Caspian Sea via Iran, and is then connected to St. Petersburg and North Europe via Russia. The grouping was formally expanded to include ten other countries, connecting Azerbaijan and Armenia in the Caucasus, then moving north and west to Turkey, Belarus, Syria, and Bulgaria, to Oman in the Middle East, as well as north and east to reach Kazakhstan, Kyrgyzstan, and Tajikistan.

Chris Devonshire-Ellis of Dezan Shira & Associates comments: “It is projects like the INSTC and the development of regional Free Trade Agreements such as those between the EAEU and Iran that will really engineer China’s OBOR ambitions. Although China is not involved in either of these developments, they will have a marked impact on Eurasian trade and development. Understanding how OBOR fits in as well as understanding other regional initiatives is key to appreciating how the entire redevelopment of Eurasia will come to pass, and the impact it will have on the economies of countries such as Iran, India, Russia, China, as well as the Near East and Europe.”

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