Iran Commences Eurasian Economic Union Free Trade With Russia & Kazakhstan

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Iran has begun its new era of Eurasian Economic Union Free Trade, and has signed off an initial agreement with Russia and Kazakhstan to broaden cooperation with those countries within the framework of a recently signed agreement with the Eurasian Economic Union (EAEU).

Iran’s position within the EAEU can be seen in the following graphic:

eurasian-economic-union_update

“The first trade deal is the transit and swap of wheat.” Deputy Head of Iran’s Trade and Agricultural Organization Ali Akbar Mehrfard said on Sunday. He noted that under the interim trade agreement signed between Iran and the Eurasian states, the volume of trade exchanges between them will increase.

Iranian Deputy Minister of Agriculture Ali Akbar Mehrfard said currently the exact amount of wheat to be exported is not set under the deal as it is up to the private Iranian private millers to decide. “The memorandum covers three important aspects. Firstly, Russia and Kazakhstan can use Iran’s logistical capabilities to transit and deliver their wheat to third countries. The second aspect covers the joint development of wheat SWAP contracts with Russia and Kazakhstan.” “The third aspect is related to the conditions of temporary importation,” Mehrfard told reporters at the signing ceremony.

Iran does not export its locally-produced flour and it has enough wheat to meet the flour demand in the country. Meanwhile, Deputy Agriculture Minister of Kazakhstan Gulmira Isayeva said Iran is a promising market for Kazakhstan as the country seeks to expand its wheat export market. She said Kazakhstan supply between 500,000 and one million tonnes of wheat on average per year. In 2018, the country exported a total of 11.7 million tonnes of grain.

Russia is the world’s largest producer of wheat and exported 43 million tons of wheat last year.

On October 27 this year, the Preferential Trade Agreement (PTA) between Islamic Republic of Iran and EAEU came into effect for 862 products.

The current trade volume exchange between Iran and EAEU nations stands at US$2.6 billion. Now the FTA has been signed off, this opens up a new trade corridor that can be expected to develop fast.

This agreement includes 862 products, with 360 related to the EAEU and 502 to Iran.

Head of Trade Promotion Organization of Iran (TPOI) Hamid Zadboum has stated that the EAEU deal  is an outset of doing free trade and business with Eurasia; preliminaries of free trade with Eurasian zone are provided one year after the implementation of this trade agreement.”

There remain another two years of negotiations to increase the scope of the FTA in terms of specific products to be traded between Iran and the EAEU. Iran is currently under heavy sanctions from the United States and has been blocked from the global SWIFT network, making payments for oil products difficult. It has instead been trading with countries like China and Russia in gold, and also plans to launch a resource backed cryptocurrency to mitigate against US dollar trade. However, aside from the energy industry, trade opportunities remain within agriculture, electronics, aviation and automotive industries as Iran seeks alternative suppliers in the longer term.

Iran is also home to the International North-South Transportation Corridor which links Mumbai to Moscow and is increasing diplomatic and trade ties with both as it turns away from the United States and EU markets and politics.

 

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