Iran’s Economic Partnership with EAEU: A Boost Towards Free Trade Agreement Success!

In a significant development for Iran’s international trade landscape, leaders of the five member states of the Eurasian Economic Union (EAEU) have officially endorsed Iran’s observer membership. This pivotal agreement, signed during a ceremony in Saint Petersburg, saw the participation of Iran’s Minister of Industry, Mine, and Trade, Mohammad Atabak. Iran’s new status as an observer member opens doors for enhanced economic collaboration and trade opportunities with EAEU member states.

As Iran embarks on its journey as an observer member of the EAEU, it can now conduct 80% of its trade with member states tariff-free, marking the beginning of a new chapter in economic relations. However, several challenges remain that could undermine Iran’s potential share in global trade.

Despite not yet being a full member of the EAEU, Iran’s long-standing efforts to join the union have finally borne fruit. Achieving observer status allows Iran to participate in union meetings and decision-making processes while gaining access to valuable data shared among member states. This is a vital step toward full membership, which would further strengthen Iran’s economic ties with EAEU countries.

The removal of customs tariffs on various goods is a significant development that has made trade between Iran and the EAEU more accessible. However, several barriers still hinder trade, such as:

• International sanctions: Ongoing sanctions against Iran pose substantial challenges.
• Differences in production standards: Varied health and safety standards can complicate trade.
• Political considerations: Diplomatic relations and political agendas may affect trade flows.

Addressing these obstacles is crucial for Iran to fully benefit from the economic opportunities presented by the EAEU. Fortunately, the previously established Free Trade Agreement (FTA) between Iran and the EAEU offers numerous advantages for exporting high-quality Iranian products to the union’s member states.

The EAEU is recognized as one of the most significant economic organizations globally. The relationship between Iran and the EAEU began in 2015, following the announcement of the Free Trade Agreement by the Eurasian Economic Commission. The most recent development is Iran’s acceptance as an observer member, paving the way for greater economic collaboration.

Looking back at the history of the EAEU, it was established by Russia, Kazakhstan, and Belarus in October 2011. The formal treaty was signed in 2014, with implementation commencing on January 1, 2015.

Recent statistics from the Islamic Republic of Iran Customs Administration (IRICA) reveal promising trade figures, indicating that Iran exported approximately 3.86 million tons of non-oil goods valued at $1.5 billion to EAEU member states during the first nine months of the current Iranian calendar year (March 21 to December 22, 2024). This represents a remarkable growth of 21% in value and 22% in weight compared to the same period last year.

Experts believe that resolving the existing trade barriers could lead to a substantial increase in bilateral trade between Iran and EAEU member states. Currently, Iran exports a diverse range of products, including:

• Agricultural products: nuts, fresh fruits, vegetables
• Dairy and food products: conserves, fruit juices, tomato pastes
• Ironware, pipes, and profiles
• Chemicals: fertilizers, detergents
• Petrochemical products: polyethylene, propylene

Among the EAEU member states, Russia stands out as the largest importer of Iranian goods, totaling approximately 1.96 million tons. Other significant markets include Armenia (1.48 million tons), Kazakhstan (360,000 tons), Kyrgyzstan (44,000 tons), and Belarus (14,000 tons).

Examining the advantages of Iran’s EAEU membership reveals several key benefits:

• Enhanced trade facilitation: Improved trade relations between Iran and EAEU member states.
• Counteraction to US sanctions: Strengthening economic ties with the EAEU can mitigate the impact of sanctions.
• New trade opportunities: Access to economies that are more aligned with Iran’s trade interests.
• De-dollarization efforts: The EAEU’s move to reduce dependence on the US dollar enhances economic freedom for Iran and Russia.
• Strategic positioning: Iran’s role in the International North-South Transport Corridor (INSTC) will be strengthened through its EAEU membership.

The EAEU is a regional economic organization that includes Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan. Its primary aim is to foster trade, investment, and economic cooperation among its members. Iran’s entry into the economic cooperation field began with a preferential trade agreement in 2018, marking a significant step toward expanding trade relations.

In summary, Iran’s observer membership in the EAEU presents a host of economic opportunities. While the recent agreement has set the stage for improved trade dynamics, addressing existing challenges is essential for maximizing these benefits and ensuring sustainable economic growth for Iran.

Reported and compiled by Morteza Ahmadi.