Russia and Iran intensify trade and economic ties

Iran and Russia aim to strengthen cooperation in different economic sectors (Credits: CC BY 4.0, Kaspijskij Vestnik)

While the Western world is increasingly moving away from Russian exports, Moscow and Tehran are taking measures to intensify trade and economic cooperation, as evidenced by intensive negotiations between the parties.

A delegation of Iranian businessmen will visit Moscow in early April to present industrial and investment potential. Notably, Russia and Iran are working on the issue of combining financial message transmission systems bypassing the SWIFT international system for transferring interbank payments. Tehran is also considering recognising the Russian payment system “Mir” cards. Moreover, Eurasian Economic Union member states are preparing an agreement to establish a free trade zone between them and the Islamic Republic of Iran (Russia-Iran entente on Eurasian current issues and dynamics).

Iran – Russia’s potential cooperation in agribusiness, industry and trade

On March 18th, 2022, a working meeting was held in Moscow between the Deputy Head of Rosselkhoznadzor Konstantin Savenkov and the Head of the Iranian Plant Protection Organization (IPPO) Jahpur Jamshid Alai Moghadami and the Head of the Iranian Veterinary Organization (IVO) Seyyed Mohammad Aghamiri. The event was attended by senior officials of the Iranian Embassy in Moscow and the Ministry of Agriculture of Russia. The parties confirmed their intention to develop bilateral trade and business relations intensively, adhere to the principles of openness and trust, and build a direct dialogue to resolve emerging issues promptly.

The Iranian side said that it is interested in increasing the volume of imports of grains and oilseeds from Russia from the current 7 million tons per year to 12 million tons. In addition, Iran plans to consider opening its market for Russian poultry, lamb and other meat products in the near future. Shortly, Iranian specialists will come to Russia to inspect poultry processing enterprises.

As for Iranian food exports to Russia, the talks discussed Iran’s ability to supply up to 2 million tons of vegetables, such as tomatoes, eggplants, cucumbers, peppers, greens and apples. The volume of imports of these crops to Russia by the Iranian side is estimated at 570,000 tons.

The parties discussed in detail the existing quarantine and plant protection systems in Russia and Iran, the mechanisms for ensuring phytosanitary and veterinary safety, which allow for strict control over the supply of products for export.

During the meeting, an agreement was reached to promptly complete work on two agreements that will regulate the interaction of the parties in the field of the safe use of pesticides and agrochemicals and allow for the establishment of electronic document management for traceability of trade processes.

A separate topic of the dialogue was the export of dairy products from Iran. Rosselkhoznadzor reported that after the reconstruction, the international checkpoint “Yarag-Kazmalyar” (Republic of Dagestan) is starting to work, the import of products through which will significantly simplify logistics between countries. The Russian department noted that Iranian enterprises certified for export consistently supply Russia with a wide range of dairy products in consumer packaging, including cheese, butter, and cream. In a short time, the Rosselkhoznadzor will send detailed explanations to the Iranian Veterinary Service regarding the situation with frozen concentrated cream, the import of which to Russia is temporarily limited.

A few days after the talks in Moscow, on March 23th, 2022, a working meeting was held between the Russian Ambassador to Iran, Levan Jagaryan and the head of the Trade Development Organization, Deputy Minister of Industry, Mines and Trade of Iran A. Peymanpak. Rustam Zhiganshin, Trade Representative of Russia in Iran, reportedly took part in the meeting.

At the talks, the Iranian side confirmed the growing interest of the country’s business circles in expanding trade and economic cooperation with Russia. It was announced that a delegation of Iranian businessmen is scheduled to visit Moscow in early April to present industrial and investment potential. More than forty companies producing food products, seafood, cosmetics, household chemicals, construction and sanitary materials, leather and textile products, accessories, polymers, plastics, medicines have already expressed their readiness to hold meetings at the site of the Chamber of Commerce and Industry of the Russian Federation.

During the conversation, A. Peymanpak spoke about the demand for Russian mining equipment and machinery, buses and minibuses, locomotives, ships, agricultural raw materials in Iran and expressed the seriousness of intentions to implement joint investment projects in the automotive industry, medicine and agriculture.

Rustam Zhiganshin informed the Deputy Minister of Industry, Mines and Trade of Iran about the increased number of proposals from Russian companies for cooperation with Iranian partners.

In turn, the Head of the Trade Development Organization, A. Peimanpak, assured that the Iranian side would provide the necessary assistance in expanding foreign economic relations with Russia.

Against the backdrop of the negotiations held in March, it became known that Russia and Iran are working on the issue of combining financial message transmission systems bypassing the SWIFT international system for transferring interbank payments. Kazem Jalali, Ambassador of the Islamic Republic of Iran (IRI) to Russia, told journalists.

“We are making efforts in this direction (connecting Iranian banks to the SPFS) to hold good events in this area in the future,” Jalali said.

As the Iranian ambassador noted, his country is also discussing with Russia the recognition of the cards of the Russian payment system “Mir”. “This issue is also on the agenda. We discussed it with our Russian colleagues,” the ambassador said.

Notably, the integration of the Iranian payment system Shetab with the Russian MIR was announced in 2017 when a corresponding agreement was signed between the countries. In August 2017, much technical work began, but the US withdrawal from the JCPOA in 2018 partially created sanctions risks for certain Russian banks planning to integrate with the Iranian Shetab system.

The Financial Message Transfer System (SPFS) of the Bank of Russia was created in response to the risks of a possible disconnection of Russian banks from SWIFT, an international interbank system for transmitting information and making payments.

Conclusion

In conclusion, one more important event that took place in Tehran in March should be noted. On March 14th-16th, 2022, the second round of negotiations was held to prepare an Agreement on the establishment of a free trade zone between the Eurasian Economic Union and its member states and the Islamic Republic of Iran.

The event was attended by representatives of the Eurasian Economic Commission and the Trade Development Organization of Iran, the Russian Foreign Ministry, the Russian Ministry of Economic Development, the Russian Ministry of Industry and Trade, various departments of the EAEU member states joined via videoconference. As a result, the parties agreed to hold the next round of talks in Moscow.

Recall that the Interim Agreement leading to forming a free trade zone with Iran was signed on May 17th, 2018 and entered into force on October 27th, 2019. As a result, the countries of the Eurasian Economic Union (EAEU) and Iran are increasing the volume of mutual trade. Thus, according to the Iranian customs service data, the trade turnover between Iran and the EAEU countries for 11 months of the current Iranian year (March 21st, 2021 – February 19th, 2022) increased by 48%, amounting to more than $5 billion.


Author: Vlad Kondratiev. Article in media partnership with Kaspijskij Vestnik initially published in the Russian language at the following link: Россия и Иран активизируют торгово-экономические связи. Translated by: Silvia Boltuc. Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of SpecialEurasia. Assumptions made within the analysis are not reflective of the position of SpecialEurasia.