Geopolitical Report ISSN 2785-2598 Volume 32 Issue 9
Author: Silvia Boltuc
In a strategic move amid shifting geopolitical dynamics, Kyrgyzstan and Iran are attempting to expand their trade and economic ties, driven by Bishkek’s pursuit of alternative transit routes and access to Iranian oil products, and Tehran’s strategic outreach towards the Central Asian republics considering Western sanctions and recent developments in the Eurasian region.
On July 7th, 2023, Ambassador Extraordinary and Plenipotentiary of the Islamic Republic of Iran to the Kyrgyz Republic Gholam Hossein Yadegari presented his credentials to the President of the Republic of Kyrgyzstan, Sadyr Japarov.
The Kyrgyz head of state noted that the Central Asian republic is interested in cooperation with Iran with an emphasis on trade, economic and investment areas, highlighting the significant role of the Kyrgyz-Iranian intergovernmental commission in this. And he proposed to hold its next meeting this year in Bishkek.
In a recent exclusive interview with Fars News, the Minister of Economy and Commerce of Kyrgyzstan, Daniyar Amangeldiev, confirmed Bishkek’s desire to expand cooperation with Tehran in different fields.
He noted that various activities have been initiated to bring both nations closer and acquaint them with each other’s capabilities. One noteworthy development, for instance, was the specialised exhibition of Iranian companies and goods held in Kyrgyzstan in October 2022.
Previously, in November 2021, Kyrgyz Minister Amangeldiev led an official delegation in Iran and visited the port of Bander-Abbas. During his stay, the Minister held meetings with key Iranian officials, including the Minister of Economic Relations and Finance of the Islamic Republic of Iran, Ehsan Khandozi, the Minister of Roads and Urban Development of the Islamic Republic of Iran, Rustam Ghasemi, and the Governor of Khormazgon Province, Mohandes Mehdi Dustin, and the management of the port of Bander-Abbas, Shahid Rajai .
Efforts are also being made within the framework of the Joint Intergovernmental Commission on Trade, Economic, Scientific, Technical, and Cultural Cooperation between Kyrgyzstan and Iran. The upcoming 13th meeting of the commission is expected to further intensify bilateral relations.
Regarding the Free Trade Zone, as Amangeldiev underlined in the interview, Kyrgyzstan is working within the EAEU to establish a comprehensive free trade agreement with Iran. The removal of barriers with transit states like Uzbekistan and Turkmenistan is being pursued to facilitate the supply of goods to and from Iran. This agreement is projected to provide significant benefits to Kyrgyzstan, including considerable savings on import customs duties and better market access for export goods.
The trade turnover between Kyrgyzstan and Iran has shown growth in recent years, although it still remains relatively small at around $80 million. The Kyrgyz Republic is interested in expanding cooperation with Iran across various economic sectors and has expressed a priority for joint ventures in agricultural processing.
In June 2023, in occasion of the Eurasian Intergovernmental Council in Sochi, Deputy Minister of Economy and Commerce of the Kyrgyz Republic, Nazarbek Malaev, stated the volume of trade between Iran and Kyrgyzstan is growing: in 2022 it increased by 1.8 times, of which exports increased by 14 times, and imports by 1.3 times.
According to the results of the first quarter of 2023, the volume of trade increased by 2.5 times, including imports by 2 times, exports by 5.5 times. Kyrgyzstan imports tea, dried fruits, paints, carpets and other goods from Iran, exports beans, dried fruits, nuts, meat and other goods to Iran.
The Kyrgyz Republic is actively considering utilising the opportunities provided by Iran, such as the allocation of a site in the Free Economic Zone of the port of Bandar Abbas. Access to Iranian ports could significantly enhance Kyrgyzstan’s transit potential and export capabilities, especially in the context of projects like the China-Kyrgyzstan-Uzbekistan railway.
The geopolitical dynamics of Central Asia play a crucial role in shaping the economic cooperation between Kyrgyzstan and the Islamic Republic of Iran. Understanding the regional context and key actors involved is essential to comprehending the prospects and challenges of their bilateral relations.
- Regional Importance
Central Asia has emerged as a region of growing importance in the global geopolitical landscape. Its strategic location at the intersection of Europe, Asia, and the Middle East renders the region a crucial trade and transportation hub.
As a landlocked country, Kyrgyzstan is particularly interested in developing access to the sea and alternative logistics corridors to diversify its transit potential and reduce dependency on existing routes. Iran, as a major regional power, serves as a gateway between Central Asia and the Middle East. The Islamic Republic has long sought to strengthen its economic ties with Central Asian countries, including Kyrgyzstan, as part of its efforts to expand trade and acquire regional influence.
- Iran’s International Relations
Iran’s position as a permanent member of the Shanghai Cooperation Organization (SCO) and its interest in closer cooperation with the Eurasian Economic Union (EAEU) have significant implications for its economic ties with Kyrgyzstan. The SCO serves as a platform for member states, including Kyrgyzstan, to engage in economic, political, and security cooperation.
By becoming a permanent member of the SCO, Iran can further leverage its regional influence and strengthen economic relations with other member states, including Kyrgyzstan. The SCO’s focus on promoting mutual settlements in national currencies can facilitate trade between the countries and reduce reliance on the US dollar in their transactions.
Furthermore, Iran’s Free Trade Agreement with the EAEU presents a valuable opportunity for Bishkek to enhance its economic ties with both Tehran and other EAEU member states. The prospect of a comprehensive free trade agreement with Iran holds the potential to provide a boost to the Kyrgyz economy, granting preferential access to Iranian markets and enhancing export opportunities for Kyrgyz products.
- Economic Complementarity
Kyrgyzstan and Iran exhibit economic complementarity that can serve as a foundation for deeper cooperation. Kyrgyzstan’s main exports to Iran, including agricultural products like beans and cotton fibre, align with Iran’s import demands, while Iranian oil products present an attractive opportunity for Kyrgyzstan, especially in light of Tehran’s efforts to develop domestic production amid international sanctions.
According to Kyrgyz official sources and statements, the Islamic Republic’s industrial prowess, despite the economic blockade, and its agricultural and pharmaceutical sectors make it an enticing partner for Kyrgyzstan, which seeks to establish joint ventures for processing agricultural products. This potential collaboration can contribute to technology transfer and capacity building in Kyrgyzstan’s economy, fostering economic diversification and sustainable growth.
- Transit and Transport Corridors
Bishkek’s possible involvement in the Free Economic Zone of the port of Bandar Abbas represents a significant development with considerable geopolitical implications. Access to the Iranian port provides Kyrgyzstan with an alternative route to the sea, unlocking new possibilities for trade with the Middle East and beyond. This development aligns with Kyrgyzstan’s broader vision of becoming a transit hub in the region, particularly with the construction of the China-Kyrgyzstan-Uzbekistan railway.
The success of this endeavour is contingent on addressing challenges related to insufficient cargo volume and the need to increase export products. As Kyrgyzstan works towards boosting its export capacity and diversifying its products, utilising Iranian ports for logistics and trade can be a game-changer for the landlocked country.
- Navigating Sanctions and Export Controls
Both Kyrgyzstan and Iran have faced economic challenges because of international sanctions. Kyrgyzstan has been dealing with sanctions imposed on its strategic partner, Russia, which have implications for its economic relations. However, the country has demonstrated a willingness to comply with export controls and has engaged in negotiations with the European Union and the United States to facilitate trade while addressing concerns related to dual-use goods.
Iran’s experience with economic sanctions might help Kyrgyzstan, which seeks to enhance domestic production and stimulate consumption of its own products. The Iranian economy’s resilience and continued attempts to find new markets and trade partners despite sanctions showcase the potential for Kyrgyzstan to explore new avenues for economic growth and self-sufficiency.
The economic cooperation between Kyrgyzstan and the Islamic Republic of Iran presents promising prospects in the context of their regional importance, economic complementarity, and shared interests in transit and transport corridors. Both countries are engaged in building closer ties and exploring opportunities for joint ventures, technology transfer, and trade expansion.
While challenges remain, such as navigating sanctions and increasing export capacity, the commitment of both countries to develop their economic cooperation and establish mutual settlements in national currencies signals a positive trajectory for their bilateral relations.
To fully capitalise on the opportunities presented, sustained efforts are required to implement agreed-upon measures, remove barriers to trade, and foster an environment conducive to economic collaboration. International cooperation within the SCO and EAEU frameworks can also play a vital role in facilitating and enhancing economic ties between the two states.
As geopolitical dynamics continue to evolve in the region, both Tehran and Bishkek must adapt to changing circumstances and seize opportunities for mutual benefit. Effective engagement and pragmatic approaches to economic cooperation will be essential for Kyrgyzstan and Iran to realise the full potential of their partnership and bolster their economic development in a rapidly changing world.
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