EAEU-Iran: Towards the Creation of a Full-Fledged Free Trade Zone
Persian Files ISSN 2975-0598 Volume 20 Issue 1
OSINT Team*
The recent signing of the Free Trade Agreement (FTA) between the Eurasian Economic Union (EAEU) and the Islamic Republic of Iran represents a significant milestone in Iran’s regional economic integration. Tehran’s substantial concessions in regulatory and tariff domains, coupled with its imminent BRICS membership, underscore a strategic move towards deeper engagement with Eurasian markets. The FTA aims to elevate trade between the parties, with a focus on agriculture, industry, and non-tariff sectors. This report analyses the geopolitical and regional implications, assesses associated risks, presents potential future scenarios, and concludes with recommendations.
Key Findings
- The FTA eliminates import customs duties on almost 90% of the commodity nomenclature, showcasing ambitious concessions by Iran and creating a conducive environment for trade.
- The agreement resulted from the successful implementation and effectiveness of the Interim Agreement since 2019, leading to a substantial growth in mutual trade between the EAEU and Iran.
- Exclusive conditions for agricultural and industrial goods, along with additional agreements in non-tariff sectors, indicate a comprehensive approach to fostering economic cooperation with Russia, Central Asia and the Caucasus.
EAEU: Background Information
On December 25th, 2023, the Supreme Eurasian Economic Council convened a meeting in St. Petersburg. Following the forum, a FTA was signed between the EAEU and its member states on one side and the Islamic Republic of Iran on the other side.
The FTA builds upon the previous Interim Agreement, which, despite its limited coverage initially, facilitated a significant increase in mutual trade from 2.4 billion dollars in 2019 to 6.2 billion dollars in 2022.
The current FTA will eliminate import customs duties on almost 90% of the commodity nomenclature, representing over 95% of Russia-Iran mutual trade.
Analysis
The FTA signifies a strategic move by Iran towards deeper economic integration within the Eurasian region, a move that aligns with the country’s upcoming membership in the BRICS. The emphasis on agriculture and industrial goods, coupled with non-tariff sector agreements, reflects a comprehensive approach to economic collaboration. The agreement not only solidifies Iran’s position in the Eurasian markets but also offers substantial opportunities for EAEU countries to access Iran’s diverse market and foster economic growth. Tehran had not previously provided any country in the world with concessions of comparable scale in both regulatory and tariff parts. This significance step will contribute to the development of the North-South Economic Belt.
Risk Assessment
The principal risk lies in the potential delay or disruption of the ratification procedures in both Iran and EAEU countries, which could impede the timely enactment of the FTA. Additionally, geopolitical tensions in the region may affect the smooth implementation of the agreement. Regarding the transport link, special attention should be paid to resolving transport and logistics issues, as well as addressing transit traffic matters.
Scenarios Analysis
- Smooth Implementation. If ratification procedures proceed without significant delays, the FTA’s smooth implementation could lead to enhanced economic cooperation, benefiting all parties involved.
- Geopolitical Challenges. Unforeseen geopolitical challenges may hinder the agreement’s execution, potentially affecting trade relations and economic collaboration between the EAEU and Iran.
- Economic Synergies. Successful implementation of the FTA could pave the way for further economic synergies, positioning Iran as a key hub for trade and commerce within the Eurasian region.
Conclusion/Recommendations
The signing of the Free Trade Agreement between the EAEU and Iran marks a pivotal moment in regional economic partnerships. To ensure the timely enactment of the agreement, it is recommended that all parties expedite the ratification procedures. Furthermore, ongoing diplomatic efforts should address potential geopolitical challenges, fostering an environment conducive to seamless economic collaboration. As the FTA comes into effect, stakeholders are encouraged to explore and capitalise on the diverse opportunities presented by Iran’s burgeoning market, promoting shared prosperity and economic growth within the Eurasian region.
*We based this report on the article written by Vlad Kondriatev and published by our media partner, Kaspirskij Vestnik.
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