Stakes involved in Iran’s partnership with Eurasian Union

Leaders of the Eurasian Economic Union (EAEU) countries will grant Iran an observer status and discuss the joint work of the members and the Islamic Republic within the free trade agreement in their meeting to be held in St. Petersburg on Thursday, December 26.

They are also set to sign a number of documents on forming a unified customs transit system, a common electricity market and a single market for services, harmonizing financial laws and implementing liberalization plans for certain sectors of services.

The meeting comes just a year after the Eurasian bloc, comprising Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, signed a fully-fledged free trade agreement with Iran to eliminate customs duties on almost 90% of goods and establish a preferential regime for almost all trade between Iran and Russia.

The agreement is expected to bring bilateral trade with Iran to $18-20 billion over five to seven years from $6.2 billion in 2022. In the EAEU, 80% of Iran’s trade is with Russia, followed by Armenia (10%), Kazakhstan (8.7%), Belarus (0.6%) and Kyrgyzstan (0.5%).

Iran and Russia have cultivated closer political and economic relations in recent years under their shared goal of countering Western sanctions. They have announced a flurry of joint initiatives, including trading in their national currencies as part of their de-dollarization program.

Barter arrangements have involved exchanging Russian metals for Iranian automobile parts and gas turbines, while the two countries have held talks with Azerbaijan to revive the rail component of the International North–South Transport Corridor to connect them to India.

In the energy sector, the National Iranian Oil Company and Gazprom have unveiled an ambitious plan for $40 billion of Russian investments in Iran to sustain and develop oil and gas fields, build liquefied natural gas facilities and construct gas pipelines.

Deal with Russia heralds Iran as regional gas hub

Last week, much of the news about the signing of a “strategic” memorandum to supply Russian pipeline gas to Iran was lost in political din as the election fever gripped the nation.

Iran’s disenchantment with the West marked by the collapse of a nuclear agreement after former President Donald Trump withdrew the US from the accord in 2018 and imposed more draconian sanctions on Tehran has convinced the Islamic Republic to look to its neighbors for trade.

The Eurasian Economic Union, due to the low volume of its economic relations with the US and the dominance of Russia over the bloc, offers Iran a fertile ground to expand economic diplomacy.

The commercial opening achieved through the free trade agreement and reduction of tariffs and the use of the existing capacities in the union to circumvent economic sanctions, provides a platform for a long-term strategic cooperation between Iran and the EAEU.

The Eurasian Union, as a pole of regional convergence in North and Central Asia, creates a breathing room for Iran for business where the close cooperation of China, India, Turkey and some other East Asian countries with the group holds the prospect of easing up the sanctions pressure.

Over the past few decades, Iran has sought to make the best use of its domestic capacities including privileged geographical features, rich natural resources and young and educated manpower to forge various partnerships in its foreign policy outreach to hedge against hegemonic powers.

Hence, economic diplomacy and the use of foreign policy capacities to advance the goals of national development has been more or less constant in different administrations and reflected in the strategic development documents of the country.

The main issue in cooperation with the union is to formulate short-term strategy for boosting the productivity of the existing commercial opportunities in parallel with a long-term strategy to strengthen the export capacity and reduce the level of vulnerability of the country's production system.

Caution should be observed in binding the country to the union’s regulatory regime where Russia rules supreme and any excessive commitment could expose and compromise the country’s economic, commercial, technological and political capabilities.

That said Iran's economic diplomacy, currently limited to tariffs and free trade, should be expanded to investment and technological cooperation. The government, as the main actor, should also provide for the cooperation of private and non-governmental actors.

The emerging regional integration will create economic interdependence and lead to the internationalization of economy and politics. This will increase the sensitivity and vulnerability of other nations against hostile measures such as unilateral sanctions by the United States.

Therefore, the regional economic convergence will act as a buffer against coercive measures and create economic deterrence.

Press TV’s website can also be accessed at the following alternate addresses:

www.presstv.co.uk