Dec 11, 2018

Earlier this month, an interim agreement on free trade between Iran and the Eurasian Economic Union (EAEU) was approved at the regional body's summit in the Russian city of St. Petersburg. After relevant legal procedures in Iran are fully carried out, the deal is expected to take effect as of early 2019.

Seen as Iran's biggest ever deal on free trade with foreign partners, the document is aimed at the formation of a full-scale free trade zone between Iran and the EAEU member states, under which the two sides will be decreasing or removing export-import duties from bilateral trade. Meanwhile, within one year into the provisional deal's implementation, negotiations on a full transition and perpetuating the agreement will kick off and are scheduled to be concluded by 2020. In case of failure within that time frame, the two sides will then decide on whether to maintain the interim agreement, which can end up in the attachment of a protocol.

Holding 84% of the EAEU’s gross domestic production, Russia is the body's leading member state. Iran has in recent years turned into Russia's geopolitical partner and is now seeking to become its geo-economic one as well. With the recent reimposition of US sanctions on Iran following the former's withdrawal from the Joint Comprehensive Plan of Action (JCPOA), Tehran has been trying to boost business with Moscow and has prioritized that in its economic diplomacy. To that end, Iran is determined to both augment and consolidate non-oil exports to Russia.

Yet to turn into Russia's geo-economic partner in particular, and to become a close business ally of the EAEU in general, Iran faces a complicated and lengthy process. The country's foreign trade statistics for March-November 2018 reported $236.3 million in exports to the union member states. During the same period, Iran imported commodities worth $807 million from them, of which $723 million was Russia's share. The EAEU member states were the destination of 1% of Iran's total exports, while they made up 3% of the entire volume of commodities imported by Iran.

Russia has been Iran's 22nd export partner, while standing ninth on the list of countries Iran imported goods from. Imports from Russia also witnessed a 76% jump compared to the same period in 2017. Iran also doubled its imports from the EAEU member states. The bulk again belonged to Russia that grabbed 75%. Likewise, Russia was the key market for Iranian commodities. Of the EAEU's 1% share of Iran's total exports, Russia held 49%.