While the news of Iran’s membership in the Eurasian Economic Union (EAEU) has been covered many times by the media these days, it should be noted that Iran is not going to become an EAEU member but rather an agreement has been signed to reduce the customs tariffs between Iran and the EAEU. It will run within three years and, if successful, will turn into free trade between Iran and the Eurasian Economic Union.
Therefore, Iran is not a member of the Eurasian Economic Union because the country is not in the geographical space of Eurasia. Only a preferential free trade agreement has been signed between Iran and the EAEU, which the government submitted to the parliament last year and was approved by the MPs in June. Last week, the official note of the Islamic Republic of Iran was submitted by the Iranian embassy in Moscow and will run until October 27, that is in less than 60 days. The EAEU has pledged to reduce tariffs of 500 items, and Iran has pledged 360 items. That is, the total number of commodities to be covered by trade tariff cuts is over 800 items. Another point is that EAEU member states are Russia, Kazakhstan, Kyrgyzstan, Armenia and Belarus, and it started work in January 2015. The Eurasian Economic Union is therefore a new organization.
Concerning the impact of Iran’s cooperation with the Eurasian Economic Union, it should be borne in mind that this agreement could create an export leap for Iran, namely Iran can export items such as flowers, carpets, carpets, foodstuffs and citrus fruits, and, on the other hand, import items such as wheat, meat, cereals and industrial machinery from the EAEU member countries.
In the meantime, the quality of our products and their competitiveness must be enhanced in order to make the most of this deal. Another point is that under the sanctions, this kind of cooperation can create a breathing space for us, although it certainly cannot solve all the problems, but as it was said, it will create a breathing space for our country.
On the other hand, since bank-to-bank swaps are not carried out in euros and dollars but in the currencies of countries in particular IR rial and ruble, Swift and INSTEX (Instrument in Support of Trade Exchanges) are independent financial systems designed to be an internal system between Iran and the Eurasian Union. It should also be borne in mind that there is a close link between Iran and these countries in terms of land and rail, which is very important in these circumstances.
Another point is that Singapore, Vietnam and Turkey are also negotiating a free trade agreement with the EUEA, but Iran is the first country to have signed and ratify the agreement.
Finally, it must be borne in mind that the success of the deal depends on how the various Iranian agencies, the Central Bank, the Customs Administration, the border terminals and free trade zones would operate. If all these bodies work together and operate in harmony, the project is likely to succeed. Moreover, domestic production must be of high quality in order to be able to compete.
As the tariff rate is set to go down to zero in the next three years, this will make both Iranian and Eurasian citizens to pick up the products in a competitive way.
If an agreement is reached with the Eurasian Economic Union (EAEU) it can be used as a model for other regions such as the Association of South East Asian Nations (ASEAN) as well as trade ties with other countries.