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Iran-Central Asia Trade Making New Highs

Tuesday 6 June 2023
Iran-Central Asia Trade Making New Highs

Alwaght- For a long time a scene of ‘Great Game’ of big powers such as Russia, the US, and Britain, Central Asia in recent years has seen a newcomer like Iran as a key player in the club of the heavyweights to secure for itself a toehold in this strategic region.

Due to cultural bonds with Central Asian states, geopolitical position, a large-scale economy in the region, and common security interests concerning terrorism especially in Afghanistan, Iran has managed to make gains for powerful entry into the region.

Meanwhile, administration of President Sayyed Ibrahim Raeisi of Iran, which since the beginning put ‘pivot to the East’ policy and expansion of partnership with neighbors high on agenda of its foreign policy, has opened a new chapter in Tehran-Central Asia relations, with its effects glaringly apparent in the form of boost of trade with Central Asian republics over the past two years.

In this regard the Iranian government spokesman on Tuesday said that Iran's exports to Central Asia, Caucasus, and Russia grew 50 percent compared to the year before in the first two months of New Persian year (from mid-March to mid-May). Rahmatullah Khormali, director general of Central Asia, Caucasus and Russia of the Trade Development Organization of Iran said that Iranian exports to these regions grew by 18 percent last year and by 50 percent in the first half of the year compared to the same period last year.

“Iran's exports to the countries of Central Asia, Caucasus, and Russia reached more than $3.2 billion last year,” Khormali said, adding that last year Turkmenistan with $460 million and Uzbekistan with $290 million had the highest trade volume with Iran.  The trade between Iran and Kazakhstan in 2022 compared to 2021 increased by 20 percent and reached $528 million from $440 million. The trade with Kyrgyzstan and Tajikistan has also reached a significant figure last year with an increase of more than 20 percent, and Iran had exported goods to Tajikistan worth about $170 million. Also, in the last two months, Turkmenistan with $27 million and Uzbekistan with $20 million became Central Asian trade partners with highest trade volume with Iran.

Omid Golzari, the interim head of public affairs and international relations of Customs of Iran, a couple of days ago on the sidelines of the economic forum of Eurasia Economic Union mentioned this growth in Iran's trade with the region, adding: “Last year, the trade volume of Iran and the member states of the Eurasian Union was $5.5 billion, and with the signing of the Comprehensive Free Trade Agreement with this union, it will triple.”

Though Iran could not make a proper place in the strategically important Central Asia over the past three decades since independence of its republics, due to changes the world has undergone since the start of Ukraine war, boosting ties with this region gained increasing importance for Tehran. Neutralizing the Western sanctions, gaining economic influence in its countries, and diversifying the partners in foreign policy are the main factors motivating Tehran's economic approach to Central Asia.

Central Asian leaders have always looked for new markets that could get out of the geographical bottleneck and gain access to high seas, and they found all these advantages in Iran. That is why since inauguration of new government in Iran two years ago, leaders and officials from Central Asia paid visits to Tehran to take advantage of the capacities of the Islamic Republic to improve their regional position.

Last year, Iran and Turkmenistan agreed on the Iranian gas swap from Turkmenistani soil to Azerbaijan, and they are going to transfer 1.5 to 2 billion cubic meters of gas to Azerbaijan via Turkmenistan every year. They have also agreed to increase this volume of gas exports to double the current figure. Turkmenistan is Iran's gateway to Central Asia, and if border crossings and markets are reopened, customs tariffs are reduced, and visas are dropped, the path will be paved for the expansion of trade relations and the entry of Iranian businessmen to regional economies.

Driven by their cultural and lingual commonalities, Iran and Tajikistan are heading go bolstering their trade exchanges. Last year, they signed 17 agreements on trade, transportation, education, tourism, and resumption of Tehran-Dushanbe flights, with a majority of these deals under implementation.

Senior Iranian and Kazakh officials signed agreements on transportation, energy, investment, tourism, establishing joint chambers of commerce and inter-government economic commissions, and facilitation of private sector activities and visa issuance, and their trade is set to touch $3 billion by 2030, several folds of the current figure. Kazakhstan, as the richest country in Central Asia, exports two-thirds of its oil to world markets through Russian ports, which are now facing problems due to Western sanctions, and it is looking for alternative export routes, and Iran offers the best option.

Uzbekistan, in lower rates in terms of economy and natural resources, counts on trade with Iran to get rid of the economic bottleneck. With restrictions removed, now 350 Iranian companies are working in Uzbekistan, and the Uzbeks are seeking access to the high seas of Indian Ocean and also Persian Gulf through Iran.

The Iranian administration eyes turning Iran into the regional energy hub, but this takes fundamental arrangements. If Iran can expand its transit routes and involve many countries in a network of interconnected routes, it can get the regional energy pulse in the future.

Though Iran's trade volume with Central Asia is less than 2 percent of its total foreign trade and this is trivial compared to rivals like China and Russia, the policies of administration of President Raisi are expected to uplift it to a considerable point. If the agreements inked over the past two years are properly implemented, a trade volume of over $10 billion with Central Asia is not out of reach. Evidence shows that the two sides are resolved enough to reach this volume.

The Iranian and Central Asian exports and imports cover a wide range of goods. According to statistics, Iran exports various types of spare parts, various plastic products, industrial machinery, audio and video equipment, various medicines, aluminum, mineral fuels, grains, fruits, dried fruits, tea, iron and steel products, construction materials and chemicals to Central Asian republics. On the other hand, the main Iranian imports from Central Asian countries are electricity and energy to meet the needs of its border areas.

North-South Corridor, a booster to bilateral relations

The Iranian-Central Asian trade is growing day by day, and should the North-South corridor be completed in the near future, their relations will experience further expansion, too. This is because the Central Asian states have a special focus on this corridor to send their goods to Indian Ocean and the Persian Gulf. By using this transit route, Iran can transfer goods to the Indian Ocean and the Persian Gulf in the shortest possible time and at a lower cost than other routes, and to improve the quality of services, it can also improve its railways and infrastructure. Due to its location in the best transit position between the Caspian Sea and the Persian Gulf and in the east-west transit position, Iran can make a suitable route for the transit of Central Asian countries' goods. According to Iranian customs officials, President Raeisi’s administration will work on creating more free trade zones to help increase Iran's attractiveness as a transit hub for regional trade.

The first Iran-Central Asia summit that was held last year focused on transit cooperation, and the participating countries decided to increase transit of goods to 20 million tons per year. Given their membership in Shanghai Cooperation Organization, Economic Cooperation Organization, and European Union, Iran and Central Asian states can advance the multi-faceted interactions within the framework of these regional organizations.

Cooperation within economic unions

Along strengthening their bilateral ties, Iran and these states are also bolstering their partnership within regional organizations.

“There are big programs in the field of transportation, finance, agriculture and other fields, which will be realized with the political support of the countries,” Andrey Slepnev, the minister in charge of trade of Eurasian Economic Commission, said in January after Tehran and Central Asian states signed free trade agreement.

Iran and the Eurasian Economic Union (EEU) reached a free trade agreement in October 2018, according to which about 862 items were subjected to preferential tariffs. According to this agreement, Iran enjoyed easier export conditions and lower customs duties for 502 items of goods, and the same applies to 360 items of goods from the member countries of the EEU. The free trade zone agreement highlights the will of Tehran and Moscow to deal with Western sanctions and economic pressures and expand their cooperation with former Soviet republics.

Iran has also voiced its readiness to strengthen the EEU and there is just one step to realization of this goal. This union was founded in 2015 with the aim of facilitation of trade among its member states and also with other countries. Last year, this 5-member bloc traded worth of $800 billion goods with other parts of the world. Iran is currently negotiating to join the union to take advantage of its market opportunities. Economic experts suggest that Tehran views Eurasia as a gateway to global trade and an opportunity to counter US sanctions that seek to isolate it from global markets. Iran now expects to have $15 billion in annual trade with the EEU over the next five years if it becomes its sixth member.

Eurasian economic opportunities are significant for Iran because in the past years, Tehran has fallen behind its rivals in the market of Commonwealth of Independent States and had no proper trade turnover with these countries, while Iran and Eurasia can meet each other's needs with the lowest price and supplementarily. And finally, with Iran-Central Asia trade boost, Iran's ground for non-oil exports to this region will be prepared, something helping Iran exit its single-product economic status.

Tags :

Iran Central Asia EEU Russia Western Sanactions

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