Russian-led union signs FTA with Iran

MOSCOW:

Members of the Russian-led Eurasian Economic Union (EEU) have signed a fully-fledged free trade agreement with Iran, Russia’s economy ministry and the EEU said on Monday.

The agreement will become permanent and replace a similar temporary pact in force since 2019. The previous deal facilitated mutual trade with Iran and increased it to $6.2 billion in 2022 from $2.4 billion in 2019.

The EEU comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. Both the region and Iran have taken on additional significance for the Kremlin after Western sanctions over Moscow’s conflict in Ukraine limited Russia’s foreign trade routes and forced it to look for markets outside Europe.

The new deal will eliminate customs duties on almost 90% of goods, while the agreement establishes a preferential regime for almost all trade between Russia and Iran.

Russian Economy Minister Maxim Reshetnikov said the deal would allow Russian business to save around 27 billion roubles ($294 million) each year.

Earlier this year, Russia and Iran signed a deal to finance and build an Iranian railway line as part of an embryonic international North-South Transport Corridor.

The Rasht-Astara railway is seen as an important link in the corridor, intended to connect India, Iran, Russia, Azerbaijan and other countries via railways and sea – a route that Russia says can rival the Suez Canal as a major global trade route.

“The unique North-South transport artery, of which the Rasht-Astara railway will become a part, will help to significantly diversify global traffic flows,” Russian President Vladimir Putin said on the occasion.

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He also said the 162 km (100 mile) railway along the Caspian Sea coast would help to connect Russian ports on the Baltic Sea with Iranian ports in the Indian Ocean and the Gulf.

Similarly, in April, Russia started fuel exports to Iran by rail this year for the first time after traditional buyers shunned trade with Moscow, according to industry sources and exports data.

Russia and Iran, both under Western sanctions, are forging closer ties in order to support their economies and to undermine Western sanctions which both Moscow and Tehran cast as unjustified.

Western sanctions on Russian oil products over what Moscow calls its “special military operation” in Ukraine have reshaped global fuel markets with tankers taking longer routes and suppliers choosing exotic destinations and ways of transportation.

Last autumn, Russia’s Deputy Prime Minister Alexander Novak announced the start of swap supplies of oil products with Iran, but actual shipments only started this year, sources said.

In February and March, Russia supplied up to 30,000 tonnes of gasoline and diesel to Iran, sources familiar with the export data told Reuters.

All the volumes were supplied by rail from Russia via Kazakhstan and Turkmenistan. One of the sources said that some gasoline cargoes were sent on from Iran to neighbouring states, including Iraq, by truck.

Iran is an oil producer and has its own refineries, but its consumption exceeded domestic fuel production, especially in its northern provinces, a trader in Central Asian oil products market earlier said.

Published in The Express Tribune, December 26^th, 2023.

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