The Eurasian Economic Union (EAEU), which includes Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan, will sign a comprehensive partnership agreement with Iran on December 25. Russian Presidential Assistant for International Relations Yuri Ushakov told reporters that this happened in St. He said it would take place at the summit in St. Petersburg. According to him, the document is “very important in the context of the development of not only economic ties, but also further economic ties between Iran and the EAEU countries.”
Trade
Candidate of Economic Sciences, Associate Professor at the Department of Global Financial Markets and Fintech at the Russian University of Economics. GV Plekhanov Ilyas Zaripov noted that Tehran is primarily interested in trade with the EAEU and, above all, with Russia, which accounts for 75% of transactions within the union.
“There are areas of mutually beneficial cooperation – military, space technologies, dual-use technologies (Can be used in both military and civilian products)“Scientific and production cooperation in the fields of nanotechnology, pharmaceuticals, information technology, energy,” Zaripov told socialbites.ca.
Expanding trade would allow Moscow and Tehran to soften the impact of Western sanctions against them, the economist added.
Russia and Iran announced that they plan to increase their trade turnover by 10 times compared to 2021, from $4 billion to $10 billion in the coming years. 40 billion dollars. The trade volume between Moscow and Tehran already exceeds 5 billion dollars. This is almost three times higher than in 2018 and 20% higher than last year.
What can Russia get from Iran?
Speaking to socialbites.ca, Konstantin Kharchenko, associate professor of the Department of State and Municipal Administration at the Financial University, said that today Russia needs equipment for aircraft, auto parts and gas turbines among Iranian products.
“The unavailability of foreign products previously supplied from the West and in demand in Russia opens solid market niches for Iran. This includes clothing and household appliances,” the economist added.
BitRiver financial analyst Vladislav Antonov emphasized in an interview with socialbites.ca: Fruits, vegetables, nuts, dried fruit, spices and handmade carpets can come from Iran to Russia..
What can Iran get from Russia?
Kharchenko believes that Iran needs Moscow’s unique capabilities in the field of nuclear energy, as well as Russian steel.
According to him, in the pre-sanctions period, agricultural products and food dominated the exports of both Iran and Russia. The Iranian side announced that it plans to purchase corn, barley, vegetable oil, oil cake and sunflower seeds from foreign markets at the end of summer 2023. Among livestock products, Iran is ready to buy mainly lamb and beef from Russia.
“Traditionally, Russia has been the largest wheat supplier to the Iranian market. However, the sufficient amount of this product harvested in Iran this year is a factor that caused the decrease in imports. The economist also said that Iran also needs oilseed supplies for food and feed purposes.
Antonov added that Iran could also purchase timber, equipment, mineral fertilizer and military equipment from Russia.
Energy
Antonov suggested that despite the obvious rivalry, Moscow and Tehran would expand cooperation in the oil, gas and electricity sectors.
“Russian companies can invest in the development of Iranian energy infrastructure by providing advanced technology and equipment, as well as personnel training. “In contrast, Iran has a wealth of experience working under sanctions and can share this with its Russian partners,” he said.
The countries also plan to implement joint projects to export energy resources to third countries.
Cars
Automobile experts interviewed by socialbites.ca doubt that the Russian car market will be filled with a large number of affordable cars from Iran. This is not in the interest of the Russian Federation and domestic producers, says Maxim Kadakov, editor-in-chief of Za Rulem magazine.
“I don’t expect any serious expansion. We need to understand what a free trade agreement means and what the tax preferences are. Will there be zero customs duty? They will still have to pay the recycling fee and the amounts are crazy. The cars won’t be very cheap. The cheapest of these cars compete directly with Lada. In terms of protecting our industry, it is not yet very profitable for Russia to bring cheap cars here.“, explained the expert.
Iranian automotive companies have been planning to enter the Russian market for several years but have never been able to do so. According to Kadakov, Iranians are not used to working in modern conditions, where significant investments are required to achieve results in the dealer network, marketing and advertising, even if they are stuck with sanctions.
“All they have offered potential partners so far are cars and the price at the border; to these you also need to add delivery throughout Russia, customs clearance, disposal fees, etc. And then figure it out yourself. For modern conditions, such an approach to gaining ground in the market is very strange, it does not work. To seriously enter the market, you need everything from warranty conditions to spare parts supply, this is a big investment. “Their approach is to make money today, but no one knows what will happen tomorrow,” he said.
Alexey Serezhenkin, deputy general director of the Association of Russian Automobile Manufacturers, says that Iranian cars will be able to compete with AvtoVAZ products, but everything will depend on the pricing policy and the possibility of operation in terms of spare parts and maintenance.
“Iran will not fill our country with its cars; There is someone to fill the market, this is China. The level of Chinese automobiles has increased recently, and automobile production volumes in China have increased to 22 million units per year. Can you imagine how powerful you are? We will produce 600 thousand passenger cars this year. “The Iranians have the capacity to produce cars, but they are not in demand in Russia today,” Serezhenkin added.
Iran’s transit corridor
Dmitry Rogov, also the founder of the RogovMobil company (Specializes in turnkey car delivery from abroad) he believes this Iran may be a new channel for automobile supply to Russia.
“It requires a lot of careful research and you need to understand how this will work as you try to get the first experience. Cooperation within the EAEU is uneven; For example, Russia’s most active connections are with Belarus and Kyrgyzstan, but not so intensely with Kazakhstan and Armenia,” explained the expert.
According to him, the introduction of the increased recycling fee in 2023 showed market participants that interaction within the EAEU is being established quite quickly. However, he emphasized that those involved in foreign trade activities learned about the changes after the event and received clarification only in practice and within a few months after the law came into force.
socialbites.ca appealed to the Eurasian Economic Commission (EEC) with a question about how the procedure for importing cars from Iran to Russia will change. The EEC stated that they could respond only after the free trade area agreement is signed between Iran and the EAEU.
finance
According to Antonov, Moscow and Tehran will most likely switch to agreements in national currencies (ruble and Iranian rial).
“This will simplify business operations and reduce costs for companies in both countries. The analyst noted that it is also possible to develop cooperation between the banks of the two countries.
Tourism
Additionally, Moscow and Tehran are discussing the introduction of a visa-free regime.
“Removal of visas will attract Moscow’s attention” twice as much It was seen that there were more tourists coming from Tehran than before the pandemic. Russians will be able to visit Iran more often, and Iranians will be able to travel around Russia, which is positive for both countries. Russia will attract foreign investment, Iranians will benefit from the services of our hotels, restaurants and shops,” thinks Antonov.
This agreement does not provide for a simplified acquisition of residence permits and Russian citizenship for Iranians in the Russian Federation.
“It is too early to address this issue and discuss Iran’s possible full membership in the EAEU. First of all, we should establish a free trade zone with Iran and evaluate the effectiveness of this mechanism and its benefits for Russia. Only then should we start taking further steps towards integration,” Zaripov concluded.
Benefits for Russians
According to Zaripov, Russians will be able to pay for tourism and other services in Iran with ruble cards.
The economist added that cheap vegetables and fruits from Tehran will first appear on the shelves of Russian stores.
Iran is the world’s largest peanut exporter. Iranian cream, which is offered in industrial packaging for the use of confectioners, is also valuable. You can find Iranian watermelons in the Russian market in June.
Kharchenko described the advantage of Iranian food products as their organic nature, as well as the minimal use or complete absence of preservatives.
“Iran’s advantage is also its own fabric production and cheap labor, which allows us to create competitive prices. However, Iranian clothing brands are mostly unfamiliar to Russian consumers; “These need to be promoted,” he said.
He added that Russia will start importing noticeably more household appliances, especially refrigerators, from Iran in 2022-2023.