Although Iran’s full membership in the EAEU is still unclear, it seems that with the implementation of recent agreements, we will witness a serious renaissance of trade relations and a significant leap and a new window for the beginning of new economic relations between Iran and the member states of the union.
In the past years, EAEU has taken steps to facilitate trade, sustainable economic development, a single market for goods, services, labor, and capital, modernization, increasing competitiveness, the gradual removal of customs laws, the establishment of a common foreign tariff, and customs harmonization and economic cooperation, and growing the GDP according to the guidelines until 2025.
Iran’s name was first raised for joining the union in May 2015. The EAEU has economic, cultural, political, and geopolitical commonalities with Iran and is particularly important.
Iran and the EAEU signed an interim preferential trade agreement in 2018. The agreement with the Eurasian Economic Union is one of Iran’s most important, serious experiences in agreeing on a regional economic union.
In May 2024, the EAEU received Iran’s desire to obtain observer state status. Then the EAEU examined Iran’s application for observer state status.
Also, with Tehran’s participation in the Supreme Economic Council of EAEU meeting, the presence of the First Vice President at the previous meeting of the Eurasian Economic Forum, and Tehran’s efforts and Moscow’s support, a full-fledged free trade agreement with Iran and the approval of Iran’s observer status in the EAEU last December, and its signing by the heads of the five member states of the union in St. Petersburg led to the signing of the agreement by the leaders of the five member states of the union in St. Petersburg.
Tehran’s approach and opportunities
In recent years, Iran has included the “Look East” policy, expanding relations with its Asian neighbors, and membership in regional organizations in its foreign policy.
Iranian officials have repeatedly emphasized their commitment to expanding bilateral and multilateral economic relations with the EAEU in the past year. In fact, Tehran is seeking deeper integration into the regional economy, strengthening its presence in international markets, playing a more active role, and strengthening political relations with the member states of the union.
In this regard, the Iranian parliament also approved the general terms of the 2023 free trade agreement with the five EAEU member states.
The strategic goal of the Eurasian Economic Union is to deepen regional integration and create a new architecture of international economic relations. Therefore, the connection between the EAEU, SCO, ASEAN, and BRICS countries also benefits Tehran’s interests.
The EAEU’s respect for the independence and territorial integrity and the specifics of the political structure of its member states, common interests, equality, market economy, and the integrity of the Eurasian economic space are important incentives for Iran to cooperate further.
Iran and Russia have announced a sum of joint initiatives in recent years, including trade in national currencies. However, due to Russia’s role in the bloc, the EAEU provides Iran with a suitable platform for expanding economic diplomacy and using foreign policy capabilities to advance national development goals.
Iran considers joining the Eurasian Economic Union (EAEU) as an observer state an important event and is preparing the necessary infrastructure and coordination.
Iran’s observer membership also acts as an incentive and catalyst for reducing the discrepancies between the two sides.
EAEU approaches, future agreements to create common markets for energy resources, and forming a common Eurasian energy market can serve Iran’s interests. For example, in the energy sector, Iran and Gazprom have unveiled an ambitious plan for Russia to invest $40 billion in Iran. They signed another memorandum of understanding to transport Russian gas to Iran.
From the perspective of many in Iran, and considering the continuation of sanctions, expanding trade with the EAEU, and using its potential is useful for countering sanctions and threats, expanding economic influence, diversifying foreign policy, neutralizing Western sanctions, and growing exchanges in national currencies.
Iran is the main link of the International North-South Transport Corridor (INSTC), for moving cargo between India, Iran, Russia, EAEU, and Europe.
Apart from the capacity of Iranian ports in the Persian Gulf and the Sea of Oman, the northern Iranian ports in the Caspian Sea basin in the north of the country can also become one of the most important trade hubs of the EAEU with other countries.
EAEU can help Iran gain access to an annual income of about 20 billion dollars with the operationalization of INSTC.
The formation of new transport corridors and export and import channels in the EAEU is also in Tehran’s interests.
Iran sees the access of EAEU to other countries, and cooperation in the field of export and swap of oil and gas, electricity, minerals, and agricultural products in line with its economic diplomacy.
Given the important financial role of the Eurasian Development Bank (EDB), Tehran seems to see financial transfers and implementation of priority infrastructure projects with the bank’s assistance as mutually beneficial.
Iran is now gaining better access to the 190 million-strong EAEU market to diversify its economy, reduce its dependence on oil revenues, boost non-oil exports, and mitigate the consequences of Western sanctions.
The head of the Iranian Trade Development Organization also emphasized that trade between Iran and the Eurasian Economic Union has increased by more than 2.5 times. Also, the volume of trade between Iran and the EAEU in the first 9 months of 2024 increased by 11 percent compared to the same period last year.
Russia is Iran’s most important partner, and Armenia is Iran’s second trading partner in the EAEU. Kazakhstan is Iran’s third trading partner in Eurasia. Kyrgyzstan and Belarus are other members of the union.
With the new conditions, the EAEU’s bilateral trade with Iran is expected to reach $18-20 billion in the medium term. Iran’s membership in the EAEU as an observer will lead to increased opportunities for Investment, tariff elimination, and development of cooperation in related infrastructure.
Challenges and prospects
In the EAEU, there is practically no horizontal linkage between countries, and challenges such as limited financial resources, lack of symmetrical structure of members, etc., in the EAEU, and the lack of rail connections between Iran and Armenia can negatively affect trade with the EAEU. Currently, road transport between Iran and Armenia is difficult.
The domestic economic challenges of the countries are the lack of a two-track electric railway to Chabahar port, and the US sanctions, to exploit the accelerator of Iran’s multilateral trade relations with the EAEU.
Many obstacles, including international sanctions, the Ukrainian crisis, differences in production standards, health and safety, political considerations, and fluctuations in the value of national currencies (in Iran and Russia) can affect Iran’s relations with the EAEU.
Also, the risk of escalating military tensions in the Middle East, wider regional conflict, and geopolitical outlook could overshadow economic relations and trade opportunities with the EAEU.
However, the EAEU with a combined GDP of $2.4 trillion, and $800 billion in foreign trade has complementary economic elements with Iran (with over $80 billion in potential trade with the EAEU).
Despite structural changes in the global economy, and increasing foreign trade turnover within the region, the geographical expansion of the EAEU members can play a vital role in strengthening its position and in line with the long-term vision of the union for 2045.
After accepting Iran as an observer member, the possibility of Iran’s further participation in the EAEU and its strengthening has been provided.
The Free Trade Agreement (FTA) between Iran and the EAEU is expected to be finalized by the end of January 2025, after the approval of the Guardian Council, and the preparations of both sides.
Although Iran’s full membership in the EAEU is still unclear, it seems that with the implementation of recent agreements, we will witness a serious renaissance of trade relations and a significant leap and a new window for the beginning of new economic relations between Iran and the member states of the union.
Samyar Rostami is a political observer and senior researcher in international relations