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Interim Agreement signed between the EAEU and Iran enabling formation of free trade area

Interim Agreement signed between the EAEU and Iran enabling formation of free trade area

5/17/2018

The Interim Agreement enabling formation of a free trade area between the Eurasian Economic Union (EAEU) and the Islamic Republic of Iran was signed on May 17 within the framework of the Astana Economic Forum.
 
The Agreement was affixed with the signatures of the Chairman of the Board of the Eurasian Economic Commission (EEC) Tigran Sargsyan, the Vice Prime Minister of the Republic of Armenia Tigran Avinyan, the First Deputy Prime Minister of the Republic of Belarus Vasily Matyushevsky, the First Deputy Prime Minister of the Republic of Kazakhstan Askar Mamin, the Vice Prime Minister of the Kyrgyz Republic Zamirbek Askarov, the Deputy Head of the Government of the Russian Federation Dmitry Kozak and the Minister of Industry, Mining and Trade of the Islamic Republic of Iran Mohammad Shariatmadari.
 
The signing ceremony coincided with the panel discussion “EAEU – Iran: New Prospects of Cooperation in Preferential Trade Context”, ​where its participants discussed effects from conclusion of the agreement, new opportunities opened for exporters from the Union and Iran as well as areas of deepening of cooperation between the parties.
 
Opening the discussion Tigran Sargsyan noted that this document had become significant for the EAEU, because it implied two stages of formation of the free trade area (FTA). At the current stage, the Interim Agreement will apply. It is planned to come to a fully-functional agreement on the FTA between the EAEU and Iran in three years. The Agreement on the FTA will cover almost the entire commodity nomenclature. Looking forward, commodity turnover may increase by one and a half times (150%).
 
The Chairman of the EEC Board Tigran Sargsyan thanked all the parties to the negotiation process – representatives of the five countries of the Union, business community and the Commission employees who, under the supervision of the EEC Minister in charge of Trade Veronika Nikishina, had done “tremendous substantive and organizational work and got a result satisfying all parties to the agreement”, as well as Iranian partners – “for demonstrating flexibility upon attainment of so grand-scale and meaningful arrangements”.
 
“Nowadays, the agreement includes a first-priority list of goods with the import duties thereupon in mutual trade to be reduced or cancelled after the document comes into force, - told the Chairman of the EEC Board. – The agreement covers 50% of the volume of mutual trade which is certainly indicative of significance and serious nature of the arrangements”.
 
Tigran Sargsyan named several key advantages to be obtained by entrepreneurs of the Union countries and Iran upon entry into force of the agreement. One of such advantages is savings in payment of import customs duties.
 
The second advantage is transparent and predictable mutual trade environment. “Apart from reduction of import duties the Interim Agreement stipulates for compliance by its parties with the fundamental principles of international trade. It prescribes a scheme similar to the WTO regulations which imposes obligations and requirements on Iran notwithstanding the fact that our partners are not members of the WTO”, - the Chairman of the EEC Board reported.
 
The parties also reached an understanding obliging them not to apply unreasonable non-tariff measures restricting trade with regard to the goods listed in the agreement.
 
Tigran Sargsyan invited economic operators to actively use their opportunities and the created regulatory environment. “It is necessary to develop trade in all the products, because in the mid-term it will also serve as a criterion suggesting which goods will become subject to liberalization at the second stage”, - the Chairman of the EEC Board addressed the business community.
 
The First Deputy Prime Minister of the Republic of Kazakhstan Askar Mamin emphasized the positive dynamics of commodity turnover between Kazakhstan and Iran in Q1, 2018. “Increase in trade volumes in the first quarter before entry into force of the agreement amounted to 72%”, - the First Deputy Prime Minister told.
 
Askar Mamin also mentioned that Kazakhstan is ready to provide for efficient logistics for goods supplies from Iran to the EAEU market and from the Union to Iran. For illustrative purposes he referred to current logistics projects in the sphere of railroad transportation and port infrastructure.
 
The Vice Prime Minister of the Republic of Armenia Tigran Avinyan mentioned historically established good-neighbour relations with Iran. “Armenia is the only country of the EAEU which has land border with Iran, and we will try to use it to the benefit of Armenian, the EAEU and Iranian market”, - he said.
 
Tigran Avinyan reported that cooperation with Iran would involve the free economic area (FEA) “Meghri”. It provides an opportunity to arrange for joint production at its platform. Manufacturers from Iran may export raw materials to the FEA and obtain finished products escaping bureaucratic procedures for supplies to the EAEU market.
 
The representative of Armenia mentioned existing experience as an example of cooperation with Iran – Armenia manufactures food products in compliance with Iranian “halal” standards.
 
“The first unique experience of establishing multilateral relations with the Islamic Republic of Iran has rather good prospects. We have reached very good mutual results”, - the First Deputy Prime Minister of the Republic of Belarus Vasily Matyushevsky stated.
 
The representative of Belarus underlined significance of the agreement for the implementation of export strategy of the Republic. “Our mutual trade has been developing rather dynamically since 1993. In 2017, mutual commodity turnover between Belarus and Iran raised threefold. A very positive dynamics was also observed in Q1, 2018”, - Vasily Matyushevsky reported.
 
Investment cooperation is developing along with the traditional trade and economic cooperation. Belarus invests into machine engineering in Iran. Iran implements a number of large logistics projects in Belarus.
 
The Vice Prime Minister of the Kyrgyz Republic Zamirbek Askarov emphasized advantages to be obtained by the Republic upon entry into force of the Interim Agreement. “Trade volumes between Iran and Kyrgyzstan are yet insignificant but we witness a trend for mutual trade growth. Kyrgyzstan may supply to Iran pasta, dairy butter, electronic incandescent lamps and other products”, - Zarimbek Askarov reported. He mentioned the importance of including into the agreement the parties’ obligations to provide for the most-favoured nation treatment.
 
The Deputy Head of the Government of the Russian Federation Dmitry Kozak welcomed signing of the agreement. He called business to be its key beneficiary. “The document stipulates a specific article for establishing business dialogue. The exact format of this platform will be determined in the near future with the participation of businesses”, - Dmitry Kozak said.
 
The Minister of Industry, Mining and Trade of the Islamic Republic of Iran Mohammad Shariatmadari mentioned high potential of the EAEU countries and Iran as actors of the world economy.
 
“Iran sets an objective to ease export procedures, to remove obstacles, to develop logistics and to establish stable trade and economic relations between the EAEU and Iran, – stated the Republic’s representative. – We focus on the second stage which will serve as guarantor of the development of our relations in the future.”
 
For reference
 
The EAEU list will include meat and fat and oil products, certain types of confectionery and chocolate as well as metals, cosmetics, and certain types of electronic and mechanical equipment.
 
The Iranian party will be granted tariff preferences for an extended list of food products, in the first place, vegetables, fruit, dried fruit as well as construction materials, dishware, carpets, some articles made of non-ferrous metals.
 

The average level of import duty rates of Iran for industrial goods will decrease from 22.4% down to 15.4%, that is by 7 p.p., and that of the Union – from 8% down to 4.7%, that is by 3.3 p.p. Iran will reduce duties for agricultural goods on the average from 32.2% down to 13.2%, that is by 19 p.p., and the Union – from 9.6% down to 4.6%, that is by 5 p.p.