Negotiations on a full-scale free trade agreement between Iran and the Eurasian Economic Union (EAEU) are planned for the second half of 2021. The success of the current interim agreement with Iran suggests that initiating a proper FTA could indeed work. However, a number of obstacles—which have nothing to do with customs duties and trade tariffs—need to be eliminated if any possible agreement is to bear fruit. Being the parties most interested in reaching such an agreement, Iran and Russia remain the main drivers of Iran’s rapprochement with the EAEU.
A Full-Scale Agreement
Signing a full-scale free-trade agreement with Iran was hardly surprising, given the previous agreements between the EAEU and Tehran. On May 17, 2018, Iran put pen to paper on a three-year interim agreement on the establishment of a free trade area (FTA) that entered into force on October 27, 2019. Among other things, the parties agreed to launch talks on making the interim agreement permanent (with changes) no later than 18 months after it would come into effect, as well as to conclude such talks within three years of that same date.
Everything that the parties have said and done in this respect has been in accordance with the previous agreements. The decision to launch negotiations with Iran was made on December 11, 2020, and the first consultations took place on February 17, 2021, that is, somewhat less than 16 months after the FTA agreement entered into force.
Assuming everything goes to plan, the issue of a full-scale agreement should be settled before October 27, 2021. To this end, more comprehensive negotiations have been pencilled in for the second half of this year. In any case, the sides still have over a year to resolve any issues that may come up, as Minister of Energy of Iran Reza Ardakanian duly noted in early March when he said, “We’ve got some one and a half years to put things in place.” 
In other words, a full-scale free-trade agreement between Iran and the EAEU may not necessarily be concluded by the end of this year. Judging by what both Iran and the EAEU member states say, all the sides are interested in replacing the interim agreement with a permanent one. However, a new round of talks will surely focus on expanding the range of goods and reducing the duties even further. The parties will try to protect the interests of their domestic producers as much as possible, and it will hardly be surprising if they fail to reach a consensus straight away so that everything eventually drags out.
There is another factor that might prove a serious obstacle to cooperation between the EAEU and Iran, which is the EAEU’s ongoing FTA negotiations with Israel. The Israeli Ambassador to Russia has noted that such an agreement could be signed as early as this year. Iran has yet to comment on the matter. However, should Tel Aviv and the EAEU manage to reach agreement, there are forces within the Iranian political system that are capable of stirring up a wave of discontent, which could scupper all diplomatic efforts invested to achieve a full-scale FTA.
The rumour that Iran could be about to join the EAEU added a new dimension to this story. Tongues started wagging following the comments made by Mohammad Bagher Ghalibaf, the Speaker of Iran’s Parliament, after his trip to Moscow on February 10, 2021, which many interpreted as Tehran announcing its intentions to become a full-fledged member of the Union. A number of Russian and English publications ran with the story, discussing the prospects of such a move.
However, the Ministry of Trade and Integration of the Republic of Kazakhstan would later deny these rumours. There are certain procedures that must be followed to become a member of the EAEU, including that of submitting an application to the Chairman of the Supreme Eurasian Economic Council. “As of February 17, 2021,” the Ministry’s statement reads, “the relevant application has not been received from the Islamic Republic of Iran.”
A Pivot to the East
The very notion of rapprochement between Iran and the EAEU fits comfortably into Tehran’s strategy of pivoting to Asia and its markets. The move started to take shape back in the 2000s and was mainly motivated by economic trends, namely, the growing need in energy resources of the rapidly developing Asian economies, such as China and India. Then sanctions followed, and following the US withdrawal from the nuclear deal in May 2018 the pressure has considerably increased. All this made the Iranian elites to become disenchanted with the idea of fostering economic ties with Europe, as businesses in the EU turned out to be most sensitive to the restrictions imposed by Washington.
It would seem that cooperation with the EAEU avails Iran an opportunity to mitigate the effects of the U.S. sanctions policy. The fact that several EAEU countries are under Western sanctions certainly helps in this respect. On February 7, 2021, Roman Golovchenko, Prime Minister of Belarus, argued that the EAEU is looking to develop a mechanism for countering sanctions to give cause for optimism.
What is more, Iran is interested in abandoning the U.S. dollar in settlements and switching to national currencies. This remedy acquired even greater urgency once Iran was cut off from the SWIFT international settlement system as a result of U.S. pressure. The EAEU has repeatedly stated that it is consistently moving towards this goal. Similar comments and practices are evident in bilateral relations between individual EAEU member states and Iran.
Finally, Tehran is trying to break out of its political isolation. Rapprochement with the EAEU could thus help elevate its status on the international stage. On the whole, establishing the interim FTA with its subsequent transformation into a full-scale agreement should be viewed in the broader context of Iran’s striving to strengthen regionalism and bolster Eurasian cooperation.
As far as the EAEU interests are concerned, one should say that Iran represents serious potential for the Union’s expansion. Among the economies of the EAEU member states, observers and partners, the Iranian economy is second only to Russia’s. In terms of economic cooperation, Russia and Kazakhstan stand to benefit most from lowering tariff barriers. In addition, the project is of particular interest to Armenia, which is the only EAEU member that has a land border with Iran—currently under a partial blockade. Armenia could thus be used as a transit country for Iranian imports and exports. A free-trade agreement with Tehran would also do wonders for Moscow’s integration policy.
The interim agreement on establishing a free trade area between the EAEU and Iran entered into force on October 27, 2019 and provided for a reduction in customs duties on 862 categories of goods (502 for Iranian exports and 360 for EAEU exports). The list of goods covers approximately 50% of the total mutual trade between the partners. The agreement came into effect amid a difficult time in Iran, owing to the U.S. sanctions regime and the coronavirus lockdown. Despite this, however, trade turnover between the EAEU and Iran grew to $2.9 billion in 2020, an 18% increase from 2019.
At the same time, as far as EAEU exports are concerned, we rather stand witness to their recovery to the level prior to the restoration of U.S. sanctions. It was immediately after the nuclear deal became effective and the sanctions against Iran were lifted in 2016 that exports hit a recent-year record high at $2.6 billion. While EAEU 2020 exports rose by 2% as compared to 2019, they only amounted to $1.6 billion.
A somewhat different situation could be observed in the case of EAEU imports from Iran in 2020, which grew by 51.5% as compared to 2019, surpassing $1.2 billion. This is significant, as for the previous ten years imports had not exceeded $1 billion. In other words, the Iranian economy benefited significantly more from the establishment of the FTA than the EAEU, at least during the initial stages of the deal. What is more, this had to do with non-oil sectors of Iran’s economy, as EAEU imports are primarily based on agricultural products.
At the same time, Iran occupies a relatively insignificant place in the trade balance of the EAEU countries, accounting for just 0.5% of all trade operations in the Union. Meanwhile, the EAEU countries account for approximately 3% of Iran’s trade balance.
We should also note the uneven distribution of trade between the individual EAEU countries and Iran. For example, Russia accounts for approximately 75% of all trade between the EAEU and Iran, which is around 85% of exports and 65% of imports. Kazakhstan accumulates some 10% of the total trade turnover, with its trade volume shrinking by 37% in 2020, as opposed to the trade with the EAEU as a whole. Meanwhile, the share of Belarus and Kyrgyzstan is almost next to nothing.
Relations between Tehran and Yerevan are somewhat different. Armenia makes up approximately 15% of all trade with the EAEU. Additionally, more than 25% of all EAEU imports from Iran go to Armenia. Armenia is thus a valuable partner for Iran, purchasing food and industrial products, as well as oil and gas from the country. These special relations are reflected in the fact that Iran makes up almost 9% of Armenia’s trade turnover.
Definite changes were recorded in the dynamics of trade relations following the conclusion of the interim FTA agreement. In the case of Russia, both exports and imports increased (by 19% and 100%, respectively). Meanwhile, Iran’s trade with Belarus and Kyrgyzstan remained negligible. In the case of Armenia, slight changes have taken place, with exports increasing by 1% and imports falling by 3%. Exports from Kazakhstan have dropped by 54%, while imports have increased by 32%.
In other words, the FTA serves as an incentive for Russia to foster trade with Iran. Kazakhstan has also increased its imports from the country. However, there have been no serious positive shifts with regard to the remaining EAEU countries.
It would seem that trade cooperation between Iran and the EAEU will do little to alter the economic situation for its participants. For Tehran, however, the EAEU can serve as a reliable partner with stable trade ties, something that is of particular importance to a country suffering partial economic isolation. Meanwhile, Moscow—still the key driver for cultivating economic relations with Iran—sees Tehran as a potential buyer of its industrial goods. This is especially important given the fact that hydrocarbons remain at the heart of Russia’s exports around the world. Finally, as we mentioned earlier, Iran can play a special role in the development of the Armenian economy.
Expanding the FTA agreement to include additional product lines may serve as a basis for bringing the economic relations between the parties to a new level. However, a number of barriers that have nothing to with customs duties and trade tariffs still pose a major problem for the development of trade between Iran and the EAEU. On the one hand, there are objective limitations that will hardly be eliminated in the foreseeable future. For example, trade opportunities are limited by the fact that the oil sector remains the backbone of the economies of Iran, Russia and Kazakhstan. This is why the EAEU cannot offer Iran anything comparable to what China offers. Then, there is the special position that Russia occupies on the EAEU energy markets. Tehran can hardly expect to significantly increase its gas supplies to Armenia, as Russia continues to have a hold on this market. Finally, U.S. sanctions play a huge role in limiting development opportunities, and the EAEU and Iran can only partially neutralize their negative effects.
At the same time, the parties are in a position to work on removing other equally important obstacles, for example, developing a transport and logistics infrastructure and automating and digitalizing customs procedures in order to avoid delays and red tape at the borders. Receiving payment for goods remains a big problem after Iran was cut off from the SWIFT system. Much work has already been done to transition to settlements in national currencies, although it is far from complete. What is more, Iran is not a member of the WTO, and its business practices do not meet international standards in most cases.
We should also mention the specifics of doing business in Iran, which presents additional challenges when it comes to concluding and implementing agreements with foreign partners. Iran’s economic isolation and unpredictable foreign policy environment are the core reasons why it keeps such business practices. Increasing its foreign economic activity, including that with the EAEU countries, should help Iranian businesses get to grips with working under the rules that have been adopted in international trade.
In other words, a full-scale agreement between Iran and the EAEU has great development prospects. However, real prospects primarily depend on the ability of both governments and businesses to work to remove those barriers that are not connected with customs duties and trade tariffs.
From our partner RIAC
Accelerating COVID-19 Vaccine Uptake to Boost Malawi’s Economic Recovery
Since the onset of the COVID-19 pandemic, many countries including Malawi have struggled to mitigate its impact amid limited fiscal support and fragile health systems. The pandemic has plunged the continent into its first recession in over 25 years, and vulnerable groups such as the poor, informal sector workers, women, and youth, suffer disproportionately from reduced opportunities and unequal access to social safety nets.
Fast-tracking COVID-19 vaccine acquisition—alongside widespread testing, improved treatment, and strong health systems—are critical to protecting lives and stimulating economic recovery. In support of the African Union’s (AU) target to vaccinate 60 percent of the continent’s population by 2022, the World Bank and the AU announced a partnership to assist the Africa Vaccine Acquisition Task Team (AVATT) initiative with resources, allowing countries to purchase and deploy vaccines for up to 400 million Africans. This extraordinary effort complements COVAX and comes at a time of rising cases in the region.
I am convinced that unless every country in the world has fair, broad, and fast access to effective and safe COVID-19 vaccines, we will not stem the spread of the pandemic and set the global economy on track for a steady and inclusive recovery. The World Bank has taken unprecedented steps to ramp up financing for Malawi, and every country in Africa, to empower them with the resources to implement successful vaccination campaigns and compensate for income losses, food price increases, and service delivery disruptions.
In line with Malawi’s COVID-19 National Response and Preparedness Plan which aims to vaccinate 60 percent of the population, the World Bank approved $30 million in additional financing for the acquisition and deployment of safe and effective COVID-19 vaccines. This financing comes as a boost to Malawi’s COVID-19 Emergency Response and Health Systems Preparedness project, bringing World Bank contributions in this sector up to $37 million.
Malawi’s decision to purchase 1.8 million doses of Johnson and Johnson vaccines through the AU/African Vaccine Acquisition Trust (AVAT) with World Bank financing is a welcome development and will enable Malawi to secure additional vaccines to meet its vaccination target.
However, Malawi’s vaccination campaign has encountered challenges driven by concerns regarding safety, efficacy, religious and cultural beliefs. These concerns, combined with abundant misinformation, are fueling widespread vaccine hesitancy despite the pandemic’s impact on the health and welfare of billions of people. The low uptake of COVID-19 vaccines is of great concern, and it remains an uphill battle to reach the target of 60 percent by the end of 2023 from the current 2.2 percent.
Government leadership remains fundamental as the country continues to address vaccine hesitancy by consistently communicating the benefits of the vaccine, releasing COVID data, and engaging communities to help them understand how this impacts them.
As we deploy targeted resources to address COVID-19, we are also working to ensure that these investments support a robust, sustainable and resilient recovery. Our support emphasizes transparency, social protection, poverty alleviation, and policy-based financing to make sure that COVID assistance gets to the people who have been hit the hardest.
For example, the Financial Inclusion and Entrepreneurship Scaling Project (FInES) in Malawi is supporting micro, small, and medium enterprises by providing them with $47 million in affordable credit through commercial banks and microfinance institutions. Eight months into implementation, approximately $8.4 million (MK6.9 billion) has been made available through three commercial banks on better terms and interest rates. Additionally, nearly 200,000 urban households have received cash transfers and urban poor now have more affordable access to water to promote COVID-19 prevention.
Furthermore, domestic mobilization of resources for the COVID-19 response are vital to ensuring the security of supply of health sector commodities needed to administer vaccinations and sustain ongoing measures. Likewise, regional approaches fostering cross-border collaboration are just as imperative as in-country efforts to prevent the spread of the virus. United Nations (UN) partners in Malawi have been instrumental in convening regional stakeholders and supporting vaccine deployment.
Taking broad, fast action to help countries like Malawi during this unprecedented crisis will save lives and prevent more people falling into poverty. We thank Malawi for their decisive action and will continue to support the country and its people to build a resilient and inclusive recovery.
This op-ed first appeared in The Nation, via World Bank
An Airplane Dilemma: Convenience Versus Environment
Mr. President: There are many consequences of COVID-19 that have changed the existing landscape due to the cumulative effects of personal behavior. For example, the decline in the use of automobiles has been to the benefit of the environment. A landmark study published by Nature in May 2020 confirmed a 17 percent drop in daily CO2 emissions but with the expectation that the number will bounce back as human activity returns to normal.
Yet there is hope. We are all creatures of habit and having tried teleconferences, we are less likely to take the trouble to hop on a plane for a personal meeting, wasting time and effort. Such is also the belief of aircraft operators. Add to this the convenience of shopping from home and having the stuff delivered to your door and one can guess what is happening.
In short, the need for passenger planes has diminished while cargo operators face increased demand. Fewer passenger planes also means a reduction in belly cargo capacity worsening the situation. All of which has led to a new business with new jobs — converting passenger aircraft for cargo use. It is not as simple as it might seem, and not just a matter of removing seats, for all unnecessary items must be removed for cargo use. They take up cargo weight and if not removed waste fuel.
After the seats and interior fittings have been removed, the cabin floor has to be strengthened. The side windows are plugged and smoothed out. A cargo door is cut out and the existing emergency doors are deactivated and sealed. Also a new crew entry door has to be cut-out and installed.
A new in-cabin cargo barrier with a sliding access door is put in, allowing best use of cargo and cockpit space and a merged carrier and crew space. A new crew lavatory together with replacement water and waste systems replace the old, which supplied the original passenger area and are no longer needed.
The cockpit gets upgrades which include a simplified air distribution system and revised hydraulics. At the end of it all, we have a cargo jet. If the airlines are converting their planes, then they must believe not all the travelers will be returning after the covid crisis recedes.
Airline losses have been extraordinary. Figures sourced from the World Bank and the International Civil Aviation Organization reveal air carriers lost $370 billion in revenues. This includes $120 billion in the Asia-Pacific region, $100 billion in Europe and $88 billion in North America.
For many of the airlines, it is now a new business model transforming its fleet for cargo demand and launching new cargo routes. The latter also requires obtaining regulatory approvals.
A promising development for the future is sustainable aviation fuel (SAP). Developed by the Air France KLM Martinair consortium it reduces CO2 emissions, and cleaner air transport contributes to lessening global warming.
It is a good start since airplanes are major transportation culprits increasing air pollution and radiative forcing. The latter being the heat reflected back to earth when it is greater than the heat radiated from the earth. All of which should incline the environmentally conscious to avoid airplane travel — buses and trains pollute less and might be a preferred alternative for domestic travel.
There Is No Business, Like Small Business: New Strategy
Once upon a time, all big businesses of the world were only small businesses. However, occasionally, when big businesses classified as too big to fail, it is the special status when they start failing their own nations, damaging common good, hurting humankind at large. This is when big business allowed to morph into a Godzilla to trample all over the governments and institutions and line them up as hostages. Study the rise and fall of the world’s largest business empires of last century.
Now Showtime: There is no business, like small business, because the small business sector is not only a giant business, but also the biggest layer of the economy, largest contributor in kind to its nation, adding jobs, paying taxes and creating real value creation, while taking all the abuse and bureaucratic nonsense. Hence, post pandemic recovery will take no prisoners and harshly unleash economic challenges as mirror on the economic development competency and question national priorities. Here, no worries, as usual the big business will always take care of itself. Small business will be the only game left in town, something for the political leadership to cling on to and something for local trade groups to try to claim as success. The definitions on what is big and what is small are both on the table for honest evaluation and equally juxtaposed need a declaration on what business serves the economy of the nation and what business destroys the economies of nation.
New math of the post pandemic world clearly shakes down old mindsets. Unless national economic development leaders, trade groups and trade associations acquire proven entrepreneurial experiences, expertise and tactical battlefield capability at the very top and display a warrior mindset to upskill for global competitive excellence, they are just a dance party with water pistols. Entrepreneurialism is the real value creation driving force behind the economy and not a value manipulation exercise with some certificates. Any misunderstanding on such issues only creates shiny cities, surrounded by tent-cities. Study the global economic chaos and worklessness is creeping across the world.
The illusion of super big technology driving super global growth is another myth of crypto-tyrannies. The worshiping super magnanimous technologies, including Facebook engaged in stealing the future from the next generations, now manipulating data to divide and conquer elections and serving special agenda groups causing tribalism and global socio-economic damage. Study how the future routinely stolen in broad daylight by Social Media.
Mutation of economic thought: Why is creation of fake economies much easier; this is where zeros bought, sold and traded as real assets, everything multiplied, subtracted, divided but nothing adds up, there are no bottom-line totals, ever. When columns do not fit anywhere, like an abstract art on canvas, for the eye of the beholder they glow in the dark. Hence, cubism-finances and impressionist-economies, while on the other hand, real value creation economy is one of the hardest journeys,it isrealentrepreneurialism wrapped in integrity and solid hard day’s work creating common good. The reason is that small medium businesses have lost trust in their government and major institutions, while they paint the economy as abstract art and print invisible unlimited money but SME only thrown in jail if they only photocopy a dollar bill. Covidians demand a new narrative on economic affairs and overall totals of budgets.
Unless trade groups of nations assembled and thanked profusely for their work done over the last century. Invited to join as new players, as this is now a new page for a new age and a new direction for a new digital future. Let meritocracy chart out the future of trade-groups; let vertical sectors build their own independent global age narratives to ride on entrepreneurial mindsets. When methodical agenda on simultaneous synchronization bring all key components under master plan tabled critical thinking and hardcore business experiences should lead. When vertical groups and all upskilling and reskilling features interact on digital platforms combined, eventually they will all see the light and most importantly learn the future of the global-age of digital commerce. Upskilling of all layers is critical so all grow together. Reskilling to create real value production is essential so it becomes a sustainable model.
With no room to spend another decade on some academic feasibility studies, organize a warrior team to undertake such mobilization developments. Such national mandates are often not new funding dependent rather execution starved and deployment hungry. Why shut down the electricity of the building and climb the skyscraper via the staircase. With the majority of nations locked up in an old mindset on digitization, today, they simply cannot zip up to the top floor, exhausted and breathless as they are climbing stairs and badly stuck on lower floors. Pandemic recovery is harsh. Fire the first person who says they need heavy new funding, fire the second person who says they are too busy to change. Change is a gift for free but for the right mindset.
The New Trends: National mobilization of entrepreneurialism will advance; small and medium businesses will grow, as they have no choice but to upskill innovative excellence and reskill for quality manufacturing of goods and services. Learn from Asia, study Africa, stop reading newspapers but the world maps, acquire new math from ‘population-rich-nations’, and expand collaborative alliances with the knowledge-rich-nations to reach global markets.
New Trends on Small Medium Business Economy:
The new math: why all over the world it is now attracting new entrepreneurs at rapid speed? Why are Covidians all over the world refusing high-rise, low pay, cubical-slavery and transforming to creative freedom, global-age access and hammocks. Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 90% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.
The new uplifts: How struggling economies are now exploring the “National Mobilization of Entrepreneurialism on Digital Platforms of Exportability Protocols” as alternate revolutionary thinking. Study how Africa model under Dr. Ameenah Gurib-Fakim is expanding and why the groups of western developed economies are so fearful of such a mega shift in thinking. Study Expothon on Google.
The new speed: If Agrarian age to industrial age took a millennia, while industrial age to computer age took a century, now from cyber-age to paperless, cash-less, office-less and work-less age it is almost knocking the door, just open and see. Is this the revenge of The Julian Calendar, time like a tsunami drowning us in our own depths of performance, challenging our lifelong learning and exposing our critical thinking forcing us to fathom the pace of change, swim or drown?
Time to study deeply, why forest fires always put out by creating more selected fires; therefore let government and bureaucracy stay where they are, while creating a far superior brand new meritocracy centric digital firefighting unit to act at the top and bring required results. The cost is a fraction of what routinely wasted 1000 times in lost and missed opportunities.
Time to appreciate, why is the fear of exposure of limited talent the number one fear of adapting digitizationas digital-divide is just a mental-divide.Why without digitization there is no economy and why it has taken decades?
Time to apply entrepreneurial mindset, why incentivizing all frontline management of all midsize business economic development and foreign investment attraction and export promotion bodies is a requirement of time? Observe the power of entrepreneurial mindset in the driver seat, deploy national mobilization of midsize economies, accept upskilling as a national mandate, and digitization as national pride.
Is there any authoritative leadership on entrepreneurialism present in the boardroom? No need to have chills, as mainly from Asia, there are some 500 million new entrepreneurs already on the march, therefore, no need to ask where are they headed but rather ask where your national entrepreneurialism is going? Study why entrepreneurialism is neither academic-born nor academic centric, why all most successful legendary founders that created earth shattering organizations were only the dropouts?
Is there a new realization or back to water pistol games? Not to be confused with academic courses on fixing Paper-Mache economies and already broken paperwork trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on taxation policy matters. Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Observe the trail of silence. The empty shelves are not supply chain issues but symptoms of broken down economies. Economies are not cryptopia; they are about real value creation by the local small medium business forces to create local grassroots prosperity. The failure is not having the right mindsets.
Five things to watch for the year 2022: US election will surprise the world as it has the last two times. World economies tested, financially along with leadership competency levels. Big business will remain big and undisturbed. The Covidian will march for truth. Small medium business mobilization will further grow as a reliable answer to the economy and jobs.This is how humankind will crawl towards critical thinking.
The rest is easy
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