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Iran and Eurasian Economic Union Negotiations

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The Treaty on the Eurasian Economic Union (EAEU) was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan, and Russia, and came into force on 1 January 2015. Treaties for Armenia’s and Kyrgyzstan’s accession to the EAEU were signed on 9 October and 23 December 2014, respectively. Armenia’s accession treaty came into force on 2 January 2015 and Kyrgyzstan’s—on 6 August 2015. In January 2015, the EAEU in its full membership officially began its activities. The core objective of the Single Economic Space is the development of a single market and achieving the “four freedoms”, namely the free movements of “goods”, “capital”, “services” and “people” within the single market. The EAEU has an integrated market of 184 million people and a gross domestic product of over $5 trillion.

One year after the formation of the EAEU, in 2016, Iran proposed to the Eurasian Economic Commission the creation of a free trade zone between itself and this economic bloc. After two years of negotiations, an interim agreement was concluded and was signed on May 17, 2018, within the framework of the Astana Economic Forum. This was followed by the “Law on Interim Agreement Establishing a Free Trade Area between the Islamic Republic of Iran and the Eurasian Economic Union and its Member States” passed by the Iranian parliament in June 2019. The importance of this agreement was further underlined by the participation of the former Iranian president Hassan Rouhani in the EAEU summit in Yerevan, Armenia on October 1, 2019. Shortly after that, the EAEU-Iran preferential trade agreement (PTA) was implemented on October 27, 2019, offering lower tariffs on 862 commodity types, of which 502 are Iranian exports to the EAEU.

This agreement significantly increased the trade volume between Iran and the member countries of the Union. In the period between October 2019 and October 2020, the trade volume increased by more than 84%. However, the coronavirus crisis that caused border closures and health restrictions has significantly curbed this growing trend. After the start of vaccination in Iran and the member states of the EAEU and the reopening of borders, the volume of trade gradually climbed and the value of trade between Iran and the members of the EAEU exceeded $1.957 billion in the first five months of the current Iranian calendar year (March 21 – August 22, 2021), marking 96 per cent growth compared to the same period of the previous year.

 Indeed, according to Hossein Kakhaki, director-general of the International Cooperation Department of the Islamic Republic of Iran Customs Administration (IRICA), Iran exported over $420.823 million worth of commodities to the EAEU members in this period, 37 per cent more than the figure for the same period in 2020. During these five months of 2021, the top destinations for Iranian exports to the EAEU were:

  • Russian Federation ($222.743 million),
  • Armenia ($99.683 million),
  • Kazakhstan ($63.677 million),
  • Kyrgyzstan ($26.981 million),
  • Belarus ($7.738 million).

This volume of trade was achieved at a time when the United States withdrew from the Joint Comprehensive Plan of Action (JCPOA) in May 2018 and was following the policy of “maximum pressure” against Iran.

As the agreement was designed to be in effect for 3 years, it is to expire on October 5, 2022. For this reason, the parties have recently begun technical and expert negotiations to upgrade the PTA to a free trade agreement (FTA). In this regard, Iran and the EAEU held their first round of negotiations on upgrading the PTA to a free trade deal in Tehran on July 19, 2021. According to Hamid Zadboum, the former head of Trade Promotion Organization of Iran, the two sides have agreed upon most terms related to the outlines of the PTA; the partner countries have reached an agreement to gradually remove tariffs and duties on most imports and exports in the near future to expand business opportunities.

After the new Iranian government headed by Ebrahim Raisi came to power in August 2021, the process of negotiations between Iran and the EAEU accelerated. Iran’s new president announced “neighborhood policy” and “economic diplomacy” as two main priorities of Iran’s foreign affairs vector. Iran’s change of membership from the main observer in the Shanghai Cooperation Organization (SCO), which took place at the Tajikistan Summit in September 2021, led to promoting this approach by the new Iranian government. Regarding the EAEU, a new round of talks between Iran and the Union was held in Armenia on November 1, 2021. Head of international and trade affairs in Trade Promotion Organization (TPO) of Iran, Mir Hadi Seyyedi said that Iran and the EAEU had previously held seven rounds of virtual meetings to discuss the potential free trade deal and in this meeting two sides reached an initial agreement to extend free trade arrangements to 80 per cent of goods covered in the PTA signed in November 2019.

A very important point to note is that if the EAEU-Iran preferential trade agreement is upgraded to an FTA, the number of items of the agreement will rise to at least 8000, which is sure to set off a massive increase in the volume of trade between Iran and the Union. This could bring much of Iran’s economic and trade potential into the Union. Iran has a total population of approximately 80 million that live in a total area of 1,648,195 sq km.; approximately 74 % of the population live in urban areas with an annual growth rate of 1.97%, making it a major consumer market for the member states of the Union. Iran has fifteen common land or water borders with neighboring countries. Numerous Iranian ports in the Caspian Sea in the north and the Sea of ​​Oman and the Persian Gulf in the south, as well as an extensive road and rail network provide a convenient location to transit goods between Iran and the Eurasian Economic Union. In this regard, Iran has a very good position for the North-South corridor, the Persian Gulf-Black Sea corridor, and the One Belt One Road initiative. In addition to the mentioned capacities, there are also problems and challenges that can negatively affect the process of upgrading the PTA to an FTA and therefore should be considered in the process of upgrading the agreement.

The first problem is the limitations of money transfer transactions between the banking systems of the five member states of the Union and Iran because of the unilateral U.S. sanctions against the country. This has created serious constraints for businessmen and traders on both sides especially for filing letters of credit (LC). Currently, the creation of LC for Iran is done only by “Mir Business Bank” in Russia, which is a Russian bank with a 100% participation of foreign capital; its founder and the only shareholder is Bank Melli Iran. “Mir Business Bank” has three branches in Moscow, Astrakhan and Kazan. But in the other four EAEU member states, Belarus, Armenia, Kazakhstan and Kyrgyzstan, transfers of money by exporters and importers are problematic and take place mainly through exchange offices. The establishment of Mir Business branches in these countries or the use of Russian SWIFT could possibly solve part of this problem.

The second problem is underdeveloped rail communication between Iran and Russia in the Caucasus region. Unfortunately, due to the non-membership of Turkmenistan and the Republic of Azerbaijan in the EAEU, Iran does not have a direct land connection with the Union. And Armenia—although a neighbor of Iran and a member of the EAEU—does not share a border with Russia. In such circumstances, the railway network is very important to overcome this geographical gap, especially since the volume of goods transported by rail is far greater than the land and truck route. Fortunately, in December 2014 the 920-kilometer East Caspian railroad between Iran, Turkmenistan and Kazakhstan was opened in December 2014. It is now an important trade artery that plays an important role in the export and import of products from Iran to Kazakhstan and the eastern regions of Russia. But there is no similar railway network in the Caucasus region, between Iran and Russia yet. As a result of the First Nagorno-Karabakh War, unlike Turkey and Russia, Iran missed its rail connection to the Caucasus. In these circumstances, the Astara-Rasht-Qazvin railway was formed in the framework of the North-South Transport Corridor (NSTC). Astara (Iran)-Astara (Azerbaijan) railway was officially inaugurated in a ceremony held on March 29, 2018; the Rasht-Qazvin segment was opened on 6 March 2019. Therefore, a 164 km-long railway route from Rasht to Astara in the Iranian province of Gilan—located on the southern shore of the Caspian Sea and adjacent to the Republic of Azerbaijan—is the only remaining railway section in NSTC between Iran, the Republic of Azerbaijan, the Russian Federation and India. Since the railway route between Astara to Rasht has not been built inside Iran yet, freight trains at Astara (Iran) railway station will be transferred to trucks or vice versa. Therefore, the completion of the Rasht-Astara railway, which costs approximately $500 million, should be given more attention as an important priority for the three countries of Iran, Azerbaijan and Russia. It should be noted that Russia accounts for more than 80% of Iran’s trade with the EAEU. For this reason, direct rail communication between Iran and Russia can increase the volume of trade between the two countries, especially in western and southern Russia such as North Caucasian Federal District, Volga Federal District and Southern Federal District.

The third obstacle to increasing the volume of trade between Iran and the EAEU, especially in the form of free trade, is the shortage of trucks and wagons equipped with refrigerated containers. This is important because more than 60% of Iran’s exports to the EAEU are agricultural and livestock products. On the other hand, Iran imports products such as meat from the Union, which also require refrigerated containers. The long land route and the very cold weather in the winters of Kazakhstan, Armenia and Russia, as well as the very hot weather in Turkmenistan in the summer have created conditions within which it is not possible to export and import agricultural and livestock products without refrigerated containers. Unfortunately, at present, the number of trucks and wagons equipped with refrigerated containers does not cover the high volume of exports and imports of agricultural and livestock products between Iran and EAEU. Therefore, serious attention should be paid to this issue in the process of converting the PTA into an FTA.

The forth problem lies in the domain of low shipping capacities of Iranian ports in the Caspian Sea, although the country shares a maritime border with Kazakhstan and Russia. The capacity of Turkmen port in Golestan province, Nowshahr and Amirabad ports in Mazandaran province and Anzali and Astara ports in Gilan province are transfer points of more than 40 million tons of goods per year; however, only 6 million tons are currently exploited. Although there are trade links between the ports of Astrakhan and Makhachkala in Russia, as well as the port of Aktau in Kazakhstan, the current capacity is far from its potential. Intensifying commercial shipping in the Caspian Sea, a regular and long-term shipping plan that is predictable and planned for traders and businessmen, and especially the development of Roll-on/Roll-off Shipping (RORO) are one of the measures that can increase the volume of trade between Iran and the EAEU.

The fifth—and perhaps the most important—problem is the lack of adequate knowledge of Iran and the member countries of the EAEU about each other’s markets and economic and trade capacities. Although the situation has improved significantly since the implementation of the PTA in October 2019, the problem of information asymmetry persists. In order to solve this problem, it is necessary to bring up the economic and trade capacities of the two sides in the media, to hold specialized exhibitions with the participation of Iranian businessmen, traders and the member countries on a regular basis. The chambers of commerce of Iran, Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia should work on strengthening their cooperation. In this regard, the inauguration of Iranian Trade Office in Astrakhan in October 2017 and holding the first exclusive exhibition “Eurasia Expo” in Tehran on July 9–13, 2021, are beneficial and effective actions that need to be encouraged in the future. In this process, it is very important that the new conditions that will be created after the upgrade of the EAEU-Iran PTA to an FTA are clearly explained to the businessmen and chambers of commerce.

Overall, the implementation of the EAEU-Iran PTA is a very important development that has taken place in recent years in Iran’s relations with Eurasia. This agreement has had a very positive effect on increasing the volume of trade between the two sides. But at the same time, it made the weaknesses and problems of this path clear to both sides. Therefore, in the process of upgrading this agreement to an FTA, due attention should be paid to its problems and solutions. Clearly, unless banking, transit and trade infrastructure is established, the prospective agreement will be nothing more than words on paper.

From our partner RIAC

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Reskilling Revolution: Leaders Preparing 1 Billion People for Tomorrow’s Economy

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Investing broadly in the skills of the future for both today’s and tomorrow’s next-generation workforce could add an additional $8.3 trillion in increased productivity to the global economy by 2030.

The Reskilling Revolution initiative, a coalition of 50 CEOs, 25 ministers and 350 organizations committed to realizing these gains for their economies, societies and organizations, marked two years of progress at the World Economic Forum Annual Meeting 2022 in Davos today. Their work will benefit over 100 million workers on their journey towards reaching 1 billion people by 2030 with better education, skills and economic opportunity.

Accelerating the Reskilling Revolution

Global inequities in lifelong learning and childhood education, a pandemic that closed schools and workplaces and rapid technological change are highlighting the need to double down on reskilling, upskilling and the future of learning. The Reskilling Revolution initiative, launched at the World Economic Forum’s 50th Annual Meeting in January 2020, is working to provide 1 billion people with better education, skills and economic opportunity by 2030.

At its heart is a commitment from over 50 CEOs to inspire global business leadership on the upskilling, reskilling and human capital investment agenda. By working together with a growing network of national-level country accelerators launched to date in 12 countries – Bahrain, Bangladesh, Brazil, Cambodia, Georgia, Greece, India, Oman, Pakistan, South Africa, Turkey and the United Arab Emirates, with knowledge support from Denmark, Finland, Singapore and Switzerland – the Reskilling Revolution has mobilized a multistakeholder community of over 350 organizations across 12 countries and is on track to benefit 100 million people on its journey towards 1 billion.

“In an era of multiple disruptions to the labour market – the pandemic, supply chain changes, the green transition, technological transformation – the one ‘no regret’ investment all governments and business can make is in education, reskilling and upskilling. It is the best pathway to expanding opportunity, enhancing social mobility and accelerating future growth,” said Saadia Zahidi, Managing Director, World Economic Forum.

Enabling Education 4.0

Two years into its work the initiative will expand beyond adult reskilling and upskilling and integrate a focus on education for children and youth. These efforts will be taken forward by a new Education 4.0 Alliance, bringing together 20 leading education organizations at the Forum’s Annual Meeting 2022.

A new report from the project, Catalysing Education 4.0 Investing in the Future of Learning for a Human-Centric Recovery, focuses on preparing today’s generation of school-age children with better collaborative problem-solving that could add $2.54 trillion – over $3,000 per school-age child – from this one skill alone.

The report, developed with support from the LEGO Foundation and in consultation with leading education experts from the public, private and educational sectors, finds that investment in the skills of the future for primary and secondary school learners would create an additional $489 billion in Europe, $458 billion in South Asia, $333 billion in East Asia, $332 billion in Latin America, $266 billion in the Middle East, $235 billion in North America, $179 billion in sub-Saharan Africa, and $163 billion in Central Asia.

Meanwhile, China ($356 billion), the United States ($218 billion), Brazil ($143 billion), Mexico ($80 billion) and Italy ($72 billion) are the five countries standing to gain the most, while the benefits relative to the size of their economies today would be greatest in sub-Saharan Africa and Latin America.

To unlock this education transformation, the Education 4.0 initiative will focus on three key investment areas: new assessment mechanisms; adoption of new learning technologies; and empowerment of the teaching workforce.

Expanding the Accelerator network

Complementing the Skills Accelerators, the World Economic Forum’s Annual Meeting also featured the official launch of the first school-age focused Education 4.0 Accelerator, a national-level public-private collaboration platform for action. The Education Accelerators – complementing a network of successful Closing the Skills Gap Accelerators – aim to mainstream technology-enhanced learning experiences, implement new measurement mechanisms, empower educators and mobilize investment in the sector.

Bangladesh will be the first country to pioneer this new model in Asia. Dipu Moni, Minister of Education, Bangladesh, said: “Bangladesh is committed to ensuring high-quality education for all children and youth. We are delighted to partner with the World Economic Forum to launch the first Education Accelerator in South Asia and to be part of this global network to advance the Education 4.0 agenda.”

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Sanctions against Russia: do they have any point?

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It’s hard to recall a day since the beginning of the conflict in Ukraine when there was no mentioning about new sanctions being imposed against Russia. On May 9th, the EU announced that it had almost finished preparations for the sixth package of sanctions, and rumors on the Internet are already mentioning the seventh.

What are sanctions?

In brief, sanctions are a list of political and economic decisions applied by states and organizations in order to protect national interests, international law, and defense from threats to international peace and security. As a rule, they are temporary and are removed when the cause/threat has been eliminated.

According to the EU’s official website, “Restrictive measures (sanctions) are an essential tool in the EU’s common foreign and security policy (CFSP), through which the EU can intervene where necessary to prevent conflict or respond to emerging or current crises. In spite of their colloquial name ‘sanctions’, EU restrictive measures are not punitive. They are intended to bring about a change in policy or activity by targeting non-EU countries, as well as entities and individuals, responsible for the malign behaviour at stake.”[1]

How many sanctions have been imposed against Russia in total?

On May 8th, the Chairman of the State Duma of the Russian Federation Vyacheslav Volodin shared a post on his Telegram channel that “10 128 sanctions have been imposed against our country. More than against any other state in the entire history of their existence.”[2] From this number, 2,754 were introduced in the period from 2014 (the Crimean issue) and before the beginning of the special operation in Ukraine.[3] The rest – more than seven thousand – were introduced in a short three-month period. According to The Castellum.AI, a service which takes a record of sanctions and updates weekly, as of May 9, their number has already exceeded 7,600, making Russia the state with the largest number of sanctions imposed. For comparison: 3,161 sanctions have been imposed against Iran, 2,608 – against Syria, and 2,077 – against North Korea.[4] Other states can “boast” with the list containing less than 1,000 sanctions. Thus, in a short period of time, Russia not only got on the list of sanctioned countries, but also topped it.

The sanctions have affected almost every sector of Russia – from individuals, which list already counts numbers in the hundreds, to the spheres of energy, economy, trade… The enumeration can go on for a long time. It can be said that there is practically not a single area left that wasn’t affected by sanctions: for example, one of the articles published by the Atlantic Council had the heading “What’s left to sanction in Russia?” And yet, at almost all the examples given, it is mentioned that sanctions have already been imposed in this area.[5]

So is there anything else that can be included in the sanctions lists? The question itself is good, but alas – it will take quite a long time to search for the answer: sanctions are already everywhere.

So is there any point in sanctions?

This is quite an interesting question, although in this situation it would be more accurate to say that sanctions have not only a point, but also consequences.

As it was mentioned above, sanctions are usually temporary, but Russia has been living with almost 3,000 sanctions imposed against it for more than 8 years. Has it brought any tangible results in influencing Russia? No. Have those who introduced them achieved the result what they had introduced those sanctions for? No. Have these sanctions been lifted? No. Therefore, is there any point in imposing them on Russia? The answer is still the same – no, because as it can be observed,  these sanctions are in the list of existing ones, and Russia still continues to exist, quite successfully adapting to them. And there are a lot of sanctions – 2,754 (for the period before the Ukrainian issue), but the thing is that the country against which they were introduced does not complain about its size and capabilities either.

There is a point in sanctions, and first of all – for Russia.

Following numerous bans on the export of various kinds of products, as well as the departure of many companies operating in various fields, the Russian government introduced a number of measures to support different areas, and which have already started to show positive results. According to Rosstat, several sectors of the Russian economy showed positive dynamics as soon as measures were introduced (compare to the same period of 2021): the mining industry grew by 7.8%, energy, heat and gas supply – by 1.5%, water supply and waste disposal – by 7.2%.[6] There is also an increase in the food sector – by 1.1%, and medical production increased by as much as 46.8% compared to March 2021, and turned out to be 9.1% higher than in February 2022. As Rosstat data shows, according to a preliminary estimate of the country’s GDP for the 1st quarter 2022, there is a positive growth of 103.5% compared to the same period last year.[7] The Economist noted that “as imports slide and exports hold up, Russia is running a record trade surplus.”[8] The Institute of International Finance estimates that “in 2022 the current-account surplus, which includes trade and some financial flows, could come in at $250bn (15% of last year’s gdp), more than double the $120bn recorded in 2021”. As a result, the world sees that rather than damaging Russia, sanctions are contributing to its strengthening. [9]

The consequences of the sanctions, however, were faced not only by Russia and Belarus (which also got quite an amount of them because of good relations with Russia), but also by the rest of the world, including even the part that had nothing to do with this issue. And the consequences of those 7 thousand+ recently imposed sanctions are especially severe.

Some countries are already complaining about food shortages, as their supplies have been seriously reduced due to sanctions. People are dissatisfied with the increase of prices for various products and goods, but this is caused by the increase of fuel prices – which people are also dissatisfied with. Shocks and turmoil in the social and economic sectors started to affect the political situation both within countries and their international policies, as they have to choose whether to join the sanctions or try to stay away.

Why “try”?

Even at the first weeks of the conflict, the United States were seen trying to put pressure on states to either join the sort of “sanctions coalition” or stay away, preventing any attempts to help Russia. As it turned out, one of these countries was China: back in April 2022, the US Deputy Secretary of State Wendy Sherman said that the sanctions imposed against Russia should give China (and President Xi personally) an idea of the consequences that it could face in case of providing assistance to Russia: “<it> gives President Xi, I think, a pretty good understanding of what might come his way should he, in fact, support Putin in any material fashion.”[10] If there was an attempt to put pressure on China, which is far from being the last figure in the international arena, then what can be said about other states – especially European ones?

Hungary is now becoming one of the stumbling blocks, as it refuses to support sanctions with regard to the embargo on fuel imports. According to Prime Minister Viktor Orban, it will be equal to an atomic bomb dropped on the Hungarian economy, since it simply will not have time to adapt – it will take at least five years and a large number of investments. Nevertheless, he noted that Hungary is ready for negotiations – if the proposals are consistent with the interests of the state.[11] However, according to information, a video conference between Ursula von der Leyen and Viktor Orban, held on Monday last week, did not lead to a compromise, thus delaying the adoption of the sixth – the heaviest, according to EU representatives – package of sanctions.[12] Against this background, Polish Prime Minister Mateusz Morawiecki expressed the opinion that the sixth package of sanctions could be adopted in a reduced form, since “we must observe unity in the EU.”[13]

So…what can be expected in the future?


[1] https://ec.europa.eu/info/business-economy-euro/banking-and-finance/international-relations/restrictive-measures-sanctions/overview-sanctions-and-related-tools_en

[2] https://t.me/vv_volodin/427

[3] https://ec.europa.eu/info/business-economy-euro/banking-and-finance/international-relations/restrictive-measures-sanctions/sanctions-adopted-following-russias-military-aggression-against-ukraine_en

[4] https://www.castellum.ai/russia-sanctions-dashboard

[5] https://www.atlanticcouncil.org/blogs/new-atlanticist/whats-left-to-sanction-in-russia-wallets-stocks-and-foreign-investments/

[6] https://rosstat.gov.ru/folder/313/document/163079

[7] https://rosstat.gov.ru/folder/313/document/165370

[8] https://www.economist.com/finance-and-economics/2022/05/13/russia-is-on-track-for-a-record-trade-surplus

[9] https://www.economist.com/finance-and-economics/2022/05/13/russia-is-on-track-for-a-record-trade-surplus

[10] https://www.reuters.com/world/us-says-china-could-face-sanctions-if-it-supports-russias-war-ukraine-2022-04-06/

[11] https://www.reuters.com/world/europe/hungary-cannot-support-new-eu-sanctions-against-russia-present-form-pm-orban-2022-05-06/

[12] https://www.ft.com/content/abba000b-992a-45a3-941a-3616e335ccc5

[13] https://tass.ru/mezhdunarodnaya-panorama/14676015?utm_source=yandex.ru&utm_medium=organic&utm_campaign=yandex.ru&utm_referrer=yandex.ru

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Anglo-American Axis Needs Common Market, not Common Alliance

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With the eruption of the war in Ukraine, and considering the post-war situation, the alliance system in the West and its future should be something worthy of concern.

Anglo-American Axis is a concept that I proposed well before Brexit, and such an axis has already been fully formed today. With Brexit, the United Kingdom is now no longer part of the continental European alliance. It has instead re-aligned with the United States, and reverted to being a maritime nation that it used to be.

Such an axis would not be moved by the independence inclination of France, the wish of Germany to become the leader, nor the ambition of Turkey to be a regional hegemon. It cares even less about countries like Israel, Iran, and India. What the Anglo-American Axis focuses is to control the high ground of fundamental values, so that it can win the historic future as long as civilization continues to progress. Wars in other regions do not carry much significance to it. For NATO to play a role, it must negotiate conditions with the United States. It is not the Anglo-American Axis that needs NATO, but that NATO needs the Anglo-American Axis.

The United States, Canada, Australia, and New Zealand, the former members of the Commonwealth, have formed the largest single market in the world, with a coordinated monetary policy for the U.S. dollar and British pound. Such a market can consider certain African and South American countries, as long as they remain stable, and this usually means some “friendly dictatorships with open economies”, similar to Chile in the past.

Civilization is a dynamic force. Although many have studied monetary issues and finance, they fail to link these with civilization. In fact, these are appendages of civilization, and they are products of it. Humanity will inevitably move towards civilization.

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