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A trade deal between Iran and the Eurasian Economic Union will take effect on October 26, Russia’s Energy Minister Alexander Novak said during a meeting with Iran’s Energy Minister, Reza Ardakanian.
Mehr news agency reports Iran became a member of the free-trade union as a means of boosting its economy amid crippling U.S. sanctions by increasing the share of non-oil exports in revenue streams. Russia, the leader of the EAEU, spearheaded the negotiations and will now provide financial help to the newest member of the union in the form of a US$1-billion loan for the construction of a power plant.
But financial help is just the start, theoretically. With Iran’s addition to the EAEU, which also includes Kazakhstan, Kyrgyzstan, Belarus, and Armenia, the sanction-bound country will receive access to a free-trade zone with Iran’s ambassador to Russia estimating bilateral trade could spike to US$10 billion within two to three years.
How likely this is to happen remains anyone’s guess. Trade between Russia and Iran currently stands at about US$1.7 billion and that’s lower than the figure just two years ago, in 2017, when trade between the two totaled US$2.1 billion.
As Gazeta.ru noted in a report on the topic, Iran’s main exports are not of any interest to Russia: they are the same as Russia’s own main exports, namely oil, gas, and oil derivatives. What Iran can export to Russia are fruit and nuts, as well as other foodstuffs. While the size of these exports is too small to really matter for either country, Iran’s joining the EAEU will lead to tariff cuts that could indeed liven up trade with Russia and the other member of the union.
Iran has few options available to fight growing unemployment and soaring inflation amid the U.S. sanctions. While negotiations with the European signatories to the so-called Iran nuclear deal continue, it is only rational for Tehran to seek other ways to prop up its ailing economy as well.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.