Will Iran become a competitor of Kazakhstan in the EAEU?

_ Askar Muminov. Astana, 11 May 2018. Published for debate.

The countries of the Eurasian Union and Tehran will abide by the WTO principles.

Russian Prime Minister Dmitry Medvedev signed a provisional agreement on creating a free trade zone between the EAEU and Iran. It is expected that this summer ZTS Iran with the EAEU will work, however it is an optimistic prognosis, and possible another delay.

According to experts, it opens new frontiers for cooperation with Tehran, however, there are risks, including in the field of competition for markets and political instability in the Islamic Republic. While the agreement is temporary for a period of four years, the free trade zone will be in effect for a limited range of goods.

As reported, the Eurasian economic Commission, in accordance with the interim agreement the parties will abide by the fundamental principles of the WTO is to provide MFN and national treatment in respect of all goods in the course of trade between the EEC and Iran.

In the coordinated draft agreement recorded that all charges associated with the importation of goods shall not exceed the cost provided for customs clearance services. These fees can not be indirect protection for domestic goods or a taxation of imports or exports to additional taxes. This requirement is one of the most important in WTO law and predictability of the trade regime between the two countries.

Do not forget about the rules of the WTO

It is assumed that in the framework of the interim agreement, the import duty will be reduced to the minimum quantity of goods of up to 200 commodity positions on both sides. If the EAEU countries and Iran considers preferential trade effectively in the future possible transition to full-fledged free trade zone.

Previously member of the Board for trade of the EEC Veronika Nikishina said that Iran, which is not a WTO member, has made commitments to observe the regime of trade-level requirements of your organization. Iran will apply the obligations under that regime in respect of all bilateral trade, not only to the goods for which will be agreed preferential rates.

“All the countries of the Union have been working under WTO rules, therefore, from the Iranian colleagues it was a unilateral concession, demonstrating their interest in the liberalization of our trade regime,” she said.

As stated by the Minister of foreign Affairs of Iran Mohammad Javad Zari, the document will increase the direct cooperation of Iran with Russia and partners in Eurasia. The first free trade agreement with the EAEU was signed by Vietnam, now there are negotiations with India, Singapore, Egypt, Israel and Serbia.

“Капитал.kz” tried to find out from the experts what awaits the EAEU and Kazakhstan from the accession of Iran to the free trade zone with the Union, what are the advantages of this solution, where the possible pitfalls.

In the shadow of policy

Senior analyst “Alpari” Vadim Iosub noted that the major traditional exports of Iran, except for oil, chemical products, fruits and nuts, carpets, weapons. However, to consider cooperation with the country solely through the economic lens it is difficult, without geopolitics here not to do, he said. The expert noted that just recently the Prime Minister of Israel accused Iran of secretly developing nuclear weapons, in violation of the”nuclear deal”. The accusation that Iran supported the press Secretary of the White house Sarah Sanders, which complicates the situation.

“Violations of the Iran, as a minimum, must receive confirmation from the IAEA, after studying of the documents obtained by the Israeli intelligence service. But in the case of such confirmation possible return of Western countries to the policy of sanctions against Iran. Including the so-called “secondary sanctions,” which may affect third countries collaborating with a pariah. In this situation, Iran is quite “toxic” for cooperation, and the trading partners of the country can get from such cooperation more minuses than pluses,” said Vadim Iosub.

Possible multiplier effect

Financial analyst of the company “Opening Broker” Timur Nigmatullin noticed that other things being equal, the development of a free trade zone accelerates the rate of economic growth. Local producers, including from Kazakhstan may face increased competition. However, in most industries, this negative will be offset by an increase in market. Relatively speaking, manufacturers may lose in margin, but will win by increasing sales.

“It is worth noting some aspects of the agreement. Its geography makes the area of free trade is most beneficial for Kazakhstan, but the main beneficiary will be Russia on the background of the expansion of payment systems in Iran, which is interested in infrastructure because of the risk of sanctions. Nevertheless, the General effect of the agreement is reasonable, since Iran is a resource-based economy, as Kazakhstan and Russia”, — said the analyst.

We are not talking about a full-fledged trade

Specialist on Iran, Deputy General Director of the Russian Center for strategic estimations and forecasts, Igor Pankratenko noticed that the agreement as such yet. And when exactly it will be signed — is not clear. According to the optimistic forecasts of Yuri Ushakov, assistant to the President of the Russian Federation — in a few months. Especially when you consider how many times the timing of his signing was postponed, and taking into account the fact that the positions of the sides remain rough.

Besides, speech does not go about full-fledged free trade area, and temporary, for four years, mode, and even very limited — now known on paragraphs 314 — product line. He also noted that the issue of an FTA with Iran and there is a serious political component. In particular the question of whether there is a trump of agreement on Iran’s nuclear program, will be introduced new sanctions against the Islamic Republic, and if so — and this is sure to be something in what amount.

In short, the assumption of the expert, the free trade area of member States of the Eurasian economic Union is still dostatochnogo and uncertain. There are some intentions and declarations, EstDomains and projects, but what it will come”out” to speak is quite difficult.

In Iran, almost all have

Today Iran may offer the EAEU is quite a wide range of goods — from cars to sewing machines and tobacco products, from refrigerators to clothes and office supplies, agricultural products — from shrimp to pistachios. By the way, on April 30 in Tehran held a Grand exhibition of Iranian products industry, which justifiably can be called “Made in Iran”. The show was very impressive, the range is huge and varied. It is also important that the products produced in Iran — as a very high quality, is in the middle price segment. Which, of course, very attractive to the consumer and quite”tasty” for retail.

Competition would increase

As noted by Igor Pankratenko, Iran is ready to offer the whole range of petrochemical products, bituminous substances and mineral waxes, iron and steel, plastics and articles thereof polymers of ethylene, in primary forms, semifinished products of iron or non-alloy steel, and fertilizers. All this, by the way, he is now actively buys over Europe and beyond.

But here, of course, not everything is rosy, he said.Those segments of the market that could come of Iranian goods has long been divided and distributed between producers from different countries — from China to Europeans. And therefore any suggestion of Iranian production should be accompanied by thorough market research and flexible policy, who is going to promote goods from Iran in local markets.

“Of course, at first glance, the main risk rests with the political component. Will begin a new stage of sanctions pressure — and the Americans brought this mechanism almost to perfection, having worked and continuing in a number of issues to work it on the same Iran, and plans for a free trade zone with the EAEU Tehran will be in the future. But only if that’s the case? Look, in fact, although some of the sanctions still in effect, but the same Europe, not to mention China, increasing trade and economic cooperation with Iran. Thus, the turnover 28 EU member States with the Islamic Republic for the first two months of this year amounted to 3 billion 740 million euros,” — said Mr. Pankratenko.

It is worth noting that, for example, the Italians for two months 2018 traded with the Iranians on 844,92 million euros, the French — 664,84 million Germans — 545,83 million, the trade turnover between Iran and Spain amounted to 457,65 million

With a turnover of not going smoothly

And in this sense revealing are the figures for trade between the Eurasian economic Union and Iran, for example, if you take all of last 2017, the picture is much more modest. With the largest economy of the EAEU — Russia, Iran sold for all fit worth about billion dollars, with Belarus — only about a hundred million, with Kazakhstan, according to the state revenue Committee of the Ministry of Finance — $552,6 million and this is the worst figure for the last six years.

“So, maybe the problem of trafficking of member States of the EAEC with Iran are more profound than in the presence or absence of political risk, free trade zones and so on? Only here who tried to answer this question. Yes, trade is a good thing, and the creation of free zones is great. The problem is that such decisions are often made not on the basis of economic calculations and careful analysis, and from political considerations. As a result, the good intentions remain empty declarations, not filled with practical sense,” said Igor Pankratenko.

The export of raw materials from Kazakhstan to Iran in 2017 dropped to $423 million, while imports of goods rose to $59 million In 2016, the two countries traded at $596 million, Kazakhstan imports Irasema, steel and fertilizer. Tehran imports in Kazakhstan nuts, cement, dates and grapes. In recent years, the export of wheat and steel products in Iran dropped significantly due to the imposition of substantial duties under the policy of import substitution.

Source: csef.ru/

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