_ Hovhanness Azizyan, Deputy Minister of Economy, Republic of Armenia. Interviewed by Arshaluys Mghdesyan. Yerevan, 10 May 2018.
An interim agreement to establish free trade zone (FTZ) between Eurasian Economic Union and Iran will be signed at Astana Economic Forum on May 17-19. Kazakhstan’s Minister of National Economy Timur Suleymanov made such announcement a few days ago, saying it will be a three-year agreement. Why do they plan to conclude an interim agreement? What effect will it have on the commodity turnover between Armenia and Iran? What will Iran export to EAEU? What commodities will Armenia export to Iran?
– Mr. Azizyan, the date of Iran, EAEU signing the agreement on FTZ is known. Reportedly Armenia is the initiator of the interim agreement. Why do they plan to sign an interim agreement? What are expectations of the sides?
– As an EAEU member, Armenia is naturally interested in that agreement. Iran is our neighbor, a solvent, large market, and Armenia is the only country in the Eurasian Economic Union to have a land-based border with Iran. Many Iranian products may be in demand in Armenia and in EAEU market, at large. In addition, EAEU countries seek to export their goods to the Iranian market. Talks to establish an interim agreement on FTZ were held with Iran for about a year. The text of the agreement has been prepared already, and intra-state coordination of the document is nearing completion as well.
It will be concluded soon. The document has not been published yet. It will be done while being ratified. Hopefully, the sides will ratify the document by the end of the year and it will come into effect.
As regards the interim nature of agreement, it implies zero customs duties on both sides. In particular, Iran has strict restrictions in the field. Tehran does not reduce customs rates below 4%, this is a requirement of Iranian laws. In this light, we make an interim agreement meeting all requirements of WTO. The agreement will be made for a period of three years. After the expiry of the agreement, the sides will have to either extend it or start talks for an agreement on comprehensive free trade area. Then either the customs rates will be zeroed out or they sides will set a term for their gradual zeroing out. Of course, certain types of goods of both the countries will not be included in that universal agreement, unlike others. As for the current agreement, it includes about 900 types of goods of the two countries. The agreement is a result of a mutual concession. Both EAEU and Iran made certain concessions.
– Does the agreement include any energy products?
– No, not any. At the current phase, energy products are not weighed. I cannot say if that issue will be discussed later. Anyway, interim agreement is a big step, as it helps launching a mutually-advantageous trade dialogue with Iran, a process that can be continued in future.
What expectations does Armenia have from that agreement? The commodity turnover between Armenia and Iran is not that high – $260 million for 2017. Do they expect any drastic growth of exports from Armenia to Iran?
On the Armenian side, we have included the products that may be competitive in the Iranian market. I am speaking about meat, mineral and sparkling water, sweets, fish, honey, jewelry, light industry etc. This is not the full list, of course. We anticipate intensification of the Armenian-Iranian trade, as Iran’s customs duties on certain groups of commodities will be reduced threefold.
Iranian market will become more interesting to Armenian producers. They will work to introduce standards of that market locally. I am speaking mainly about “Halal” food standard. The country is ready to develop infrastructures to support producers in introducing those standards. At presents, discussions are underway with Iran for opening of Iranian laboratories in Armenia and issuing certificates locally. We are ready to establish representations of our laboratories in Iran to facilitate introduction of Iranian products into Eurasian market.
Much work has been done to that end. A memorandum will be signed with Iran shortly to develop legal bases to promote these works. There are producers in Armenia that meet “Halal” food standards and they work on the Iranian market.
Let’s return to expectations and assessments of this agreement’s probable effect on growing trade volumes between Iran and Armenia…
Exclusive of energy products – there are no such in that agreement – I think trade turnover between our countries will grow significantly. We anticipate a 2-3-fold growth of commodity turnover for a period of two years. I’d like to reiterate that this does not include energy products, as Armenia and Iran have barter trade – gas in exchange for electricity.
– A free economic zone is being established on the Armenian-Iranian border. Will that infrastructure be involved in implementation of the agreement on FTZ?
– Sure, free economic zone on the Armenian-Iranian border is, first of all, an additional link between our economies. This not only reduces logistic costs, but also helps arranging complementary production. We will get an opportunity to unite our industrial capacities. In other works, Iran can open a factory in the free economic zone in Meghri (Armenian town bordering with Iran – editor’s note) and process raw materials imported from Iran and supply finished products to the Eurasian market on favorable terms. The same can be done in the near border free economic zone of Iran with a focus on the Iranian market.
What makes free economic zones favorable is facilitated documentation and price making procedures for arrangement of production and export of finished products to third countries. The agreement of FTZ will become another impetus for Armenian-Iranian trade. Actually, an Iranian businessperson can import products specified by that agreement into the free economic zone, process and supply it to Eurasian market at a reduced customs rate.
Danger is threatening Iran again. U.S. and some EU countries speak of revising “the nuclear deal,” while Russia and China oppose them. U.S. threatens Iran with new sanctions. How will this affect relations of Armenia and Iran?
I think all the countries, not just U.S. but also EU countries can see that Iran is a very important direction for Armenia’s foreign policy. This is a logistic corridor, a country supplying raw materials to Armenia. Meantime, Armenia has almost no alternative (Armenia is blocked by Turkey and Azerbaijan from two sides due to Karabakh conflict – editor’s note). Just look at the region’s map to understand how important Iran is for Armenia. From this point of view, Armenia is extremely interested in stable geopolitical situation around Iran without any serious conflicts of interests with Western countries.