0624 GMT October 05, 2022
Russian President Vladimir Putin recently gave news of the decision to start negotiations for the Eurasian Economic Union (EAEU) free trade agreement between the union`s member states: Iran, Belarus, Kazakhstan, Russia, Armenia, and Kyrgyzstan.
The importance of this order is better understood if put into perspective: the East-West Corridor connects Shanghai to the heart of Europe, and the North–South Corridor links Saint Petersburg to Mumbai. The only region in the world in which these two corridors converge is Iran and Eurasia.
The EAEU helps boost and reinforce this corridor since one of Iran`s challenges in doing so is to attract transit through the corridor. Consistent trade between Iran and the Union means a well-trafficked corridor.
Economic experts believe that if the United States' tariff war on China escalates, and the US continues trampling the achievements of the World Trade Organization (WTO), China will eventually join the EAEU, whose members have ancient racial and cultural links with the country, are mostly placed along the Silk Road, and will consequently turn the region into the world`s new economic hub in the next decade.
In a Supreme EAEU Council session, Putin added that the union is working on a cooperation agreement with China. Both countries, Russia and China, stress the issue of confronting the United States' hegemony and seek to neutralize its outrageous policies in the East. NATO`s expansion to the very borders of Russia and China hindered in the South China Sea led to the “China-Russia mutual understanding of the international threat”.
Aside from the confronting US policy, another reason for this strategic cooperation is rooted in the concept of a “Greater Eurasia” which is increasingly popular among Russian intellectuals, which means Russia turning back from the West to the Far East. In the eyes of Russia, it is Asia that is going to accommodate technological and economic markets of the future.
To this end, Russia is to enter into strategic cooperation with China. This strategic cooperation means greater participation and involvement of Russia in Beijing`s “New Silk Road” project. It is no surprise that Putin and Chinese President Xi Jinping have had more than 30 meetings.
Fyodor Tyutchev, a 19th-century Russian poet and politician, had this to say about Russia: “You cannot understand Russia with logic and reason, nor can you measure it with common standards. Rather, you must feel it and know it”. Some Russian historians describe the complex and labyrinth nature of the events of this country with an analogy. Comparing Russia to its popular souvenir Matryoshka Dolls, colorful wooden dolls put one inside another, designed so that by opening one doll, you come across another smaller Matryoshka doll inside and so on.
With this description of the complexity of Russia in mind, the core challenge of Iran in exporting its goods to the EAEU goes back to its lack of adequate export and re-export infrastructure.
In Iran, production is not meant for export and the norm is to export the excess and the overflow, while export marketing, by definition, starts at the moment of production.
Also, another issue facing Iran in these negotiations with the EAEU is the challenge of its export foreign currency return in trading with other countries.
This is while growth investing requires high institutional development levels. In this kind of growth, the investors have to wait for years to make a profit. To endure this long period, trust in a stable political climate and protection of the owner`s property rights is a must.
Despite all potential challenges, it is time we shifted our focus and policy from oil exports through Iran`s southern borders to more complex protocols of non-oil exports through the country`s northern borders to the EAEU.
*Farahnakian is an Iranian attorney-at-law and holds a PhD in oil and gas law.