Content Group 3 of Iran
Trade Updates
Firms doing business in Iran face risks after President Donald Trump of the United States imposed the first batch of secondary sanctions against the Middle Eastern nation in Q318. August 6, 2018, marked the first of two deadlines that the United States president gave companies to wind down activities in Iran. In May 2018, he announced that he was pulling the United States out of the Iranian nuclear deal – officially known as the Joint Comprehensive Plan of Action (JCPOA).
The JCPOA was agreed on between Iran and Mainland China, France, Russia, the United Kingdom, the United States and the EU in 2015. While the United States has long maintained its tough stance on United States persons dealing with Iran, the JCPOA meant that it agreed to lift its secondary sanctions – those that apply to non-United States persons and entities engaged in Iranian transactions. These sanctions, however, have now been re-imposed.
With the EU expected to enforce a blocking regulation – a statute that makes it illegal for any EU company or person to comply with those United States sanctions – EU firms will face significant challenges when it comes to doing business in Iran and complying with United States requirements. A number of states within the EU have committed to implementing the blocking regulation as of Q219.
Multinational Trade Agreements
Active
- Syria-Iran Preferential Trade Agreement: Syria is not a viable trade partner while its civil conflict continues and, therefore, the FTA is unlikely to offer attractive trading opportunities for many years, even if the war ends.
- Economic Cooperation Organization (ECO): The partial scope agreement came into force in February 1992. The list of signatories includes Iran, Pakistan and Turkey.
- Global System of Trade Preferences Among Developing Countries (GSTP): The partial scope agreement came into force in April 1989.
- Iran- Eurasian Economic Union (EAEU) FTA: The EAEU is an economic union of states located in central and northern Asia and Eastern Europe. The Treaty on the Eurasian Economic Union was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan and Russia, and came into force on 1 January 2015. An FTA between Iran and the EAEU entered into force on October 27, 2019, creating conditions for preferential trade between Iran and the current EEAU members: Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. The FTA will give Iran access to a single market comprised of 183 million people and with an aggregate GDP of USD4 trillion.
Under Negotiation
- Gulf Cooperation Council (GCC): Iran is reliant on GCC states for imports, which flow through the better connected ports of the United Arab Emirates. Iran is currently negotiating an FTA with the GCC.
- Pakistan-Iran FTA: In December 2016, Pakistan and Iran started negotiating an FTA with the resolve to complete the negotiation process and achieve the objective of enhancing bilateral trade for the betterment of people of both countries. As of June 2019, negotiations are ongoing although the negotiations are reportedly entering its final phase, with the Pakistan Ministry of Commerce seeking comprehensive analysis of Iran-Pakistan trade relations prior to approving the agreement.
- Indonesia-Iran FTA: Indonesia is a large economy that could provide a significant market for Iranian oil exports. As of June 2019, plans have not passed the discussion phase.
- Turkey-Iran: Turkey is conveniently located next to Iran and is among the top five trade partners for Iran in terms of both exports and imports, which offers a huge market for Iranian hydrocarbons. A successful trade agreement between the two countries would open up considerable opportunities for businesses to take advantage of.
Sources: Preferential Trade Agreement between the Syrian Arab Republic and the Islamic Republic of Iran, Fitch Solutions