Priority of Reviving Economic Ties: Iran and Europe’s Test

Now that the international relations’ arena has been influenced by issues like war and disputes around the Black Sea, the Ukraine war, fundamental changes in the Middle East and the Persian Gulf, ongoing instability in Afghanistan, the global economic crisis resulting from the corona pandemic, infiltration of big world powers in the important international organizations,
3 April 2022
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Ali Beman Eghbali Zarch


Now that the international relations’ arena has been influenced by issues like war and disputes around the Black Sea, the Ukraine war, fundamental changes in the Middle East and the Persian Gulf, ongoing instability in Afghanistan, the global economic crisis resulting from the corona pandemic, infiltration of big world powers in the important international organizations, last steps of the sensitive nuclear negotiations for the US return to the JCPOA, and the west’s strong resolve for sanctioning and isolating Russia, giving attention to the foreign policy dimensions for preserving the national interests as well as the country’s stability and security becomes twice important for the 13th administration, which has taken power more than six months ago. Occurrence of political and economic conflicts and wars in recent decades in Iran’s surrounding areas proves the urgency of promoting diplomatic capacities on every dimension, especially economic diplomacy, and countering the oppressive US sanctions and heightening foreign policy. Adopting a strategy that, on one side, gives the Islamic Republic of Iran the possibility to utilize the conditions and  opportunities based on national interests and goals, and on the other side, makes the country immune to probable damages and threats, can be among the major and basic strategies of the Iranian foreign policy.

Iran and Europe share common grounds and commonalities in the economic sector, energy and primary materials being among them. Although in the military theories there have occurred major and profound changes and understanding and intelligence have come to become the most important factor; in the economic sector, especially in the European economy, the underground resources say the last word, and if Europe today imports 50% of its energy and primary materials, the figure will amount to 70% in the coming decades. Therefore, the EU, along with its current affairs, has several long-term basic agendas with economic approach, chief among them the Comprehensive Energy Strategy aimed to cut back dependence on outside regions and increase clean energies share and diversify the sources and countries supplying energy; a matter that has gained double importance with the emergence of the Ukraine crisis and the Russian sanctions becoming serious. Also, traditionally and historically, the European market has been a fertile ground for the exclusive Iranian superb goods such as carpets, pistachios, saffron, and in recent years petrochemical products. On the other side, the EU has always had special attention to the Iranian consumer market. The 27 EU member states with 7% of world population and over 4 trillion euros worth of trade constitute 20% of world trade as the largest exporter and second largest importer of the world. The Iran/EU trade had an upward trend by the end of the 2000s and the exchanges decreased since 2012 due to harsh oppressive sanctions, so that the 26.9 billion euros trade of 2011 relegated to 12.2 billion euros in 2012 and in the last year the figure reached its lowest at 3.5 billion euros, of this same figure 80% being the share of EU exports to Iran. Generally, the bulk of the Iranian trade with the green continent has been with the EU zone, so that over 75% of the Iranian exports to Europe in 2014 has been to the EU members; in other words, of $2 billion of Iranian exports to the green continent, more than $1.5 billion has gone to the EU zone.

A look at the history of the exchanges is proof that in the 1st decade of the Islamic revolution, exports of the European Society, which was comprised of ten countries, was an annual $1 billion and imports from Iran which was mostly consisted of oil was about $6 billion. However, during this period, some countries from the communist camp like Romania and the former Yugoslavia had especial relations with Iran and exchanged considerably with Iran. For example in 1988, the Iran/Romania exchanges went over $1 billion. In a part of the Construction Program and Reforms period, the trade surged to over $20 billion, but in the waning years of the Ahmadinejad administration, the Iran/ EU exchanges plummeted. According to Eurostat report, in 2012 Iran had about one billion euro worth of exports to the EU, while the figure was 3.8 billion euros in the previous year. During this period, a major chunk of the Iranian exports to Europe was crude oil; since the 2nd half of 2011, the European companies totally stopped Iranian oil purchases due to the US sanctions. The same trend occurred with other trade partners of Iran.

Some Iranian products, especially hand-woven carpets, pistachios, Caviar, and saffron are publicly known to the Europeans, and until a decade ago the largest part of Iranian non—oil exports to Europe consisted of carpets and pistachios. But the daily-increasing scientific and production achievements of Iran can be a good ground for export of knowledge-based products to Europe. But access to third markets is of special importance to Europe, and the reality is Iran , with its geostrategic position, is the best platform for access to the over 500 million market of 15 neighbors along the Persian Gulf coast and in Central Asia and the Caucasus.

Regarding trade and economic cooperation with the green continent, it is necessary that more attention be paid to Central and Eastern Europe which covers 14 countries. This region accommodates about 120 million people and its GDP amounts to $1200 billion, enjoying an average GDP growth of 4%, and its foreign trade has been about $1530 billion, with Iran about $770 million of exports and imports under the conditions of Trump withdrawing from the JCPOA. The biggest economic potentials are in Poland, Czech, Hungary and Romania and among these countries Poland, Romania and Bulgaria have the highest trade exchanges with Iran. Over the last half century, Iran has had considerable cooperation with Romania in electrical industries, with the former Czechoslovakia in building power plants, aluminum plants and Tabriz Machinery Company , with Poland in ship-building, copper , with Hungary in agriculture and the Environment, and with former Yugoslavia in heavy industries, and in the post-revolution era exchanges with these countries have considerably grown.

The reality is overcoming the economic problems and creating jobs are hard without active presence in the major global markets. Despite vast and unique economic and underground resources, the Iranian presence in European markets has been little because the Iranian foreign trade per capita is about 1000 euros, but this figure, even in the weakest European countries, is 4000 euros, and for pioneering countries up to 40000 euros. Therefore, developing cooperation with the green continent countries, while exploiting the vast market, can help obtain experience and upgrade the Iranian foreign trade. With constructive and dynamic interaction in utilizing the resources and making joint investments on various grounds with the European countries, Iran can move towards exports and imports of energy carriers with a partnership approach in the global value chain as well as expand the transfer and storing  network and take steps to diversify energy exports markets like oil, gas and petrochemical products, with the prioritization of the region, and use the current seasonal gas agreements with the neighboring countries and connect to the European electrical grade to increase Iran’s share of the world trade. Finally, Iran can make efforts to attract foreign and domestic private investment in the energy sector and commercialize innovative ideas and adopt flexible and local policies toward production and constructive competition on the international arena by branding and commercialization

 Ali Beman Eghbalizarch, senior expert of Europe        

      (The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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