How Turkey-Iran trade deal collapsed in two years

Al Monitor| Mehmet Cetingulec: A preferential trade agreement between Turkey and Iran has proved to be a huge disappointment in its first two years, with bilateral trade lagging far behind the $35 billion target the deal was supposed to achieve. The agreement, which took effect Jan. 1, 2015, introduced tariff cuts on about 300 products with a view of tripling the trade volume. The results, however, turned far off the mark, failing to achieve even one-third of the target.

Starting from its first year, the deal led to an awkward outcome: Instead of growing, the trade volume between the two neighbors declined. At the end of 2015, Turkish-Iranian trade stood at $9.76 billion — not only $25 billion short of the target, but also $4 billion below the 2014 figure of $13.7 billion.

Thus, hopes had to be extended to 2016, which came with added optimism as international sanctions against Iran were lifted in the wake of its nuclear deal with world powers. While the Iranian market whetted the appetite of global trade giants, Turkey saw itself in a highly favorable position, being an immediate neighbor with tariff cuts already in place. Yet a bigger disappointment was in store. Despite the lifting of sanctions, Turkish-Iranian trade in 2016 turned about $100 million less than the previous year, signaling the collapse of the preferential trade deal in just two years’ time.

It is almost impossible not to conclude that serious political issues are snagging economic ties. Chief among them is the two neighbors’ diverging policies in the Middle East, especially on Syria and Iraq. As Al-Monitor’s Fehim Tastekin noted in February, political tensions between Turkey and Iran, stemming from their regional rivalry, have come to threaten economic ties.

Political discord has undermined the two countries’ commerce so much that they seem headed to a point where they will trade only in natural gas and a few other urgent and compulsory items. The trade figures from the past five years offer a clear illustration of that trend.

 

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