Iran-Russia trade obstacles reviewed

Financial Tribune- Despite the opportunity for Iranian merchants and economic players to increase their exports and establish a foothold in the Russian market as a result of tensions between Moscow and the West in recent years, Iran largely remains an importer of goods from Russia and has a meager share in the Russian market.

Economic sanctions on Russia by the European Union were introduced on July 31, 2014, initially for one year in response to Russia’s actions in Ukraine. They were reinforced in September 2014. They target the financial, energy and defense sectors, and the area of dual-use goods. Sanctions have been extended until January 31, 2017.

Enumerating the challenges facing Tehran-Moscow trade ties, experts say a lack of proper marketing and unawareness of the Russian market’s capacities, different hygienic standards applied in the two countries, visa complications, the tendency to consume European goods by Russians and a lack of reciprocal trust between merchants of the two sides are among the main obstacles that must be addressed, the Persian weekly Tejarat-e Farda reported.

Non-Compliance With Nat’l Standards

Mohammad Lahouti, the head of Iran Export Confederation, said that in conducting trade, all countries must align their commercial standards with those of their trade partners.

“Moving on the path to industrialization, a country like ours has to abide by international commercial standards and produce and export high added-value goods in line with the tastes of its customers,” he said.

Iranian merchants, according to the official, have failed to meet the abovementioned standards in trade with Russia.

“For example, the Russian side had asked for labels of exported goods to be in Russian, yet Iranian traders were slow in meeting this demand,” he said.

“Other factors impeding successful trade with Russia include a lack of adequate transportation infrastructure, banking and finance problems and the high price of Iranian products.”

However, Lahouti believes the main obstacles crippling Iranian companies in the international markets are structural.

“Iranian products cannot compete with similar products in the global market due to their high price, which is a result of unreal foreign exchange rates and low productivity,” he said.

“Buyers of Iranian goods are made to pay many times as much in tariffs since our country is not a member of World Trade Organization. Moreover, liquidity problems, high interest rates of banking facilities and instability of export regulations related to some products are other structural obstacles.”

Asadollah Asgaroladi, the head of Iran-Russia Chamber of Commerce, said visa problems are hindering bilateral trade.

“We asked the Russians to grant Iranian merchants one-year visas, but as yet, the request has not been accepted. There is no proper mechanism for issuing long-term and multiple visas for traders from the two countries,” he said.

Asgaroladi mentioned banking problems and transportation issues as factors hampering the expansion of Iran-Russia trade.

Iran, says the seasoned businessman, needs to make structural reforms on macro scales and separate politics from economy to be able to reach its trade goals.

He suggests that exporters upgrade the quality of their products.

“Russia is no longer a traditional market nor one that will accept low-quality products. Therefore, Iranian exporters need to improve the quality of their products while considering packaging the way Russians would approve,” he said.

“We have to take measures to ensure goods are delivered on time. For example, if we are exporting cucumbers and the transportation is delayed, the products will perish.”

Asgaroladi believes that to expand bilateral trade, commercial delegations from Iran should visit Russia and vice versa every few months.

Trade Turnover

According to the Islamic Republic of Iran Customs Administration, Iran exported 150,000 tons of non-oil goods worth $86.5 million to Russia during the seven months to October 21, down 6% in value compared with last year’s corresponding period.

Food supplements, fruits and vegetables, raisins, dates, tomato paste, pistachios, carpets, petrochemicals and cement were among the main exports.

Some 890,000 tons of goods worth $1.1 billion were imported from Russia to Iran during the period, registering a rise of 235% in value year-on-year. Imports mainly included electronic devices, grains, corn fodder, wood, paper and vehicles.

Tehran hosted the 13th session of Iran-Russia Economic Commission in December. The meeting concluded with the signing of nine memoranda of understanding in the fields of economy, transportation, trade promotion, banking and gas.

Last month, about 20 tons of agricultural products were exported to Russia from Jiroft County in the southeastern Kerman Province for the first time.