By Victoria Panfilova, a Nezavisimaya Gazeta columnist, exclusively for Vestnik Kavkaza
Iran and Armenia are two countries in some form of a blockade. Tehran is suffering from sanctions imposed because of its nuclear program. Communications of Yerevan with Azerbaijan and Turkey are blocked due to the occupation of 20% of Azerbaijani territory in Nagorno-Karabakh and seven surrounding districts. It seems logical that Tehran and Yerevan try to help each other improve the situation. Iran has recently offered Armenia to form a free trade zone (FTZ). The offer will most likely be accepted. On the other hand, there are some problems. Creation of a FTZ will have to match with Armenia’s joining the Customs Union (CU) and the Eurasian Economic Union (EaEU).
Washington did express disappointment at the sudden intensification of Armenian-Iranian mutual interests a few years ago, at the peak of the anti-Iranian sanctions, but it eventually turned a blind eye to the developments. The U.S. considered that there would be nothing bad in realization of projects of Yerevan and Tehran, considering the complicated situation in Armenia. But there was another explanation to the serenity in the U.S.: specialists there figured that the two countries would achieve nothing. Both versions seem legitimate. The cooperation was not intensive, although important for Armenia. U.S. experts were right when they said that all the projects would remain nothing more than projects.
According to the agreements, Armenia and Iran were to build a power line that would supply Iranian border territories with electricity. The sides agreed to build an oil pipeline from Iran to Armenia. The Armenian border territories were to build a refinery with enough output to make gasoline exports unnecessary for Armenia. As a gesture of friendliness, Iran declared zero transit fees for Armenian freighters. For some time it announced zero fees for Armenia at the ports of Bandar Abbas on the Persian Gulf and Enzeli on the Caspian coast.
“Unfortunately, things did not get any farther than words, not a single project has been realized. Not even a single deal has been signed, just protocols of intention that have remained intentions. But the projects were interesting indeed,” Sevak Sarukhanyan, deputy director of the Noravank Fund for Strategic Studies, told Vestnik Kavkaza. In his opinion, the main problem was lack of money. Iran had the financial burden in all the projects. Opportunities were probably evaluated incompletely. “The funds needed were not found. Because of international sanctions, Tehran had no opportunities for investments abroad. The same sanctions were impeding attraction of investments. As a result, it was all left on paper,” said Sarukhanyan.
In his words, Iran lost interest in Armenian electricity after a couple of years. Concerning petroleum projects, they looked dubious from the very start. Building a refinery is a very costly initiative, in terms of financing and technologies. Pumping gasoline through the pipeline is not a very clear idea, because Iran needs the fuel itself.
The same problem applies to freighting. The offer to lift fees on roads and at ports was a good-neighbourly offer. The question is how much freighting is needed to make a profit. No answer has been found.
“Of all the ideas in the package, I think that only construction of a railway line to connect the railways of Iran and Armenia was topical. However, that proposal will probably lose value if the Qazvin-Rasht-Astara line connecting the railway networks of Iran and Azerbaijan is implemented,” said Sarukhanyan. In that case, Tehran will lose interest in access to Armenia, especially when the Abkhaz railway that would give access to Russia through Georgia remains closed. Iran will get access to Georgian Black Sea ports through Azerbaijan, then to Russia or anywhere else.
The expert considers the idea to form a FTZ interesting and essential for both countries. Firstly, Iran is still under pressure of the sanctions and tries to liberalize trade relations with its neighbours. Tehran calls it a policy of forming free trade zones and free terminals, using them to bypass restrictions and barriers caused by Western sanctions. Secondly, Armenia has reconsidered the situation in Iran: trade turnover has been dropping in the last years. If they do not boost trade, Armenian-Iranian economic relations will stay solely in the energy sector.
“Formation of the FZT does not conflict with Armenia joining the CU and the EaEU. You should not think that Iranian goods would start entering the CU market without customs fees. It is a purely Armenian-Iranian project and any Iranian product entering the CU from Armenia will be given a fee,” supposes Sevak Sarukhanyan. In general, according to the expert, Tehran and Yerevan need to do something in the economic sector to make relations in the sector meet at least a satisfactory level of bilateral political relations. Armenia and Iran have been supporting each other on the world arena in many issues. Although the support has not played a decisive role in resolving issues, it established good-neighbourly relations. Now they need an economic filling. “That is why we can assume that other offers will appear after the proposal to form the free trade zone,” said Sarukhanyan. The question of whether they will be implemented remains open.
Armenia is joining the Customs Union and is discussing a free trade zone with IranBy Victoria Panfilova, a Nezavisimaya Gazeta columnist, exclusively for Vestnik KavkazaIran and Armenia are two countries in some form of a blockade. Tehran is suffering from sanctions imposed because of its nuclear program. Communications of Yerevan with Azerbaijan and Turkey are blocked due to the occupation of 20% of Azerbaijani territory in Nagorno-Karabakh and seven surrounding districts. It seems logical that Tehran and Yerevan try to help each other improve the situation. Iran has recently offered Armenia to form a free trade zone (FTZ). The offer will most likely be accepted. On the other hand, there are some problems. Creation of a FTZ will have to match with Armenia’s joining the Customs Union (CU) and the Eurasian Economic Union (EaEU).Washington did express disappointment at the sudden intensification of Armenian-Iranian mutual interests a few years ago, at the peak of the anti-Iranian sanctions, but it eventually turned a blind eye to the developments. The U.S. considered that there would be nothing bad in realization of projects of Yerevan and Tehran, considering the complicated situation in Armenia. But there was another explanation to the serenity in the U.S.: specialists there figured that the two countries would achieve nothing. Both versions seem legitimate. The cooperation was not intensive, although important for Armenia. U.S. experts were right when they said that all the projects would remain nothing more than projects.According to the agreements, Armenia and Iran were to build a power line that would supply Iranian border territories with electricity. The sides agreed to build an oil pipeline from Iran to Armenia. The Armenian border territories were to build a refinery with enough output to make gasoline exports unnecessary for Armenia. As a gesture of friendliness, Iran declared zero transit fees for Armenian freighters. For some time it announced zero fees for Armenia at the ports of Bandar Abbas on the Persian Gulf and Enzeli on the Caspian coast.“Unfortunately, things did not get any farther than words, not a single project has been realized. Not even a single deal has been signed, just protocols of intention that have remained intentions. But the projects were interesting indeed,” Sevak Sarukhanyan, deputy director of the Noravank Fund for Strategic Studies, told Vestnik Kavkaza. In his opinion, the main problem was lack of money. Iran had the financial burden in all the projects. Opportunities were probably evaluated incompletely. “The funds needed were not found. Because of international sanctions, Tehran had no opportunities for investments abroad. The same sanctions were impeding attraction of investments. As a result, it was all left on paper,” said Sarukhanyan.In his words, Iran lost interest in Armenian electricity after a couple of years. Concerning petroleum projects, they looked dubious from the very start. Building a refinery is a very costly initiative, in terms of financing and technologies. Pumping gasoline through the pipeline is not a very clear idea, because Iran needs the fuel itself.The same problem applies to freighting. The offer to lift fees on roads and at ports was a good-neighbourly offer. The question is how much freighting is needed to make a profit. No answer has been found.“Of all the ideas in the package, I think that only construction of a railway line to connect the railways of Iran and Armenia was topical. However, that proposal will probably lose value if the Qazvin-Rasht-Astara line connecting the railway networks of Iran and Azerbaijan is implemented,” said Sarukhanyan. In that case, Tehran will lose interest in access to Armenia, especially when the Abkhaz railway that would give access to Russia through Georgia remains closed. Iran will get access to Georgian Black Sea ports through Azerbaijan, then to Russia or anywhere else.The expert considers the idea to form a FTZ interesting and essential for both countries. Firstly, Iran is still under pressure of the sanctions and tries to liberalize trade relations with its neighbours. Tehran calls it a policy of forming free trade zones and free terminals, using them to bypass restrictions and barriers caused by Western sanctions. Secondly, Armenia has reconsidered the situation in Iran: trade turnover has been dropping in the last years. If they do not boost trade, Armenian-Iranian economic relations will stay solely in the energy sector.“Formation of the FZT does not conflict with Armenia joining the CU and the EaEU. You should not think that Iranian goods would start entering the CU market without customs fees. It is a purely Armenian-Iranian project and any Iranian product entering the CU from Armenia will be given a fee,” supposes Sevak Sarukhanyan. In general, according to the expert, Tehran and Yerevan need to do something in the economic sector to make relations in the sector meet at least a satisfactory level of bilateral political relations. Armenia and Iran have been supporting each other on the world arena in many issues. Although the support has not played a decisive role in resolving issues, it established good-neighbourly relations. Now they need an economic filling. “That is why we can assume that other offers will appear after the proposal to form the free trade zone,” said Sarukhanyan. The question of whether they will be implemented remains op
