By Asif Aydinly
In an era of shifting global trade dynamics, Iran is taking a bold step toward deeper economic integration with its Eurasian neighbors. The recent ratification of the Free Trade Agreement between Iran and the Eurasian Economic Union (EAEU) marks a significant milestone in regional economic cooperation. As Tehran seeks to navigate the challenges posed by Western sanctions, this agreement opens the door to new trade opportunities, reduced tariffs, and expanded market access across Eurasia.
In late February 2025, the Iranian parliament ratified an agreement establishing a free trade zone with the Eurasian Economic Union (EAEU). For the EAEU member states-Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan-closer trade ties with Iran offer strategic advantages, from increased export potential to streamlined logistics and stronger industrial partnerships. The deal signals a shift toward a more interconnected Eurasian economy, where free trade serves as a key instrument for growth and resilience.
Yet, alongside its opportunities, the agreement also presents challenges, including political uncertainties, infrastructure development needs, and currency fluctuations. The success of this initiative will depend on how effectively these hurdles are addressed.
Expanding Economic Horizons
The establishment of a free trade zone between Iran and the EAEU holds vast economic potential. For Tehran, it represents a crucial opportunity to expand exports, strengthen domestic industries, and reduce dependency on traditional trade partners. Given the EAEU’s well-developed industrial and agricultural sectors, Iran’s participation in the bloc’s trade network could create new avenues for cooperation, particularly in energy, food production, petrochemicals, and textiles.
EAEU Free Trade Agreement was signed with Iran. December 25, 2023.Photo credit: primeminister.kz
Preferential trade conditions will enable Iran to supply its products to EAEU countries with minimal customs restrictions. This, in turn, is expected to boost Iranian exports, particularly in key sectors such as food production, metals, construction materials, and textiles. By lowering trade barriers, the agreement enhances Iran’s competitiveness in the Eurasian market, paving the way for sustained economic growth.
From the perspective of the EAEU, the deal unlocks access to Iran’s substantial consumer market, creating new trade opportunities for its member states. Russia, Kazakhstan, and Belarus, in particular, are well-positioned to increase their exports of food products, machinery, fertilizers, and industrial goods. Additionally, simplified trade conditions will reduce logistics and transportation costs, offering tangible economic benefits for businesses across the region.
The Role of Russia and Other Key Players
Russia plays a pivotal role in fostering economic cooperation between Iran and the EAEU. Bilateral trade between Moscow and Tehran has been steadily growing, and the free trade agreement is expected to accelerate this trend. With energy, industry, and infrastructure development forming the backbone of Iran-Russia trade relations, the deal could lead to expanded collaboration in these sectors.
Russian President Vladimir Putin, right, and Iranian President Masoud Pezeshkian walk during their meeting on the sidelines of the BRICS summit in Kazan, Russia, Wednesday, Oct. 23, 2024. (Maxim Shemetov, Pool Photo via AP)
Beyond Russia, Armenia serves as a crucial link between Iran and the EAEU, acting as a key transit hub for goods flowing between Iran and Eurasian markets. Kazakhstan and Belarus also view this agreement as an opportunity to deepen economic engagement with Iran, particularly in the areas of grain exports, petroleum products, and industrial trade. Meanwhile, Kyrgyzstan stands to benefit by increasing its agricultural exports, further diversifying its economy.
Prospects and Challenges
While the agreement presents promising economic opportunities, its successful implementation hinges on overcoming several key challenges. Political uncertainties, particularly external pressures on Iran, remain a significant factor. Western sanctions could complicate the full-scale realization of the free trade zone, limiting financial transactions and trade flows. Moreover, any shifts in the policies of EAEU member states could impact the long-term stability of the agreement.
Another pressing challenge is the need for enhanced transport infrastructure. To maximize trade potential, Iran and its EAEU partners must invest in modernizing logistics routes, improving transportation networks, and developing mechanisms for efficient cross-border trade. Iran’s ongoing efforts to expand its ports and transport corridors could play a decisive role in strengthening its economic ties with the EAEU.
Currency volatility is another factor that could influence trade relations. As transactions between Iran and EAEU nations may be conducted in national currencies, exchange rate fluctuations could affect product pricing and profitability for exporters. Addressing these financial risks will be essential to ensuring the stability of the trade agreement.
Photo credit: brokers.am
The creation of a free trade zone between Iran and the EAEU represents a strategic step toward deeper regional economic integration. For Iran, the agreement offers a pathway to mitigating the impact of sanctions, expanding exports, and solidifying its economic presence in Eurasia. For EAEU countries, the deal provides access to a dynamic new market, strengthens external trade partnerships, and enhances overall trade volumes.
Despite the challenges associated with sanctions, infrastructure development, and currency risks, the agreement lays the foundation for a more interconnected and resilient Eurasian economy. If successfully implemented, it has the potential to redefine trade relations in the region, drive economic growth, and reinforce Iran’s position as a key player in the evolving Eurasian trade landscape.
