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Some Practical Notes on Improvement of Iran Trade Ties with Europe

Sunday, December 1, 2013

Said Khaloozadeh
Ph.D. in Political Science from University of Paris, Senior Expert in European Studies & University Professor

The signing of a recent agreement [on Iran's nuclear energy program] between the Islamic Republic of Iran and the member states of the P5+1 group of world powers, first of all scored a victory for a negotiated and diplomatic approach over the policy of sanctions and mounting pressure. Foreign ministers from six major world powers – the US, the UK, France, Germany, China, Russia – and Iran reached the conclusion in the morning of November 24, 2013, that it was better for everybody to sign an agreement, which would put an end to ten years of difficult diplomatic confrontation between the two sides. It seemed that everybody had won. On the one hand, some analysts believe that all the countries involved in contentions over Iran's nuclear energy program were really fed-up with the case and were quite ready to get rid of it once and for good. Now, suitable conditions have been provided and all the involved players have set their eyes on an extended perspective which is now visible in relations between the two sides. The European countries, with no doubt, enjoy a special status in this regard.

It seems that as of now, the member states of the European Union as well as major European companies are ready to travel to Iran in order to hold negotiations with the Iranian officials for the conclusion of a great number of investment contracts and taking part in Iran's major development projects. The Islamic Republic of Iran, after more than a decade of conflicting relations with many countries, is now offered with a good opportunity to open up its economy through improvement of its foreign relations with other countries. It seems that in the near future, we will witness the presence of many big and creditable companies from all over the world, especially from Europe, in the vast Iranian market through conclusion of very important contracts. The Iranian market has a potential customer base of over 77 million people which can offer great opportunities for investment and trade to interested companies. Major projects that Iran envisages in such economic fields as auto making as well as oil and gas industry provide very good grounds for the conclusion of major trade contracts with the world’s biggest companies.

Under these conditions, which have come about just 100 days following the onset of [the new Iranian President Hassan] Rouhani’s administration, circumstances in Iran's relations with the world have greatly changed. The recent nuclear agreement in Geneva will lead to the creation of many economic and trade opportunities for both the Islamic Republic of Iran and major European countries.

When regulating Iran's trade ties with the European Union, every effort should be made to get rid of the existing differences by identification of those differences and finding applied solutions to them. The European countries have no major problem for the extension of their trade relations with Iran because finding new markets for their products has been a regular concern on their part. In the meantime, joint chambers of commerce between Iran and individual European countries, can play a very effective role in this regard. These chambers have been very active in the European countries and seeing the slightest sign of improvement is enough to make them interested in uplifting their trade ties with the Islamic Republic.

The new Iranian administration should first identify damages done to its trade relations with the European countries. In the second step, it should launch an all-out study of those relations and finally come up with a well-defined strategy toward the European Union, which would be based on realistic viewpoints and aimed at recognizing Europe’s economic capacities, problems and changing capabilities. In that case, the future outlook for further development of economic relations with Europe would be more promising and taking better advantage of huge existing capacities in bilateral relations will become more possible.

At a time that diplomacy is facing certain limitations for the normalization of political and economic relations between countries, it would be advisable to act through public diplomacy and the potentialities of the civil society. In the modern world, public diplomacy is a focus of attention for many countries. As a result, in many cases it can play an effective role in the foreign policy of countries more easily, more rapidly, and at a lower cost compared to traditional diplomacy. Trade companies belonging to the private sector, chambers of commerce, credit institutions, as well as trade experts each play their own effective roles in this regard. Also of special import is to hold specialized gatherings and seminars in order to introduce the available grounds for cooperation and investment, new economic opportunities as well as the extensive grounds that exist for further development of cooperation on the basis of the common interests of Iran and Europe. Such events can be effectively organized by private sectors from both sides.

The election victory of Dr. Hassan Rouhani has created a new atmosphere in international relations and has led to new speculations – most of which is positive – about basic changes in the foreign relations of Iran. The administration of Dr. Rouhani is able to create huge capacities for the promotion of constructive negotiations and interaction with the European countries. This is while most Western countries are currently more interested in exchange of viewpoints and dialogue with Iran as well as presence in Iran's big 77-million-strong market.

In any future relations between the Islamic Republic of Iran and the European Union, efforts should be made to promote bilateral relations through conclusion of a trade cooperation agreement in order to establish contractual relations between Tehran and Brussels. Conclusion of an economic and trade agreement will provide a strong bedrock for further development of all kinds of political and economic relations between the two sides. Such an agreement will also offer both sides with very extensive opportunities for economic and trade exchanges. As a result, other kinds of relations between Tehran and Brussels will not easily falter as a result of possible challenges and problems. Even if there is a problem, it would be rapidly resolved through mechanisms envisaged by that agreement. Today, only those countries have extensive trade relations with the EU that have been already successful in signing a comprehensive agreement for the promotion of cooperation and trade with the member states of the Union.

In the next step, reciprocal measures should be taken by both sides to open representative offices or even embassies in Tehran and Brussels to which independent envoys would be assigned to head respective diplomatic missions in the two capitals. Establishing such a high level of relations will not only lead to qualitative promotion of bilateral relations, but also make way for any possible differences and problems in bilateral relations to be solved more easily and under a better atmosphere of interaction. The existing conditions in the country are more apt than any time before for the establishment of an independent diplomatic mission at the European Union headquarters in Brussels, in return for the EU to establish its mission in Tehran.

It seems that the European Union and its big member states, especially Germany, France and Britain, which have also played an important part in the nuclear negotiations with Iran, are getting ready for a new era of cooperation with the Islamic Republic and are willing to end the current period of downturn in relations between the two sides. At present, the relations between Iran and the European Union stand at their lowest in the past years and this situation of frozen ties encompasses all kinds of political, economic, trade and other forms of exchanges. The three aforesaid countries have been instrumental in bringing about the existing situation of stale relations between Iran and the EU. Now, following the conclusion of the Geneva agreement, a tangible change can be expected to take place in the positions and the viewpoints of these countries and the entire European Union toward Iran and we must actually witness the beginning of a new era of all-out relations and cooperation with the member states of the EU. By promoting economic diplomacy with the European Union, suitable grounds could be provided for further development of bilateral cooperation and the presence of the European investors and industries in Iran.

Due to its position in the heartland of the world energy (including oil and gas) resources, the Islamic Republic of Iran enjoys high strategic and geo-economic significance among the international community. By possessing about 11 percent of the world’s known oil reserves and 16 percent of its known gas reserves, the Islamic Republic of Iran enjoys a special status as the country having the third biggest oil reserves and the second biggest gas reserves in the world. Since the known energy resources are dwindling across the globe and due to the European countries’ increasing dependence on and need to hydrocarbon energy resources (including oil and gas reserves), the importance of Iran as a source of energy supply to the world, especially to the European countries, is expected to increase. For Iran, as a country with huge oil and gas reserves both within its borders and in areas shared with the neighboring countries, energy can be used as a means to help the country make the most of the benefits of being a member of the world’s political and economic system. This is why a decision to engage in dialogue and cooperation with the European Union and its member states should be taken quite seriously by Tehran. Consequently, taking good advantage of energy diplomacy, as a good means of development, will help Iran to not only to avail itself of the benefits of investment by the European countries and companies, but also make the most of their credit and financial capacities.

Under these circumstances, it would be logical to look forward to seeing more opening in Iran's foreign relations and foreign trade with various countries of the world. On the other hand, lifting of certain sanctions imposed against Iran in addition to reduction of political and psychological pressures that result from those sanctions, will offer the Islamic Republic of Iran with myriad opportunities. Such opportunities are sure to pave the way for new interactions between Iran and Europe in all political, economic and trade fields. They can be also taken as a good omen for development of new diplomatic relations between Iran and the European countries. On the whole, one may daresay a new chapter is opening in Iran's foreign policy in which dialogue, negotiations and presentation of new economic and investment plans can be used as means of providing new grounds for development of Iran's economic and trade ties with the world. In doing so, the European countries will enjoy a special status and they should be able to take the best advantage of new conditions in their relations with Iran within framework of common interests of the two sides.

Key Words: Iran, Trade Ties, Europe, P5+1, Joint Chambers of Commerce, Hassan Rouhani, Investors and Industries, Energy Resources, Khaloozadeh

More By Said Khaloozadeh:

*Ashton Looks Forward to Success of New Talks with Iran: http://www.iranreview.org/content/Documents/Ashton-Looks-Forward-to-Success-of-New-Talks-with-Iran.htm

*Review of Dr. Rouhani’s New York trip and its Impact on Iran-EU Relations: http://www.iranreview.org/content/Documents/Review-of-Dr-Rouhani-s-New-York-trip-and-its-Impact-on-Iran-EU-Relations.htm

*Importance of Confidence-Building in Iran's Relations with the European Union: http://www.iranreview.org/content/Documents/Importance-of-Confidence-Building-in-Iran-s-Relations-with-the-European-Union.htm