Iran’s Trade Ties with Europe: Going downhill

08 March 2012 | 14:37 Code : 1898800 Europe
Losing place in the EU’s strategic plan will have adverse consequences for Iran. Shamsoddin Khareghani, Iran’s former ambassador to Germany.
Iran’s Trade Ties with Europe: Going downhill

The European Union is one of the largest economic powers of the world and unfortunately Iran has never been a major trade partner of this political unit. The US, China, Russia, Switzerland, Turkey and Japan all enjoy significant economic transaction with the EU, and emerging economies such as India, South Korea and Brazil are also on their path towards strong trade bond. The liberal essence of EU regulations will serve as a scaffold which holds up the union in future and collapse of the EU is unlikely. Iran’s relations with the EU can be divided into five historical periods:

 

1.      Before the 1979 Islamic Revolution: Iran started serious relations with the European community in 1963 and was one of the first countries to sign economic contracts with the union. However, the Shah of Iran was mostly inclined towards trade ties with the United States and showed unwilling to expand relations with the European countries. Germany was Iran’s key European trade partner at this period.

 

2.      1979-1989: at this period, Iran was occupied with war with Iraq, MEK’s subversive operations and low oil prices. Iran’s trade relations with the EU were insignificant and revenues were spent for war expenses. Some European countries experiences serious tensions with Iran, and some other preferred to keep up their relations.

 

3.      1989-1997: in these years war had ended, Ayatollah Hashemi Rafsanjani had become the president and kicked off his open market policy. He favored expansion of trade relations with the EU. The collapse of the Soviet Union and reconstruction of relations with Arab neighbors both helped to improve relations with Europe. Iran and Turkey were the only routes towards the Central Asian countries, and Iran was the preferred conduit. Unilateral sanctions imposed by the Americans, which were opposed by the EU, and the Myconos controversy created turmoil. Despite Iran’s strong relations at the beginning of this period, the last years witnessed scaled down trade ties.

 

4.      1997-2005: Khatami’s presidency and his policy of détente with the West and Arab countries ushered in comprehensive negotiations particularly in trade and finance. Iran took its first steps to join the World Trade Organization. MEK was listed as a terrorist group by the EU and the United States and Iran’s prompt rejection of the 9/11 terrorist attack further improved relations. Negotiations between the European trio [France, Britain and Germany] and Iran over its nuclear program started at the final years of this period.

 

5.      2005-2012: Mahmoud Ahmadinejad’s presidency, nuclear talks and increasing proximity between the EU and the US are the key features of this period. Several sanctions were also passed against Iran.

 

Iran ranks 25th in the list of EU trade partners, standing below countries such as Egypt. In 2010, our share of EU imports was 12.5 billion dollars, which equals one percent of the EU’s total imports. Oil imports comprise ninety percent of Iran’s exports to Europe, while imports from the European countries are mostly capital goods; which means a huge loss for Iran. Iran is losing its status in Europe’s strategic decisions, which implies that Tehran’s choice of investment will be increasingly limited to the East, particularly China, that will have unfavorable ramifications in the long run.