Beyond borders
Impressive trade, economic ties between Armenia, Iran
The historically positive relations between the Republic of Armenia and the Islamic Republic of Iran have consistently emphasized economic development, aiming at mutually beneficial cooperation and strengthening ties between the two countries. Being an important player in a number of fields of the Armenian economy, Iran has its unique role, especially in the field of trade as one of the main trade partners of Armenia. As such, the existing trade and economic ties between Armenia and Iran are important not only for the two countries but also for the entire region.
By Eliza
Matevosyan
Economist
According to data from the Armenian Statistical Committee (SC), Iran ranked Armenia’s 4th largest trade and economic partner in 2023, with a trade turnover of over $692 million. However, a decrease of 2.5% was recorded compared to the previous year. Data from the first eight months of the current year indicate that although the trade turnover with Iran increased by 0.9% compared to the previous year, Iran’s share in Armenia’s total mutual trade turnover was 2.1% compared to 3.7% in the same period of 2023.
It is noteworthy that in 2023, the Islamic Republic of Iran became Armenia’s fourth-largest import partner by country of origin (accounting for 4.9% of Armenia’s total imports), following Russia, China, and the United States. And in the same period, Iran ranked as Armenia’s 8th largest export partner with a share of 1.1%.
It should be noted that Armenia’s trade turnover with Iran has a negative balance. The volume of Iranian goods imported into Armenia exceeds that of Armenian goods exported to Iran. As the chart shows, it has consistently remained negative over the past 10 years under review. Additionally, the presented statistical data clearly indicate that over the past 10 years, a significant increase in the volume of imports from Iran was recorded in 2019, and import activity rose even further in 2021 and remained high in subsequent years. Such a situation is primarily due to the embargo imposed by the Armenian government on numerous Turkish products in 2021, which led to the replacement of certain Turkish goods in the Armenian market with Iranian products, giving trade and economic relations with Iran a new direction and momentum.
As you can see, the Islamic Republic of Iran plays a significant role in Armenia’s economy, particularly in terms of imports. Let us first examine the structure of imports from Iran to Armenia. However, it is important to note that imports from the Islamic Republic of Iran are significantly more diversified than exports from the Islamic Republic of Armenia to Iran. Based on 2023 data, 732 product groups (under the four-digit FEA PN classification) were imported to Armenia from Iran, and in comparison, during the same period, Armenia exported to Iran only 196 products under the same classification of the FEA PN.
According to the data published by the Armenian State Revenue Committee (SRC), the largest share in the volume of imports from the Islamic Republic of Iran to the Republic of Armenia in 2023 consisted of mineral fuel, oil, and oil refining products, amounting to 24.5%. Of this product group, the largest imports were petroleum gases and other gaseous hydrocarbons ($60.8 million), oil and petroleum products (over $44.1 million), and petroleum bitumen ($39.5 million). The second-largest product group in the volume of imports from Iran to Armenia is ferrous metals, with a share of 23.2% in 2023. In this product group, the most imported items were iron or non-alloy steel bars without further processing ($72.5 million), iron and non-alloy steel flat rolls (over $24.7 million), and hot-rolled bars ($16 million). Other products with relatively high customs import values from Iran include molybdenum ores and concentrates ($18.9 million) and ethylene polymers in primary forms ($17.8 million).
The analysis of export structure from Armenia to Iran by product groups reveals that electricity is the primary export, comprising 63.5% of exports to Iran in 2023, with a value of $60.9 million. It is important to note that since 2009, Armenia and Iran have been cooperating under the “Gas for Electricity” program. Based on that program, Armenia supplies Iran with 3kWh of electricity for every 1 cubic meter of gas, directly benefiting the economic and energy cooperation between the two countries.
The second largest item exported during the same period is copper ores and concentrates with a customs value of $10.9 million. Other export items with relatively high customs value include semi-finished products of iron or non-alloy steel ($4.4 million), fresh or frozen mutton or goat meat ($4.1 million), cigars ($2.4 million), live sheep and goats ($1.8 million), and unprocessed aluminum ($1.1 million).
Thus, as we can see, the main part of the trade turnover between Armenia and Iran falls on industrial products, food industry goods, energy, and agriculture, which reflect the economic interests of both countries and their potential for cooperation.
To elevate the economic relations between the two countries to a higher level, it is essential to promote increased investments, particularly in infrastructure improvement and the implementation of joint projects. And since the diversification of trade partners is one of the economic priorities of the Republic of Armenia, in that regard, Iran plays an important role, especially from the point of view that the latter, as a neighboring country, allows the Republic of Armenia to enter larger markets.