Ali Atef‏‏

Amid wide-ranging economic sanctions stemming primarily from its strained political and military relations with the West and the broader international community, Iran has sought to develop new economic and trade partnerships with non-Western blocs, particularly countries that are politically aligned with Tehran and partners in Asia, including members of BRICS. As part of this broader strategy, Iran has shown particular interest in strengthening economic and trade ties with Eurasian countries, most notably Russia, Kazakhstan, Kyrgyzstan, Armenia, and Belarus. These countries are members of the Eurasian Economic Union (EAEU), an economic bloc established to promote economic integration and create a common market that ensures the free movement of goods, services, capital, and labor among its member states.As part of its efforts to develop a strong economic and trade partnership with the bloc, Iran has <a href="http://kremlin.ru/supplement/6252" rel="noopener noreferrer" target="_blank">obtained</a> observer-state status in the EAEU and <a href="https://rtais.wto.org/UI/PublicShowRTAIDCard.aspx?rtaid=1316" rel="noopener noreferrer" target="_blank">signed</a> a comprehensive and permanent free trade agreement with the union, which officially entered into force on May 15, 2025.Strategic ObjectivesIran’s efforts to strengthen economic and trade cooperation with the Eurasian Economic Union are aimed at achieving several objectives, including the following:1. Mitigating the Economic Impact of Western Sanctions: Iran’s primary objective in strengthening economic and trade cooperation with EAEU countries is to mitigate the effects of the extensive U.S., European, and international sanctions imposed on it for decades. Tehran is seeking alternative channels through which it can export and import goods with fewer restrictions, an opportunity provided by Asian economic blocs that also benefit from their geographic proximity to Iranian territory.In the same context, the EAEU provides Iran with an opportunity to <a href="https://www.ilna.ir/%D8%A8%D8%AE%D8%B4-%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%AF%DB%8C-4/822129-%D8%A7%D8%AC%D8%B1%D8%A7%DB%8C-%D8%AD%D8%B0%D9%81-%D8%AF%D9%84%D8%A7%D8%B1-%D8%A8%D8%A7-%D9%BE%DB%8C%D9%88%D8%B3%D8%AA%D9%86-%D8%A7%DB%8C%D8%B1%D8%A7%D9%86-%D8%A8%D9%87-%D9%85%D9%88%D8%A7%D9%81%D9%82%D8%AA-%D9%86%D8%A7%D9%85%D9%87-%D8%A7%D9%88%D8%B1%D8%A7%D8%B3%DB%8C%D8%A7-%D8%A2%D9%85%D8%B1%DB%8C%DA%A9%D8%A7-%D8%A8%D8%A7-%D8%A7%D8%A8%D8%B2%D8%A7%D8%B1-%D8%AF%D9%84%D8%A7%D8%B1-%D8%AC%D9%86%DA%AF-%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%AF%DB%8C-%D8%B1%D8%A7-%D8%AC%D8%A7%DB%8C%DA%AF%D8%B2%DB%8C%D9%86-%D8%AC%D9%86%DA%AF-%D9%86%D8%B8%D8%A7%D9%85%DB%8C-%DA%A9%D8%B1%D8%AF%D9%87-%D8%A7%D8%B3%D8%AA-%D8%B1%D8%A7%D9%87-%D8%A7%D9%86%D8%AF%D8%A7%D8%B2%DB%8C-%D8%A7%DB%8C%D9%86%D8%B3%D8%AA%DA%A9%D8%B3-%D8%A8%D8%B3%D8%AA%DA%AF%DB%8C-%D8%A8%D9%87-%D8%A7%D9%82%D8%AA%D8%AF%D8%A7%D8%B1-%D8%A7%DB%8C%D8%B1%D8%A7%D9%86-%D8%AF%D8%B1-%D9%85%D9%86%D8%B7%D9%82%D9%87-%D8%AC%D9%87%D8%A7%D9%86-%D8%AF%D8%A7%D8%B1%D8%AF" rel="noopener noreferrer" target="_blank">reduce</a> its reliance on the U.S. dollar in some of its foreign transactions, particularly as Tehran and some EAEU countries move to expand the use of national currencies in trade settlements. The free trade agreement between the two sides also provides Iran with greater opportunities to import machinery, equipment, and industrial and agricultural products from EAEU countries, while providing greater market access for a wide range of Iranian products in EAEU markets.2. Developing Alternatives to SWIFT: Iranian banks face major constraints on their ability to send and receive funds internationally, which has contributed significantly to their financial isolation. This is primarily due to their exclusion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an electronic financial messaging network used by thousands of financial and banking institutions worldwide to facilitate financial transactions.Against this backdrop, Iranian Minister of Industry, Mine and Trade Seyed Mohammad Atabak <a href="https://www.yjc.ir/fa/news/9092091/%D8%A7%DB%8C%D8%B1%D8%A7%D9%86-%D8%A7%DB%8C%D8%AC%D8%A7%D8%AF-%D9%86%D8%B8%D8%A7%D9%85-%D9%85%D8%A7%D9%84%DB%8C-%D9%85%D8%B3%D8%AA%D9%82%D9%84-%D8%A7%D8%B2-%D9%82%D8%AF%D8%B1%D8%AA%E2%80%8C%D9%87%D8%A7%DB%8C-%D8%AE%D8%A7%D8%B1%D8%AC%DB%8C-%D8%AF%D8%B1-%D8%A7%D8%AA%D8%AD%D8%A7%D8%AF%DB%8C%D9%87-%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%AF%DB%8C-%D8%A7%D9%88%D8%B1%D8%A7%D8%B3%DB%8C%D8%A7-%D8%B1%D8%A7-%D9%BE%DB%8C%D8%B4%D9%86%D9%87%D8%A7%D8%AF-%DA%A9%D8%B1%D8%AF" rel="noopener noreferrer" target="_blank">stressed</a> at a May 2026 meeting of the Supreme Eurasian Economic Council in Astana that an independent mechanism for financial settlements needs to be established and that the use of national currencies should be expanded in order to reduce the impact of external sanctions on EAEU member states.3. Advancing the "Look East" Strategy: The "Look East" strategy gained increasing momentum in Iranian foreign policy following the election of former President Ebrahim Raisi in August 2021, marking a departure from the approach of his predecessor, Hassan Rouhani, who served as president from 2013 to 2021. Raisi’s government pursued a "Look East" policy and expanded it over the course of his presidency until his death in May 2024. The strategy sought to shift Iran’s political, diplomatic, and trade partnerships away from the West and toward allied countries or states opposed to Washington in Asia, Africa, and Latin America.Accordingly, Iran sought greater involvement in non-Western multilateral organizations and cooperation frameworks, including the Shanghai Cooperation Organization (SCO), BRICS, China’s Belt and Road Initiative, and the Eurasian Economic Union. Iran’s main objective in pursuing its "Look East" policy has been to reduce the country’s political and economic isolation.4. Advancing the International North-South Transport Corridor: Iran is seeking to leverage its cooperation with EAEU countries to support and accelerate the development of the infrastructure required for the International North-South Transport Corridor (INSTC), which is intended to connect Eurasian countries with the Arabian Gulf and India through Iranian territory. Once completed, the corridor could generate significant financial returns for Iran.Tehran is seeking to improve relevant transportation routes across the Caspian Sea, particularly those <a href="https://link.springer.com/article/10.1007/s42533-025-00196-7" rel="noopener noreferrer" target="_blank">involving</a> the Iranian ports of Amirabad and Anzali and Russia’s Port of Astrakhan, by attracting investment from EAEU countries to upgrade infrastructure at these ports and along other overland routes.Similarly, Tehran plans to leverage agreements with EAEU countries to develop railway infrastructure forming the western route of the INSTC, including <a href="https://eabr.org/upload/iblock/e13/1_EDB_ETN_Report_Eng.pdf" rel="noopener noreferrer" target="_blank">completion</a> of the Rasht-Astara railway connecting Iran and Azerbaijan as part of the project. One of Iran’s objectives in deepening economic cooperation with the EAEU is therefore to establish itself as a major international transit hub.Persistent ObstaclesDespite Iran’s efforts to strengthen economic cooperation with the Eurasian Economic Union in pursuit of these objectives, several obstacles could limit the further expansion of this cooperation in the coming period. The most significant challenges include the following:1. International Sanctions on Iran and Its Economic Partners: Although sanctions have been one of the main drivers behind Iran’s efforts to strengthen relations with EAEU countries, particularly Russia and Belarus, they simultaneously represent a structural obstacle to expanding this cooperation. Washington <a href="https://www.bbc.com/arabic/articles/czxqvkj1159o" rel="noopener noreferrer" target="_blank">imposes</a> secondary sanctions that can affect foreign companies and financial institutions engaging in certain sanctioned transactions with Iran or designated Iranian entities. These measures, alongside financial sanctions and restrictions imposed by other Western countries, could make some companies and banks in EAEU countries reluctant to conduct business with their Iranian counterparts because of the risk of sanctions or related compliance concerns.Similarly, financial institutions in countries such as Kazakhstan, Kyrgyzstan, and Armenia face difficulties in conducting certain transactions with Iranian banks and companies because of sanctions on Tehran and the risk of exposure to U.S. secondary sanctions. These risks are significant for these three countries in particular because they are not subject to the extensive Western sanctions imposed on Iran, Russia, and Belarus, while their financial institutions remain keen to preserve their access to international financial messaging networks and banking relationships. This could limit Iran’s ability to take full advantage of its free trade agreement with the EAEU.2. Infrastructure and Logistics Challenges in Iran and EAEU Countries: Iran and the EAEU countries face a range of infrastructure challenges that could constrain further cooperation. Iran, for example, has an aging railway sector that requires substantial financing for rehabilitation and development, including the Rasht-Astara railway.Another technical obstacle is the difference in railway gauges, with Iran using a gauge of 1,435 mm compared with a gauge of 1,520 mm across railway networks in <a href="https://eabr.org/upload/iblock/318/EDB_2021_Report-5_INSTC_eng-_1_.pdf" rel="noopener noreferrer" target="_blank">EAEU countries</a>. This gauge mismatch means that cargo must be transshipped or otherwise handled at interchange points, which increases both transportation times and costs.Iranian and Russian ports on the Caspian Sea also face logistical challenges, including limited maritime shipping capacity and a shortage of modern cargo vessels needed to expand transportation along the trans-Caspian route. At the same time, a significant portion of Iran’s road transport fleet is <a href="https://www.chn.ir/transportation-economics/183574/" rel="noopener noreferrer" target="_blank">aging</a>, reducing efficiency while increasing operating costs and fuel consumption.3. The Impact of Security and Military Tensions with the West: Tensions with the West pose a significant challenge both for Iran, on the one hand, and Russia and Belarus, on the other, as they seek to deepen their cooperation with other EAEU member states. Iran has been involved in a prolonged series of military and security confrontations with the United States and Israel, which have previously impeded the development of the country’s industrial and commercial sectors. The fallout of these conflicts continues to weigh on Iran, particularly given the absence of a settlement to the Iran-U.S. war that began in February 2026.The situation applies to a large extent to Russia and, to a lesser degree, Belarus, which maintains deep defense ties with Moscow. If these tensions continue, it could impose additional risks and constraints on economic cooperation and limit the ability of Iran and EAEU countries to take full advantage of available trade and investment opportunities.In conclusion, Iran has expanded its economic partnerships with Asian countries and other allies in recent years. However, such integration cannot, on its own, be expected to provide a sustained qualitative improvement in Iran’s economic performance or living conditions. This is primarily because Tehran continues to face structural constraints, foremost among them its prolonged conflict with the United States and Washington’s ongoing sanctions and broader policy of economic pressure against Iran. These constraints could undermine Iranian efforts to expand cooperation with foreign economic blocs.

Why Is Iran Seeking to Strengthen Cooperation with the Eurasian Economic Union?