Russia-Iran use national currencies in trade

Iran and Russia have been using national currencies in more than 96% of their mutual payments, the Kremlin’s press service said on the verge of the meeting between presidents of the two countries to be held on the sidelines of the BRICS Summit in Kazan.

"The leadership of both countries pay priority attention to the development of trade and economic ties. Growth of mutual trade in 2023, despite a certain decline, totaled over US$4.0 billion.

We recorded growth of 12.4% as of the end of January - August. The share of national currencies in mutual payments ws over 96%," the press service informed.

Russia and Iran are implementing several large-scale mutual projects in the sphere of transport and energy, the Kremlin said. The North-South international transport corridor project is being developed. Russian-Iranian relations are on the rise, the press service noted.

According to the Islamic Republic of Iran Customs Administration (IRICA), the value of Iran’s non-oil exports to Russia rose 12% in the first six months of the current Iranian calendar year as compared to last year’s first half.

According to the IRICA data, Iran exported 1.3 million tons of commodities worth over US$494 million to Russia in the first half of the current Iranian year.

Non-oil exports to the Russian Federation also increased by 20% in terms of weight.

In the first half of the current Iranian year, foreign transit through Iran from Russia reached 526,000 tons with a growth of 17%, and foreign transit to Russia was 56,000 tons, which decreased by 18%.

The Islamic Republic had exported 2.2 million tons of commodities worth US$965 million to Russia in the previous Iranian calendar year, which also registered a 54% increase in weight and a 28% rise in value.

The main Iranian products exported to Russia in the previous year were fresh or dried pistachios, ordinary non-expandable polystyrene, fresh kiwi and synthetic fibers, and other types of polyester.

Iran and Russia have been taking serious steps to boost their mutual trade over the past few years.

In late January, Iran’s late President Ebrahim Raisi said that the Islamic Republic and Russia have reached an agreement to boost the trade between the two countries up to US$10 billion.

“We agreed to remove trade barriers and boost the economic exchanges between the two countries. Currently, the level of mutual trade is not acceptable, so the two countries agreed to increase trade to US$10 billion a year,” Raisi said on January 21, upon arrival to Tehran after a two-day visit to Moscow.

He also noted that the two sides also discussed monetary and banking issues during his talks with Russian officials.

The two countries also agreed to identify mutual agricultural capacities as well as suitable areas for the exchange of agricultural products in order to increase the level of trade in the agricultural sector, according to the official.

He went on to say that the Islamic Republic of Iran has very good capacities in the field of transit and transportation, saying: “During this visit, it was agreed to activate the north-south corridor. This transit route will make the time and distance of transiting goods from Russia and different northern countries to the southern regions much shorter.”

 

 

Iran-India committed to strengthen relations

India and Iran have stated their unwavering commitment to fostering better ties in many areas of cooperation. Hossein Amir Abdollahian, Iranian Foreign Minister, stated that senior officials from both nations are committed to strengthening their relations at a meeting with Indian Foreign Secretary Shri Vinay Kwatra in Tehran.

Kwatra pointed out that the Indian government is adamant about deepening its ties with Iran and that it expects that via working together, the two nations’ economic ties would grow in a number of areas, such as traditional medicine, agriculture, and fishing.

The Indian diplomat expressed New Delhi’s commitment to sending humanitarian help to the Palestinian people while applauding Iran’s leadership position in West Asia.

Expressing satisfaction with the political consultations between the two countries, he said, “The Indian government, at the highest levels, is firmly determined to enhance relations with the Islamic Republic of Iran.”

Earlier, the Indian foreign secretary attended the 18th round of political consultations between Iran and India.

A broad range of political, economic, and consular matters, as well as regional and global trends, were covered during the four-hour meeting. The agenda for the future phase of the two nations’ relations was also discussed at the conference.

In a phone conversation in August, President Ebrahim Raisi of Iran and Indian Prime Minister Shri Narendra Modi discussed ways to enhance bilateral relations, mutual cooperation and the realization of the full potential of Chabahar Port.

Raisi stated that Iran and India should increase their cooperation in the areas of transportation and energy security.

The Iranian president emphasized the need for increased dialogue along the North-South Corridor.

“Iran seeks to strengthen regional convergence and develop economic relations with all countries across the globe, particularly those in Asia, in this regard,” Raisi noted.

The president remarked that historical similarities between Iran and India provide solid justification for the development of ties at all levels.

For his part, the Indian prime minister praised long-term collaboration with Iran. India, he asserted, was prepared to complete the necessary paperwork for the project’s completion.

The Indian prime minister was quoted by the ministry as saying that the relationship between Tehran and New Delhi is underpinned by close historical and civilization connections, including strong people-to-people contacts.

 

Iranian foreign minister on two day visit to Pakistan

Pakistan and Iran agree on a five-year plan on Thursday to achieve US$5 billion bilateral trade. The two countries in late 2021 decided to take measures to expand annual bilateral trade to US$5 billion by 2023.

The new plan has been devised while Iran Foreign Minister Hossein Amir Abdollahian is on a two-day visit to Pakistan; he reached Islamabad on Wednesday on the invitation of Pakistani at foreign minister Bilawal Bhutto-Zardari.

Addressing a press conference alongside him in Islamabad on Thursday, Bilawal said the five-year trade cooperation plan was aimed at removing impediments in bilateral trade, finalizing a free trade agreement and establishing institutional linkages between the private sectors of both countries.

“I am confident that the steps we are taking today will chart the course for a long-term durable economic partnership between our two countries in the months and years ahead,” he said.

Abdollahian said both countries were committed to increasing the bilateral trade to US$5 billion and had agreed to set up a special economic free trade region along the common border points.

A press conference was held after the two foreign ministers led delegation-level talks at the Foreign Office in Islamabad earlier today.

Bilawal told the media that the two sides had agreed to priorities the operationalization of the five remaining border markets by the end of year 2023.

The foreign minister said both sides had also agreed to continue their active engagement on Afghanistan with the view to advance peace and stability there and promote the wellbeing and prosperity of Afghan

Speaking after him, Abdollahian emphasized the need for enhanced bilateral cooperation in the fields of economy, trade and tourism.

The Iranian foreign minister also emphasized the completion of the Pakistan-Iran gas pipeline, saying that the project would definitely serve the national interests of the two countries.

He called for supporting the people of Afghanistan, highlighting that any situation in Afghanistan would have an impact in the neighboring countries, Pakistan and Iran.

Later, the two foreign ministers saw the signing of memoranda of understanding between Pakistan and Iran in various fields.

Abdollahian’s arrival was preceded by the arrival of a high-ranking delegation, including Iran’s deputy foreign minister for economic affairs and senior officials from the Ministries of Trade, Roads and Urban Development, Investment, Agriculture and Energy for preparatory meetings.

Pakistan inching towards balance of payment crisis

Remittances to Pakistan have been on a decline (down 3.8%YoY in 4MFY17), where recovery following the sharp dip in July16 (-20%YoY) has been slow to materialize.

 Driven by weak global macro dynamics and depressed crude oil prices the trend remains similar to other regional countries (Bangladesh/India down 9%/14%YoY in CY16TD) which are also considerably reliant on remittance flows.

 Going forward, we expect seasonal recovery to keep remittances marginally higher in FY17. With effects from current trends lingering we project remittance growth to remain in low single digits over the medium term.

 In this context, we highlight room for greater BoP volatility on weaker trade dynamics. Nonetheless, support to external account is expected to come in the form of higher foreign debt inflows (multilateral and bond issuances) driving exchange rate stability and consequently keeping depreciation pressures on the Pak Rupee limited.

 Pakistan emerged more vulnerable in the region due to a weak global macro outlook impacting remittance flow adversely, with major impact on South Asian countries that share reliance on remittances (avg. Remittance/GDP ratio: ~10%) for foreign inflows.

 Depressed crude prices affecting labor dynamics in GCC region has been a key driver in this regard where the region receives ~63% (2015 est.) of all GCC-sourced remittance. Consequently, Bangladesh and India have seen sharp decline in remittances with flows contracting 9%YoY and 14%YoY in CY16 so far respectively.

 Though initially sturdy, Pakistan is also witnessing a slowdown in remittances with 4MFY17 inflows declining by 3.8%YoY, where inflows from the GCC region declined 4.6%YoY in the same period.

 However, analysts take it as a bigger concern for Pakistan compared to regional peers in the backdrop of worsening trade dynamics (trade deficit up 11%YoY in FY16) compared to Bangladesh/India that contracted trade deficits by 9%YoY/10%YoY in FY16. With oil prices unlikely to mark a sharp recovery in the near-term and slow global demand recovery (UK/European economies), outlook for remittances remains tepid, where the WB has projected a dip of 2.3% in 2016, followed by moderate recovery in 2017/18 (2.2%/2.3% growth).

 Similar to the region, outlook for remittance to Pakistan remains subdued where analysts expect flows to stagnate around US$20 billion. Though currently on a decline, they see room for seasonal recovery near the end of FY17 - with flows increasing marginally for the year.

 Going forward, effects of low oil prices are likely to linger over the medium term, strong correlation of GCC remittance and oil price decline. On the other hand, recent dip inflows from US on account of higher transfer costs is expected to normalize.

 In aggregate, remittance growth is projected to remain in single digits over the medium term. However, key risks remain in the form of further slowdown from UK/EU region on account of Brexit and concerns emanating from recent US elections.

 Going forward, expanding trade deficit (FY17F: 14%YoY) amid weak remittance outlook remains a major risk to BoP stability, where analysts see current account deficit rising to 1.7% of GDP as against 1.2% for FY16).

 That said, concerns on exchange rate stability remain limited, where analysts derive comfort from expected foreign debt inflows (multilateral commitments and another bond issue planned) keeping foreign exchange reserves position stable.

This remains a key positive for exchange rate strength, where stronger foreign exchange reserves position will provide room to counter current account weakness.