Challenges of Expanding Economic Relations between Iran and Russia
Date of publication : March 28, 2016 21:50 pm
The first challenge in Iran-Russia economic ties is transferring money and the fact that the deals are not made with the national currencies of the two countries.
Secondly, high tariffs imposed by Russia on Iranian goods, especially agricultural products have created some problems for directly exporting goods to this country. Also, it would be necessary that the lack of implementation of agreement on livestock quarantine which has progressed to some extent is pursued.
Another issue is relying upon trade in goods. The expansion of economic relations should not be limited to exchange of goods, rather it should include attracting tourists, exporting technical and engineering services, attracting investments and technology transfer. Therefore, much importance should be attached to signing agreements on foreign investment promotion and protection and also customs and tax cooperation. Investments oriented towards promoting exports in the fields such as production lines transfer, renting depot, silo, refrigerator, dock and creating distribution centers and networks by the private sectors in the both countries are insignificant.
Another problem is the incompatibility of Russia's Gost standard with Iran's standard, so that some Iranian exporting goods which are compatible with European standard system are not accepted by Russia's standard.
One of the problems in trade between Iran and Russia is the export of Iran's pharmaceutical products to Russia. In a standard form, before the supply of medicines to the market, clinical tests are carried out and only in case of the results are appropriate, the authorization for consumption will be issued. But the Russian side is very scrupulous and requires that the clinical tests are once again conducted in Russia to allow the Iranian side to register its request, a procedure that entails much higher costs. In the sector of land transportation, Iranian drivers should pay a certain amount of fee when they enter Russian territory from the border of the republic of Azerbaijan; this has a negative impact on the cost price of Iranian goods given the Russia's price-centered and competitive market. There are also some difficulties in maritime and air transportation.
Another problem which exists in exporting goods to Russia is the lack of competitiveness of Iranian goods in terms of quality, packing, and cost price given the presence of powerful rivals in the market of this country. Most firms in Iran are of small and medium size and are not able to enter the costly market of Russia. For this reason, it is necessary that Iranian large companies and holdings which have higher financial assets establish their offices in Russia's market and conduct marketing research to get a complete understanding of Russian consumers and to adopt marketing strategies based on customer and market stratification in order to distinguish their products from those supplied by their rivals. The formulation of an integrated marketing mix guided by a marketing strategy is one of the other tasks of companies. These companies should engage in activities such as analysis, planning, implementation and control to achieve the optimum strategy and marketing mix to make themselves compatible with existing forces in marketing environment such as suppliers, rivals, marketing mediators and people and thereby increase their competitiveness to be able to enter Russia's market and have a sustainable presence there.
Farhad Parand, a university lecturer, is the senior fellow at The IRAS Institute.