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Armenia to Build FEZ on Iranian Border

The creation of a free economic zone (FEZ) in Meghri, Armenia, on the border with Iran, is to begin before summer, Minister of Economic Development and Investments of Armenia, Suren Karayan, said on March 16. “Preparatory works are underway, and the corresponding development program will soon be submitted to the government for approval,” he said.

The total cost of building the FEZ is estimated at $32 million, out of which $28 million is capital expenditure. The total area on which the relevant buildings will be located is 10-15 hectares, with the possibility of expanding to 45-50 hectares. According to the Ministry of Economy of Armenia, exploitation of the FEZ on the Iranian border will create 2,500 jobs, raising exports from Armenia by about a third. 100-120 companies are expected to operate there, whose revenues over 10 years will amount to more than $50 million. The total investment of all companies for 10 years is planned to increase to $350-400 million.

The functioning of the FEZ is enshrined in the Customs Code of the Eurasian Economic Union (EEU). Goods produced will be exported to Iran, the countries of the EEU, the Middle East, Turkmenistan, etc. Collaborating businesses will be exempt from VAT, income tax, and property tax. These preferences are calculated to be introduced for a period of two to four years, depending on the type of business. In addition, individuals can allow purchases through the duty-free system without customs duties. The Armenian Ministry of Economy expects that Iran, Russia and other EEU members will agree on a list of goods for which customs duties will be reduced or canceled. Iran and the EEU countries, including Armenia, will have to solve the problem of certification of their goods and optimize the mechanism of bank transfers.

The construction of the FEZ on the border with Iran is one of the priority investment programs of the Armenian government. The primary goal is the development of trade and economic relations with Iran and other countries of the region, the development of the strategically important Syunik region, the consolidation of Armenia as a hub linking Iran with the EEU countries and with Georgia. In the course of the February visit of Prime Minister Karen Karapetyan to Tbilisi, preliminary agreements on the sustainable work of the ferry route between the ports "Caucasus" (on the shore of the Kerch Strait in the Azov Sea) and the Georgian port Poti were apparently reached, which will largely solve the problem of Armenia's transport isolation from Russia.

Various companies have expressed a desire to start work in the FEZ - more than a dozen companies from Russia, Iran and Europe. The relevant issues were discussed during the Russian-Armenian negotiations at the level of the heads of government in Bishkek and Moscow. Earlier, the Ministry of Economy of Armenia announced that several large Iranian companies (some of which are pharmaceutical companies) made written proposals on opening their production facilities for the EEU market on the territory of the free economic zone. The Chinese were also interested in the conditions of work in the zone.

"We offered our Russian, Georgian, Kazakh and Belarusian partners use of the site of the Meghri FEZ to enter the Iranian market. The Iranian side is negotiating the creation of a special company in the FEZ to export large volumes," said the Armenian PM. At present, the level of trade with Iran is extremely low - about $75 million, except for the energy sector, where a barter scheme operates (Armenia, in exchange for receiving 1 cubic meter of gas from Iran, supplies 3 kW/h of electricity). As such, this is an opportunity to achieve "phenomenal growth", bringing the volume of mutual trade to $1 billion.

Being a member of the Eurasian Economic Union, the Republic of Armenia actively develops relations with the EU. "Armenia, having clearly assessed the economic and financial aspects of membership in the EEU, has made a very conscious decision that membership in the EEU is economically more expedient than signing a free trade agreement with the European Union,” Armenian Defense Minister Vigen Sargsyan said at the outgoing meeting of the Valdai Club in Yerevan. “Then, and now, we proceed from the premise that our membership in the Eurasian Economic Union in no way hinders the development of deep relations with the European Union in terms of political dialogue, and in terms of developing economic ties. Today, Armenia has a trade system with the European Union GSP+, and this allows Armenian producers to easily enter European markets. In Russia itself, there are manufacturers who understand that making a product in Armenia makes it much easier to get the product into the European market. We are developing a very intensive dialogue with Iran”.

Earlier, speaking at the Carnegie Center in Brussels, Armenian President Serzh Sargsyan stressed the readiness of his country to promote mutually beneficial rapprochement of the positions of the EEU and the EU. "At the initial stage, Armenia's membership in the EEU was taken as hostile by some Western partners, but I'm glad that time has put everything in its place. We are ready to promote mutually beneficial rapprochement of the positions of the EU and the EEA. Armenia is interested in all-European cooperation," Sargsyan said. He also noted that the close economic, political and cultural ties between Yerevan and Teheran make Armenia a good place for European companies to enter the Iranian market: "Armenia can become the most reliable and shortest transit route connecting the Persian Gulf with the Black Sea ports ... Cooperation Armenia - a member state of the EEU and Georgia - an associative member of the EU, testifies to new opportunities for mutually beneficial relations".

Meanwhile, the leaders of the border Meghri and the Iranian Noraduz discuss issues of cross-border cooperation. In particular, the measures on qualitative servicing of large flows of people and cars. The issues of fees levied on vehicles entering Armenia and on passenger cars heading to Iran are being considered. During the spring Novruz holiday, the flow of Iranian tourists to Armenia has traditionally increased and the launch of new production facilities in Meghri will give a new dimension to Armenian-Iranian relations.

In addition, by the end of March, Iranian President Hassan Roukhani is epected to visit Moscow. “During the visit, an agreement may be signed on the establishment of a free trade zone (FTZ) between Iran and the EEU,” said Russian Energy Minister, Alexander Novak.

Dimitri Dolaberidze

20 March 2017 17:41