Iran Trade Profile
Table of Contents
Overview
The Islamic Republic of Iran stands as the second-largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia. The country holds the ninth-largest population in Asia, standing at 78.77 million, with a GDP per capita of $2,422.5.
The United Nations removed sanctions on Iran in January 2016, through a Joint Comprehensive Plan of Action (JCPOA), which was an agreement signed by Iran along with the P5+1 countries (China, France, Russia, the United Kingdom, the United States, plus Germany). This was seen to increase the economic interest in the country, mainly due to the lifting of the oil embargo imposed by the European Union, the reduction in Iran’s trade costs, and the liberalization of cross-border trade in the context of financial and transport services. Regional trade partners like the United Arab Emirates and other countries in the Middle East and Central Asia witnessed an expansion of oil and non-oil trade as a result of lowered sanctions-induced trading costs, while Iran’s own economy faced relaxation of trade barriers.
Iran has an abundance of energy resources. Their oil reserves are the fourth largest in the world, and their national gas reserves fall second to only those of Russia. As a member of OPEC, Iran’s exports are largely based on petroleum, and also include mineral fuels, plastics and articles, organic chemicals, and edible fruits and nuts. Iran also holds the world’s largest zinc reserves, second-largest copper reserves, and further reserves of iron, uranium, lead, chromate, manganese, coal, and blue, which contribute to its major mineral-related exports. Iran’s automotive sector served as its second-largest industry, which has also been approached by Western companies for exporting their products to neighbouring countries. Agriculture also forms one of the most important sectors of its economy, which provides for its major non-oil export items such as pistachios, raisins, and carpets, amongst others.
As of 2019, Iran was labeled the 69th largest export economy in the world, with its global exports worth $25 billion and global imports of $ 34.9 billion, resulting in a trade deficit of $9.9 billion. Iran’s top 5 export and import countries of 2019 are highlighted in Figure 1.1 and 1.2 below respectively.
| Figure 1.1 | |
|---|---|
| Countries | Import USD$ |
| China | $9.61 B |
| United Arab Emirates | $7.08 B |
| India | $3.86 B |
| Turkey | $2.60 B |
| Brazil | $2.19 B |
| Figure 1.2 | |
|---|---|
| Countries | Export USD$ |
| China | $12.1 B |
| India | $3.03 B |
| South Korea | $1.89 B |
| Turkey | $1.50 B |
| United Arab Emirates | $1.14 B |
Pakistan - Iran Trade Profile
Pakistan’s Exports to Iran
In 2018, Iran’s imports from Pakistan constituted $330.24 million, according to the United Nations COMTRADE database on international trade. The major products imported from Pakistan in 2018 have been highlighted in Figure 2.1 below.
| Figure 2.1 | |
|---|---|
| Imports from Pakistan in 2018 | Value |
| Cereals | $228.76M |
| Oil seed, oleagic fruits, grain, seed, fruits | $41.09M |
| Paper and paperboard | $16.10M |
| Live animals | $15.39M |
| Edible fruits, nuts | $12.63M |
| Meat and edible meat offal | $10.39M |
| Optical, photo, technical, medical apparatus | $2.56M |
| Machinery, nuclear reactors, boilers | $1.13M |
| Plastics | $449.44K |
| Iron and steel | $232.19K |
In 2019, Iran received imports worth $4.68 million from Pakistan, where the main products received were cellulose fibers paper ($3.78 million), air pumps ($278 thousand), and raw plastic sheeting ($195 thousand). The categories of products imported include paper goods constituting 80.7% of imports from Pakistan, plastics and rubbers at 7.63%, machinery at 5.94%, vegetable products at 3.73%, and surveying equipment at 1.98%.
Pakistan’s Imports from Iran
In 2019, Iran exported $500 million worth of products to Pakistan, which comprised mainly petroleum gas ($199 million), refined petroleum ($107 million), and scrap iron ($69.7 million). The categories of major products exported include mineral products constituting 72.4% of exports to Pakistan, metals at 14.6%, vegetable products at 6.16%, stone and glass, animal hides, chemical products, plastic and rubbers, textiles, and machinery, amongst others. In 2020, Iran’s exports to Pakistan constituted $371.83 million, according to the United Nations COMTRADE database on international trade. The major products exported to Pakistan in 2020 have been highlighted in Figure 2.2 below.
| Figure 2.2 | |
|---|---|
| Exports to Pakistan in 2020 | Value |
| Mineral fuels, oils, distillation products | $247.25M |
| Edible vegetables and certain roots and tubers | $33.44M |
| Edible fruits, nuts | $24.70M |
| Iron and steel | $21.80M |
| Coffee, tea, mate and spices | $8.78M |
| Raw hides and skins (other than furskins) and leather | $5.24M |
| Ceramic products | $3.65M |
| Salt, sulphur, earth, stone, plaster, lime and cement | $3.40M |
| Rubbers | $3.28M |
| Inorganic chemicals, precious metal compound, isotope | $2.12M |
In order to increase exports to Iran, the top potential items that should be taken into consideration include:
- Cereals (rice, semi-milled or wholly milled, whether or not polished or glazed)
- Cotton (cotton, not carded or combed)
- Petroleum oils (other petroleum oils and preparations)
These exports stand at a potential of $1.6 billion, $123 million, and $100 million respectively.
In 2019, Pakistan exported $4.68 million to Iran. The main products exported from Pakistan to Iran were Cellulose fibers paper ($3.78 million), Air Pumps ($278 thousand), and Raw Plastic Sheeting ($195 thousand). During the last 22 years, the exports of Pakistan to Iran have decreased at an annualized rate of 6.62%, from $21.1 million in 1997 to $4.68 million in 2019.
Pakistan’s exports to Iran were $3.2 thousand during 2020, according to the United Nations COMTRADE database on international trade.
| Pakistan Exports to Iran | Value | Year |
|---|---|---|
| Machinery, nuclear reactors, boilers | $3.20K | 2020 |
| Paper and paperboard, articles of pulp, paper and board | $3.78M | 2019 |
| Plastics | $357.38K | 2019 |
| Cereals | $161.92K | 2019 |
| Optical, photo, technical, medical apparatus | $92.49K | 2019 |
| Oil seed, oleagic fruits, grain, seed, fruits | $6.20K | 2019 |
| Coffee, tea, mate and spices | $5.95K | 2019 |
| Printed books, newspapers, pictures | $594 | 2019 |
| Lac, gums, resins | $594 | 2019 |
| Furniture, lighting signs, prefabricated buildings | $43 | 2019 |
Trade Framework with Pakistan
Bilateral Agreements
| Pak-Iran Preferential Trade Agreement (PTA) | Pakistan signed a Preferential Trade Agreement with Islamic Republic of Iran on 4th March 2004. The Cabinet ratified the agreement on 25th May 2005. As mutually agreed, the agreement has become operational from 1st September 2006. Under the Agreement, Pakistan offered concessions to Iran on 338 tariff lines , whereas Iran gave concessions on 309 tariff lines . Preferences granted by both countries to each other cover approximately 18% of MFN tariff of both countries. |
Regional Agreements
| South Asian Association for Regional Cooperation | The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of states in South Asia. Its member states are Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. SAARC comprises 3% of the world's area, 21% of the world's population and 4.21% (US$3.67 trillion) of the global economy, as of 2019. Even though Iran is not a member, on 4 March 2007, Iran requested observer status. |
Recent Developments and Strategic Commitments
- Pakistan and Iran have decided to increase their bilateral trade volume to $5 billion in the next five years.
- The agreement was reached at a high-level discussion in Tehran between Abdul Razak Dawood, the Prime Minister’s Adviser on Commerce and Investment, and Syed Reza Fatimi Amin, Iran’s Minister of Industry, Mining, and Trade, before the 9th Joint Trade Committee meeting (JTC).
- Both neighbouring countries discussed barter trade, cooperation in transportation, a Free Trade Agreement, construction of border markets, and other issues affecting bilateral trade. The Iranian minister also invited Pakistani companies to invest in Iran.
- A Memorandum of Understanding (MOU) on exhibition cooperation has also been signed between the two countries.
Key Institutions
The financial institutions mutually affiliated with Iran and Pakistan are as follows:
- International Monetary Fund (IMF)
- The World Bank
- PAΪR Investment Company Limited (PICL): A Joint Venture Investment Company formed as a result of an agreement between the Governments of Pakistan and Iran.
- Islamic Development Bank (IsDB)