Islam Times - North-South Corridor: Catalyzing Iran-UAE Trade Jump

Islam Times - The UAE is one of the main trade partners of Iran and in recent years, Abu Dhabi has voiced its interest to expand its partnership with Tehran.

Since rapprochement of the 2022 between the two countries, their trade cooperation has thrived and presented one of the successful examples of beating the obstacles and embracing the possibility of growing economic partnership on the two sides of the Persian Gulf.

According to a Reuters report, in the fiscal year ending in March 2024, Iran imported $20.8 billion worth of goods from the UAE, and in this period, the UAE has been the third destination of Iranian exports with $6.6 billion. This means that the Iranian-Emirati trade jumped to $24 billion in 2023 from $11 billion in 2021.

Now, maintaining this momentum and strengthening the volume of economic interactions is one of the agendas of the negotiations between the officials of the two neighbors. Recently, during the visit of Iranian Minister of Roads and Urban Development and Chairman of the Joint Economic Commission between Iran and the UAE, Mehrdad Bazarpash, a meeting of the joint commission between the two countries was held after a ten-year hiatus to discuss grounds of cooperation boost.

Foundation of this commission dates back to 2014, when an MoU was signed between federation of chambers of commerce of the two countries.

Now, with the resumption of work of this commission, Tasnim news agency quoted Bazarpash as predicting that the trade volume between Iran and the Emirates will reach $30 billion in 2025.

To facilitate presence of Iranian companies, the Emiratis are taking some measures. Financial Times in October last year, quoting Iranian businessmen and officials, reported that the UAE in recent months has eased the restrictions on company registration and visa issuance to Iranian businesses included in unilateral American sanctions.

The report adds that the Iranians are considering how to strengthen bilateral trade by establishing financial mechanisms for their transactions in the UAE.

In the meantime, it seems that the participation of the UAE in the strategic North-South Corridor project has become one of the most central discussions and economic topics of the two sides, which can catalyze a big jump in their partnership.

According to reports, looking into ways of bilateral transit cooperation through North-South Corridor for transferring Emirati goods through Iranian soil to Central Asia, Caucasus, and Russia was one of the topics of discussion of Bazarpash with Emirati officials during the joint commission meeting.

Bazarbash called the UAE to use Iran's logistics ports and invest in new Iranian port development projects, as this will undoubtedly help facilitate Abu Dhabi's access to Eurasian countries and even Europe.

The Iranian minister confirmed that the two countries through strategic decisions can play a unique role aimed at accessing southergn and northern markets.

Impressive economic benefits of North-South Corridor for the UAE

The North-South Corridor is one of the world's biggest international transportation projects that links Mumbai, India's economic capital, to the vast region of Eurasia. Actually, this corridor primarily facilitates the transportation of goods from India to the port of Chabahar in southeastern Iran, the sole Iranian port on the Indian Ocean coast. From there, the goods are transported via land routes to the Iranian port of Anzali on the Caspian Sea coast, then onward to Astrakhan port in northern Russia, and ultimately by railways to Europe.

This corridor consists of a multi-route, 7,200-km network that includes maritime routes, railways, and land routes, and is meant for transportation from India to Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, and Eastern Europe.

In addition to the main partners, so far other countries such as Turkey, Armenia, Sultanate of Oman, Kazakhstan, Tajikistan, Kyrgyzstan, Ukraine, Belarus and Bulgaria have signed an agreement to participate in the North-South Corridor project as observer members.

One of the unique advantages of the North-South Corridor for the UAE is that compared to the Suez Canal route, it is effective in cutting the cost and time of transporting goods to the target markets. A comparison of the shipping route from India to Northern Europe through Iran and the shipping route through the Suez Canal shows that the shipping corridor through Iran is shorter.

According to an Iranian official, compared to the Suez Canal, the trade link between Mumbai and St. Petersburg reduces the time it takes to transport goods from 38 days to 14-16 days. While the route through the Suez Canal is 16,000 km, it takes at least one day to travel 30 to 40 km, depending on the traffic of the ships and the coordinates of the canal.

According to a report by The Diplomat, this North-South Corridor cuts the Indian-Russian transportation costs by up to 30 percent.

In terms of security, natural and human disasters, and given the escalation of military tensions in the Red Sea in recent years and months, the Suez Canal has proven to be one of the most vulnerable transit routes.

Additionally, involvement in the North-South Corridor project plays into the hands of Emiratis who in recent years pushed to bolster economic cooperation with Russia and the Eurasian Economic Union and the Shanghai Organization. Being a member of these blocs, Iran will play the role of a connecting bridge for this Arab country.

Also, over the past years, the UAE through DP World, a global port and transit giant, has increased its share in the key international ports and maritime transit network, and currently it operates 60 transit ports across the world. One of the new destinations of the Emirati investment is Russia.

In October, Russia's Rosatom and DP World struck a deal to create a global logistics operator to develop northern shipping corridor linking the Atlantic Ocean to the Indian Ocean. The northern navigation corridor stretches across the Arctic Circle and connects the Atlantic and Pacific Oceans. Russia is working rapidly to develop it and plans to use this corridor for oil and gas exports and expects it to become a major trade route between Europe and Asia.

This brings forth doubled necessity for broader partnership of the UAE with the North-South Corridor, as the first railway transit shipment of this corridor included Russian goods exported to the UAE through Iran in May 2022.