Enhancing trade relations is part and parcel of Iran’s new diplomacy to extend economic ties and foster alliances with several countries. In its fifth edition, and after a four-year delay, the launch of Iran EXPO 2023 serves several strategic objectives, including the promotion of business interests with the Gulf states, especially Saudi Arabia, and the reliance on trade to enhance land and maritime networks in the Middle East. Moreover, political and security developments in the Arab region have been leveraged to increase trade and economic convergence across states. Trade is likely to be the starting point for rapprochement and the return of full economic relations with all Arab countries.

Tehran is holding the fifth International Exhibition Iran EXPO 2023 to showcase the country’s non-oil export capabilities between 7-10 May 2023, with many businessmen and officials from several adjacent countries are participating in the exhibition. The following points list the most notable implications of the EXPO: 

1. Objective: The overall objective of the exhibition is to market non-oil Iranian goods, and to strengthen the structure of small and medium-sized productive enterprises, along with well-known export companies, while reducing the effects of the Western embargo on Iran’s foreign trade. In this context, Alireza Peymanpak, head of the Iranian Trade Promotion Organization, predicted that the 2023 exhibition would result in the signing of trade deals and agreements of up to USD2 billion.

2. Participants: Ministers, deputies, officials, as well as presidents of chambers of commerce and corporate representatives hail from 65 countries, including the Gulf states of Saudi Arabia, the United Arab Emirates, Qatar, and the Sultanate of Oman, as well as European countries including Germany, Belgium, and Russia. Asian participants include representatives from India and China, as well as those from South America, including Brazil, Venezuela and Mexico (according to Peymanpak). At home, Iranian officials are attending the exhibition events, and more than 750 Iranian companies are showcasing their products (according to Iranian Deputy Foreign Minister for Economic Diplomacy Mahdi Safari).

3. Opportunity: Peymanpak asserted that the exhibition was designed to focus on Iran’s export capabilities across 12 sectors, including industry, agriculture, energy, medicine and pharmaceuticals, noting that representatives from participating countries will visit Iran’s northern and southern ports to explore areas of potential cooperation. In this context, Iranian President Ibrahim Raiki stated in his opening speech at the launch of the 2023 expo, that his administration has been able to export a more than USD50 billion worth of goods since taking power in August 2021, noting that this sum sets a new record over the past 40 years.

Positive Effects

The exhibition provides an opportunity for Iran to open up to the world economy in the light of regional and international developments that have paved the way for mending ties. Thus far, Iran EXPO was first held in 2013, then in 2017, 2018 and 2019, after which the exhibition was suspended for four years because of the COVID-19 pandemic. Moreover, the fourth expo in 2019 was not as successful of previous exhibitions due to the intensification of sanctions on Iran, as well as the deterioration in its relations with the majority of the countries of the Middle East, prompting Tehran to postpone its convening. However, the fifth Iran EXPO 2023 was launched under more conducive circumstances created by the following factors: 

1. Promoting trade interests between Iran and Gulf states: The high rate of attendance by delegations and businessmen from Gulf states raises the possibility of restoring and strengthening trade relations, specifically with Saudi Arabia and the UAE. Trade between the Iranian private sectors and those in other countries is a prelude to the formal promotion of trade between governments, especially since Iran and Gulf states have recently focused on strengthening the role of the private sector internally. For example, for Saudi Arabia, Vision 2030 includes the empowerment of the private sector. In return, Tehran seeks to implement Article 44 of the Iranian Constitution, which highlights the importance of the private sector, as well the 2003 vision “Iran at Horizon 2025”, which focuses on Iran’s centrality in its regional surroundings, mainly through the use of Iran’s exports to extend its economic influence to neighboring countries. Iran is also following the Saudi and UAE approach to resume relations with Turkey, particularly through financial support.

One of the objectives of Iran Expo 2023 is to increase the volume of Iran’s exports to neighboring countries, especially the Gulf, which has declined significantly since 2019 in the face of increased imports, resulting in a growing trade deficit, which has been steadily rising since (See Table 1). At the same time, Tehran believes that trade with Gulf states, even if at a deficit, is important within the framework of Tehran’s economic diplomacy. Indeed, the Iranian president confirmed during the opening of Expo 2023, that his administration’s foreign policy is focused on strengthening relations with neighbors and allies, and developing economic diplomacy.

Source: www.trademap.org

Trade as a tool to enhance transport across the Middle East: The Expo 2023 exhibition coincides with extensive Iranian efforts aimed at enhancing cooperation in the field of transport with many countries of the region. On May 7, 2023, The Islamic Republic of Iran Railways and the Iraq Republic Railways Co. signed a memorandum of understanding on the operational procedures for connecting the railways in Shalamchech, Basra (the line was proposed in November 2018 by Iran), which is an integral point of rail carriage for goods from China to the Mediterranean along China’s Belt and Road initiative. Moreover, a memorandum of understanding was signed on 3 May 2023, aimed to connect railways between Syria and Iran during the visit of an Iranian delegation to Damascus headed by Iranian President Ibrahim Raiki, in preparation for the construction of a rail link between Iran and Syria through Iraq, that provides Iran with access to the Mediterranean Sea (see Map 1).

The plans for this line is can be considered as a response to the proposal by Israel in 2019 to link Saudi Arabia and the Arabian Gulf countries to the Mediterranean Sea through Jordan and the Israeli port of Haifa (see Map 2). This may create a rivalry based on the volume of trade passing through Iran from the east, or even the volume of its exports and imports. In this context, Iran Expo 2023 is an important factor in realizing Iran’s blueprint to become an East-West trade crossing on the one hand, and to have a competing trade corridor for similar regional projects on the other. 

On the maritime front, Expo 2023 offers important opportunities to familiarize Gulf States, especially Saudia Arabia, with Iran’s shipping infrastructure. This is evidenced by the emphasis on the visit of the exhibit’s participating delegations to Iranian ports in view of Iran’s forthcoming role in maritime connectivity with Gulf States and the Middle East, and it’s increased investment opportunities. In particular, the prospects of opening direct shipping lines with Saudi Arabia to promote trade between the two sides, and the exchange of goods between them is an encouraging element for the development of a maritime network in the event of trade deals between the two countries’ companies in Expo Iran 2023.

1. Capitalizing on de-escalation in Arab and regional interactions: Developments in the region reveal a trend towards conflict settlement and resolution. With the emergence of a Saudi/UAE rapprochement aimed at ending tensions with Iran and Syria, there is a visible effort in the region to strengthen security and stability in inter-Arab relations in order to meet expected economic challenges. In this context, Expo 2023 is an opportunity for Iranian rapprochement with all countries of the region without reservations, and without any pressure to improve economic relations with Tehran. In this context, the signing of trade deals between Gulf delegations and Iranian companies is likely. Mutual investments between the parties in Expo 2023 are also likely to establish a turning point for Iran’s Arab relations. Due to the exploratory nature of the Expo 2023, trade and investment is not required to commence immediately given that the expo is mainly about surveying potential cooperation, particularly for Saudi Arabia and Iran, given that the latter’s trade relations with other Gulf states have not been interrupted.

Gradual Involvement

In conclusion, Iran is taking gradually resuming relations with Arab states, and strengthening trade may be the first step to opening further possibilities to reintegrate into the Arab economy. This includes trade agreements in strategic goods, preferential or free trade agreements, establishing economic zones with neighboring states, as well as joining existing regional economic entities as an observer or strategic partner. The gradual approach to increasing Iran’s involvement in the region provides an opportunity to leverage the country’s economic interests, while postponing any agreements that may harm its economy, for instance, as signing a free trade agreement with the Gulf Cooperation Council exacerbates Iran’s trade deficit with these states. In this context, the linkage between Iran and the Arab states in the medium-term will depend on meeting mutual economic interests, as opposed to the pattern of relations between other countries, which may depend primarily on strategic political and security dimensions.