New free trade deals could connect Turkiye, Iran and the Gulf states

Iran has revealed plans for a free trade zone with Turkiye, with an agreement expected to be signed in the next couple of months.

Turkiye has also reached a free trade agreement with the UAE, one of Iran’s leading trade partners in the region. The agreement aims to increase trade volume between the two countries to $40 billion in five years.It is currently worth about $8 billion a year, and the UAE is the 10th largest overseas market for Turkish businesses.

The UAE has also been a hot market for Iranian businessmen and traders. Turkiye’s signing of free trade deals with both Iran and the UAE could positively affect trade in the region, while also increasing Iranian trade in the Gulf. Although the UAE has reached free trade agreements with a number of countries, Turkiye stands at a critical point. It is a member of, or signatory to, many trade-related international organizations and treaties. Besides these, Turkiye is of great significance for Iran, because Turkiye’s free trade agreement with the UAE has the potential to become an important economic, political, and transit advantage for Iran. Considering the recent normalization climate in the region, in particular between Saudi Arabia and Iran, the implementation of a free trade agreement between the UAE and Turkiye is important for Tehran, which aims to play a key role in connecting all these countries together.

Turkiye stands at a critical point, as a member of, or signatory to, many trade-related international organizations and treaties.

Sinem Cengiz

Turkiye’s free trade deals with the UAE and Iran may swiftly improve trade connections in the region. They may also encourage other Gulf states to take a similar path with Turkiye. In February 2017, at the first meeting in Ankara of the Turkish-Saudi Coordination Council — which enables political, military, intelligence and economic cooperation —foreign ministers of the two countries discussed the possibility of increasing free trade. However, the topic disappeared from the agenda as relations between Ankara and Riyadh entered an era of tension. Now that Turkish-Saudi relations have started to normalize, Ankara considers a similar deal with Riyadh crucial for the future development of economic relations with the Gulf region as a whole.

Turkiye also seeks free trade deals with Kuwait and Qatar. In the past decade, Turkiye and the GCC states took important steps in this regard, although there has been no fruitful. In the early 2000s, an important development in the economic sphere was the start of discussions on a free trade deal between Turkiye and the Gulf countries. In 2005 in Manama, Turkish President Abdullah Gül and GCC secretary-general Abdul Rahman bin Hamad Al-Attiyah signed a framework agreement to launch talks for a free trade agreement between Turkiye and the GCC. At the ministerial meeting in Kuwait in 2010 between Turkiye and the GCC countries, Ankara emphasized that a free trade agreement should be concluded as soon as possible. However, the GCC noted that despite economic progress between Turkiye and the Gulf states, there were still difficulties in concluding the agreement and eventually the talks reached no concrete conclusion.

Turkish-GCC relations are important in economic terms as the two sides have complementary economic structures, which offer a good basis for deepening economic and trade connections. The trade volume between the Turkiye and the GCC has increased rapidly in recent years, with the exception of a period of tension. However, Turkiye’s trade volume with the GCC countries has remained below its potential levels. Turkiye could be the “Germany” of the region for GCC investments, but the two sides have failed so far to realize the full potential.

Turkish-GCC relations are important in economic terms as the two sides have complementary economic structures.

Sinem Cengiz

Tehran has also traditionally paid special attention to the GCC. Before the Arab uprisings in 2010, Tehran promoted the idea that it could become a vital nexus connecting the Gulf states with Turkiye, and could profit from its role as a transit hub while incorporating itself in the regional system of economic relations. However, the regional developments after 2010 tested Iran’s economic presence in the GCC.

Now that the Saudi-Iranian deal has brought a new approach in the region, Tehran once again fixes eyes on the development of economic ties with the GCC countries. Following the deal, the statements made by GCC and Iranian officials highlighted the importance of economic, trade, and investment cooperation. In this regard, Saudi Finance Minister Mohammed Al-Jadaan’s statement that “there are a lot of opportunities for Saudi investments in Iran that could happen very quickly” is noteworthy.

In a nutshell, not only Turkiye or Iran but also the Gulf countries aim to develop economic cooperation and investment prospects that could have positives for all sides. If the free trade deals achieve their aims, theywill promote regional economic integration and build shared approaches to trade and investment between Turkiye, Iran and the Gulf states.

• Sinem Cengiz is a Turkish political analyst who specializes in Turkiye’s relations with the Middle East. Twitter: @SinemCngz