Evaluation and Estimation of Iran’s Food Industry, the Potentials of Exports to the Russian Market

In the age of globalization and the regional economic integrations (REIs) of the world economy, economic development is not just a national issue. In order to achieve the desired level of national development, the states should also avail themselves of existing regional and international resources and opportunities.
Nowadays, the world is experiencing different levels of regional Trade/economic integration (RT/EIs) in different regions. In the region surrounding Iran, there also exist several regional economic arrangements which are called ECO (Economic Cooperation Organization), CIS (Commonwealth of Independent States), SCO (Shanghai Cooperation Organization), CAC (Central Asian Cooperation Organization: FTA between Russia with CIS members) and SCR (Caspian Sea Region) which can be considered as Iran’s potential natural trade partners (NTPs). At first, there seem to be clear differences among member states of the three arrangements, including, inter alia, incongruous economic structures, uneven human/economic development, varying political systems, and ethnic and cultural diversity.
Having substantial potential, most CAC/CSR/ECO member countries also have long been pushing for establishment of regional economic and trade cooperation. These efforts imply an interest on the side of CAC/CSR/ECO countries. However, despite these efforts, no commensurate progress has been made. It appears that, under these circumstances, it is not feasible to establish an efficient economic and trade arrangement embracing all CAC/CSR/ECO member states and taking an incremental or step-by-step approach would probably be more successful. Thus, the most practical way to achieve the long-term goal of “sustainable regional development” would be to create an active nucleus of CAC/CSR/ECO members with more capacity, interest and coordination for economic and trade issues which could pave the ground for other countries to join later.
In the following article it is intended to assess Russia’s Market for Iran’s food industries’ export capacity and trade potentials (between Iran and Russian Federation) by using Several indices of trade potential and revealed Comparative Advantages (RCA) between 2006-2017. The findings of the research are as follows:
The examination of Iran’s food industries’ exports to Russia during the last decade by focusing on the individual market in terms of Iran’s foodstuff exports’ trend, composition/diversification and dynamics on the one hand and the individual the foodstuff (HS 6-digit codes) in terms of changing trend, composition/diversification and comparative advantage on the other, reveals a wide gap between actual and ideal states. In effect, in foodstuffs value chain, Iran generally stands at an early stage, with low value added and high local content in its food industries’ products, being far away from ideal state in terms of product diversification and differentiation, economies of scale, structural reforms and endogenous competitive advantage.
A pathological study of Iran’s food industries’ exports to Russia at various levels of state, associations and enterprises in terms of economic diplomacy, trade policy, institutional factors and infrastructures reveals that the requirements and infrastructures for the promotion of production and export of Iran’s food industries’ products are not adequate at international/regional, state and institutional levels and the stakeholders of production and trade, especially the export sectors of food industries’ products suffer a high transaction cost compared with other rival countries, even in the region.
The estimation of export potentials and the analysis of the prospects of import demand for foodstuffs in the Russian market through analysis of Iran’s complementarity of foodstuffs exports to Russia’s market (products with existing and growing advantage on an HS 6-digit code basis); prospects of import demand of selected countries for food industries’ products, assessed by all indices; and the relationship between the growth of demand for foodstuffs and the growth of food industries reveal a relatively high potential for exports to Russia in terms of number, diversification, value and capacity.
The analysis of challenges to import demand of the Russian market for food industries’ products in terms of the rivals and changing market shares; changes in import policy of Russian market toward Iran; restrictions and barriers to Iran’s presence in Russian market; and challenges facing Iran at international/regional, state and associational levels does not suggest promising prospects for export and penetration into Russian market, with economic inefficiencies affecting various levels.
There is a similar situation for Iran’s strengths, weaknesses, opportunities and threats. Analysis shows that lack of intra-regional trade development is due to the export-import (trade) structure that Iran and Russia in bilateral trade, and other CAC/CSR/ECO members are facing and thus, the Regional economic integration seems impossible at the moment, but the exploitation of the trade integration benefits is expected with an enhancement of trade/economic structure of the I. R. of Iran and Russian Federation.