Export and Import Operations with Iran

Based on the current situation, there are all prerequisites for further economic and trade integration between Russia and Iran.

Moreover, active trade has been conducted between our countries before, which is associated with the presence of production specializations of the partner that are of interest to each side, as well as relative geographical proximity and the possibility of organizing logistics by water through the Caspian Sea.

Practice of Export-Import Operations with the Islamic Republic of Iran

The Islamic Republic of Iran is a large state located in the Middle East. In terms of population, it ranks, according to various estimates, 17th–18th in the world, competing in this indicator with Turkey. It is these two countries that are the most populous in the macro-region (if we do not count Egypt, which is located on the African continent). A large population determines a capacious market in terms of consumer goods and services.

In terms of GDP (PPP), Iran is also ranked quite high, occupying 22nd place according to the World Bank's estimate. This indicates a developed economic system in terms of its size and production scale. As a result, Iran can act both as an active importer of industrial goods and as a supplier of a wide range of products to the Russian Federation.

The current level of Iran's foreign trade activity does not correspond to its production potential and domestic market capabilities, which is associated with long-term economic isolation and sanctions.

Thus, according to 2021 data, Iran ranked only 54th in the world in terms of import volume (53 billion US dollars), and 46th in terms of export volume (75 billion US dollars). Thereby, the country is characterized by a pronounced positive trade balance and has every opportunity to increase the import of goods into its territory.

What products does Iran export?

The first place, unequivocally and expectedly, is held by mineral fuels (commodity group 27), which accounts for more than 50% of Iran's export structure. For Russian buyers, this product group is not of great interest.

In second place are ferrous metals, which are also a specialization industry of Russian industry. But already in third place in Iran's export structure is a rather interesting group of goods - plastics and articles thereof (export volume over 6.3 billion US dollars), since Russian production largely depends on imported plastics of various processing levels, and Iranian plastics are characterized by medium and above-average quality at a low price relative to European and Russian analogues.

The next product group in the ranking is organic chemical compounds (4.4 billion US dollars), which can be characterized in terms of prospects for application in the Russian market similarly to the previous point.

Fifth place is held by fruits and nuts (2.3 billion US dollars), which in a certain assortment are already actively supplied to the Russian market, primarily, Iranian pistachios and some types of fruits are well-known. Nevertheless, imports of goods from Iran in this direction can also be significantly increased.

Among the subsequent priority product groups of Iranian exports from the point of view of potential interest for the Russian market, it is worth noting copper and articles thereof (a deficit of copper is gradually emerging in the Russian market due to the growth in production of certain types of goods in 2022), vegetables, textile products, confectionery, processed vegetables and fruits, glass and glassware.

At the same time, as a country of potential import for Russian products, the Islamic Republic of Iran is an even more interesting partner than for finding suppliers there, since the Iranian domestic market is large and poorly saturated with imports.

The first import item into Iran is cereals (7.6 billion US dollars), which is equivalent to 14% of all imports into the country. Simultaneously, the Russian Federation is one of the key world players in grain exports.

The second and third product groups of imports - electrical equipment (7.5 billion US dollars) and mechanical equipment (7.1 billion US dollars) are approximately at the same level as the leader of the list and can also be partially supplied from the Russian Federation.

The fourth product group in Iran's import structure is animal and vegetable oils (2.7 billion US dollars), which are simultaneously profile export goods of Russia.

Fifth place is held by land transport (2 billion US dollars), but here the market potential for Russian companies is not so great, considering the capabilities of the Russian automotive industry under sanctions.

Among other product groups that are massively imported into Iran and can be supplied to the country, taking into account the capabilities and specialized industries of the Russian economy, it is worth noting pharmaceutical products, oil seeds and oleaginous fruits, animal feed, sugar and confectionery, as well as wood and wood articles.

Analysis of imports, as well as exports of the Islamic Republic of Iran, shows that the current influence of the Russian Federation is not as great as it could be in the future. Thus, Russian companies export products to Iran (according to 2021 results) in the volume of 1.7 billion US dollars, which is only 3% of the country's total imports. For comparison, the UAE supplies products worth 16.5 billion US dollars, China - 12.7 billion US dollars, Turkey - 5.3 billion US dollars. At the same time, the current macroeconomic and political situation clearly expands the horizons of opportunities for cooperation between companies of the analyzed countries, while Russian business, even large ones, does not always consider the Iranian market as a priority. This is due to many factors, but, first of all, to a lack of information and a weak understanding of the patterns of functioning of the economy and markets in Iran.

Marketing Research and Census of Iranian Commodity Markets

In the understanding of businessmen from most countries of the world, Iran is a very closed country, information about which is hardly accessible, has low relevance and is often unreliable. All this leads to the opinion that it is impossible, or very difficult and expensive, to collect any significant data on the markets of goods and services in Iran. And therefore, this country is either excluded from the list of potential sales markets, so to speak, "drops out" of business development priorities, or the task is set to come and figure it out on the spot immediately within the framework of negotiations, which more often leads to their complete failure, since in this version it is not even possible to select any reference companies to reach agreements.

Indeed, conducting marketing research in Iran can be difficult. Let's start with the specific structure and writing of the Farsi language, knowledge of which is highly desirable for studying market information. It should be noted that the English language is not widely spoken in the country, although it is spoken by middle and top-level managers of large companies. For the majority of local residents, even in large cities, like Tehran, the only language of communication is Farsi; the second most popular language in Iran is Azerbaijani, predominantly in the north of the country.

Websites of local companies, as a rule, are not adapted for interaction with foreign partners. Therefore, reading them is difficult, and automatic translators do not help fully. This is also due to the right-to-left script used, the Muslim calendar, as well as the rather poor design and content of websites in general, which does not allow collecting a large amount of useful information within the framework of remote desk marketing research. Some websites do not open from abroad or are blocked as unverified and potentially dangerous.

Official sources on Iran, such as state statistics, are also oriented towards Farsi-reading consumers; moreover, they are quite scarce and uninformative in the part that is publicly available.

Thus, marketing research conducted on Iran requires a fairly good knowledge of the few local sources of information that can be verified and compared with each other. For consumer goods, a census of the territory, including retail outlets, can be quite effective. The retail sector of the Islamic Republic of Iran is quite diversified and represented by various types of players, including traditional markets (bazaars), classic and modern retail, and an online retail channel with home delivery is also developing.

Such events are best carried out in partnership with local companies that can organize the collection and primary processing of information. At the same time, it is very important to set tasks for them correctly (and for this, one needs to understand the main features and principles of local markets), as well as correctly distribute the assigned tasks among several contractors, including for the purpose of cross-control, which is of fundamental importance for working with Iran in any field of professional activity.

When conducting marketing research on the Iranian market, it is necessary to pay attention to the analysis of barriers to the import of products, since local legislation is quite specific and may contain restrictions that are not found in other countries. This is due not so much to the implementation of the norms of Muslim law, but to measures to protect its own food and industrial security under sanctions.

In conclusion of a brief consideration of the principles of conducting marketing research on Iranian markets, it is important to note the importance of understanding the fact that this is a large country with pronounced regionalization. Goods flows enter the country from different directions, and the standard of living and development of production in them varies. All this can be important for a correct understanding of the market, and, consequently, for developing an effective marketing strategy for working with Iran, forming a competitive commercial proposal that can be "tailored" to different territories and consumer segments.

Iran is divided into 31 regions (ostans), which are unequal in area and level of socio-economic development. First of all, Tehran stands out - the capital, in whose agglomeration up to 15 million people live, meaning it is itself a large consumer goods market, comparable to Moscow in terms of the number of buyers (but not in their purchasing power). Moreover, Tehran is also the largest production center, where almost half of the country's entire industrial sector is concentrated.

The regions located in the North near the Caspian Sea are quite developed, where the port of Anzali is located, often indicated as the preferred place for the supply of goods from the southern regions of the European part of Russia. The largest city in this macro-region is Tabriz (not far from Azerbaijan).

The Northeast and East of the country are not as successful in terms of development, and the territories here are sparsely populated, but near the border with Turkmenistan, there is the industrially developed Ostān of Khorasan Razavi with the large center of Mashhad.

Separately, one can consider the richer South of Iran, whose regions have a coastline on the Persian and Oman Gulfs of the Indian Ocean. The largest port here is Bandar Abbas, which will be the preferred entry point for Russian companies from the Far East and North-West of Russia.

Business Culture of Iranian Entrepreneurs and Organization of Negotiations

Conducting negotiations with Iranian businessmen is a very interesting topic, dominated by stereotypes. On the other hand, they did not arise out of nowhere and have a right to exist.

Indeed, communication with representatives of Iranian business can be quite difficult. This is not related to the atmosphere of the negotiation process, which, as a rule, is very friendly, but with the very content of the negotiations and the achievement of mutually beneficial agreements that are binding on both parties.

It is worth noting right away that remote or so-called online negotiations without direct contact are of little effectiveness, which is generally characteristic of communications with all representatives of Eastern-type cultures. Their value in the eyes of an Iranian partner will be low, and therefore they can be considered as a stage of the negotiation process, but not the point of achieving a result.

In this regard, it is highly desirable to travel to Iran for communication or to invite Iranian companies to your production sites in Russia. Therefore, for negotiations with Iranian partners, participation in direct and reverse business missions can be recommended, which help to communicate directly with reference companies.

Also, a large number of industrial exhibitions on various topics are held in Iran, where both local companies and enterprises and organizations from a number of Middle Eastern, European, Central and Southeast Asian countries are represented. Iranians themselves also travel quite a lot to exhibitions, especially in the UAE, which is their main trading partner.

In general, business culture in Iran implies quite polite and prolonged communication with potential partners, whether they are sellers or buyers, but the main activity should come from the seller. He must be prepared in terms of justifying all the basic parameters of the deal, including pricing and logistics of supplies, which can vary greatly depending on the location of the buyer in Iran.

A separate issue is the form of payment between the parties. Iran has been under sanctions for quite a long time, which has led to the development of various indirect forms of payment, for which suppliers must be prepared, including payment through companies located in third countries (often Turkey or the UAE) or a barter payment scheme. All these issues need to be worked out before the start of negotiations, otherwise they will slow down significantly, including in the commercial proposal for cooperation.

At the same time, the negotiation process itself also proceeds at a slow pace and may involve several stages and even a series of meetings. Combining personal meetings with contacts at major events, such as international exhibitions, can lead to agreements and signing a contract much faster.