What’s in It for Armenia? The EAEU–Iran Free Trade Pact Explained

Listen to the article. 

On May 1, 2025, the Free Trade Agreement between the Eurasian Economic Union (EAEU) and Iran enters into force. While all signatories, Iran, the EAEU and its member states, appear on the Agreement’s cover, the agreement carries the imprint of a deal driven by Moscow and Tehran. For the rest, including Armenia, it functions like a classic pactum in favorem tertii – a deal made by others, from which they nonetheless benefit.

And benefit Armenia might. The agreement opens the door to expanded trade, smoother customs procedures, and regional infrastructure opportunities that serve its economic interests. In a region where geography so often acts as a constraint, this deal, whatever its political undercurrent, offers practical advantages that few in Yerevan can afford to ignore.

It also underscores a broader point: that Armenia’s membership in the Eurasian Economic Union, however politically fraught, is not without function. Unlike the Collective Security Treaty Organization (CSTO), whose credibility has withered beyond repair in Armenia, the EAEU continues to produce tangible outcomes. And in times of growing economic uncertainty, tangible matters.

Still, this balance between defending national economic interests within the EAEU and signaling a quiet but clear westward drift cannot be sustained indefinitely. The question may no longer be whether Armenia wants to continue walking this tightrope but how long it will be permitted to do so.

Unpacking the Free Trade Agreement

The Free Trade Agreement (FTA) is a dense and technical document. Structured into eight chapters, it covers everything from tariff reductions and customs cooperation to health regulations and dispute settlement. Here’s a summary you could consider as a roadmap for navigating the full text, without getting lost in legalese.

Chapter 1 sets the stage. It defines the purpose of the agreement: to create a free trade area that simplifies trade and lowers tariffs. It also introduces the institutional backbone, the Joint Committee, which will oversee the Agreement’s implementation. A Business Dialogue Platform gives businesses on both sides—EAEU and Iran—a voice. Crucially, this chapter lays down the rules for transparency, communication, and exceptions, making clear that national interests like public health or security remain protected.

Chapter 2 is about the actual trade in goods. This is where the practical benefits begin. The chapter ensures that both sides provide equal and competitive conditions in the market for each other’s products, committing to reducing or eliminating customs duties. It also covers how rules should be published, how fees must reflect actual costs (not serve as hidden barriers), and how goods in transit should be allowed to move freely. In simple terms, a country must treat imported products no less favorably than similar locally produced goods. For example, imported goods cannot be taxed more heavily or face stricter packaging rules than domestically produced ones. A dedicated committee will track how all this works on the ground.

Chapter 3 provides safeguards. Sometimes trade causes problems, like a sudden flood of cheap imports, hurting local producers. This chapter allows countries to respond through anti-dumping measures, countervailing duties, or temporary safeguards. But it doesn’t give a blank check: countries must investigate thoroughly, follow clear procedures, and avoid using these tools as cover for protectionism.

Chapter 4 focuses on standards. Countries often have different technical rules on product safety, labeling, or certifications. This chapter aims to prevent such differences from becoming trade barriers. It encourages mutual recognition of each other’s standards, promotes transparency, and calls for early consultation when new regulations are introduced.

Chapter 5 addresses health and safety. Known as sanitary and phytosanitary measures, these rules protect people, animals, and plants from disease or contamination. This chapter ensures that such protections are science-based and not used to unfairly block imports. It promotes cooperation, trust, and mutual recognition, while still letting countries act quickly in emergencies.

Chapter 6 explains how to define origin. In a free trade deal, not every product automatically qualifies for tariff cuts. This chapter sets clear rules to determine whether a good is “from” the EAEU or Iran. It outlines what counts as locally made and how to verify. This helps prevent abuse and makes sure the benefits go to the right producers.

Chapter 7 is about customs and trade facilitation. Trade doesn’t just happen, it moves through borders, paperwork, and inspections. This chapter encourages electronic submissions, trusted trader programs, and risk-based inspections while ensuring fairness, transparency, and the right to appeal decisions.

Chapter 8 handles disputes. What if one side thinks the other is breaking the rules? This final chapter sets up a step-by-step process for resolving disagreements—first through consultations, then, if needed, through arbitration. It is designed to keep things fair, rule-based, and focused on solutions.

Unlike many modern trade agreements that blend tariff reduction with investment protection, the EAEU–Iran Free Trade Agreement does not include an investment chapter, nor does it provide for investor-state dispute settlement (ISDS) or investment arbitration. The dispute resolution mechanism it establishes applies only to state-to-state disputes over the agreement’s interpretation or application. This aligns with both Russia and Iran’s suspicion toward the investment arbitration system, which they often view as biased in favor of Western investors and infringing on state sovereignty. As a result, any disputes involving private investors will continue to fall under separate bilateral investment treaties, if they exist, rather than being covered by this agreement.

Chapter 9 is about government procurement. The parties commit to sharing information about their procurement systems and relevant laws, including through official websites and e-procurement platforms. While it does not grant full market access or legal obligations to open tenders to foreign suppliers, it encourages the exchange of experience, technical assistance, and efforts to align procurement practices over time. 

Chapter 10 focuses on sectoral cooperation. Beyond trade, the parties agree to deepen ties across a range of strategic areas, such as transport, energy, health, education, science and technology, telecommunications, and more. The chapter envisions collaboration on innovation and digital infrastructure, aiming to strengthen economic integration and shared value chains across the region.

Chapter 11 wraps things up with final provisions. It provides the legal and procedural foundation to ensure that the agreement remains flexible, functional, and enforceable over time.

In short, the agreement is a comprehensive framework for managing trade between Iran and the EAEU, including Armenia. Whether it lives up to its promise will depend, of course, on how it is implemented. But on paper, it’s a serious effort to build a predictable and mutually beneficial trade relationship in a region that badly needs both.

Armenia’s Piece of the Pie

From an economic standpoint, the immediate implication is increased market access. Businesses across EAEU member countries and Iran can now benefit from preferential tariffs, which means lower import costs and improved competitiveness. Enhanced predictability, transparency, and simplification in customs procedures will stimulate trade flows and reduce transaction costs.

This agreement positions Iran as a crucial economic partner for the EAEU, bridging markets in Central Asia, the Caucasus, and the Middle East. Given current global geopolitical dynamics, especially sanctions regimes involving Iran and Russia, the agreement can provide both sides with a valuable economic alternative. This might partially alleviate isolation and diversify trade partnerships beyond traditional Western markets. Moreover, closer economic ties may strengthen diplomatic relationships and mutual reliance, enhancing political stability and collaboration on regional matters.

For Armenia, the FTA means improved market access to Iran, with a large consumer market of over 80 million people. While a temporary FTA providing zero tariffs between the EAEU countries, including Armenia, and Iran has been in effect since 2019, the new agreement becoming comprehensive and permanent in May 2025 further solidifies and expands this trade relationship. Armenia’s economy can benefit from increased trade volumes and lower transaction costs in accessing Iranian markets. Key Armenian sectors likely to benefit include agriculture, processed foods, pharmaceuticals, information technology, and manufacturing. 

Armenia—the only EAEU country bordering Iran—could become a crucial logistics hub, a gateway between the EAEU and Iran, leveraging its EAEU membership and geographical proximity to Iran. Article 6.3 of the Agreement, which defines the origin of goods for preferential treatment, states that products “wholly obtained or produced” in a Party are considered as originating in that Party. This technical clause may have practical consequences for Armenia. By positioning itself as a production base within the EAEU, Armenia could attract foreign investment through locally incorporated businesses looking to benefit from tariff advantages. Specifically, goods that qualify as “originating” under Article 6.3 (produced in Armenia) can enter the Iranian market at preferential tariffs or even duty-free. In other words, products labeled as “ Made in Armenia” would gain clear market advantages compared to similar products manufactured in countries without such agreements. Therefore, this makes Armenia an attractive location for foreign investors seeking cost-effective market access to Iran.  As is often the case, major foreign investments, especially those tied to production and export, tend to generate secondary economic effects: new infrastructure, expanded logistics networks, and a ripple effect of local business development in their orbit. Armenia, with its direct border with Iran and preferential EAEU access, could quietly become a strategic node in this regional trade equation.

The energy sector stands out as a strategic beneficiary. Iran has vast reserves of oil and natural gas, and Armenia currently imports natural gas from Iran in exchange for electricity. This existing arrangement can potentially expand into larger energy trade agreements and collaborative energy infrastructure projects, significantly enhancing Armenia’s energy security and reducing dependency on a single energy supplier. Until now, such ambitions have been often held back by a mix of political sensitivities, financial gaps, and a lack of coordinated planning across borders. The entry into force of this FTA, however, may help create a more predictable, rules-based trade, and strengthen institutional cooperation through the Joint Committee as well as sectoral cooperation provisions. The FTA, for instance, could incentivize the revival of significant infrastructure projects, such as the North-South transportation corridor connecting Armenia with Iran, and subsequently to the wider EAEU markets. 

Geopolitical Dimensions, Challenges and Risks

On a strategic level, the FTA serves as a geopolitical balancing act for Armenia. Armenia currently faces significant economic and security challenges stemming from regional isolation, closed borders, and dependency on Russia. Strengthening economic ties with Iran through this FTA gives Armenia greater strategic depth, reducing its overreliance on Russia economically, and diversifying its geopolitical partnerships. Russia is likely to show less jealousy toward deeper trade and communication with Iran when it happens under the umbrella of the EAEU. In the past, even bilateral energy or transit initiatives between Armenia and Iran have drawn unease from Moscow. But within a multilateral framework that it actively leads, Russia may view Armenia’s outreach to Iran as less threatening.

Despite the substantial opportunities the FTA presents, Armenia will need to deal with a series of complex risks and structural limitations to fully reap its potential benefits. One of the most immediate challenges is geopolitical. Iran remains under a wide range of Western sanctions, some of which carry extraterritorial reach. Armenia wants to tread carefully to ensure that any expanded economic engagement with Iran does not provoke diplomatic backlash or secondary sanctions from its Western partners.

This becomes especially delicate in the context of Armenia’s increasingly visible steps to reorient itself toward Western institutions. Deeper trade ties with Iran, even under a multilateral umbrella like the EAEU, could be perceived—fairly or not—as contradicting this westward shift. The risk is less about the substance of trade and more about optics and timing. That said, it is important to note that Iran has not expressed concern over Armenia’s growing cooperation with the West. 

On the domestic front, Armenia also faces significant limitations in its capacity to scale up trade rapidly. While its proximity to Iran is advantageous, the current state of infrastructure, particularly in logistics, border processing and transportation, could certainly use further development to handle the kind of trade volume this agreement envisions. 

Moreover, Armenia’s business climate, though improved in some areas, still suffers from well-known constraints: a limited credit environment for SMEs, cumbersome bureaucracy, inconsistent regulatory enforcement, and gaps in institutional capacity. Many Armenian businesses, particularly outside Yerevan, may lack the export-readiness or institutional support to take advantage of preferential market access in Iran. Trade facilitation measures can only go so far if businesses are not equipped to respond to new opportunities with scalable production, quality control, and competitive pricing.

To overcome these structural barriers, Armenia will need targeted public investment in infrastructure and logistics, policy support for SMEs aiming to enter export markets, and clear legal frameworks that allow trade with Iran to remain transparent, traceable, and in line with Armenia’s international obligations. Without such efforts, the FTA risks becoming a missed opportunity, another agreement full of promise on paper but limited in practice. Armenia’s challenge is to ensure that it does not remain a passive beneficiary of a pact made by others but instead positions itself as a strategic and capable actor.

Perhaps an even more pressing issue that could constrain Armenia’s ability to fully capitalize on the FTA is the broader security environment. Azerbaijan’s increasingly aggressive rhetoric and demands around the so-called “Zangezur corridor” could undermine this potential. Trade infrastructure is not just a technical issue but a highly politicized and vulnerable asset. If Armenia cannot guarantee security and sovereignty over its southern routes, it may not be able to reliably serve as a connector between Iran and the rest of the EAEU.

Yet, this also works in reverse. The very existence of the FTA and Iran’s growing strategic interest in direct access to northern markets may act as a counterweight to Azerbaijani pressure. Iran has consistently rejected the idea of any extraterritorial corridor cutting through Armenian territory and has repeatedly stated its support for Armenia’s territorial integrity. 

In this sense, the FTA could, at least indirectly, contribute to regional restraint. It gives Iran, and by extension, the EAEU, an economic stake in the uninterrupted functioning of Armenian trade routes, potentially adding weight to diplomatic efforts against Azerbaijan’s destabilizing moves. While the agreement is not a security pact, its implementation may influence the regional balance by tying economic stability to political restraint.

Nonetheless, Armenia cannot rely solely on this indirect protection. To meaningfully participate in and benefit from the FTA, it must continue to defend its sovereignty, invest in physical and institutional resilience, and build partnerships that reinforce its economic and security posture. In a region where trade, transit and power politics are deeply entangled, the ability to stay economically relevant may well depend on the ability to stay secure.

Concluding Thoughts

The entry into force of the FTA between the EAEU and Iran marks a notable economic shift with far-reaching implications across the region. For Armenia in particular, it opens a timely window of opportunity to strengthen its economic resilience, diversify external partnerships, and recalibrate its geopolitical footing in an increasingly volatile neighborhood. By leveraging its geographic advantage and its unique position within both the EAEU and the Iran-facing corridor, Armenia has a chance to enhance its role as a regional connector.

That said, the agreement is no panacea. Its benefits will not materialize automatically or evenly. It should be received with measured anticipation and strategic planning. Real gains will depend on Armenia’s ability to invest in infrastructure, improve the ease of doing business, align regulatory frameworks, and ensure that trade policy is matched by implementation capacity. If used wisely, the FTA can be a stepping stone toward economic growth, stronger connectivity, greater energy cooperation, and a more balanced geopolitical posture. The challenge now is to turn this opportunity into durable and inclusive outcomes.

Also see

Politics