Iranian “Aras” Economic Zone

8 m.   |  2019-12-11

East Azerbaijan with Tabriz as its center, is one of Iran’s dynamically developing provinces, which has a significant transit, economic, industrial, agricultural as well as tourist potential. Located on the Silk Road, highways and railways will be built to increase its transit significance within the region. This will allow to enter Europe through Turkey, connect with Georgia through Armenia and Russia through Azerbaijan.

In 2005, the “Aras” free economic zone was established (AFZ), covering up to 51 thous. hectares of territory which include Julfa, Kaleibar and Khodafarin towns.

“Aras” free economic zone headquarters in Julfa town. Photo by the author

Iran’s Economic Zones

A ccording to the latest results of the FEZ activities in Iran, “Aras” FEZ has improved its position in terms of its development and occupies a leading position compared to other FEZ’s in Iran. There are 7 free economic zones in Iran, which are deployed in certain areas allowing the country to be connected to international transit routes from north to south, east to west, helping provide economic activity in the respective areas.

Besides “Aras” there are the following free economic zones in Iran:

  • “Kish” is located in the Persian Gulf, on Kish Island,
  • “Qeshm” is located on the Qeshm Island of the Persian Gulf,
  • “Arvand” on the eastern part of the Persian Gulf,
  • “Chabahar” on the Oman Sea shore,
  • “Anzali” on the Caspian Sea coast,
  • “Maku” on the West Azerbaijani province.

“Aras” FEZ Structure

“Aras” FEZ consists of 6 districts in its turn with a governing body for each of them.

  • Julfa district
  • Nordouz district
  • Khodafarin district
  • Aslan Duz district
  • Parsabad district
  • Bilasuvar district

The above mentioned photo is “Aras” FEZ representative office on Iran-Armenia border, at the Norduz checkpoint. Taking into account the strengthening of the dollar against Iranian Rial, many traders from Armenia cross into the FDZ for trade. According to the data provided by Ahmad Hassan Nejad, head of the Nordouz district of “Aras” FEZ in Iran, in the first 8 months of 2019, 178 thous. Iranians visited Armenia and 238 thous. Armenians visited Iran.
Photo by author

Transit Opportunities for “Aras” FEZ

“Aras” FEZ connects Turkey (Razi checkpoint), Turkmenistan (Saraskh checkpoint), the Indian Ocean (Mirjave checkpoint) and international transit routes of significant importance through the Julfa railway. Tabriz and Julfa enable export of goods from Iranian ports to the Eurasian region as well as to Europe. FEZ also gives investors

an opportunity to connect with Turkey through Poldasht, Nakhichevan through Julfa, Armenia through Norduz and Azerbaijan through Gholibeglu checkpoints.

Iran-Nakhichevan border. The railway bridge, better known as an “Iron bridge” was built in 1913. Nakhichevan-Iran railway was launched in 2016, which connected Nakhichevan region to Iran’s Mashhad religious city. However, the passenger rail services stopped in 2018 because of the lack of passengers. Photo by author

The construction of “Aras” FEZ Airport is now in the process, which can contribute to the activation of economic cooperation with the countries in the region. Currently, the Tabriz International Airport provides the air connection with “Aras” FEZ, which is about 120 km away. The cargo carriers use highways of East Azerbaijan when organizing exports to Turkey, Nakhichevan, Armenia and Azerbaijan, and these highways have been increasing export import opportunities year on year.

Road reconstruction between Armenia and Iran in 2019 has reduced drive time by 3 hours.

Investment Opportunities in “Aras” FEZ

“Aras” FEZ offers exemption from taxes for 20 years and cheap gas and electricity, free access to entry and exit of capital, investment guarantees and the right of residence. Customs duty is not charged for the export of raw materials, technologies to neighboring countries and it’s possible to produce part of a potential product in “Aras” and finalize it in another country. This opportunity can be profitable for Armenian businessmen, who by taking advantage of cheap gas offer, can organize the initial production stage at “Aras” and finalize it in Armenia, later exporting it to the EEU market.

One of the industrial complexes of “Aras” FEZ.
Photo by Aras.TV

Tourism Opportunities in “Aras” FEZ

T ourism is developing in the “Aras” FEZ, the strategy of which envisages to make “Aras” FEZ one of the tourism hubs in the region by modernizing the world-renowned East Azerbaijani tourist centers. Potential investors visiting as tourists can get acquainted with the “Aras” FEZ investment opportunities. 

One of the most famous tourist centers in “Aras” FEZ territory is perhaps the Armenian Church complex of St. Stephanos Nakhavka (9th century), which was included in the UNESCO World Heritage list in 2008.

After the reconstruction of the church thousands of tourists visit yearly both from Iran and from Armenia, as well as from abroad.

As there are no Armenian settlements left in the area, liturgy is held once a year.
Photo by the author
Armenian Church complex of St. Stephanos Nakhavka.  Photo by the author

The Shepherd’s Chapel was built in the 13th century. According to tradition, two shepherd brothers built two similar churches, one of them on the right bank of the Araks River, the other built on the left bank in Nakhichevan.  Photo by the author

The Khoja Nazar’s caravanserai on Iran-Nakhichevan border, on the bank of the Araks River. It was built during the Safavid period. The Caravanserai was established with the financial means of a famous Armenian merchant from Jugha and Shah Abbas’s friend Khoja Nazar. Photo by the author

The Khoja Nazar’s caravanserai. Photo by the author

The next “Aras” FEZ famous tourist centers is the historical complex of Kordasht village on Armenia-Iran border, just a few kilometers from Norduz checkpoint. Kordasht historical complex dates back to the Safavid and Gajar period, which includes the Shah’s residence, bath, garden, fridge and historic Gharib Mosque. Photo by the author

“Asiab Kharabe” is one of the famous tourist centers in East Azerbaijan. It served as a mill for the surrounding population, however after being destroyed over time, it got the name “Ruined Mill”. Currently the area is known as a waterfall. Photo by the author

“Armenia is the only EEU member country, which provides land connection between the Union and Iran”, “Armenian is a gateway to Iran and for the EEU”: Armenian and Iranian officials and experts began using these wordings more frequently, when the agreement on free trade zone between Iran and EEU was signed. “Aras” FEZ is a developing complex, which tries to adapt to the current realities through a flexible policy. In 2017, a memorandum of cooperation was signed between the two economic zones.

Currently, Turkey and Azerbaijan have a significant participation in “Aras” FEZ. According to Iranian data, there are no Armenian companies represented in the zone. Although “Meghri” free economic zone in Iran is a competitor to “Aras”, Iranian officials are sure that the EEU provides a great opportunity for mutually beneficial cooperation. The Iranian side is interested in the potential of Armenian companies to operate in “Aras”.

After establishing a free economic zone between Iran and EEU (October 2019), Iran is now greatly interested in Armenia. There is now intense competition between the Iranian “Aras” and “Enzeli” FEZ. “Enzeli” FEZ tries to connect EEU through “Aras”, by emphasizing that it is much more convenient for Iran to connect with the EEU countries through the Caspian Sea via Russia rather than Armenia. Although Azerbaijan does have a land border with Iran it does not have a common border with any of the EEU member countries.

Turkey, Nakhichevan and Azerbaijan are in a favorable position with their infrastructures and with their economic presence in “Aras”, which influences Iran’s political stances towards these countries.  Armenia needs to have a certain presence in “Aras”, which will both provide further opportunities to the Iranian market and will impact on the development of South Caucasian policy of Iran.