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Iran, Indonesia Ink Preferential Trade Agreement

May 23, 2023
2 min read
Iranian President Ebrahim Raisi and Indonesian President Joko Widodo walk upon their meeting at the Presidential Palace in Bogor, Indonesia, May 23, 2023. REUTERS/Ajeng Dinar Ulfiana
Iranian President Ebrahim Raisi and Indonesian President Joko Widodo walk upon their meeting at the Presidential Palace in Bogor, Indonesia, May 23, 2023. REUTERS/Ajeng Dinar Ulfiana

Iran and Indonesia signed a bilateral preferential trade agreement (PTA) during a two-day official visit by Iranian President Ebrahim Raisi aiming to strengthen economic ties between the two Muslim-majority nations.

Raisi and his Indonesian counterpart, President Joko Widodo, oversaw the signing of the PTA and other agreements on May 23 at a ceremony in the presidential palace in Bogor, outside the capital, Jakarta.

The visit to Southeast Asia’s largest economy comes as the Iranian economy is facing a deepening economic crisis, in part due to crippling US sanctions imposed over Tehran’s nuclear program.Ties between Tehran and the West become increasingly strained following the Islamic Republic’s brutal crackdown on months-long anti-government protests. 

Indonesia is seeking new markets to diversify its export options and reduce its reliance on traditional trade partners that have been affected by a weakened global economy and geopolitical risks. 

Two-way trade between Indonesia and Iran increased by more than 23 percent to $257.2 million last year, with the Southeast Asian country recording about a $200 million surplus, according to the Indonesian Trade Ministry.

Under the PTA, worth $20 billion, Iran would give Indonesia greater access to products like processed food and pharmaceuticals, textile, palm oil, coffee and tea, while Southeast Asia’s largest economy will lower tariffs for Iranian oil and chemical products, metals and some dairy products.

Speaking in a joint news conference on May 23, Widodo said he hoped the agreement "would increase trade between Indonesia and Iran."

He said the two presidents also discussed expanding export opportunities in the Middle East and offering opportunities for Iranian businesses to invest in the development of Indonesia’s future capital on Borneo island.

Raisi said that “the numerous documents that we signed today showed the will of the two countries to develop relations in all situations despite threats and sanctions by the enemies.”

Indonesian trade ministry official Djatmiko Bris Witjaksono said on May 23 that the two countries agreed on a scheme in which goods and services can be exchanged "without being constrained by scarcity or currency difficulties."

The previous day, Djatmiko told reporters that the archipelago nation of over 270 million people is keen to boost trade with the Middle East and the surrounding region.

"Iran could be a gateway to the surrounding region, such as Central Asia...or even to Turkey because we do not have any trade deal with Turkey yet," the official said.

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