Oman and Iran: Transforming diplomatic ties into economic growth
Oman and Iran, bound by deep historical and cultural ties, are steadily strengthening their economic relationship. This enduring connection, built on a foundation of stable diplomacy, is paving the way for increased trade, investment, and business collaboration, fostering prosperity for both countries and the wider region.
Oman's pragmatic and balanced foreign policy has consistently enabled it to maintain stable relations with Iran, even amidst broader regional tensions, positioning the Sultanate of Oman as a crucial mediator and a significant economic gateway. This consistent diplomatic stability provides a predictable and reliable framework for economic engagement, offering a distinct advantage in a complex region. Furthermore, the joint agreement between Iran and Oman to provide security for the strategically vital Strait of Hormuz, a critical global chokepoint, translates into a potentially more secure and predictable maritime route, vital for logistics and supply chains, effectively reducing perceived transit risks for businesses.
Recent trade figures from the National Centre for Statistics and Information (NCSI) in Oman provide a snapshot of the bilateral exchange, reflecting a notable trade deficit on Oman's side. Oman's exports to Iran remain relatively modest, amounting to approximately RO 1.04 million. Key export commodities include fish-based flours and pellets, primarily used for non-human consumption (RO 665,633); refined palm oil (RO 112,789); and aerated and flavoured beverages such as cola and orangeade (combined RO 86,967). Other miscellaneous products accounted for RO 96,343.
In contrast, Oman's imports from Iran are significantly higher, totalling over RO 90 million. The major import category was live sheep, accounting for RO 78.4 million and dominating the trade balance. Other significant imports included pharmaceuticals containing hormones/steroids (RO 901,618), construction materials like cement (RO 699,442) and iron/steel doors and windows (RO 687,333), and fresh apples (RO 518,453). Other imported goods totalled RO 9.9 million. With total imports valued at approximately RO 90.13 million and exports at RO 1.04 million, Oman faces a significant trade deficit of around RO 89 million in its trade with Iran. This highlights a substantial imbalance, driven largely by livestock and essential materials sourced from Iran. However, it is important to consider these figures within the broader context of trade potential. The Iran-Oman Joint Chamber of Commerce reported a substantial increase in trade volume from $221 million in 2013 to nearly $2 billion by 2022. This suggests that the current trade volume is far below its potential, highlighting opportunities for significant growth.
Both Oman and Iran are actively seeking to expand investment and business collaborations. For Omani companies considering investment in Iran, the Iranian Ambassador to Oman has encouraged starting with smaller-scale projects to establish a foothold in the market. Key opportunities for Omani companies in Iran are highlighted in non-oil sectors such as tourism, mining, and agriculture. This specific focus on these sectors suggests a deliberate strategy, as this region might offer particular advantages, such as proximity, resource availability, or less sensitivity to broader geopolitical factors.
Conversely, Oman's economic ecosystem is described as favourable and "open and welcoming" for Iranian private sector companies. Sectors well-suited for Iranian firms in Oman, owing to Iran's competitive advantages, include oil and gas, engineering services, food industries, and agriculture. Oman's consistent portrayal of its market as open for Iranian firms, combined with Oman's broader efforts to attract foreign investment, suggests a calculated risk-taking approach designed to maintain its mediatory role and achieve economic diversification goals. This openness can lead to new partnerships, technology transfers, and job creation within Oman, particularly in the identified sectors.
Joint investment discussions between Oman and Iran are gaining momentum, with an agreement to support such ventures reached at the 21st Joint Economic Committee meeting. Both nations are looking to exchange lists of active companies in the energy and mining sectors and formalise partnerships through memorandums of understanding. Beyond traditional oil and gas, there's a clear move towards diversifying joint ventures into areas like industrial parks, power plants, and maritime transport, aligning with Oman's Vision 2040 for economic diversification. This also includes leveraging Iran as a transit hub for Eurasian Economic Union exports to Oman and increasing air and shipping links.
The Iran-Oman Joint Chamber of Commerce plays a pivotal role in facilitating cross-border trade and investment, particularly for small and medium enterprises (SMEs). Established in 2013, the Chamber has significantly boosted trade volume, from $221 million in 2013 to nearly $2 billion by 2022, and has expanded its membership. It offers a comprehensive suite of services, including legal and commercial guidance, investment support, and organising business-to-business meetings, acting as a crucial institutional bridge for SMEs navigating the complexities of cross-border trade.
Looking ahead, the future of Oman-Iran economic relations is positive, underpinned by a strong political will and a sustained "neighbourhood policy". The anticipated finalisation of preferential trade agreements and tariff elimination is expected to significantly boost bilateral trade. Continued efforts to facilitate financial transactions and reduce reliance on the US dollar are also anticipated. Furthermore, Oman's strategic position as a transit hub for Iranian goods to global markets, leveraging its free trade agreements, remains a key area of development.
To fully capitalise on opportunities and foster deeper collaboration, businesses should strategically leverage Oman's unique diplomatic stability and its role as a mediator, which significantly reduces perceived political risk and offers a competitive advantage in the region. Prioritising growth sectors like agriculture, food industries, tourism, and specific mining ventures can yield immediate benefits. For investments, a phased market entry, starting with smaller-scale projects and building local partnerships, is advisable to test viability and build trust.
Active engagement with the Iran-Oman Joint Chamber of Commerce is crucial for accessing legal, commercial, and financial guidance; facilitating business-to-business connections; and gaining valuable market insights. Furthermore, exploring the re-export and transit hub potential by leveraging Oman's strategic ports like Suhar and Duqm and its network of free trade agreements can facilitate the movement of goods to and from Iran. For Omani businesses, strong adherence to In-Country Value (ICV) principles can enhance domestic competitiveness and make them attractive partners for foreign investors, including Iranian firms, seeking to operate in Oman, as this policy encourages local sourcing, Omanisation, and the development of national suppliers, contributing to job creation and manufacturing within Oman.
The Oman-Iran economic corridor, driven by strong diplomatic ties and geographical proximity, holds significant long-term potential. By focusing on strategic partnerships, diversifying into promising sectors, and leveraging existing facilitative frameworks, both nations can build a more robust and integrated economic future.
2022 © All right reserved for Oman Establishment for Press, Publication and Advertising (OEPPA) Provided by SyndiGate Media Inc. (Syndigate.info).
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