Officials in Yerevan denied on Tuesday reports that Armenia and neighboring Iran have finalized a free trade agreement in an effort to expand bilateral economic ties.
“The Tehran Times” claimed on Monday that the agreement will be signed during Armenian Economy Minister Nerses Yeritsian’s upcoming visit to Iran. Citing the official IRNA news agency, the English-language daily said the issue was discussed last week by Iranian Commerce Minister Mehdi Ghazanfari and the Armenian ambassador in Tehran, Grigor Arakelian.
An Armenian government source dismissed the report, however, saying that the two governments are still holding “preliminary discussions” on a free trade deal and that talk of its impending signing is therefore “premature.”
“The Iranians very much want to have it signed but the terms they are offering are not beneficial for us,” the source, who asked not to be identified, told RFE/RL’s Armenian service. He did not elaborate on Yerevan’s objections.
The source added that such an agreement “will definitely not be signed” during Prime Minister Tigran Sarkisian’s visit to the Islamic Republic scheduled for the second half of October. He and Armenian officials could not clarify whether it will take place after the separate trip reportedly planned by Yeritsian but not yet confirmed by the Armenian Ministry of Economy.
Armenia - President Serzh Sarkisian (L) greets Iranian Foreign Minister Manuchehr Mottaki in Yerevan, 27Jan2010
The Iranian side is also likely to raise the matter with Foreign Minister Edward Nalbandian. The latter was due to fly to Tehran later on Tuesday for talks with his Iranian counterpart, Manouchehr Mottaki, and other Iranian leaders. 
Mottaki stressed the importance of a free trade regime between Armenia and Iran in an interview with Panarmenian.net published on September 2. He said it “would help to elevate our relations to an adequate level.”
The Iranian minister likewise made a case for the signing of such a deal when he visited Yerevan early this year. Armenian-Iranian trade would skyrocket as a result, he said.
The scale of that trade remains rather modest in both absolute and relative terms. According to the National Statistical Service (NSS), it totaled $97.6 million and accounted for only 4.5 percent of Armenia’s overall external exchange in the first half of this year. By comparison, the volume of Armenia’s trade with the United States was slightly higher.
The Iranian market remains protected by extremely high import tariffs, a sharp contrast to Armenia’s liberal trade regime. That is one of the reasons why Armenian exports to Iran make up only a fraction of bilateral trade. Armenian businessmen have long complained about that disparity.
Iran, which unlike Armenia is not a member of the World Trade Organization, had expressed readiness in 2001 to set duty-free import quotas for some Armenian products such as including machines, chemicals, and cigarettes. No relevant inter-governmental agreement is known to have been signed in the following years, however.
Armenian-Iranian trade should rise significantly in the coming years with an anticipated surge in Iranian natural gas supplies to Armenia and the implementation of more joint energy projects planned by the two governments. Those include the construction of a major hydroelectric station on the Armenian-Iranian border and a third high-voltage transmission line linking the two countries’ power grids.