YEREVAN (RFE/RL) — Armenia has reaffirmed its plans to create a “free economic zone” along its border with Iran amid ongoing efforts by the governments of the two neighboring states to expand bilateral commercial ties.

Iran’s First Vice-President Eshaq Jahangiri and Energy Minister Hamid Chitchian reportedly spoke of Tehran’s strong interest in closer economic cooperation with Yerevan when they met with Armenia’s visiting Minister for Energy Infrastructures Ashot Manukian on Monday.

Manukian flew to Tehran to co-chair, together with Chitchian, a regular session of an Armenian-Iranian intergovernmental commission.

Chitchian was reported to announce that the two sides signed a “comprehensive cooperation document” at the end of the two-day meeting. “The document envisions cooperation in the fields of energy, electricity exchange, natural gas, banking and insurance, and trade,” the Mehr news agency quoted him as saying.

In particular, Iran “will establish a free trade zone in Armenian territory,” the Iranian minister added without elaborating. He noted that the document was signed on the eve of Iranian President Hassan Rouhani’s visit to Armenia.

Chitchian appeared to refer to what the Armenian Ministry for Energy Infrastructures and Natural Resources described as a joint memorandum of understanding adopted by the Armenian-Iranian commission.

In a statement on the commission meeting, the ministry said: “The Iranian side showed a great interest in and readiness for cooperation on the planned creation of a free economic zone on the Armenian-Iranian border.”

The plans for the tax-free area were first revealed by official Yerevan in late August. Then Prime Minister Hovik Abrahamian said that it will function in Armenia’s southernmost Meghri district bordering Iran.

In Abrahamian’s words, Iranian entrepreneurs will be able to set up manufacturing firms in the zone and engage in duty-free exports of their products to Russia and other members of the Eurasian Economic Union (EEU).

According to Armenian government data, Armenia’s trade with Iran stood at $276 million in 2015 and is on course to shrink this year.

Jahangiri lamented these modest trade volumes when he met with Manukian on Monday. “The obstacles hampering economic cooperation between Tehran and Yerevan must be removed,” he said, according to another Iranian news agency, Fars.

“Unfortunately, economic ties and trade have failed to keep up with the excellent level of political relations and the goodwill of senior Iranian and Armenian officials. So the joint commission should be more active in this regard,” added Iran’s first vice-president.

Armenian-Iranian trade should rise significantly after the construction of a new power transmission line connecting the two countries. The $120 million facility, slated for completion by 2019, will allow for a sharp increase in exports to Iran of Armenian electricity generated by Iranian natural gas.

According to the Armenian Ministry for Energy Infrastructures, the joint commission discussed the possibility of accelerating the transmission line’s construction.

Armenia apparently plans to increase imports of Iranian gas even before that construction is complete. An Armenian government delegation held talks for that purpose with representatives of Iran’s National Iranian Gas Export Company in Tehran on October 31 and November 1. One of Manukian’s deputies, Hayk Harutiunian, said afterwards that they discussed not only the cost of additional Iranian supplies but also possible transit of Iranian gas via Armenia.

Armenia currently imports up to 500 million cubic meters of Iranian gas annually through a pipeline built in 2008. By comparison, its gas imports from Russia total around 2 billion cubic meters.

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