Around 220 trillion rials ($656 million) are needed to complete the construction of Rasht-Astara railroad, says the CEO of the Construction and Development of Transportation Infrastructures Company.
Kheirollah Khademi added that the government is working to procure this amount through local or foreign investment, the news portal of the Ministry of Roads and Urban Development reported.
“Russia has shown readiness to invest in this project. Expert Russian teams have visited the railroad’s site and we have given them the project’s technical data. They are to respond within a month,” he said, adding that the Iranian side is waiting for the Russian side to announce its preferred mode of financial engagement in the project, which would either be in the form of a government loan, joint investment, or financing.
The 164-km Rasht–Astara railroad has faced years of problems in terms of construction and implementation. The main obstacle has been financing, particularly due to the United States’ sanctions on Iran.
According to an earlier agreement between Iran and the Republic of Azerbaijan, both sides pledged to provide $500 million each to build the Rasht–Astara railroad. And in 2016, the International Bank of Azerbaijan signed a deal with Iran on the allocation of a $500 million loan for this purpose. However, in practice, this agreement and the loan did not materialize due to the comprehensive US sanctions on Iran’s banking network.
“Russian Railways is expecting a decision soon on completing a section of the Rasht-Astara railroad in Iran,” Sergei Pavlov, the company’s first deputy head, said last month during the Made in Russia 2022 international export forum.
"Rasht-Astara is a serious obstacle today for connecting the [North-South] railroad route into a single network," Pavlov said, noting that the RZD-Logistics subsidiary currently uses the route for multimodal transportation, Interfax reported.
"We are currently holding very intensive negotiations with the Iranian side and with the Azerbaijani side in order to launch the route," Pavlov said.
"I am certain that we will be able to hear positive news very soon, because all the participants, all the governments and the ministries of transportation and railroad organizations are working toward the single goal of launching the railroad as soon as possible."
Connecting Southeast Asia to Eastern Europe, Russia
Khademi noted that Rasht-Astara railroad is a key project connecting Southeast Asia to Eastern Europe and Russia.
“Its completion can bring in enormous revenues by increasing the volume of goods transited through Iran. The route can attract the lion’s share of the cargo transported between Russia and India or Eastern Europe and India,” he said.
The Astara–Rasht–Qazvin railroad, which will wind along the southwestern corner of the Caspian Sea, forms a central link of the longer INSTC, a multimodal route linking India, Iran, Azerbaijan, Russia and Europe.
The cross-border Astara (Iran)–Astara (Azerbaijan) section of the railroad was officially inaugurated on March 29, 2018, while the Rasht–Qazvin section inside Iran was implemented on March 6, 2019. Therefore, the only remaining gap is a 164-kilometer railroad section from Rasht to Astara.
Until this railroad segment is completed, freight carried by train must be transferred to trucks and then back again.
Khademi referred to the passage of Rasht-Astara railroad through farms along 50% of the route as a significant hurdle in completing the project.
“We need to purchase these farms and after that, build bridges to preserve the Nature. So far, we have designed bridges along 52 kilometers of the way,” he said.
Proposal to Create INSTC Logistical Operator
Russia has invited Azerbaijan and Iran to create a logistical operator for the western route of the International North-South Transportation Corridor, Russian First Deputy Prime Minister Andrei Belousov said at the 15th Verona Eurasian Economic Forum on Friday.
"Today, the historically established transport infrastructure of both Russia and other countries, which was primarily formed on the basis of the principle of parallels, in other words, on the East-West horizon, is already ceasing to meet the global trends and the realities we are facing. The meridian routes, the North-South route in the first place, are starting to play a key role today," Belousov was quoted as saying by Interfax.
The North-South route, with its access to the Persian Gulf states, India, China and Africa, could become an actual competitor to the Suez Canal in the future, he said.
"The development of the corridor today depends to a decisive degree on Russia's interaction with the Republic of Azerbaijan and our countries' interactions with Iran. We expect that the amount of Russian cargo via all three arms of the INSTC will increase nearly twofold by 2030 from the current 17 to 30 million tons. But we see the main prospect, which will account for more than half of the growth, first and foremost in the western route via Azerbaijan," the deputy prime minister said.
"We would like to invite you to consider the possibility of creating a joint operator from the three countries, Russia, Azerbaijan and Iran, along the entire western route to ensure end-to-end transport service and a high level of logistical services," he said, mentioning the United Transport and Logistics Company operator created by Russian Railways in cooperation with the national rail companies of Kazakhstan and Belarus as an example.
Belousov said Russia calls for considering the possibility of launching such service taking into account that the operator would also perform shipping functions, contract for transportation, transshipment in seaports and provide customs and other support to transportation.
Russian Deputy Transport Minister Valentin Ivanov noted that in relation to the railroad infrastructure, the ministry believes it would be feasible to create a joint logistical operator "so that all issues dealing with transit via the territories of Azerbaijan, Iran and Russia could be addressed based on the principles of all services in one place and resolved promptly at high standards without any delay for shippers' convenience," he said.
"We believe that the creation of this logistical operator needs to be reflected in our trilateral intergovernmental agreement. We're already working on it with our colleagues from Azerbaijan and have drafted a concept of the trilateral agreement with Iran, and we're coordinating it," he said.
Comparative Advantage
The Iranian government is determined to implement this important railroad project, which compares favorably along various metrics with a handful of other railroad projects in the region, Vali Kaleji, an expert on Central Asia and Caucasian Studies, wrote for the Jamestown Foundations.
Notably, the Iranian-Armenian railroad from Meghri, Syunik Province, in southern Armenia, entails high costs and has not seen any progress since 2009. Plans to restore Soviet-era east-west rail corridors in the South Caucasus following the Second Karabakh War (Sept. 27–Nov. 10, 2020) have also stalled due to differences between Armenia and Azerbaijan over the interpretation of the ninth clause of their ceasefire agreement brokered by Moscow.
The construction and completion of the Rasht–Astara railroad is, therefore, the only practical and accessible short-term prospect for Iran to connect to South Caucasus. Its implementation will complete the last remaining section of INSTC and create a physical rail link for the Republic of Azerbaijan, Georgia and Russia to Iran’s Chabahar Port on the Oman Sea and Bandar Abbas in the Persian Gulf.
Another important issue for Iran is expanding its freight corridors to the Moscow-led Eurasian Economic Union in order to take fuller advantage of the EEU-Iran Preferential Trade Agreement.
Last year, Iranian President Ebrahim Raisi, during a tour of Gilan Province (where the two cities of Rasht and Astara are located), said railroad and other transit infrastructure projects, along with the purchase of roll-on/lift-off vessels, should be accelerated to boost intra-regional trade. (ILNA, May 25, 2022)
At present, Iran needs to urgently complete the Rasht–Astara railroad. But since the Republic of Azerbaijan has been unable to fulfill its financial obligations due to sanctions, Tehran is turning to Moscow for support.
