Iran has become indebted to China for an uneconomical project; Iran will receive a hefty loan worth 15.3 billion yuan and repay 21.88 billion yuan instead.
China has a famous solution when it comes to paying large loans to underdeveloped or developing countries: in exchange for their loan installments, they take their oil, gas, minerals and raw resources. Chinese projects, dubbed by some countries as “debt trap”, make poor and developing countries indebted to China, the Persian daily Shargh reported.
Now it seems that the Chinese have surreptitiously begun the Qom-Isfahan high-speed train project in Iran. Rail transport experts say this costly project comes, as Iran’s rail transport is loss-making and vital income-generating projects such as the Rasht-Astara and Chabahar-Zahedan railroads remain incomplete.
China’s Low-Profile Presence in Iran
President Ebrahim Raisi recently visited Isfahan, where he spoke of the certainty of the Qom-Isfahan high-speed railroad project.
Mehr News Agency has published a letter from the Plan and Budget Organization to the Ministry of Roads and Urban Development. The letter sheds light on the foreign financing of the railroad.
Alireza Salavati, the executor of infrastructure projects of Roads Ministry in Isfahan Province, confirmed the authenticity of the letter to Shargh and said, “Iran’s first high-speed train project with Chinese financing worth 15.3 billion yuan will become operational in the near future. Since 2016, China has deposited more than 2.02 billion yuan and currently 4 million yuan of this loan can be withdrawn. By 2024-25, the total amount deposited by the Chinese will reach 15.3 billion yuan and the repayment of this finance will continued until 2029-30; about 21.88 billion yuan will be repaid. This huge sum will be spent on the Isfahan high-speed railroad.”
Salavati noted that the project has been delayed many times and the exchange rate of yuan has increased by 25-fold following these delays and the the cost of the project has increased significantly.
“The Chinese have not only provided financial resources for this project in the form of loans, they have also come to Iran to carry out and supervise the work in progress,” he added.
Inefficient Prioritization of Rail Projects
Mahmoud Heshmati, former director of the Traffic Safety Department of the Islamic Republic of Iran Railways, believes the project is uneconomical. “How many passengers are expected to use the Qom-Isfahan train?” he asked.
Noting that Saudi Arabia has launched a high-speed train on the route from Mecca to Medina, he said, “There are millions of tourists in countries like Turkey and Saudi Arabia, where high-speed trains have been launched, but how economically justifiable is the railroad from Qom to Isfahan? Now that the key North-South transit corridor is unfinished, why should such a costly project take priority? This is while Iran has not been very successful in attracting foreign tourists, and the high inflation and fall in purchasing power of Iranian travelers have led to a decline in the number of domestic trips.”
According to Hormatollah Rafiei, the head of Travel Agents Guild Association, the number of Iranian tourists has decreased by 50% this year compared with the pre-pandemic years, and because of this, the number of flights has decreased on a number of routes.
Risk of Massive Financial Loss
High-speed trains cannot run on Iran’s railroads, Heshmati declared.
“The width of Iran’s railroad is 1,435 mm while the width of the Chinese and Russian railroad is 1,524 mm. Years ago, we had to rent trains from Russia and change the bogie of the train [a chassis or framework that carries a wheel set] to run the trains at a higher speed on Iranian railroads, but this created a lot of technical problems; the train kept derailing and we had to return it,” he said.
“If high-speed train is going to be imported from China under these conditions, technical problems will arise and the huge money spent on this project may be wasted. It would have been better if the Chinese high-speed trains were tested first and the financial decision was taken later.”
Red Carpet Rolled for Chinese Investors
The Qom-Isfahan high-speed train project started almost 16 years ago, but according to Mehrdad Taqizadeh, the former deputy roads minister, it requires complex safety standards, at a level similar to that of operating an airplane.
“These trains require complex software, highly skilled manpower and complicated engineering and maintenance, but Iran’s old railroad system meets almost none of these requirements, that is why it hasn’t made any progress over these years,” he added.
Taqizadeh believes that the launch of high-speed train is a good idea and it may become profitable and economical in the future, but there is no need for Iran to run up heavy debts to China; the required investment could have been easily made through partnership models.
The former deputy minister said, “How is it that the capital of Iranians has been invested in Georgia, the UAE and Turkey, but not in our own domestic projects? That is because in Iran the government gives a hard time to domestic investors, but rolls out the red carpet for foreign investors.”
