Domestic Economy

Iran Freight Transport on Growth Path

Iran Freight Transport on Growth PathIran Freight Transport on Growth Path

The prospective removal of western sanctions against Iran, imposed over the country’s nuclear energy program, is highly positive news for the freight transport sector in Iran.

Growth will be slow initially, as the economy will take some time to recover. Nevertheless, it will accelerate in the years to come across all freight modes, wrote the Business Monitor International in its latest report on Iran freight transport.

  Road Freight Forecast

Iran has been marketing itself as a transit country, taking advantage of its geographical location bordering seven countries, linking Central Asia with Europe and the Persian Gulf. The country has been investing heavily in its road network to attract and cater for increased volumes, both foreign and domestic.

The Mehran four-lane highway to Iraq was scheduled to be completed by March 2015, which will connect the western borders of Iran to Iraq. The project will help facilitate and speed up travel, as Mehran has turned into a highly specialized and important trade hub.

In August 2014, the governments of Iran and Turkey signed a memorandum of understanding to build the Tabriz-Bazargan Highway—a 225-km road linking the two countries.

  Rail Freight Forecast

Iran is advantageously bordered by Central Asia, Afghanistan, Pakistan and the Middle East, providing routes linking the Central Asian republics with the Persian Gulf and Turkey with the Indian subcontinent. The country has been making strides in ensuring it can capitalize on its transit potential. Iran has been following a two-pronged strategy of both investing heavily in developing its rail freight network and diplomatic efforts with neighboring countries regarding transit trade to grow its transit trade. An example of this is Iran guaranteeing Afghanistan access to the Iranian Indian Ocean port of Chabahar—developed by India—in a move that is mutually beneficial to both parties.

Iran is developing rail links with others of the seven countries with which it shares land borders.

The Kazakhstan-Turkmenistan-Iran railroad was inaugurated on December 3, 2014, at the Turkmen-Iranian border, 85 km of which lie within Iranian territory. Rail lines linking the country to Iraq are also being developed. The government of Iran has drawn up plans to upgrade and expand its railroad.

“We have defined about $25 billion of rail projects, for which we have prepared incentive packages to attract domestic and foreign investment,” said Mohsen Pourseyyed-Aqaei, Islamic Republic of Iran Railways’ president. Plans include expanding the country’s rail network to a track length of 25,000 km by 2025 from 15,000 km currently. All of these projects will help support continued growth in rail freight volumes beyond the scope of the forecast period.

  Air Freight Forecast

Air freight has been the major loser in recent years as a result of the western sanctions. Not only has the sector suffered indirectly as a result of the economic impact of the sanctions, but it has also been directly targeted, with Iranian carriers unable to offer full services thanks to bans on entering foreign airports and even on purchasing spare parts.

Foreign operators have also been unable to enter the Iranian market due to embargoes.

Air freight is in large part driven by consumer demand and while the recovery will not be immediate and there remain significant challenges, especially in the near term, the outlook is far brighter than it has been for many years.

In February 2014, it was reported that Iranian airlines, including Iran Air, have been importing spare parts for their aircraft at as much as five times the global average, taking advantage of easing sanctions against them.

Iranian airlines’ fleets are on average 22 years old, ISNA reported. Nevertheless, the ordering of new parts and aircraft will for the time being be constrained by the airlines’ poor limited capital; many Iranian airlines are at present heavily indebted to the oil ministry.

In Q3 2014, US-based aerospace company Boeing revealed that it had been selling to Iran Air for the first time since the Islamic Revolution of 1979. Although these sales were for charts and navigational aids rather than spare parts or planes, it is indicative of the brightening outlook for Iranian air freight.

With the easing of sanctions against Iran, Iran Air and Iran Air Cargo are now looking to the future, anticipating a much busier time ahead.

According to the company’s chairman and managing director, Farhad Parvaresh, the company will need at least 100 new passenger jets once sanctions are fully lifted. This would give Iran Air Cargo a massive boost in terms of its bellyhold capacity for transporting freight. The company would look to acquire narrow body jets.

Investment in infrastructure on the ground will also support growth in volumes.

Iran is reportedly in talks with French firms Bouygues and Aéroports de Paris to develop Imam Khomeini International Airport in Tehran. The project, part of $2.8 billion expansion plans at the airport, is expected to be undertaken as a joint venture between the companies and will include building a second terminal.

The terminal will increase its capacity to serve 20 million passengers annually. The existing terminal will be used for domestic flights, currently operating from Mehrabad Airport.

The expansion is slated to be carried out over five years. The development plans and participation of foreign companies are estimated to materialize after sanctions against Iran are lifted.