Domestic Economy

Iran Expanding Connections With World

Iran Expanding Connections With WorldIran Expanding Connections With World

The 10,500-km journey from Yiwu City in eastern China through Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan was sluggish. But when the first Chinese train pulled into Tehran station after a 14-day haul, Iranian officials hailed a great leap forward.

“We’re becoming the global hub between east and west,” boasted one minister.

By April, when the new trans-Kazakh railroad opens fully, executives in Iran hope to have cut the journey time to China (see map) to just eight days—a month less than the sea route takes. Should Turkey get on board, the line might even challenge the Suez Canal as a primary Chinese and Iranian route to Europe.

Iranian companies will no longer be limited to an 80-million-strong local market, President Hassan Rouhani’s advisers promise, but will be connected to the European Union’s 500 million, read an article recently published by The Economist.

Other rail links are coming down the line. Within six months, Abbas Akhoundi, Iran’s transport minister, will open a track to Afghanistan’s mines, which will ship minerals to India via a revamped southeastern port, Chabahar, bypassing Pakistan. Within two years, Iran will have built a bridge over the Arvandroud into Iraq and into the Fertile Crescent. The fresh track will open the way through Azerbaijan to Russia and the Central Asian republics.

“When we were inward, we had poor cross-border links,” says Akhoundi. “If we want to be outward-looking, we need to improve them accordingly.”

Iran also plans to more than double its internal 10,000-km rail network over the next decade and replace rolling stock that trundles at 90 kph with high-speed trains on electrified lines. Once the upgrades are complete, the 420-km journey to Isfahan will take 90 minutes and the 920-km trip to Mashhad less than six hours.

The hitch, of course, is finance. In Iran’s sixth five-year development plan (2016-21), now awaiting parliamentary approval, Akhoundi wants to spend $28 billion on railroads, $20 billion on roads, $50 billion on upgrading the country’s air fleet and $7 billion on airports (including extending Tehran’s main airport, Imam Khomeini, so that the largest modern airliners can land there).

Yet low oil price means that his government will find it difficult to pay for infrastructure. So, it has been wooing foreign investors instead.

They seem keen. To finance the Mashhad line, China has reportedly offered a $2 billion loan, apparently underwritten by Iranian oil proceeds it had frozen during the time of sanctions.

South Korea is exploring a similar deal. And while Italians recently waited in the wings, French rail executives, model trains in hand, paced the corridors of a Paris hotel waiting to greet Rouhani on the first trip by an Iranian president to Europe for 17 years. But with most foreign banks fearful of American fines, raising credit remains difficult.

A “silk railroad” between east and west will also require better relations with neighbors who fear Iran’s post-sanctions rebound.

“The nuclear deal has proved a double-edged sword,” moans a member of Iran’s Chamber of Commerce. “While relations have improved with the West, they have deteriorated closer to home.”

Russia suspects that Iran will come to challenge its dominance of regional markets. And the UAE, which backs Saudi Arabia in the region’s sectarian power struggle, fears that Iran, with its many tourist attractions, might challenge its position as a regional transport hub.

Much will depend on Rouhani’s diplomatic skills. Turkey’s Prime Minister Ahmet Davutoglu visited Tehran on March 4 with six ministers and discussed a high-speed rail link that might bridge Lake Van and triple bilateral trade, despite arguments over Syria.

But should tensions persist, Iran is also exploring the seas. IRISL, the national shipping line, has plans to ship to the Far East, Oman and eventually the Americas; it hopes to enlarge its 160-strong fleet by floating some of its stock by the end of this year.

Iran Air might go the same way after two years of restructuring, says the transport minister.

Get ready for Iran’s reconnection with the world.

  Shipping Industry Gathers Steam

Islamic Republic of Iran Shipping Lines’ container carrier Azargoun called at Belgium’s port of Antwerp last week, for the first time in six years. The Iranian ship moored at the Antwerp Gateway terminal in the Deurganck dock after departure from Germany’s Hamburg.

A deputation of representatives from the Port Authority, the ship’s agent PWL and the terminal operator went on board to welcome the ship’s master and crew, the port’s news portal reported.

Up until 2010, Antwerp was the main European port destination for Iranian cargo. Now that sanctions against Iran have been lifted, the Port Authority is eager to restore economic relations with that country.

With its large and growing cargo volume of containers and petrochemical products, Iran offers great potential for a port such as Antwerp, which is not only the second-largest container port in Europe but is also home to the continent’s largest integrated petrochemical cluster.

IRISL announced at the end of January that it intended to resume the direct container service between the Persian Gulf and Europe. In the longer term, it aims to operate a weekly service with units ranging from 5,125 to 6,572 TEU, but initially it is working with smaller units and a departure frequency of once every two weeks. The container carrier Azargoun (2,478 TEU) left the port of Bandar Abbas on February 19, arriving in the Mediterranean 10 days later via the Suez Canal. IRISL will send other container and break-bulk carriers to the port of Antwerp in mid-April.

Meanwhile, a general cargo vessel belonging to IRISL recently docked at the port of Masan in South Korea for the first time since 2012. A general cargo vessel is an extremely adaptable ship and can be used to transport virtually every form of dry non-bulk cargo, from railroad lines to agricultural machinery.

  Lower Costs Post-Sanctions

Transport costs of each shipping container have been reduced by $1,200 since the implementation of the Joint Comprehensive Plan of Action (Iran’s nuclear deal with world powers), says deputy head of Ports and Maritime Organization, Ali Jahandideh.

On January 16, the UN nuclear agency attested that Iran had been making good on its promise to put curbs on its nuclear program, which meant years of economic sanctions imposed by the West on Iran officially came to an end.

“With more than 2,800 kilometers of coastlines and the 300-million population of its neighboring countries, there is considerable potential for Iran to expand its foreign trade via its water borders,” IRNA quoted him as saying.