Domestic Economy

Stepping Stone Toward Iran’s Trade Hub Ambition

Stepping Stone Toward Iran’s Trade Hub Ambition
Stepping Stone Toward Iran’s Trade Hub Ambition

Iran is striving to serve as a trade hub not just for the Middle East, but also into Europe and Central Asia by creating a new transport corridor that would connect Iran, Armenia, Georgia and Bulgaria.

Regional media outlet Balkan Insight reported on Tuesday that Bulgaria will join Iran’s new transport corridor project.

According to the report, Iran is planning to launch a new transport route running from the Persian Gulf to the Black Sea connecting the four countries. The plan entails shipping of trucks by RoRo (roll-on/roll-off) ships from Georgia to Bulgaria across the Black Sea.

Bulgarian Prime Minister Boyko Borissov, who visited Tehran at the head of a Bulgarian ministerial and entrepreneurial delegation on Monday, said, “Bulgaria is ready now to take part in a new transport route using its ports in Varna and Burgas.”

He explained that in two weeks, experts from the four countries will meet in Bulgaria’s capital Sofia to discuss further details about the project.

Bulgaria’s road network can handle the traffic of goods, cargos and natural resources, once the corridor becomes operational, reads an article in Huffington Post.

The idea of a new transport corridor to Europe from Iran has been floated for quite some time now, amid insecurity on the Turkish soil. Several Iranian truck drivers have been attacked in Turkey on their way to Europe.

Ankara blames the incidents on militants affiliated to Kurdistan Workers’ Party, yet no group has claimed the attacks. The Turkish government has also not taken any concrete action to stop these attacks.

Security has not been the only issue Tehran and Ankara grappled with over the past year. The two sides have also been engaged in a longstanding transit dispute arising from different fuel prices in Iran and Turkey.

The issue prompted the government to take a series of actions, from charging Turkish trucks a fee to compensate for the considerably low prices in Iran, to sealing the Turkish trucks’ fuel tanks at the Bazargan-Dogubayazit border crossing.

The common border has frequently been the scene of heavy traffic congestion, with transit trucks queuing in lines reaching 15 kilometers at times. Agreements reached between the neighboring countries’ customs officials have done little to resolve the problem.

  Advantages, Disadvantage

Although the Turkish transit route has been a convenient choice for Iranian transport companies, as the neighboring country’s strategic location shortens the path and lowers costs, and despite the fact that compared to the regular Turkish route through the Bazargan-Dogubayazit border, the proposed routes end up being more expensive and lengthy, as they entail switching to naval routes or making a long detour, according to Iran Road Maintenance and Transportation Organization–affiliated to the Ministry of Roads and Urban Development–safety should be a priority for Iranian trucks.

Let’s not forget that the newly proposed transit corridor has the added benefit of crossing more countries on its way, which in turn means increased trade potential.

“The transport corridor is not only limited to carrying goods, but even gas. Bulgaria’s participation could begin ‘as soon as now’ through the infrastructure of the Varna and Burgas ports,” said the Bulgarian premier.

The Balkan country’s Transport Minister Ivaylo Moskovski, who accompanied the visiting delegation to Tehran earlier this week, paid an official visit to Iran back in March to attend the 18th session of Iran-Bulgaria Economic Commission.

“To Iran, Bulgaria is a gateway to Europe, just as Iran is the European country’s gateway to the Persian Gulf, the Indian Peninsula and Central Asia. It’s our hope to see the two countries’ cooperation increase following these meetings,” said his Iranian counterpart, Abbas Akhoundi, at the meeting.

Later, in an interview with Financial Tribune, Moskovski said Bulgaria is geographically the closest member of EU to Iran, which is a source of opportunity that should not be underestimated.

“There is great potential in developing transport relations between Tehran and Sofia in the context of Iranian-EU cooperation,” he said.

Iran aims to serve as a trade hub connecting the Arab world and Central Asia. Businesspeople in Tehran hope Iran can become a new conduit in the Middle East, thanks to its location, high levels of security, diverse economy and educated workforce, reported Financial Times.

“If Iran and oil-rich Arab states put capabilities together, a very good market can be created for production and trade to meet demands in Central Asia and Arab states,” said Masoud Daneshmand, chairman of a department of the Iran Chamber of Commerce, Industries, Mines and Agriculture, which deals with UAE trade.

Businesspeople in Tehran argue that Iran is no longer just a market of its 80 million population, but it should be seen as a trade hub with a market of 300 million, allowing access to Arab states in the south and west; Central Asia in the north; and Afghanistan and Pakistan in the east.

In addition, Iraq and Syria are also being considered as new markets. “Iran is familiar with the Iraqi culture and market, so it can serve as trade lane connecting Iraq and Europe,” said Yahya Al-e Es’haq, head of the Iran-Iraq Chamber of Commerce.

Moreover, when the Syrian war ends, Syria—like Iraq—is going to be a vast market. The country will have to be reconstructed from scratch and Iran stands to be the first to contribute.

Being the second largest economy in the Middle East, Iran is experiencing some big changes after lifting its economic sanctions back in January.


Italian Firm to Build Major Highway in Iran

The Iranian government has signed a deal with Italian company ANAS for the construction and management of a 1,200-km road project that will cost €3.6 billion ($4 billion).

ANAS is a government-owned company deputed to the construction and maintenance of Italian motorways and state highways under the control of Italian Ministry of Infrastructure and Transport, Reuters quoted ANAS as saying on Thursday.

The first stretch of the highway covering 350 km will be completed by 2022 at a cost of €600 million, ANAS said.

The project is to build a road linking the Persian Gulf port of Bandar Imam Khomeini to Bazargan on Iran’s border with Turkey.

Italy has worked hard to secure lucrative deals in Iran following a deal last year to lift crippling sanctions on Tehran in exchange for limiting its nuclear activities.

Iranian President Hassan Rouhani made Italy his first stop in Europe in January as he sought to drum up investment in the Iranian economy, while Italian Prime Minister Matteo Renzi visited Tehran in April with a large business delegation.

ANAS said the deal signed on Thursday with the Iranian Ministry of Roads and Urban Development was a follow-up to a memorandum of understanding initialed in February.


Railroad Deal With Ukraine

Tehran and Kiev have signed a memorandum of understanding for Ukraine to construct, develop and supply equipment for 1,000 kilometers of railroad in Iran.

The MoU was signed during a visit by Deputy Transport Minister Ali Nourzad, who chairs Construction and Development of Transportation Infrastructures Company, and his accompanying delegation to Ukraine, the company’s news service reported on Friday.

The agreement concerns the 440-kilometer-long Miyaneh-Tabriz, the 190-kilometer-long Tehran-Hamedan-Sanandaj and the 370-kilometer-long Doroud-Khorramabad-Andimeshk rail route projects, according to Nourzad.

Upgrading the Iranian rail machinery, transfer of latest technologies to the Islamic Republic and scientific cooperation are among other issues agreed upon by the two sides.

Tehran and Kiev discussed the rail projects during the meeting of their joint economic commission held in Tehran on March 7-8.