Iran at Center of New Rail Transport Route

Iran, Azerbaijan, Georgia, Ukraine and Poland have planned the transportation of 200,000 tons of cargo by the end of 2017 via a newly-proposed transit corridor that stretches from India to the Black Sea and Europe.

The announcement was made by Javid Gurbanov, the head of Azerbaijan Railways, the Baku-based Trend News Agency reported on Monday.

The so-called "South-West Transport Corridor" was discussed in a multilateral meeting between the rail authorities of the aforementioned states in Baku on Monday.

"The multimodal route will significantly reduce the time and cost of transportation of goods between India and Europe," Gubanov said during the meeting, IRNA reported.

According to the official, the path is an “economically viable” route for transportation of 72 million tons of goods shipped from India to Europe and the 25 billion tons in the opposite direction every year.

“Currently, it takes 40 days to transport shipments from India to Europe. The South-West Corridor will reduce this time to 15 days."

This is the first widely publicized development regarding the new corridor, even though the Trend report says Tehran, Baku, Tbilisi and Kiev had signed an agreement in 2016 to potentially divert up to 10 million tons of the India-Europe trade to the path.

This parallels efforts made by Iran, Azerbaijan and Russia in the past few years to launch a similar rail corridor called International North-South Transport Corridor connecting Northern Europe with Southeast Asia. An Iranian-Azeri rail connection is underway and major rail projects are being built in Iran to complete the mega project. One is being financed by Azerbaijan.

The missing links in Iran include a railroad from Qazvin to Rasht, which Iran says will come on stream soon, in addition to its extension from Rasht to the Caspian port of Astara. Baku has agreed to invest $500 million in this project.

Months ago, Azerbaijan finished a railroad to its border with Iran, as part of a line to connect the city of Astara in Azerbaijan to an Iranian port city with the same name. It included a bridge on Astracay River along the border.

During the Monday meeting, CEO of Islamic Republic of Iran Railways Saeed Mohammadzadeh referred to the so-called Astara-Astara project as examples of “successful cooperation” between Iran and Azerbaijan, adding that the neighboring countries are discussing the launch of the new route on the back of the INSTC experience.

Efforts to develop transport infrastructures in Iran gathered momentum after international sanctions imposed against the country over its nuclear program were lifted in January 2016 as part of a nuclear deal reached months earlier between Tehran and world powers.

With the sanctions lifted, Iran is planning to exploit its capacity in the transportation sector. Considering its strategic location in the region, the country presents itself as a potential transit hub.

“Iran has huge transit potential,” Mamuka Bakhtadze, CEO of Georgian Railways, told IRNA on the sidelines of the Baku meeting.

“In recent years, trade between Iran and Europe has seen a rise and this adds to the importance of the [South-West] corridor,” he added.

The export of Iran’s five main commodities shipped to the European Union saw a significant increase in value in the last Iranian year (ended March 20, 2017), compared with the average annual export value of the same products between the fiscal 2011-12 and 2015-16. The five years precede the implementation of the nuclear deal, also known as Joint Comprehensive Plan of Action.

Hot-rolled non-alloy iron and steel topped the list of Iran’s exports to the EU last year, from which Iran earned around $66 million, registering a 58% rise compared with the average annual export value during the five years preceding the JCPOA.

Non-alloy iron and steel in forms other than ingots followed earned $50 million and marked a rise of 87%.

About $41 million worth of gas condensates were also exported to the EU last year, up 100%. Light oils, petrol excluded ($25 million), and methanol ($16 million) came next, registering a 100% and 28% growth respectively.