Economy, Domestic Economy

A New Transit, Transport Hub Emerges

A New Transit, Transport Hub Emerges A New Transit, Transport Hub Emerges

Iran’s geostrategic location, along with its historic role as a conduit for the exchange of goods — especially its position on the ancient Silk Road — has made the country one of the most active transportation hubs in the world, the Washington-based website Al-Monitor says in a report.

Through both its northern land borders and the Caspian Sea, Iran has access to Central Asia, the Caucasus and Russia. To its south, it is connected to international waters through the Persian Gulf and the Sea of Oman. Iran’s unique access to landlocked countries and its exceptional location make it an ideal transit hub — both in terms of cost and time efficiency.

This position has so far granted Iran membership in several international corridors with multiple transport routes passing through the country. These corridors include the International North-South Transport Corridor, East-West Transport Corridor (the ancient Silk Road), South Asia Corridor and the Transport Corridor of Europe-Caucasus-Asia.

In recent years, and especially since Hassan Rouhani was elected president in 2013, the number of international flights that have crossed Iranian air space and the volume of goods transiting through Iranian railways have doubled. Yet despite this increasing interconnectivity, Iranian officials say the country is still using only half of its total transit capacity, which is around 10 million tons per year.

Cognizant of the important role it can play in the transportation of goods in the region, and also aware of the economic benefits that can be reaped — such as job creation and increased earnings — Iran has sought to diversify its transit routes.

Given Europe’s stated desire to become Iran’s largest trading partner once again with the lifting of sanctions, and considering the recent turmoil in Turkey, Tehran has sped up efforts to establish new routes to Europe.

  Turkish Friction

For years, Turkey has been the best conduit for the transportation of Iranian goods to Europe. Yet in terms of transit, things have turned ugly between the two countries in recent years. Attacks against Iranian trucks and drivers on Turkish soil, rows over fuel prices and tariffs imposed on Turkish drivers in Iran — not to mention the frequent Turkish border closures, which greatly impact Iranian trucking, have been among the main sources of friction between Tehran and Ankara.

These issues, coupled with the worsening security situation in Turkey, have prompted Iran to seek alternative transit routes to Europe on the ground that relying solely on its western neighbor does not, and will not, benefit the Iranian transportation system. In this regard, Iran has moved to revive its decade-old plan to connect to Europe via a new multimodal route.

The Persian Gulf-Black Sea corridor, which involves road, rail and sea transport, begins from the Persian Gulf to the south of Iran, stretches to the north of the country and then goes to Armenia and Azerbaijan, from where it reaches the Georgian ports of Poti and Batumi in the Black Sea. In this vein, Bulgarian ports also play a role via roll-on/roll-off ships used to get trucks to Greece. Trucks that head to Italy can also depart from southern Greek ports using these kinds of ships.

Iran, Armenia, Azerbaijan, Georgia, Bulgaria and Greece recently agreed on a draft plan to press ahead with the project, which is expected to be finalized by the end of 2016.

Homayoun Karimi, head of the International Agreements Group at Iran’s Road Maintenance and Transportation Organization, who attended the first of several rounds of talks between the involved countries, told Al-Monitor, “The political and international aspects of this multimodal corridor is of high importance as it will further increase the importance of our transit position in the region and globe alike.”

The Persian Gulf-Black Sea corridor holds numerous economic advantages for participating countries as it helps them facilitate trade. On the European side, the project is also regarded as significant because it facilitates European states’ access to the Persian Gulf, which in turn provides them with a shorter route to the Indian and Pacific oceans.

 Geopolitical Factor

“Having a safe, cost-effective and fast route is of high importance for transportation companies, forwarders and owners of the cargo. We need to have good marketing of the corridor to further inform business owners and transportation companies about the benefits of this new route,” said Karimi.

Akbar Khodaei, senior expert at the Economic Cooperation Organization, believes that Iran has a unique position as far as geopolitics is concerned. “By participating in the Persian Gulf-Black Sea Corridor, Iran is actually utilizing its geopolitical position in global interactions, something that definitely rebuilds the country’s ability to play roles in the economic arena,” Khodaei told Al-Monitor.

He added that the project has already turned global, as other countries — including Persian Gulf and Indian Ocean littoral states as well as European nations — are expected to join the corridor. Of note, Romania has requested to join the Persian Gulf-Black Sea corridor.

Iranian officials have stated that this corridor is not meant to replace the trans-Turkish route to Europe. Rather, Iran says it will provide the country with an additional route, which will give it the upper hand in case of any obstruction by Turkey.

While security and ease of transportation plays a crucial role in global trade, Iran, which unlike many of its neighbors enjoys a high level of stability, is expected to play a much greater role as a transit hub that bridges the East with the West and the North to the South.

As such, with more countries discovering this significant potential, and as Iran continues its efforts to become a regional transit hub, experts like Karimi believe that the new corridor will play an important role.

According to him, the multimodal approach to trade with Europe “would further increase Iran’s transit importance and pave the ground for greater foreign investments in the country’s transportation infrastructure.”