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ITE Transport and Logistics

Iran’s railways - on track for a bright future

With the removal or relaxation of a range of international sanctions, Iran’s national railway industry is making all the right signals for a strong resurgence. And this is attracting huge levels of investment from major international players.
 
Iran’s railway network – an overview
 
As of December, 2015, Iran had less than 13,000 kilometres of track. For a country of its size, some 1.64 million square kilometres, this is less than adequate – for both passenger travel and all important international trade. 
 
Iran’s geography has played a large role in stifling development of a comprehensive railway network. Desolate deserts and unforgiving mountains characterise the landscape. This does, however, mean travel and trade alternatives to trains, such as travelling by road, is long, arduous and dangerous. 
 
According to Minister of Industry, Mines and Trade Mohammad Reza Netmatzadeh, Iran needs $1.5 billion of annual investment in the railway sector over the next six years. Netmatzadeh said there are plans to stretch out the nationwide railroad line to 25,000 kilometres by 2025 from the current length.
 
While it has been noted that the air transport sector is growing rapidly, Iran cannot solely rely on air for trade and travel. That’s why the country has brokered multi-billion dollar rail deals with major international players, alongside a commitment to invest $25 billion in the network, in recent months. Let’s take a look at these developments below.
 
An Italian influence for Iranian railways
 
Italy’s national rail operator Ferrovie dello Starto (FS) signed a memorandum of understanding (MoU) with Iran in February 2016 to develop two high-speed rail lines. Of the planned routes, one will link the capital Tehran with the city of Hamadan. The other will provide a vital lifeline between two industrial cities: Arak and Qom. 
 
The deal features a complete training program from FS for Iranian rail staff. $5.65 billion in export credits from Italy to Iran were also included in the complete package.
 
FS will also be responsible for the development of a high-speed corridor between Tehran, Qom and the city of Ishafan. It has also been reported that the initial agreement included electrifying the rail link between Tehran and Tabriz close to the Azerbaijan border – a potentially vital route for the oil trade. 
 
Germany laying the tracks for the future
 
German firm DB International, one of Europe’s leading transport experts, signed an MoU with the Managing Director of  Iranian Railways, Mohsen Pour Seyed Aghaei, in late February 2016. The deal will be to provide expertise in railway management – something Iran will require in both trade and public sectors if it wishes to create a truly world class railway network. 
 
In addition to offering management support, German firms are looking to supply high quality rolling stock and maintenance to usher in a new phase for Iranian railways. Siemens, for example, won a number of deals related to providing electric locomotives, 500 passenger coaches as well as signalling equipment and related railway maintenance for Iran.
 
In June 2015, a cargo train link between Harbin and Hamburg in Germany was established and has so far delivered 1,300 containers carrying around $90 million in goods.
 
Russian railway expertise rolls forward
 
Russia and Iran inked a $1.3 billion to electrify 495 kilometres of track in the north of the country, linking Iran to neighbouring Turkmenistan in November, 2015.  The deal doesn’t stop at just electrifying the track but also promises to build 32 new stations and 95 tunnels plus additional electric locomotives. 
 
This deal comprises part of a $5 billion credit line between the two nations for investment in infrastructure projects. Due to Iran’s strategic location, and its re-emerging status as a major global oil supplier, any further investment and modernisation in its rail networks is imperative and Russia has realised the value of this.
 
Of note is the North-South transport corridor which links Iran to Azerbaijan and from there the heart of Russia. While the Azerbaijan section has yet to be fully completed, the corridor is noted as greatly improving trade networks in the region. 
 
Iran-China railway links – the Silk Road’s resurgence
 
In ancient times, the Silk Road winded its way from China and the Far East and through Persia and on into Europe. Fast forward to the present day and China is revitalising this vital trade link. One key destination for this is Iran.
 
The first cargo train from Eastern China reached Tehran in mid-February 2016 after covering a distance of over 10,000 kilometres. The route also passed through Kazakhstan and Turkmenistan. "Compared to the sea voyage of the cargo ships from China's Shanghai to Iran's Bandar Abbas port, the travel time of the train was 30 days shorter," said Mohsen Pour-Aqaei, managing director of Iranian Railways, adding that initially one such train would travel from China to Iran on a monthly basis.
 
China is eyeing up multi-billion dollar rail deals in Iran. State-run China National Transportation Equipment & Engineering Co Ltd (CTC) is close to finalizing an agreement on the $3 billion rail project to connect Tehran with the North-Eastern holy city of Mashhad. 
 
Iranian railways – full steam ahead
 
This is just a small snapshot of the investment forecast by international firms in Iran’s burgeoning rail network. The tracks have been laid for an incredible future, but there is still work to be done. But, what the above does demonstrate, is a growing desire for foreign investment in vital transport projects by the Iranian government. The opportunities are great and many in Iran – and businesses will need to act fast to capitalise on them unless they miss this extremely lucrative train.

 

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