Iran aims to become a land bridge connecting Asia and Europe. What is the importance of developing an extensive railway network to boost trade with foreign countries?
Iran has in an excellent position geographically whereby it can connect Asia with Europe, but also the CIS countries, with the Persian Gulf. We are focusing on using our location as a bridge to connect all sides. We have some connections already running from north to south. We have a rail connection from Bandar Abbas going into Turkmenistan, Uzbekistan, and Tajikistan. In 2015, we added a new connection from Sarakhs in the east of Iran that goes through Turkmenistan and directly into Kazakhstan. We have one rail connection with Turkey from Razi border. Now, we are constructing a new line to link Iran to Azerbaijan and Russia called the North-South Rail Corridor. We are also constructing a new line to Herat in Afghanistan. We have completed the work up to the border and we are now doing the construction work on the Afghan side, which Iran is also paying for. By 2016, the work will be done and then we have major plans to develop the railway further to connect to other countries. We are planning to connect with Iraq on two sides, one on the southewst of Iran through Khorramshahr to Basra, with only 35km still missing to complete this line. We have signed an MoU with the government of Iraq to build a bridge to complete that connection. We have another plan to connect with Iraq through Khosravi border, which is in the west of Iran and from the border to Baghdad it is more than 70km. Therefore, we have a plan to link up with all the surrounding countries as a bridge, and then we can play a better role in this network of connections.
What is the importance of the railway sector as a pillar for the Iranian economy?
The railways are potentially extremely important for Iran's economy. However, the reality is that for now the railways are not as strong as our road transportation network. Around 88% of our inland transport is done by road, with only 12% by rail. The new government wants to focus on developing railways and has allocated a large budget for it. As a result, for the last two years we have increased the rail transport share versus road. Rail transport has gone up from 10.5% in 2014 to 11.7% in 2015 and is now growing to 12% in 2016.
Iran is planning to develop a 12,000km rail network. What is your strategy to attract foreign investment for this project?
We have some different strategies. For the infrastructure, we are looking at using finance through tenders, not direct investment, as it is difficult to engage foreign investors in infrastructure projects. Our usual strategy is to use loans from foreign countries to finance projects. Of the intended $25 billion we plan that a maximum of $10 billion will come from foreign investors as a direct investment for operational activities and the rail fleet. For this reason, we plan to have attractive packages for the investors on the fleet. For example, we would give free infrastructure to all the operators for a number of years. This means that right now if a company invests in freight cars, it would not pay any taxes for using any of the rail infrastructures for four years. Similarly, if investors bring locomotives here to use on our lines, Railways of Iran (RAI) will give them a guarantee to buy their services. However, there are some exceptions. For example, for the Rasht-Astara railway project, which is part of North-South Corridor to link Iran and Azerbaijan, we are looking to invite foreign investors, as it is more useful for transit, and they can use foreign currency income.
What is the importance of connecting the Persian Gulf and the CIS to boost trade between these regions?
The lines connecting the ports of Chabahar and Bandar Abbas with the CIS countries are important because these countries are landlocked and need to connect with the international waters. Now, we have that good rail connection between Bandar Abbas and the CIS countries, and we are also planning to add one more connection from Chabahar Port to the region. This new line will also be used to transport goods through Afghanistan and India and vice versa. There are currently big investments being made in iron ore mining in Afghanistan and that ore can be exported via Chabahar Port. For the Rasht-Astara rail line, we have signed an MoU with the government of Azerbaijan and have started construction of a rail bridge, which is required to cross the Astarachay river on the border between both countries. The Rasht-Astara line will take around five years to finish. We are constructing a large terminal in the Iranian part; therefore, road freight can be delivered to the terminal, and from there we can put it on the railway and send it to Russia and Georgia. We are currently in negotiations with Azerbaijan and Russia to complete Rasht-Astara missing link, which is around 175km. This is an important transit route from Russia, Europe, and the Black Sea countries that will bring in a good foreign currency income when it is finished.
In February, the first train on the Silk Road arrived from China. What is the importance of this project for Iran?
This new corridor is important because Iran has a good relationship with China. Our businessmen in Iran import a substantial number of goods from China. Currently, they are using the shipping lines for it, usually from Shanghai to Bandar Abbas Port. This new railway line is important because it will reduce the transportation costs, which will attract traders to use rails to transport goods from China to Iran and on to Europe. The first train was successful, and it took around 14 days from Yiwu (China) to Tehran. We are hoping to have more trains and expand this service in the future, for example with more trains to Turkey and directly to Europe. Turkey is constructing new bridges across the Bosporus that it can be used for both road and rail. This would create a complete railway line from China to Iran and then to Turkey and Europe.
Transit traffic has risen by 100% over the last year. What are your expectations for the growth in transit traffic in 2016?
We hoped to increase transit by rail by around 100% again in 2016. Unfortunately, we are not on target to reach this goal at the moment because the price of sulfur is falling, and that particular piece of cargo makes up a substantial part of our transit business. Sulfur is transported from Turkmenistan to be exported via Bandar Abbas, but the first quarter of 2016 was not positive because Turkmenistan's sulfur sales were down. Now, the price has been regulated, and we hope to increase sulfur exports to reach our target. While sulfur is the most important, there are other transit cargoes we hope will increase in volume too. For example, goods from Uzbekistan and Azerbaijan, and heavy fuel exports that started in May from Turkmenistan. Wheat and iron ore are other products we hope will be transited through Iran from Kazakhstan for being exported through the Persian Gulf.