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Iran 2017 | TRANSPORT | REVIEW

Freed from sanctions, Iran has started the process of updating outdated infrastructure to allow for new economic growth by signing major investment deals with foreign firms.

Updating and improving its transportation infrastructure will be central to Iran's goals for economic recovery. The elimination of cumbersome international sanctions has already led to the approval of a host of ambitious projects, and more are expected as the government continues to open up the sector in the coming years. Rail and road are two sectors of particular importance, with upcoming projects expected to strengthen Iran's economic ties with Azerbaijan and Russia.

Iran's transport infrastructure was ranked 73rd in the world in the World Economic Forum's 2017 Global Competitiveness Index. Road construction was limited throughout the early part of the 20th century, but accelerated development after the Iranian revolution and the maturation of the country's petroleum industry created a national network of roads and trains that have served Iran well. Since the lifting of sanctions, the transportation sector has been one of the industries most active at reentering the global market to increase development. The deals struck with foreign countries have primarily aimed at updating and expanding rail and road infrastructure. In July 2016, the Iranian government signed a deal with Italy's federal highway agency collaborating on a project that will construct a 1,200km road from the Gulf port of Bandar Imam Khomeini to the Iranian-Turkish border. The USD4-billion project came after a visit from the Italian Prime Minister and signaled the start of a recommitment to long-term upgrades. New road investment is also en route from China; a July 2017 report announced that Chinese firm VNS will invest USD24.5 billion in road construction projects.
Iran's railways have also attained their share of major investment deals. The country's location makes it a key point for transport between Europe and Asia, and recent investments by Russia and China reflect international interest in developing the Iranian corridor to improve economic activity. After building less than 200km of railroad per year under the sanctions, Iran now expects to add almost 2,000km of track per year through 2022 and spend billions by 2027 on railroad improvements. China sees Iran as central to its Silk Road development plan that calls for improved transport routes through Central Asia, and February 2016 saw the arrival of the first Chinese freight train in Tehran. In June 2017, China's import-export bank signed a USD1.5 billion deal to finance a high-speed rail between Tehran and Mashad. Russia has also been active with new investment; the Iranian government signed a deal in early 2017 to purchase 7,000 rail wagons from a Russian firm, and Russia has proposed a deal to electrify a 600km rail line that links central Asia to the Persian gulf.
The Iranian aviation industry, while well developed domestically, has been hit hard by long-running sanctions placed upon it by the US. Bans on the direct sale of supplies including jet fuel and spare parts have forced Iranian airlines to find expensive alternate sources of supplies and ground planes that have been unable to maintain safety standards. The industry as a whole has an average fleet age of 22 years, well above the international average of 11 years; national airline Iran Air has gone from one of the most advanced fleets in 1979 to a fleet with an average age of more than 35 years. As a result, safety has suffered, with more than 40 civilian aircraft crashes since the first sanctions were passed in 1979. Despite these challenges, Iran's aviation industry has continued to see steady growth with over the years. According to aviation research firm OAG, Iran's airline capacity increased at an average annual rate of 3% from 2005-2015, with most of this growth coming from the international market, which saw 6% annual growth from 2010-2015. With sanctions eliminated, significant opportunities for expansion exist within the industry. OAG estimates that the industry will need 400 new aircraft by 2015. Since the lifting of the sanctions, carriers Iran Air and Aseman Airlines have made deals to purchase a combined 140 planes from American airplane manufacturer Boeing. While there is still some uncertainty as per the status of future deals as tensions remain between Iran and the West, industry leaders see the move as a welcome step forward toward the development of an industry with immense potential.