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To circumvent Ukraine and bottlenecks, a controversial new trade route emerges: Iran

Homajon

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To circumvent Ukraine and bottlenecks, a controversial new trade route emerges: Iran


Exclusive: Despite US sanctions, transportation industry insiders see the Islamic Republic as key land route for moving goods across Eurasia

Borzou Daragahi
International Correspondent

May, 13th 2022

<p>Trucks waiting to cross into Iran from the Turkish side of the border near the Gurbulak border crossing</p>

Trucks waiting to cross into Iran from the Turkish side of the border near the Gurbulak border crossing (AFP via Getty)

Newly emerging trade routes are slashing transport times between Europe, western Asia and the Middle East from upwards of six weeks to as little as six days, saving consumers and exporters shipping expenses, insurance fees, and refrigeration costs.

There is just one catch.

The truck routes, which were first launched last year with lorries travelling from the United Arab Emirates and Pakistan to Turkey, pass through Iran, further integrating Tehran into the global economy, adding to its coffers and increasing its clout despite years of efforts by the United States to isolate it.

“If you allow Iran to become less of a pariah by further integrating it into international trade that reduces the impact of the sanctions measures that are in place,” a former White House official specialising in trade and sanctions said. “There are folks in the US who would not take kindly to that. To the extent that we’re talking about sanctions evasion, there would be a lot of people that would be irked by that.”

Both the UAE and Pakistan transport corridors to Turkey were inaugurated with little fanfare late last year. They come as both the UAE and Saudi Arabia engaged with Turkey and began rapprochement with Iran following an escalation of diplomatic rivalries during the turbulent US presidency of Donald Trump.

With eastern Europe and the Black Sea region in turmoil because of Russia’s invasion and ongoing attack on Ukraine, Iran is also emerging as a tempting bridge between landlocked countries of central Asia and the rest of the world.

“They’ve long been hoping Iran would become a more viable option with the lifting of US secondary sanctions allowing more use of the logistics routes through Iran’s and more investment in Iran’s port infrastructure,” said Esfandyar Batmanghelidj, a fellow at the European Council on foreign relations, who recently returned from a conference in Uzbekistan.

The routes are already in use, although it is unclear how widely.

In October, an Emirati truck carrying a single set of transit papers it obtained for $30, departed from the UAE city of Ras al-Khaimah through Sharjah, where it departed by ferry to the Iranian port city of Bandar Abbas and then continued 2,100 kilometres (1,300 miles) along Iranian highways, and then another 1,100 kilometres (685 miles) along from the Turkish frontier to the Mediterranean port of Iskenderun.

The trip lasted six days, two weeks less than the 21 days it would take to get a shipment from the UAE through the Suez Canal to the Mediterranean. The shortened ground transit time reduces transport fees, refrigeration costs and cuts out the need for insurance against pirates and other mishaps at sea.

Another pair of trucks from Pakistan was also dispatched through Iran across 4,900 kilometres (3,040 miles) of highway to Istanbul, making the trip in about a week instead of up to 40 days via the maritime route from Arabian Sea ports.

Weeks later, Iran’s roads chief Javad Hedayati conferred with Emirati and Turkish counterparts to finalise the route.

One economist told The Independent that the routes are an open secret in the transport industry stricken with post-Covid bottlenecks and a worldwide shortage of sea-freight containers, but have not been widely publicised for fear of irking the Americans. Still, the Iran option is becoming increasingly tempting at a time when sea-freight costs have risen to as high as $25,000 per container.

“You save a lot of money, and you save a lot of time with Iran,” said an Istanbul-based executive at the International Road Transport Union, an organisation that represents the global trucking industry. “For many companies and many countries, there’s no issues with Iran. It’s a good country to transport goods.”

Currently international transport officials estimate that about 40,000 trucks a year transit through Iran, and trucking fees of between $400-$800 (£327-£654) per vehicle can offset the impact of sanctions, including sometimes strictly enforced secondary restrictions on seeking to do business with Iran. Among the goods transported are consumer products, appliances, foodstuffs, machinery, spare parts, electronics and heavy equipment.

map.jpeg

How the trade route affects timings
(Borzou Daragahi)


“Considering its geographical location, Iran can play a significant role in the transit of goods in the region and benefit a lot,” said the pro-government Tehran Times newspaper. “To take full advantage of its location for transit, the country has many plans underway and, on the agenda, to boost its transit capacity.”

Transport industry executives say the route has some hassles, including long waits sometimes at customs checks and 200-litre limits on fuel at Iranian petrol stations.

“This is a route that not many people know about and it’s not used very much, but in terms of costs it has its advantage,” said Hasan Guney, fleet director at Ulustrans Logistics, an Istanbul-based firm specialising in international freight transport that has used the route. “Getting from the UAE to Turkey, this is the best route. If they could only clear up the waits at customs it would be even faster.”

Mr Guney said his firm does no trucking business with the US and has little if any exposure to US sanctions.

But with several bottlenecks and escalating sea-freight fees, the costs of moving goods across the Eurasian landmass have gotten so high that firms are absorbing the risks and using Iran despite the fear of US sanctions.

“You need the route to keep the movement of goods going,” said Asli Cakir, of Turkey’s Union of Chambers and Commodity Exchanges, an industry lobby.

She described several bottlenecks that were impeding global trade, leading to supply-chain challenges that were contributing to worldwide price inflation and hampering the global economy’s recovery from the coronavirus pandemic.

“If the US would want to focus on this trade route, that could be a problem,” she said. “But you have to keep the movement of goods going somehow. Opening up Iran is one way.”

The opening of the route is a blow to Egypt, where President Abdel Fattah el-Sisi is spending $8bn (£6.54bn) in public funds in a much derided effort to expand the Suez Canal and draw more traffic. Despite the investment, bottlenecks persist. Last March the cargo ship Ever Given went aground along the waterway, blocking sea traffic for six days.

Transport industry insiders say the UAE has wholly embraced the road route, while Pakistan, despite high interest by businesses, is baulking because its banks are spooked.

“The issue exporters are facing are from secondary sanctions,” said one industry insider. “Pakistani banks are questioning any transaction that involves Iran.”

According to US law, a product merely transiting through Iran may be considered Iranian, and could be subject to restrictions, according to legal experts. The Iranian port at Bandar Abbas is deemed at least in part under the control of the sanctioned Revolutionary Guard, and any dealings with it could trigger sanctions.

suez.jpg

The container ship ‘Ever Given’ which blocked blocked the Suez Canal in March 2021
EPA


But there are also nuances.

“If a Turkish company is paying an Iranian port with US dollars, that’s a problem,” said Matt Oresman, a partner at the international law firm Pillsbury. “If an Uzbek trucker is paying some Uzbekistan soʻm to Iranian cargo handlers, that’s probably not a sanctions violation.”

Former US officials who worked on sanctions policy said that Washington was suffering from “shiny ball syndrome”, so focused on helping Ukraine fend off Russia that it likely lacked the bandwidth to zero in on the trade routes, especially at a time when it is hoping to cut a deal with Tehran to restore a faltering 2015 nuclear agreement.

“The nature of sanctions is you’re not going to stop everything, even if you have good enforcement,” one former senior US official said. “Perhaps you’d want to reach out to parties that are involved and speak to them, especially about Bandar Abbas being under sanctions. But in the real world it might not be worth pushing.”

 

Homajon

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Will Russia Complete Iran’s Rasht–Astara Railway? - Jamestown

By: Vali Kaleji

May 16, 2022 04:10 PM Age: 3 weeks

Iranian-Road-and-Urban-Development-Minister-Rostam-Qasemi-and-Russian-Transport-Minister-Vitaly-Savelyev-640x427.jpg
Iranian Road and Urban Development Minister Rostam Qasemi and Russian Transport Minister Vitaly Savelyev, Moscow, April 30 (Source: irangov.ir)

The Russo-Ukrainian war has had a direct impact on the status of the various China–Central Asia–Russia–Europe transit corridors that traverse Eurasia. The Northern Corridor branch of China’s Belt and Road Initiative (BRI), in particular, has faced serious challenges and limitations, forcing a halt to the so-called “New Eurasian Land Bridge” project, linking Russia, Ukraine, Poland and Belarus with East Asia. This has given new impetus to developing the so-called Middle Corridor—more formally known as the Trans-Caspian International Transport Route (TITR)—which starts from Southeast Asia and China, and, bypassing Russia, runs through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and further to European countries (see EDM, April 18, 19, 20). Another budding option, particularly for the land-locked Central Asian region, is to build north-south linkages to Iran’s overland transit network, which offers further connections to Turkey, the Middle East and Europe, as well as to Iranian seaports on the Persian Gulf and the Gulf of Oman (see EDM, May 5).

For Russia, the growing challenges with maintaining the west-east routes across its territory have also incentivized Moscow to focus more on trans-regional north-south routes to Central Asia/the South Caucasus and, from there, to Turkey and Iran. By strengthening these transit corridors, Moscow hopes to counter the tightening economic sanctions and transit restrictions on Russia that the West adopted in response to the Russian assault on Ukraine. In this regard, one of the most important prospects for Russia is to strengthen the land and rail routes of the International North-South Transport Corridor (INSTC). While to the east of the Caspian Sea there is a working railway route from Russia through Kazakhstan and Turkmenistan to Iran, along the western shore of the Caspian, in the South Caucasus region, the linked railway networks of Russia and the Republic of Azerbaijan still lack a physical connection with Iran.

The Astara–Rasht–Qazvin railway, which will wind along the southwestern corner of the Caspian, forms a central link of the longer INSTC, a multi-modal route between India, Iran, Azerbaijan, Russia and Europe. The cross-border Astara (Iran)–Astara (Azerbaijan) section of the railway was officially inaugurated on March 29, 2018, while the Rasht–Qazvin section inside Iran was implemented on March 6, 2019. Therefore, the only remaining gap is a 164-kilometer railroad section from Rasht to Astara. Until this railway segment is finished, freight moving by train must be transferred to trucks and then back again.

In the latest development signifying growing regional prioritization for the Astara–Rasht–Qazvin railway and the INSTC more broadly, Iranian Roads and Urban Development Minister Rostam Qasemi visited Moscow on April 30, 2022. Following his talks with Russian Transport Minister Vitaly Savelyev, the two officials signed a comprehensive agreement on cooperation in the field of transportation. Both men noted the importance of establishing a railway connecting the Asian continent’s north and south, notably stressing the need to complete the missing Rasht–Astara portion of the INSTC as soon as possible (Sharghdaily, April 30).

Rasht-Astara-RR-map-Xalq-Gazeti-300x225.jpg


The 164 km Rasht–Astara railway has faced years of problems in terms of construction and implementation. The main obstacle has been financing, particularly due to the United States’ sanctions on Iran. According to an earlier agreement between Iran and the Republic of Azerbaijan, both sides pledged to provide $500 million each to build the Rasht–Astara railway. And in 2016, the International Bank of Azerbaijan signed a deal with Iran on the allocation of a $500 million loan for this purpose (Tehran Times, June 12, 2016). However, in practice, this agreement and the loan were never implemented due to the comprehensive US sanctions on Iran’s banking network.

Nevertheless, the Iranian government is determined to implement this important railway project, which compares favorably along various metrics with a handful of other railway projects in the region. Notably, the Iranian-Armenian railway line from Meghri, Syunik Province, in southern Armenia, suffers from high costs and has not seen any progress since 2009. Whereas plans to restore Soviet-era east-west railway corridors in the South Caucasus following the Second Karabakh War (September 27–November 10, 2020) have stalled due to differences between Armenia and Azerbaijan over the interpretation of the ninth clause of their ceasefire agreement, brokered by Moscow. The construction and completion of the Rasht–Astara railway is, therefore, the only practical and accessible short-term prospect for Iran to connect to the South Caucasus. Its implementation will complete the last remaining section of the INSTC and create a physical rail link for the Republic of Azerbaijan, Georgia and Russia to Iran’s Chabahar port on the Oman Sea and Bandar Abbas on the Persian Gulf.

Another important issue for Iran is expanding its freight corridors to the Moscow-led Eurasian Economic Union (EEU) in order to take fuller advantage of the EEU-Iran Preferential Trade Agreement (PTA). In this regard, Iranian President Ebrahim Raisi last year said, during a tour of Gilan Province (where the two cities of Rasht and Astara are located), that railroad and other transit infrastructure projects, along with the purchase of roll-on/lift-off (ROLO) vessels, should be accelerated to boost intra-regional trade (Iranian Labour News Agency, May 25, 2022).

In this situation, Iran desperately needs to complete the Rasht–Astara railway. But since the Republic of Azerbaijan has been unable to fulfill its financial obligations due to sanctions, Tehran is turning to Moscow for support. Indeed, even prior to the aforementioned April visit to Russia by the Iranian transport minister, in January 2022 President Ebrahim Raisi traveled to Moscow, where the two sides finalized a previously agreed-upon $5 billion credit line for the completion of several development projects in Iran (Iran Online, January 22). Among those projects, Iranian Economics Minister Ehsan Khandouzi noted, would be the Rasht–Astara railway (Tehran Times, January 21).

About two months later, Russia’s large-scale re-invasion of Ukraine created problems for and restrictions on trans-Russian east-west transit routes across Eurasia, inducing Moscow to pay more attention to the development of corridors in the north-south direction. Tehran has sought to utilize this situation, stepping up efforts to attract Russian investment in the Rasht–Astara railway project. Russia is itself under ever more painful Western economic sanctions. But assuming Moscow can find the financial resource necessary to see the completion of Rasht–Astara, then the International North-South Transit Corridor in addition to the Middle Corridor may both end up being beneficiaries of the region-wide geopolitical reverberations caused by the Russo-Ukrainian war.

 

Sineva

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Iran tests new trade corridor to ship Russian goods to India

From Astrakhan, the cargo will cross the length of the Caspian to the northern Iranian port of Anzali and will be transferred by road to the southern port of Bandar Abbas on the Persian Gulf.

https://www.moneycontrol.com/news/world/iran-tests-new-trade-corridor-to-ship-russian-goods-to-india-8675831.html
Iran’s state-run shipping company said it started its first transfer of Russian goods to India, using a new trade corridor that transits the Islamic Republic, an Iranian port official said.

The Russian cargo consists of two 40-foot (12.192 meters) containers of wood laminate sheets, weighing 41 tons, that departed St. Petersburg for the Caspian Sea port city of Astrakhan, the state-run Islamic Republic News Agency said on Saturday, citing Dariush Jamali, director of a joint-owned Iranian-Russian terminal in Astrakhan.


The report didn’t say when the cargo, which it described as an initial “pilot” transfer to test the corridor, left or give any more details about the goods in the shipment.

From Astrakhan, the cargo will cross the length of the Caspian to the northern Iranian port of Anzali and will be transferred by road to the southern port of Bandar Abbas on the Persian Gulf. From there it will be loaded onto a ship and sent to the Indian port of Nhava Sheva, IRNA said.

Jamali said the transfer was being coordinated and managed by the state-run Islamic Republic of Iran Shipping Lines Group and its regional offices in Russia and India and is expected to take 25 days.

Since Russia was sanctioned over its war on Ukraine, Iranian officials have been keen to revive a stalled project to develop the so-called North-South Transit Corridor that uses Iran to link Russia to Asian export markets. The plan involves eventually building a railroad line that can transfer goods arriving at Iranian Caspian Sea ports to the southeastern port of Chabahar.
 

Apollon

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Project is dead from start.


1. Russia is a dead end, Europe cut all ties. Russia itself has very small economy. Its all about trade between East asia and Europe and that trade wont go through Russia.


2. Iran is not a trustworthy trade route. No european company will send workers to a country that is known to take hostages.
 

Hack-Hook

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Project is dead from start.


1. Russia is a dead end, Europe cut all ties. Russia itself has very small economy. Its all about trade between East asia and Europe and that trade wont go through Russia.


2. Iran is not a trustworthy trade route. No european company will send workers to a country that is known to take hostages.
you underestimate the power of money
 

Sinnerman108

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Project is dead from start.


1. Russia is a dead end, Europe cut all ties. Russia itself has very small economy. Its all about trade between East asia and Europe and that trade wont go through Russia.


2. Iran is not a trustworthy trade route. No european company will send workers to a country that is known to take hostages.

Feeling insecure ?
The day and I mean the day a trade route allowing china and russia access to arabian sea happens
that will be the END of weatern hegemony as we know it.
The white man will go back to the same conditions as dark ages.
 

Apollon

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Feeling insecure ?
The day and I mean the day a trade route allowing china and russia access to arabian sea happens
that will be the END of weatern hegemony as we know it.
The white man will go back to the same conditions as dark ages.

Russia has no trade, has no economy. What trade will run on this dead end? Fun fact, Italy alone has bigger economy than Russia.

So i can only laugh about this. What you gonna trade? 😅👍
 

Sinnerman108

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Russia has no trade, has no economy. What trade will run on this dead end? Fun fact, Italy alone has bigger economy than Russia.

So i can only laugh about this. What you gonna trade? 😅👍

and have you ever wondered why russia couldn't develop their economy ?
They have the geography
they have minerals
they have their own oil and gas
they have engineers

What russia didn't have, as much as they aspired to; and what russia was denied by the british was access to warm waters.
they can not trade 12 months a year at a sustainable rate.

Take for example Germany is half the size of Pakistan; but it has the right access to everything.
Russia is bigger than all europe combined.
 

Apollon

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and have you ever wondered why russia couldn't develop their economy ?
They have the geography
they have minerals
they have their own oil and gas
they have engineers

What russia didn't have, as much as they aspired to; and what russia was denied by the british was access to warm waters.
they can not trade 12 months a year at a sustainable rate.

Take for example Germany is half the size of Pakistan; but it has the right access to everything.
Russia is bigger than all europe combined.

Because its hyper corrupted and has no working ethics. Its a hellhole through and through.


Its a mafia state where 70% have no toilet in house but vladis goons have 700 million € yachts.


As i said, good luck. 😂👍
 

Sinnerman108

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Because its hyper corrupted and has no working ethics. Its a hellhole through and through.


Its a mafia state where 70% have no toilet in house but vladis goons have 700 million € yachts.


As i said, good luck. 😂👍

Time will tell,

What we see now, is active domination and war to deny China and Russia any access to the arabian sea.
We have seen how the Afghan war was carried out, to ensure Russians never get that access.
We are seeing now, how the Americans are denying China access.

Let us see how it plays out.
 

Apollon

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Time will tell,

What we see now, is active domination and war to deny China and Russia any access to the arabian sea.
We have seen how the Afghan war was carried out, to ensure Russians never get that access.
We are seeing now, how the Americans are denying China access.

Let us see how it plays out.

Dude seriously. There only is China as competition. Russia is nothing. Evryone knows that, even Putin. There are three economic super blocks. USA, Europe and China. Evrything rotates around that fact. Russia itself is an absolute economic dwarf and will always be that way. Evry connection through iran has the goal to connect china with europe. Thats what iran and china want
 

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