Possible end in sight for Iran rail funding drought

23 October 2014

Easing of international sanctions will allow stalled projects to make progress

One of the region’s most developed rail markets is in Iran, with the earliest projects dating back to the 19th century. Today, there are railway lines connecting all major cities in the country and linking to neighbouring nations.

More recently, urban rail networks have been developed. The largest is in the capital Tehran, where the first metro line opened in 2000, and today, there are 152 kilometres of metro line serving the city.

The vast majority of the design and construction work done on these lines was completed by local companies employing Iranian engineers and workers. While it may appear that the country is self-sufficient when it comes to developing rail schemes, there is one crucial element of the project mix that is missing: funding.

Over the past 10 years, sanctions have stifled Iran’s rail building programme. International banks have been prevented from doing business in the country, and without the ability to tap international markets, local banks have been unable to fill the void.

Since 1987, there have been 57 local loans and 43 international loans to fund work on Tehran’s metro network, and 10 years ago, lenders provided some 50 per cent of the funding for ongoing projects. By 2006, sanctions forced the funding mix to completely change and the contribution from banks had shrunk to zero.

As bank funding disappears, projects have slowed and targets have been missed. The Tehran Metro, for example, was planning to have 200km of operation lines by the end of 2015, but now it will have just 152km.

This trend could be reversed if sanctions ease in the coming months, following negotiations between Tehran and the West, which resume in November. People working in the rail sector are optimistic this will happen. If their hopes are well-placed then they could have a very busy decade ahead of them as they make up for lost time.

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