Tehran fails to attract foreign investors to export rail route

04 April 2008
Iran Railways shelves plans for transport link to its neighbours in the east.

Tehran has abandoned plans to begin work on a critical rail link between the port of Chabahar and its eastern neighbours this year, because of a lack of funds.

Iran had intended to begin construction on a $700m project to link the southern port with the country’s eastern border.

The rail extension would run from Chabahar, on the Gulf of Oman, to Mashhad, on the border with Turkmenistan, passing close to the borders with Pakistan and Afghanistan.

The proposal would involve building a 800-kilometre extension to existing sections of track to complete the 1,000km route.

Once complete, the line would provide a critical link for land-locked Afghanistan and northern Pakistan, as well as for the central Asian republics in the Commonwealth of Independent States (CIS).

After an initial study, however, the project has stalled, with the national rail operator, Iran Railways, unable to attract interest from foreign investors.

“A preliminary study has been completed but no detailed work has been done,” says an industry source who works closely with Iran Railways.

“There is not going to be any construction work on that line this year. We have a lot of problems with existing projects and there are not the finances available to begin another on this scale.”

The difficulty in raising finance is a familiar one for Tehran. Several major infrastructure projects around the country have stalled, been downgraded, or postponed indefinitely because of a lack of funds. The national rail company has already scaled back plans to develop two high-speed rail links across the country as it has become clear the government will have to finance them itself (MEED 4:01:08).

“There is no foreign investment in the railways,” says the source. “It is very difficult to attract foreign investment to any major infrastructure projects in Iran at the moment.”

Despite the wider problems, Chabahar port is one project that has attracted the interest of foreign companies keen to exploit its location outside the Strait of Hormuz. Iran’s Ports & Shipping Organisation (PSO) has received a proposal from Dubai’s DP World, and Hinduja Group, the Indian conglomerate, for a joint venture to build a container terminal with capacity for 500,000 20-foot equivalent units (TEUs).

The PSO’s five-phase redevelopment plan for the site would bring capacity at the port to six million TEUs by 2030, with a $350m first phase intended to bring capacity to 640,000 TEUs by 2010.

Alireza Satei, a board member of the PSO and vice-president for port affairs, says the railway would be a huge benefit to the port, and to Iran’s neighbours.

“The railway would help increase efficiency and volume for import and export to Afghanistan and the CIS, but while Iran Rail is looking for foreign investors it will continue to move cargo by road,” he says.

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