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Transportation + Logistics E1:R1

Transportation + Logistics E1:R1

Key Developments

For a country of its size and optimal geographic position, Iran's transport linkages are very underdeveloped 

◢ Iran's rail, maritime, and air transportation networks are all poised for new investment from major foreign partners who see Iran's position as a regional hub


 

Capacity of Iran’s Railways

Given that Iran is located at the juncture of major international transportation corridors, there is significant potential to expand the rail network. Following the removal of nuclear-related sanctions, the International Institute of Transport Intelligence rated Iran 15th among the world’s most promising markets, moving up from 27th.

However, the country has so far failed to take advantage of its geography and has proportionally lower levels of passenger and goods transit than would be expected for a country of its size. Currently, Iran’s railways transport approximately 33 million tons of goods and 29 million passengers each year on a network covering approximately 13,000 km. Transportation capacity is expected to reach 35 million tons next year as it finds a growth trajectory of 2.4% annual growth through 2020. 

On the east-west axis, Iran's rail system connects to that of Turkey and Turkmenistan. With the completion of the east-west rail projects between Kerman-Zahedan, Mashhad-Haraz, and Khorramshahr-Basreh, the country’s railway network will be further connected to other neighboring countries such as Pakistan, Afghanistan and Iraq. 

On the north-south axis, the network connects connects Amirabad Port and the Caspian sea the Persian Gulf and southern Iran. There are also plans for the construction of Qazvin-Rasht-Anzali-Astara lines, under a north-south corridor plan. The building of these lines could mean that Bandar Abbas and the Persian Gulf were linked to the port of Helsinki in northern Europe, via Azerbaijan and Russia.

Overall, Iran's rail network only accounts for 9% of the country's transportation market. The government aims to increase that share to 30% in the medium-term by building a further 25,000 km of inter-city and suburban rail lines, including high-speed lines. 

Expanding the capacity and connectivity of Iran's railways has been part of development plans for decades, but only minimal progress has been made. Iran will need greater participation from leading global firms in order to build the expanded network. Iran's national rail company, Islamic Republic of Iran Railways, has held international seminars to attract investment. Agreements have been signed recently with both Japanese and Italian rail companies to support technology transfer and capital investments. Foreign firms bring expertise that can help improve the overall efficiency, safety, and reliability of Iran's rail network. 

Maritime Transportation in Iran

Iran’s Ports and Maritime Organization reported that the annual loading and unloading volume of seaports in Iran reached more than 1 million tons during the Iranian calendar year of 1393 (ending on 20 March 2015).  This is a 5% increase from the previous year of 1392. At this volume, a total of 1.4% of the world’s cargo was loaded and unloaded at Iranian ports.

Iran’s container shipping capacity saw considerable development during the last 15 years, rising from 618,223 TEU (twenty-foot container equivalent units) in 1380 (2001) to reach 2,455,092 TEU last year. 

Shahid Rajaee (formerly known as Bandar Abbas) is Iran's largest container port, accounting for more than 55% of the country’s shipping services. Other significant ports on the Persian Gulf include Imam Khomeini, Boushehr, Lengeh, Asalouye, Bahonar, Abadan, and Khorramshahr ports. On the Caspian, Iran is connected by the Anzali, Noshahr, and Amirabad ports. 

Iran’s five-year development plan sets an ambitious target of 200 million tons of transit capacity, only about 160 million tons is currently being used, in part because of depressed rates of trade due to the legacy of international sanctions. 

To unlock the additional capacity, Iran is turning to foreign partners. Notably, Port of Antwerp, one of the foremost port operators in the world, has recently signed an MOU to develop capacity at Shahid Rajaee port, helping to improve processing efficiencies. Further east on the Persian Gulf, the Indian government has committed USD 500 million to support the development of Chabahar port, with the specific aim of improving the maritime trade links between India and Iran. Overall, Iran's ports are currently in a transitional phase of development moving from a traditional orientation of a port as a place to store products, towards the newer generation of ports which include the distribution and processing facilities that make up the dynamic global supply chain. 

Iran’s Aviation Industry

Iran's aviation industry is over 50 years old, and was once the regional standout for the quality of its fleet, routes, and service. Currently, Iran has 18 domestic airlines (including charter airlines). These companies account for a combined fleet of 251 aircraft with 21,000 seats. 

Iran's fleet would be larger, but about 100 planes are grounded due to parts shortages and critical aging. Due to the inability of Iran's major airlines to grow their fleets or fly to many overseas destinations under sanctions, foreign airlines have taken an unusually large share of the market. Turkish Airlines controls 80% of the international air travel market, with Emirates and European carriers such as Air France and Lufthansa also operating. Within the domestic market, it is important to note that the national carrier, Iran Air serves about 22% of the 21.4 million annual passengers. The market leader is actually the private airline Mahan Air, serving 26% of the annual passenger volume. Mahan has a newer fleet and is preferred by many Iranians for its service and safety record. 

In order to compete both domestically and abroad, Iran has signed ambitious agreements with Airbus, Boing, and ATR. The Airbus and Boeing agreement cover proposed acquisitions of about 120 planes each. The ATR agreement, which is for smaller turboprop planes, is for 20 aircraft. Overall, government officials have stated that Iran needs to have an active fleet of 400 aircraft in order to potentially emerge as a regional hub for air travel, competing with Dubai to the south and Istanbul to the West. 

However, in recent months both the Airbus and Boeing deals have come under scrutiny. The reluctance of major international banks to transact with Iran has raised question marks over how these multibillion dollar deals will be financed. Iranian authorities are hoping that the considerably lobbying influence of Boeing and Airbus and the centrality of these deals to the perceived success of Iran's sanctions relief will compel a breakthrough on financing. 

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