20 October 2020

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A ROUTE SPANNING DECADES

Time proves the feasibility of the North-South multimodal transport corridor

Author:

15.09.2020

Twenty years ago, on September 12, 2000, during the 2nd Euro-Asian Transportation Conference held in St. Petersburg, Russia an intergovernmental agreement was signed on the creation of the North-South multimodal transport corridor, which marks a very significant milestone in the history of Azerbaijan. Initially, the only participating countries in the project were Russia, Iran and India. Later, in 2005, other countries, including Azerbaijan, joined the initiative. In total, the agreement was ratified by 13 countries (Azerbaijan, Belarus, Bulgaria, Armenia, India, Iran, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, Turkey, Ukraine), which makes it a large-scale trans-Eurasian transport project. At the initial stage, it is planned to transport 6 million tons of cargo along the route. But in the future will raise to 15-20 million tons annually.

 

Azerbaijan is one of the hubs along the route

The North-South corridor is often compared to another large-scale transport project, the Chinese Belt and Road Initiative. Moreover, they are considered direct competitors, since India is one of the initiators of the first, and China of the second one. But this competition began to take shape after 2015, when the Belt and Road Initiative began to materialise. Therefore, the North-South project could be considered, perhaps, the most ambitious of those that existed at that time, both in terms of the estimated volume of transported goods and the number of potential and real participants.

From the very beginning, the project included three directions: Caucasus - Persian Gulf (Western route); Central Asia - Persian Gulf (Eastern Route); Caspian Sea - Islamic Republic of Iran - Persian Gulf (Central Route).

Azerbaijan's joining in 2005 was logical and understandable for a number of reasons. First, Azerbaijan is a state through which the shortest route from Russia to the Middle East and the countries of the Indian Ocean runs. If Azerbaijan avoided membership in the project, it would deprive itself of important advantages and considerable profits of the route. Secondly, participation fits well with the principles and goals of Azerbaijan's transport strategy aimed at increasing the transit potential of the country, as well as creating conditions for diversifying the country's economic ties.

That is why Azerbaijan immediately began to promote projects that contribute to the effective functioning of the entire route. This work intensified even more after the decree of the President of Azerbaijan dated December 7, 2015 “On accelerating works on the section of the international transport corridor North-South”.

During the first years of implementation, a new 8.3 km railway line was constructed between Astara, Azerbaijan and Astara, Iran going through the bridge over the Astarachay River. This work included the construction of a 82m-long railway bridge across this river, a 1.4km-road from the railway bridge across the Astarachay River to the cargo terminal in Iran, as well as a railway station and cargo unloading terminals on an area of 35 hectares in Astara, Iran.

In addition, in previous years, Russia, Azerbaijan and Iran agreed the tariffs for the transportation of goods by rail between respective countries. Thus, the railway line from the Azerbaijani-Russian border to the border of Azerbaijan with Iran was already operational in 2018.

Azerbaijan has become a key link in the two largest regional projects - North-South and Silk Road. In January 2017, an interactive session The Silk Road Effect was held as part of the World Economic Forum in Davos. Azerbaijani President Ilham Aliyev said that in the next two years the North-South project, which connects India, Iran, Azerbaijan, Russia, Northern Europe and the Middle East, will be integrated into the Silk Road project, which will open a new transport corridor.

This is exactly what happened, since today cargo from Iran and Russia passing through the system of transport arteries of the North-South highway continues to the west, using the road infrastructure of the Silk Road, in particular the Baku-Tbilisi-Kars railway.

 

Iranian link is the hardest

There are difficulties in the implementation of the project as well. In fact, the Iranian part of the route is considered the most difficult one technically.

Back in 2009, Iran began building a section of the railway between Rasht and Qazvin, which is considered the most difficult along the entire route. It was planned to pass through a difficult mountainous relief. Along the entire length of the railway, 22 tunnels and 15 bridges were built with a total length of 25 and 8 km, respectively.

Initially, the project cost was estimated at about $500 million, but subsequently construction costs have more than tripled.

According to Iranian Deputy Minister of Roads and Urban Development Khayrollah Khademi, more than $1.85 billion was invested in the Qazvin-Rasht railway project. Admittedly, Iran carried out construction works under the imposed financial sanctions, which were somewhat relieved only after the signing of the infamous nuclear deal with the Islamic Republic. This gave Iran a chance to increase the pace of construction works and attract necessary funds.

The first test train on the Qazvin-Rasht railway was launched on November 22, 2018. The official opening ceremony of this 175-kilometer section took place on March 6, 2019 with the participation of Iranian President Hassan Rouhani, Azerbaijani Minister of Economy Shahin Mustafayev and officials from Pakistan and Iraq.

At the same time, work on the 167 km section of the Astara-Rasht railway is still ongoing. It is noteworthy that this section of the line passes through uncrossed, flat terrain, where the construction is technically not that difficult. The problem may arise only when the authorities begin negotiations with the owners of land plots located along the projected railway line. This information appeared in the media with reference to statements of Iranian officials. But even these arguments cannot be convincing given the exceptional importance of the early completion of the project.

Indeed, the growth of capital expenditures, as well as the regular delays in the launch of the entire route affects its attractiveness. Ultimately, neither the Iranian side nor potential stakeholders of the project represented by various commercial companies of other states are happy with the situation.

Iran recently announced the construction of a new railway line from Chabahar to Zahedan designed to connect the port of Chabahar mainly invested in by India with the entire national railway system. That is, along with the port of Bandar Abbas on the Persian Gulf, the port of Chabahar will have access to the North-South international transport corridor. Thus, the Gulf countries will use the port of Bandar Abbas, and the countries of Southeast Asia - the port of Chabahar for trade with Europe through the North-South international transport corridor.

It is expected that by the end of 2020, 150 km of the Chabahar-Zahedan road (628 km in total) will be completed. The fast implementation of construction works suggests the entire road will be completed within the next three years.

According to the Iranian Ministry of Roads and Urban Development, upon completion of construction, the railway will transport approximately 927,000 passengers and 2.8 million tons of cargo annually.

Azerbaijan hopes that the works along the Rasht-Astara section of the corridor will also intensify in the near future. After all, if the Iranian authorities can launch new railway projects, it means they can also complete the old ones that have been under construction for quite a long time.

 

North – South: present stage

Currently, the construction works continue. Moreover, it is planned that part of the works are carried out in Azerbaijan, where all the main construction works were completed several years ago.

Thus, the Asian Development Bank (ADB) plans to allocate $150 million to Azerbaijan for the upgrade of the railway system until the border with Iran. The loan will be used to upgrade the Baku-Astara railway (Iranian border) too. Another $20 million will be allocated by the Azerbaijani government. At the same time, the first installment of the loan ($75 million) will be provided in 2023, which indicates the long-term nature of the program.

On June 1, 2020, during a video-conference with the ADB leadership President of Azerbaijan Ilham Aliyev said: “Azerbaijan is rebuilding the railway system from north to south. We have already made certain investments in the development of this corridor; it has great potential. We plan to invest in increasing the speed of trains in this direction. We already have traffic jams on the border with Russia, and it is impossible to transport goods with the growing volumes of exports from Azerbaijan and Iran."

Obviously, even with the unfinished construction of the Iranian section of the North-South railway, the volume of traffic along the route and the interest in the project is growing. In 2019, 363,842 tons of cargo were transported (33% higher than in 2019) through the Astara terminal located on the western railway branch of the North-South international transport corridor.  For comparison, in 2018 this indicator was 263,976 tons.

In turn, a subsidiary company of Azerbaijan Railways CJSC, ADY Express LLC, has increased some types of cargo transportation transported in transit through Azerbaijan. First of all, this includes cargo transported through the North-South corridor.

In general, despite a number of difficulties, time has proved the feasibility of the North-South project. Over the past decades, it has remained a profitable project in terms of the advantages for fast and cheap delivery of containers and other types of cargo between South Asia and Europe. Indeed, time is the main factor proving the true value and significance of the North-South project.



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