STIMULATION OR … SIMULATION?

Moscow recently hosted another round of talks on the implementation of the international transport corridor (ITC) project, North-South. The talks were joined by representatives of railway departments from Azerbaijan, Russia and Iran. Issues pertaining to the construction of the Iranian segment of the Kazvin - Resht - Astara (Iran) - Azerbaijan Border route were discussed, along with the construction of the Azerbaijan section of the Astara (Azerbaijan) - Iranian Border corridor. At the end of the meeting, railway officials of the three countries decided to set up national working groups to implement the North-South project.

Promising project 

The agreement on the international transport corridor (ITC) project, North-South was reached between Russia, India and Iran in 2000 and became effective on 16 May 2002. It envisages that the three countries will maintain transit transport communication from the Baltic to the Arabian sea and Indian ports (through the territory of the Russian Federation, Caspian Sea, Iran and the Persian Gulf). This corridor could reduce the time required for the transportation of cargo from northern Europe to southern Asia by at least 10 days: the trip by sea through the Suez Canal takes 35 days, while via the North-South line will take around 20-25 days. The ITC is designed for the transit of 15-20 million tons of cargo a year, but optimists say its capacity could be increased to 100 million tons. So far, the achievements are much more modest: about 5 million tons of cargo a year, although in prospect is an increase to 20 million tons.

Azerbaijan joined the North-South project in 2005. Belarus, Kazakhstan, Oman, Syria, Tajikistan and Armenia are already involved in the ITC. Next in line are Bulgaria, Kyrgyzstan, Turkey and Ukraine. Interest in the project is also being expressed by Georgia, Lithuania and Poland. In other words, the project is not only developing geographically, its quality is also improving. The transit promises large and stable revenues, therefore there are a number of parties interested in participating. The Russian railways alone hope to obtain access to 8 million tons of cargo, amounting to $330 million - which is achievable: for Russia and the CIS this corridor means railway access to the ports of the Persian Gulf.

Although the decision to set up the North-South project was reached seven years ago and the first cargo train was dispatched from St. Petersburg to the Caspian port of Olya on 20 July 2006, it still hasn't reached its designed capacity. Furthermore, there seems to be no stable demand for such transits in the market, though it would appear that nothing can impede the progress of the project.

To get some answers, let's first of all point out that the construction of the ITC requires $600 million. Russia has already taken steps to establish this corridor. Last summer the Caspian port of Olya was connected to a system of Russian railways (a line from Yandyki station) and now Iranian goods can reach northern Europe (and travel back) through the quickest route. However, this capacity is well below that needed to ensure the desired flow along the corridor, because the port of Olya is not sufficiently developed. Strategically, there is a need not for one or two, but for many corridors. Therefore, the Kazvin-Resht-Astara line must serve as the basis for the transport corridor. So the ball is in the Azerbaijanis' and Iranians' court.

Tehran in no hurry 

The Azerbaijan component of the North-South project, together with the reconstruction of the railway, is estimated at $20 million. We need to build about 8.5 km of railway. Most resources are required for the Iranian component of the project, where the railway is to be 350-km long. In fact, a significant part of this line will pass through mountains, which makes construction operations a lot more difficult.

Why Iran? The North-South ITC is to cover all components of infrastructure - the cargo flow proper, information channels, financial and other flows; and incorporate them into a single system. All the individual sections of the corridor - from St. Petersburg to Astrakhan, from Astrakhan to Iranian ports on the Caspian, from the Caspian to Gulf ports, and from Gulf ports to Indian ones - already exist, but they do not form a single transport system. From the list of corridor components it is clear that Iran has the central role. It also goes without saying that such an immense scope of work cannot by carried out on the territory of one country overnight, which preconditions the slow progress of work in Iran. However, Azerbaijan and Russia believe that Iran, to put it mildly, is clearly delaying its contribution to the project. In all fairness, Iran has repeatedly sent its suggestions on the project to Azerbaijan and Russia. Working groups of the three countries have held several meetings, but the issue remains unresolved. It has reached a stage where Azerbaijani and Russian officials have issued some harshly-worded statements regarding Iran's deliberations. For instance, quite recently Deputy Transport Minister Musa Panahov emphasized that Azerbaijan was not pleased with the present approach to the solution of problems and that "Russia is also expressing its discontent with the slow progress made by Iranian partners". "Iran's activity in the North-South project is not noticeable," Panahov said (Novosti-Azerbaijan).

The enormous scope of work is not the only factor. Experts believe that North-South has "tremendous political importance". Of course, Azerbaijan and Russia are interested in reaffirming their positions as major transport states. At the same time, many transporters will think twice before taking their cargo through Iran, which the United States has included in the "axis of evil". Another aspect to reckon with is the unresolved status of the Caspian. 

There are also a number of purely economic factors. Russia does not yet have enough cargo container ships. Iranian transport terminals are far from perfect, which means they may simply be unable to cope with the overwhelming flow of cargo. It is curious that despite this significant shortcoming, Iranian investors in the ITC, in May of this year, demanded that Russia step up its efforts to bring in more cargo. It was indicated at the same time that Iranian private business circles have already expressed readiness to invest in the construction of the cargo terminal in the port of Olya. Again, Russia is ready to pay whatever it costs for cargo transportation, so it is clearly not Russia that is the stumbling block. Many experts think that the flow of goods along the ITC is explained by the lack of a single rate from Iranian ports to St. Petersburg, as well as a lack of standard containers and reverse cargo flow from Iran to Russia.

And it is absolutely clear that the commencement of the North-South project construction does not depend on Azerbaijan. Why? Because our country is not the engine to this project, for the simple reason that our country accommodates only a small section of the railway. In other words, it is the opinions of Russia and Iran that matter. They are much more interested in sending cargo in all available directions. With Russia things are pretty clear: it does not want to depend on Europe and America and is trying to secure greater economic independence. It is open to a whole number of inter-regional projects.

Iran is a different story, and the USA can use the "Iraqi" option with it. This scares off potential investors in the North-South project. At the same time, Iran itself has not been very cooperative of late. The country has seen various upheavals over the recent period. As a result, countries participating in the promising ITC project view Iran as an extremely unstable partner. And this is when, in addition to politics, other aspects, such as economic factors, are taking centre-stage. Is Iran capable of guaranteeing timely and stable transit of cargoes? Finally, won't Iran face international economic sanctions because of its nuclear programmes? Can the USA play a part? Unfortunately, answers to these questions do not exist yet. In fact, all these issues delay the construction of inter-regional railway communication because, as Azerbaijan's experience shows, projects of such magnitude simply have no right to exist in economically and politically unstable regions. Does this mean that the implementation of the North-South project is in jeopardy? Not at all.

"We will go north!" 

The only obstacle the project has overcome is the signing of a number of inter-governmental agreements between Caspian littoral countries, as well as India, on the establishment of this corridor and the creation of suitable conditions within these countries to ensure that cargo flows along the route as fast as possible. This is important because goods and cargo have to cross several state borders along the way.

But let us return to the Iranian factor, particularly as Iran is putting a spoke into the project's wheels. 

It is no secret today that the transport corridor northwards is as valuable for Iran as air. As a result of sustained economic isolation, Iran's access to modern technology has been seriously restricted. The mutual geographical locations of Russia and Iran, and coordination of their action on the transportation of oil and gas to international markets, are important factors for the stability of the energy balance in the world. Russian-Iranian economic relations today are being built with the aim of opening up prospects for cooperation for both countries - in fact, not only in the export of raw materials but also in the development of high technology. These include nuclear energy, military and technical cooperation, etc. There is tremendous potential for developing Russian-Iranian cooperation in the area of IT - in cartography and the use of satellite images to resolve different socioeconomic problems. Therefore, the position of European transport organizations is very important for Iran. With a "positive" signal Iran can continue its corridors to Russian ports on the Caspian. This will enable Iran to move from the export of raw materials to transport and processing activities, which will help secure a new phase of economic independence. Russia, for its part, will provide its enterprises with guaranteed orders. Therefore, Iran's interest in the ITC does exist and goes beyond the commercial and transit spheres. The country has got to achieve technological independence through the north. Iran has already technologically challenged the world and is waiting for Russia's assistance. This means that sooner or later, contrary to the opinion of the USA and even the nuclear programme, the North-South ITC will be built and implemented, particularly as an annual increase of 6-8 per cent in cargo flowing through the port of Olya is no longer in anyone's interests. However, a more dynamic development of the ITC requires legislative support - business requires improved conditions for work and the creation of a modern transport infrastructure. It is good that the parties are interested in resolving the problems…

P.S. Russia says that by launching the North-South corridor, it would revive the famous Iranian transit route. The only thing left to do is to find customers and cargo which can be delivered from Asia to Europe in a matter of 10 days. While earlier goods were mainly transported through the Suez Canal, now caravans pass directly through Iran, then by ferry across the Caspian to the container terminal of Olya. Then, given the endless national railway network, cargo can be delivered to both Moscow and northern or southern Europe. Transport companies can save an average of $50 million a year, while ports earn by processing containers. Russian transport companies see local exporters as the main customers. They take metal, cellulose and chemical raw materials to Asia. On the other hand, India, with its famous tea, can also become a leader in cargo transportation. Indian merchants are waiting in the wings for the corridor to open. Russian transport companies are therefore quite optimistic. In any case, the volume of transit along the Olya-Yandyki line is expected to reach 35-40 million tons a year.