Will new railway project increase Azerbaijan's trade?

Turkey, Iran, and Pakistan recently unveiled the plans to revive the Istanbul-Tehran-Islamabad (ITI) railway, a project launched in 2009, Report informs, citing foreign media.

Despite several test runs, the railway link had not become fully operational.

At the Economic Cooperation Organisation transport and communications ministers meeting held virtually last month, Turkish Transport Minister Adil Karaismailoglu announced that the project would be relaunched this year. After finalizing tariff rates and a timetable, the service will initially provide container transport, while the freight services on conventional wagons will be added in due course.

Once fully functional, the railway can boost trade in other countries, including Afghanistan, Azerbaijan, and the five Central Asian states, under the Economic Cooperation Organisation, a development, business, and investment platform founded in 1985 by the leaders of Iran, Turkey, and Pakistan. The train can cover the 6,500km Pakistan to Turkey route in just 11 1/2 days, compared to 45 days by sea.

Approved by Pakistan's top economic body in August 2020, the project will cost US$6.8 billion, with China providing 90% of the financing. It is expected to be completed by the end of 2026.

Despite its enormous benefits for the region, the ITI railway project has been held up for more than a decade. One of the biggest hurdles has been carrying out business transactions with Iran after economic sanctions were imposed. Pakistani traders from the Quetta Chamber of Commerce even suggested a barter arrangement or using banks exempt from financial transactions restrictions, but this never worked out.

Second, due to insufficient infrastructure, only cargo train journeys were tried out even though the route has been recognized as an international corridor by the United Nations. According to the previous Pakistani railway minister, Ghulam Ahmed Bilour, a passenger service will be considered once the cargo train service is fully operational.

Finally, Pakistani train connections needed a standard upgrade to connect with international lines. Pakistan's railway will connect with the ITI rail route via Quetta in the southwestern province of Balochistan. The Quetta-Taftan railway track, which will be used for the ITI train, was built a century ago and badly needed upgrading.

Last August, Pakistan's railway minister announced that a feasibility study for the proposed upgrade had been completed, and 112 billion Pakistani rupees (US$694 million) would be spent on repairs. This process will have to be completed quickly for the ITI train to run on schedule.

The glitches and delays confronting the service are reminiscent of the Regional Cooperation for Development Highway project between the same three countries. The highway was their first attempt to boost trade through road and rail links under the Regional Cooperation for Development platform, set up in 1964.

The ITI railway is attractive to Iran as it can help stimulate the country's economy battered by US sanctions. Lukasz Przybyszewski, West Asia analyst for the Asia Research Centre at Warsaw's War Studies Academy, noted that "for Tehran, this is an attractive alternative trade route because the ECO countries trade in local currencies," adding that "in times of crisis and war, such alternative land trade routes are precious and profitable."

China has also wanted to establish train links with Turkey for a long time. On December 4, an export train from Turkey started for China and arrived in Xian in Shaanxi province on December 19, becoming the first train from Turkey to China. The train followed the circuitous Caspian International Transit Route via the Baku-Tbilisi-Kars railway. In comparison, the ITI route is much less complicated. Connecting Beijing to both Iran and Turkey via Pakistan can become an intrinsic part of China's Belt and Road Initiative. However, this will come to pass if Islamabad can boost its rail infrastructure.