China's Silk Road Freight Transportation Links With Iran, Kazakhstan and Central Asia Region

9 Dec 2015

Iran has been forging closer ties with China in recent years, particularly to facilitate Chinese significant plans to resurrect the ‘Silk Road’. This route will re-connect Asia to Europe and Africa to support freight logistics via land, air and sea, opening up further growth and trade for the regions. More importantly for China perhaps, the Silk Road will forge important geopolitical changes, counter-balancing US economic dominance through the dollar. Trade in local currencies could become the norm.

Deputy Economy Minister Massoud Karbasian believes that Iran could benefit from increased trade capacity to the extent of 12 million tons of traded goods every year if the Chinese vision for a Silk Road Economic Belt and Maritime Silk Road for freight shipping are realised.

Chinese President Xi Jinping is calling the venture "One Belt, One Road".  He intends to grow trade capacity for the region to more than a massive $2.5 trillion annually over the coming decade.  His administration in Beijing claim to have more than 50 countries supporting the project. This is fuelled with an initial $40 billion investment and an additional gold-related pot which could raise $16 billion more for infrastructure.   

Despite the astonishing sums involved, China has to find more markets for its burgeoning industries.  That requires building infrastructure to support the required transport logistics across Central and Southeast Asia, the Persian Gulf, the Middle East and Europe. Karbasian announced that the Chinese government have allocated a budget for around $900 billion specifically for the project.  As western tensions with Iran cease and European sanctions are lifted, the west too will want to engage in infrastructure investment to compete.

The anticipated route will include international transportation via an overland transport route passing through: Kazakhstan, Kyrgyzstan, Iran, Turkey, Greece and Austria.  The container shipping routes will link Chinese ports with Pakistan and the Persian Gulf, which includes Chabahar Port. The Nile and Kenya open up Antwerp in Belgium, from where European markets become available.

The Silk Road ambition is a staggering aspiration, estimated to reach 4.4 billion people (63% of the global population). Potential exporters and business owners seeking to look to the Silk Road for opportunities should be aware that the combined wealth of the countries involved in the transnational route is estimated in an Albawaba article to be $2.1 trillion. This amounts to almost a third (29%) of the world’s gross domestic products, which, puts the investment in perspective.

Iran Increasingly Playing A Role On The Global Stage 

Iran is increasingly acknowledged as a strategic partner for emerging superpowers. With India’s investment Chabahar close to fruition, a delegation of Chinese transportation officials has toured the Iranian Port of Shahid Rajaee in the Persian Gulf last month to assess its potential for investment. Kazakhs are looking into Shahid Rajaee and Bandar Abbas ports

Minister of Industry, Mine and Trade Mohammad Reza Netmatzadeh said Iran aims to invest up to $8 billion over the next six years to improve and expand its railway infrastructure;  this includes a rail network which connects it to Turkmenistan, opening up Kazakhstan, Turkey and Europe.

Iran is perfectly situated for the re-emerging Silk Road, originally established more than 2,100 years ago.  Karbasian, head of Iran’s Customs Administration (IRICA), said the country is neighbour to 15 countries, including seven land-locked nations. “These neighbors cannot ignore Iran’s role in transit,” he said.

In antiquity, Iran exported foodstuffs and other special products to China while tea, ginger, and fruits were traded to Iran for more than a thousand years, according to some historians.

Geopolitical importance

There is no doubting Iran’s regional importance or aspirations.  In April, China accepted Iran as a founding member of the Asian Infrastructure Investment Bank (AIIB), a potential rival to the US influenced World Bank and the Asian Development Bank.

Iran is also set to join the Shanghai Cooperation Organization led by China and Russia.

Freight shipping via the Maritime Silk Road, may end the European monopoly on international shipping once Iran’s shipping lines’ sanctions are eased. Currently, over 250 shipping companies in China account for a paltry share of the trade. (For the latest on sanctions easing, go here.)

Kazakhstan Silky Smooth Rail Cargo Arrival

June saw a huge leap forward in progress for the master-plan.  Kazakh President Nursultan Nazarbayev and his Turkmen counterpart Gurbanguly Berdimuhamedow ceremonially completed the Turkmenistan-Kazakhstan rail link, tightening its final bolts, for the first Silk Road rail freight entering Iran from Kazakhstan.  A cargo of 45 freight wagons, crossed the Incha-Burun border with Turkmenistan into Iran.

Cooperation between Iran, Turkmenistan and Kazakhstan and other countries for rail transportation and international freight transport has been discussed in a few joint sessions, making the Kazakh rail freight possible.  International logistics and partner development plans have been key to talks.

The Incha-Burun-Bandar Abbas line is key to success of the new Silk Road route according to head of the Northeast Railway 2 Mohammad Reza Qorbani.  This 926Km railway linking Iran to Turkmenistan and Kazakhstan was opened last year.

Central Asia Making Silk Road Progress

Iran and Central Asian partners are also pushing on to establish an integrated rail freight network to link Asia, the Persian Gulf, Africa and Europe, in keeping with China’s and their interests.

Central Asian countries will carry their bulk and container cargoes from the Incha-Burun border into Iran's northern Golestan province, then onto the southern Iranian port city ofBandar Abbas.  The head of Kazakhstan’s national railway company Askar Mamin has already visited Iran's Shahid Rajaee and Bandar Abbas ports.

The Head of the Islamic Republic of Iran Railways (IRIR), Abbas Nazari said that Kazakh transportation partners are interested in investing in Bandar Shahid Rajaee, in particular for constructing silos for storing wheat crops and facilitate sea freight.  A unified transit tariff is being negotiated between Iran, Kazakhstan and Turkmenistan, according to Nazari, which will make Caspian Sea logistics much simpler.