OBOR INITIATIVE AND IRAN’S TRANSIT CHALLENGES

 

Written by: Ali Shami

 

What is OBOR?

“One Belt, one Road “is a development strategy and framework proposed by Chinese paramount leader Xi Jinping in 2013. OBOR comprises a land-based “silk road economic belt” and an oceangoing “maritime silk road “. The “Belt” is an infrastructure network of transport, energy and communication projects stretching from Xian in China through Central Asia to Moscow, Rotterdam and Venice. The “Road” is its maritime equivalent, a network of planned ports and other coastal infrastructure from South and Southeast Asia to East Africa and Northern Mediterranean Sea.    

 

IRAN’S TRANSIT CHALLENGES:

 

  • Rail:

The initiative is consisting of several countries from Asia to Europe connecting through railway system which is the core transport mode in the strategy.

There is a connection from Dushanbe to Tehran and Istanbul in the initiative however it will support only part of transit volume to Europe and Asia-Central Asia cargoes will be mainly shifted to China-Kazakhstan direct connection from Horgos border since Iran railway will not have considerable share in the route.   

Currently Iran railway system is covering around 10 percent of total transit volume passing Iran territory and still requires investment to expand and integrate north-south railway.

  • ROAD:

Asia-Central Asia business is having a remarkable share in Iran’s sea-road corridor however implementation of initiative through railway connections which is expected to reduce transit time to 16 days in comparison to 45 days via sea-road corridor may influence Iran’s transit volume by road.

The other focal point is operational costs. High local tariffs in road transport via Iran acts as a negative factor which makes shippers to consider competitive options with lower cost and initiative provides opportunity to shippers.  

 

  • SEA:

“21TH century maritime silk road “is routing from South and Southeast Asia to East Africa and Mediterranean Sea without any call to Iran ports. Besides China is investing on Gwadar port at Pakistan which will play dominant role in China-Pakistan economic corridor in OBOR initiative along with Karachi port.

According to initiative major investments on railway connections have targeted 16 days transit time and hit ocean freight rates simultaneously since sea-road corridor with 45 days transit time and higher cost may not be beneficial anymore.

 

  • Conclusion:

Signs of initiative’s development have been appeared in new services announced by big forwarders. KN Eurasia Express is a good example. Alternative transport routes are expanding rapidly with the aim of cargo carriage in minimum possible time and lowest cost since geographical, geopolitical and natural advantages without investments in infrastructure, developing port capacities and providing competitive values to traders will not be enough in being pioneer in future.