Russian Railways Withdraws from Iranian Railway Project Due to Sanctions Fear
On April 2, Russian Railways (RZD) announced that it had ceased ongoing implementation of the Garmsar-Incheh Borun railway project in Iran, confirming speculation its withdrawal from February 2020. The project envisaged the electrification of 495 km railway between Iran (Garmsar) and Iran’s Turkish border crossing (Incheh Borun). Although RZD refrained from offering a reason for stalling the project, it is speculated that the decision is to avoid U.S. sanctions targeting companies involved in Iran’s construction sector. There have also been some roadblocks to the project over cost and pricing disputes between RZD and its local counterpart, Iran Railways.
The $1.3 billion Garmsar-Ince Burun project was initiated in 2017. The railway electrification also fell under the auspice of a $5 billion loan package provided by the Russian government to Tehran for a number of infrastructure projects, as listed below. It remains to be seen if these other projects are also halted amid sanctions concerns:
- Incheh Borun-Garmsar railway electrification project
- Zahedan-Birjand Railway
- The Gotvand Hydroelectric Power Plant
- Ramin Gas-Fired Power Plant
The Incheh Borun-Garmsar railway electrification project has been discussed in the context of expanded Russian-Iranian transport infrastructure by authorities on both sides. Observers also note that Iran’s Russian-assisted pivot toward developing rail infrastructure was part of an effort to offset the significant decline in its maritime trade activities in the Caspian due to sanctions. According to the Financial Tribune, Tehran’s maritime non-petroleum trade in the Caspian Sea declined by 50% due to reservations among other littoral states (Kazakhstan, Turkmenistan, Azerbaijan, Russia) about trading with Iran in the current sanctions environment.