Economy & Politico

good news iran: Implications of Iran’s membership in SCO for the transport sector

Full membership of Iran in Shanghai Cooperation Organization (SCO) was approved by the coalition’s members on 17 September 2021 during the bloc’s summit in Tajikistan’s Dushanbe after almost 15 years when Iran started its membership as observer in 2005.

Iran is seeking ways to get out of Western US-led unilateralism. Hence joining a strong Eastern coalition implicitly means challenging US hegemony. According to the spokesman of Iran Foreign Ministry, Saeed Khatibzadeh, it is considered as “a major step toward enhanced ties with neighbors and an important impetus for (our) Asia-centered foreign policy.”

Iran membership comes after it had signed a 25-year comprehensive cooperation agreement with China in March and on-going negotiations to revive the nuclear deal (JCPOA) in 2015.

What would Shanghai membership entail for Iran transport sector?

In port and maritime sector, Iran considers Shanghai membership as an opportunity based on its role in trade. Currently the eastern ports of Hormozgan Province in Iran are having a 64 percent increase in non-oil transit within last 6 months (amounting to 29,667 tons), and the total oil and non-oil freight exports amounts to 17000 tons that means a 38 percent increase compared to the last year, according to the head of Shahid Bahonar Port and Maritime Organization. Similarly, 17000 tons freights have been transited to the Eurasian countries from Anzali Port that means a 93 percent increase compared to the last year, stated head of Gilan Ports and Maritime Organization.

Similarly in the road sector, according to Javad Hedayati, the General Director of international transport and transit bureau at Road Maintenance and Transport Organization (RMTO), the trucks transited 240,000 freights amounting to more than 5 million tons within last 7 months. It is estimated to increase 8.5 to 9 million tons by the end of year. The increase is 132 percent in transit fleet and 128 percent in the volumes transited. Hedayati added that after the outbreak of covid-19 pandemic, the fare in maritime sector increased 2.5 to 3 times. So, the demand for the road transport in trade has increased due to the lower price. In last 2 months, 6 trial transits have passed from Pakistan, Emirate, and southern parts of Persian Gulf to the northern countries including Russia, Azerbaijan, and Turkey.

Basically, Iran has immense interests in regional transactions which are eased by treaties particularly in its transport sector. The interests are mainly rooted in the country’s geopolitical location amid East to West and North to South corridors. Clearly Shanghai Cooperation Organization (SCO) is not the first of its kind, as Iran already enjoys membership in ECO, TRACECA, and North-South Transport Corridor (NSTC) which comprise most of the SCO’s member countries. However, joining SCO opens a window for Iran to use the potentials of an Eastern bloc. But to what extent?

Trade and Transport Binary

Iran’s gains in SCO’s membership are dependent more on the trade dynamics than the transport infrastructures, asserted Amin Taraffo, head of Commercialization and Associations Bureau at Transport Department in Iran’s Ministry of Transport and Urban Development. Despite geopolitical advantages, Iran has a meager share of regional trade with the member countries of SCO. The reasons behind this dismal performance determine how far Iran would benefit from its full membership in SCO. Iran is gripping with multidimensional challenges that by now has deterred its claimed commercial gains to be fully met. This includes limitations in international financial transactions, low investment attractions, and international sanctions. So, transit and transport sectors are affected by limited demands and increased transaction costs.

However, to this end, Iran is already seeking ways to circumvent trade barriers. Speaking to Mehdi Safari, Iran’s Deputy Foreign Minister for Economic Diplomacy, at the sideline of Iran-Kyrgyzstan bilateral meeting on 13 November 2021, he mentioned that “Iran is considering a banking transaction that does not necessarily use SWIFT for the exchanges and is specifically devised for transactions within Central Asian region. Additionally, Iran uses barter system for its trade exchanges in the region”.

Recently 60 Iranian’s Parliamentarians addressed the President via a declaration in which they planned for gaining a 2.5 percent share from Shanghai gross products. In doing so, they have proposed for immediate mission to the Transport Ministry for construction of Chabahar-Zahedan railroad which links Iran to the Central Asian Countries, cited from Mehr News Agency on 17 October 2021. This is proposed while “Iran has already a shorter rail route to the Central Asia namely Bandar Abbas-Sarakhs”, added Taraffo. So, good existing infrastructural rail network in Iran from south to north is currently considered an advantage that Iran can use as a way to the Central Asian countries and countries within the SCO region. Particularly, Iran’s Southern ports, namely the ocean port of Chabahar, are critical in providing access for the land-locked Central Asian countries to the high seas.

Taking maximum advantage from membership in regional treaties requires active and constructive role of Iran in the region based on the imperatives of its national interests. Conforming to financial system integrity is an important initiative that would ease these interactions. Furthermore, strengthening the potentials of multimodal transport in Iran, both technically and professionally, is also another facilitating measure that can prove positive.

Considering Chinese ambition in advancing its transport and economic corridors (including the Belt and Road Initiative (BRI) and China-Pakistan Economic Corridor (CPEC)) as well as its regional and international trade, Iran should take various policies and measures into account for taking advantage of its potentials from its geopolitical position.

The Shanghai Cooperation Organization (SCO) is a Eurasian political, economic, and security alliance. SCO is the world’s largest regional organization in geographic scope and population, covering three-fifths of the Eurasian continent, 40 percent of the world population, and more than 20 percent of global GDP.

By Samaneh Afshari

PR officer at Iran’s Ministry of Transport and Urban Development

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