Return of Iranian Ports in the Post Sanction Era
Iranian economy in a glance
Islamic Republic of Iran is an outstanding figure in terms of geo-economics and geo-politics. As the largest nation in Middle East and Central Asia, Iran is an economic power in terms of international trade, industry and agriculture, energy and natural resources, science and technology, tourism and logistics. In spite of all unprecedented global pressures in the past three decades, Iran is the land of resources and opportunities. Among the great features of Iranian economy, we can point to:
- 80 million population with progressive improvement of human development ( HDI reported to be 0.749 in 2014)
- highly developed human capitals in form of young educated workforce.
- second global place in terms of natural gas reservoirs (34,020 billion Cubic meters) and third in terms of production (1.626 trillion cubic meters in 2013)[2,3]
- Fourth global place in terms of proven oil reservoir (157,530 million barrels) and fifth in terms of production (3.4 million barrels per day of petroleum and other liquids in 2014) [2,4]
- 7 percent share of mineral reserves in the world (Aluminum, Copper, Zinc, Magnesium, Chrome, Lead, Sulfur, talc, Gypsum, Phosphates , cement, silica, Gold, Uranium, Titanium, Gem Stones, and many more)[5,6]
- Significant industrial production in more than 40 industries including metals and alloys, automotive, petrochemicals, petroleum refinery, defense, Chemicals, Food and drinks, Pharmaceutical and Healthcare, construction, transport, tourism, retail, Shipbuilding, Power, telecommunication, electronics, and so on.
- Great agricultural production (classified among the top 40 countries in 12 categories out of 13 categories of agricultural products) with an estimate of 3 billion USD agricultural production in 2015.[7,8]
- Foreign trade including 32,495 million USD non-oil exports, 53,652 million USD Petroleum exports and 51,560 million USD imports[4,9]
Many of mentioned figures, though still significant in stature, reflect the induced contraction in Iranian economy within the duration of globally-enforced economic sanctions. Indeed, the real capacities and capabilities of Iranian economy are far beyond this projection. This is the main reason for the rush of global economic players to Iranian markets in the advent of post-sanctions era. As appreciated by specialists and researchers, opening of Iran’s mega-market to foreign investment can provide new investment opportunities with estimated value of 600-800 billion USD within the next decade [10, 11, and 12].
It is a fact that Iran’s role in global economy cannot be overlooked: the world needs Iran as much as Iran needs the world. The time has come for the world to deal with Iran as a global player and regional partner that is willing to contribute to peace, stability and development. In this paper we review the status of Iranian ports sector and the benefits that it can offer to world trade. We will focus more on container ports that are capable of serving various supply chains.
Iran: the potential crossroad of trade
Iran is geographically located in the intersection of Middle East, and Central and South Asia. It borders 16 countries by land, water and sea. In this sense, Iran is the second state in terms of number of neighbor countries. Iran has 890 kilometers of coastline in her north that covers the entire southern bottom of Caspian Sea, and 4900 Kilometers of coastline in her south that covers the entire northern expanse of the Oman Sea and Persian Gulf. Oman Sea is connected to the Indian Ocean, the most strategic ocean in the world. Associated with a total 2.5 billion population in her littoral states, Indian Ocean provides access to emerging and booming economies of new millennium and their markets.
Exhibit 1 – Map of some proposed International North-South Transport Corridor passing Iranian Territory
Accordingly Indian Ocean has evolved into the greatest maritime highway for transport of energy and trade that attracts half of container ships, two third of oil tankers, and one third of bulk carriers of the world. The linkage of Persian Gulf and Sea of Oman to Indian Ocean provides the connection of Central Asia and Middle East to the global maritime transport network.
Indeed all of the northern, western and eastern neighbors of Iran can be accounted as her potential hinterlands: Afghanistan, Turkmenistan, Azerbaijan, Armenia, NaKhjavan, and Kazakhstan are landlocked and do not have access to open seas. There are also landlocked states that are not direct neighbors of Iran, but border her neighbor states: these include Tajikistan, Kyrgyzstan, and Uzbekistan.
In spite of access to open seas, states like Iraq, Pakistan, and Syria not only have serious issues in terms of availability of port facilities and infrastructure, but also face serious national security issues. As the most politically stable and logistically capable country in the region, Iran is the best choice to serve the trade to these states.
Iran is also the best route for transit of trade flows from South Asia (and Far East) to states like Georgia, Turkey, westbound Russia, Ukraine, and even further to the EU states. The potential transit capability is usually recognized as proposed Transport Corridor concepts. Iran is also incorporated in several other proposed corridors (as shown in exhibit1), including North-South Corridor (INSTC), Europe-Caucasus-Asia Corridor (TRACECA), and Silk Road Corridor. In 2014, the total GDP and population of the 17 hinterland states of Iranian ports in Eurasia and Central Asia have been 3,600 billion USD and 547 million people respectively.
In the south, Iran borders with six countries of (Persian) Gulf Council, and Iraq by sea. These are emerging markets and Iran not only has good ties with them but also has substantial trades with UAE, and Iraq . The Persian Gulf Council states are mostly oil-driven economies with total GDP of 1,650 billion USD and aggregate population of 50 million people (excluding Iraq).
Iranian Ports: the natural choice
Shanghai International Shipping Institute has forecasted that within the coming ten years, the demand for container ports in Persian Gulf will grow (by a 65.44% increase) to 49.4 million TEU. According to this report, we can estimate that the transshipment /gateway traffic ratio will rise from 77.36% in 2015 to 80.55% in 2025. This is in disagreement with the natural tendency of shipping and supply chains towards increase of gateway traffic in ports. Indeed, aside from some few instances, ports are normally driven by gateway traffic all around the world, and a/m ratio is usually near 43% (accounting 30% share for transshipment in total port traffic). This natural tendency has been extravagantly breached in Persian Gulf. Instead of directing the supply chains to gateway ports to minimize the cost, time, and unwanted externalities (including the pollution, and natural resources depletion) in delivery of goods to customers in the markets, the industry has switched into transshipment of goods from remote ports on the west side of Hormuz Strait at extra-heavy costs.
For better understanding, let’s consider two scenarios: in the first scenario, a shipping line sends a 12,000 TEU ship to Jebel Ali in her Middle East Service, and a big part of cargo is transshipped to Bandar Abbas by two smaller 4,500 TEU Ships. In the second scenario, the shipping line sends the 12,000 TEU ship directly to Bandar Abbas. By comparing of costs and externalities of these scenarios, we find that scenario no.1 will require and entail consumption of 1134.2 tons of more fuel, emission of 3534.3 tons of CO2, several days of delay in delivery of goods to customers, thousands of dollars of additional cost per delivery of each container, and hundreds of thousands of dollars for deployment of ships per voyage. This is absolute diseconomy in management of supply chains. These costs and externalities could be pragmatically avoided if the 12,000 TEU vessel was sent directly to Bandar Abbas according to scenario no.2. Unfortunately what has been put into practice for decades is scenario one.
Presently, the Iranian ports sector is capable of channeling one-third of the prevailing gateway container demand in Persian Gulf region. Among the 22 container ports in Persian Gulf and Sea of Oman, Iran has 6 globally renowned ports namely Chabahar, Shahid Rajaee Port, Bushehr Port, Assaluyeh Port, Imam Khomeini Port, and Khoramshahr. These ports are connected to a network of about 85893 Kms of roads, 10407 Kms of railways, 60 airports, and supported by great transport fleets that can channel and distribute the cargo to inbound and peripheral outbound markets [17, and 18]. Moreover on the northern borders, Iran has three major ports that cover the entire southern coastline of Caspian Sea: these are Anzali, Amirabad, and Noshahr. These ports can act as forelands for other Caspian Sea ports (i.e. Baku, Astrakhan, Aktau, Turkmenbashi, etc.). Table 2 indicates the capabilities of Iranian Ports and Maritime Sector within March 2009 and March 2015.
Exhibit 2 – MSC Beatice, 13,800 TEU ULCV, berthed in Shahid Rajaee Port Complex
Many of Iranian ports are involved in development and capacity extension plans: Shahid Rajaee Port is meant to extend her capacity to 8 million TEU and 150 million tons in few years. Chabahar port has absorbed foreign investment to serve the Southern Asia- Central Asia trade in very near future. Bushehr Port is developing a 600 thousand TEU container terminal in Negin Island, and there are similar developments in BIK, Khoramshahr, Anzali, Amirabad, and Noshahr. Moreover, many infrastructure development projects are getting completed to enhance the connectivity in Iranian transport network: these consist of 11,584 kilometers of roads, 586 kilometers of freeways, and 4,371 Kilometers of railways. Many of these projects are meant to serve as parts of transport corridors that cross Iran, including Qazvin-Rasht-Astara railways, Arak-Kermanshah-Khosravi railways, Anzali-Rasht-Ramsar Freeway, Tabriz-Bazargan Freeway, Astara-Rezvanshahr highway, and many more.
The Iranian territory includes Strait of Hormuz. The strait not only accounts for passage of 35 percent of oil traded by sea, but also facilitates the crossing of around 85,500 vessels per year. This provides best opportunities for development of maritime business clusters in Iranian territory. The cluster may include such businesses as bunkering, maritime insurance, ship repair, salvage, ship chandlery, and many more businesses. The best instance of such businesses is bunkering: according to vicinity to maritime routes, economic supply of oil products, and availability of infrastructure and equipment, Iran is among the best choices to build a stable bunkering market.
Iran has been working actively to enhance her trade and business environment. Many of Iranian ports have been transformed into free zones and special economic zones. Several exemptions, discounts, and facilitations are in place to support the transit from Iranian land. Iranian state is an influential member of many economic blocs such as Economic Cooperation Organization (ECO), GECF and OPEC. Iran is also invited to join Eurasian Economic Union (EAEU), Shanghai Cooperation Organization (SCO), and bidding to join WTO as well.
In a nutshell, Iran is moving speedily to gain her merited position as a global participant in economy, international trade, and logistics in the post-sanction era. This can be a turning point in the history of Middle East. Expanded from the heart of the Heartland to the edge of the Rim-lands, Iran is the natural choice of ports and terminals in Middle East. This preference is strongly substantiated by political stability, industrial development, human development, size of accessible markets, transport facilitation, and opportunities for cooperation and investment. The time has come for the world and Iran to recognize the interests of one and another and organize their joint efforts to consolidate them.
 ) Iran has 6,000 kilometers of land (and river) borders with Pakistan, Afghanistan, Turkmenistan, Azerbaijan, Armenia, Nakhjavan, Turkey and Iraq. The sea borders include 657 kilometers with Turkmenistan, Azerbaijan, Kazakhstan, and Russia in Caspian Sea, and 2043 kilometers of sea borders with Iraq, Kuwait, Saudi Arabia, Qatar, Bahrain, United Arab Emirates, and Oman.
 )Vessel sizes are selected due to the expected cascading effects in near future.
 ) Fuel consumption rates and Carbon dioxide emissions are taken from M.Sisson, and I.M. Vincent Andersen[19, and 20].
 ) Other southern Iranian ports are Qeshm, Bandar Lengeh, Kish, Assaluyeh, Kharg, Mahshahr, Abadan, Lavan, Gonaveh. There are some other promising and/or developing ports in terms of container throughput like Souza port and Jask port. In addition, there are around 100 small and local ports in Iranian coastlines.
 )The Iranian national maritime fleet includes a total capacity of 106429 TEU container, 1338946 million gross tonnage in bulk, and 404225 gross tonnage in general cargo in IRISL. The hauliers fleet consists of 423,000 lorries and trucks. The national railways fleet consists of 444 locomotives and more than 22000 railcars in operations.
- UNDP, Human Development Report 2014, 1 UN Plaza, New York, NY 10017, USA.
- Iran International Energy Data and Information,US Energy Information Administration, June 19, 2015.
- Akhundzada,E.; Özkan,S.; Iran Energy Outlook, Caspian Strategy Institute, December 2014.
- OPEC , Annual Statistical Bulletin, 2015.
- Mobbs ,P.M.; 2010 Minerals Yearbook: Iran; U.S. Geological Survey; August 2012
- FAO, Statistical Yearbook- 2013
- Business Monitor International, Iran Agribusiness Report, May 2015.
- Trade Promotion of Iran Organization; Iran Trade Statistics in Brief (Year 2014).
- Fitch,A.; Post-Sanctions Iran Could Be A Turkey-Size Win for Investors. Wall Street Journal, March 12, 2014.
- DeRosa,D.A. , Hufbauer,G.C.; (U.S.) National Foreign Trade Council. 21st November 2008.
- Solomon,J. ;Oil, Auto Companies Make Plans to Invest in Iran if Sanctions Ease; Wall Street Journal;1rst July 2014.
- Iranian Ports and Maritime Organization Website(http://ift.tt/1SRZaQN )
- World Bank; Gross Domestic Product of Nations in 2014 (online WB databank).
- World Population by Country : Elaboration of data by United Nations, Department of Economic and Social Affairs, Population Division. World Population Prospects: The 2012 Revision. (Medium-fertility variant) (http://ift.tt/gqnKf8)
- Shanghai International Development Report, Global Port Development Report, 2nd quarter 2014.
- Yearbook of Iranian Roads Maintenance and Transport Organization ,IFY 1393.
- Iranian Railways Yearbook ,IFY 1392.
- Vincent Andersen,I.M.; Emissions from Ship Machinery (notes from lectures); Technical University of Denmark; April 2012.
- Sisson,M.; Vessel Size vs. Cost; North Carolina Maritime Strategy; May 2012.
- PMO Yearbooks between IFYs 1388-1393 (with some modifications due to enquiries from resources in PMO).
- Construction & Development of Transportation Infrastructures Company, Iranian Ministry of Roads and Urban Development.
Note : This technical paper has been published on Port Technology International in September 2015, and it is available from this link from PTI’s website (bit.ly/1QYNev0). The author specially thanks Messrs. J.A.A. Khan, and R.Joy from Port Technology International.