According to Islamic Republic News Agency, as cited by Iran Daily, Iran, Russia and Azerbaijan have signed an agreement on the development of a railway link between Iran and Azerbaijan. The project will be financed by local and international banks operating in the three countries. The memorandum of understanding (MoU) was signed on March 13, 2009 in St Petersburg, Russia. Under the contract signed by the three countries, a joint company will be established to execute the construction phase of a railroad project. The project is part of a larger venture to construct a north-south corridor, which begins with Indian ports such as Mumbai on the Arabian Sea. It will help to transit goods from southern Asia to northern Europe and Scandinavia. The report notes that Iran's rail freight sector is falling behind road and this can be seen as the positive effort by the government to shift customer focus from road to rail transport.

It is believed the new railway link will prove beneficial in enhancing trade activities between the countries and will offer better access for freight transported by rail.

In our latest Iran Freight Transport Report, it is concluded that total freight traffic will grow by an average of 3.8% per annum in the 2009-2013 forecast period. Our forecast reflects the interplay of negative and positive factors. On the negative side, it is clear that necessary investments in new pipelines, shipping and port and rail capacity have simply not been made. Also weighing down on the forecast is the fact that the oil price boom is over for the next couple of years, reducing foreign currency earnings. High political risk is another negative factor, with further potential sanctions still a possibility. There are, of course, positives. One is global demand for Iran’s natural gas and petrochemicals, much of which will need to be pumped to coastal terminals and shipped by liquefied natural gas (LNG) tankers. New investment and export deals with China underline this potential. The general growth of the Iranian economy and trade, although moderate, will also provide support.

By transport modes, road-haulage growth has lagged behind GDP in recent years, reflecting the poor quality of the highway network. Our forecast provides for a catching-up process, as overland trade with Iran’s immediate neighbours begins to grow. For 2009-2013, we predict annual average road-haulage volume growth of 4.1%, ahead of GDP. Rail freight has lagged behind the general growth of the Iranian economy, but here we are less optimistic over the ‘catch-up’ potential. Despite much talk of building a new rail-based north-south transport corridor linking Iran to its regional neighbours, we take the view that there will not be significant increases in capacity during the forecast period. Rail-freight growth will average an unimpressive 2.0% per annum. Airfreight will grow at an annual average of 3.3%, constrained by an ageing aircraft fleet and the effect of US sanctions. For the core freight modes of pipelines and shipping we see the global recession of 2009-2010 taking its toll. Pipeline throughput will average 4.3% annual growth, with shipping at 4.0%, both ahead of GDP growth by a small margin. Iran sits at the bottom end of the freight rating for markets in the Middle East and Africa (MEA) region. Given the country’s abundance of natural resources, this is a reflection on the domestic political situation, regional uncertainties and lack of a track record in providing investment opportunities in the transport sector.

The total value of transport and communications GDP will rise to US$35.7bn in nominal terms by 2013, representing 6.8% of Iran’s GDP. Projections based on employment figures compiled for the ILO in 1996 suggest that Iran’s transport and communications sector employed 3.41mn people, or 20.5% of the labour force, in 2008.