Russian Railways Quits $1.3bn Iran Railway Project in Fear of U.S. Sanctions

State-run monopoly Russian Railways has pulled out from a $1.3 billion project for electrification of a railway line between Garmsar, in Iran and Ince Burun (Narrow Cape) in Turkey, Interfax reported.

The Russian company has given up the project under the pressure of U.S. sanctions imposed on Iran. The project envisaged the electrification of 495 km, including 203 km through mountainous terrain—the line, with 31 stations, expected to pass through 95 tunnels.

Furthermore, the railway line was designed to connect Turkey via Iran to Turkmenistan and Kazakhstan.

In July 2018, local news outlets in Iran had reported that Russian Railways began the 1.2 billion-euro electrification of the Garmsar-Ince Burun railway line in Iran.

According to the contract signed by Russian Railways CEO, Oleg Belozerov, and Iran’s Minister of Roads and Urban Development, Abbas Akhoundi, the Russian government had undertaken to provide 85% of the funding.

The Supreme Leader of the Islamic Republic, Ayatollah Seyyed Ali Khamenei, had permitted the remaining 15% of the credit needed in the project to come from the National Development Fund of Iran, Akhoundi said on July 2, 2018.

The Russian Construction engineering company RZD International LLC, a subsidiary of Russian Railways, was named as the main contractor in the project. As the Russian side has pulled out of the project under pressure of U.S. sanctions, the Islamic Republic cannot sue its Russian counterpart, Interfax reported.

Belozerov said at the time that the project would double the maximum speed on the link to 120 km (about 75 miles) per hour and raise its haulage capacity fourfold to ten million tons a year.

Iran and Russia have signed multiple contracts in recent years, but none of them have materialized so far.

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