by Mrs. Size Gu, Mrs. Yitong Li and Mr. Jiacheng Huang•Published on March 25, 2024

Photo’s source: https://www.aa.com.tr/en/middle-east/turkiye-iraq-development-road-project-enhancing-regional-connectivity-trade/2993555

 

As an alternative to the traditional transit routes, Iraq’s Development Road project aims to create an Iraqi transborder transportation network, connecting the Persian Gulf with Türkiye. This network would enhance Iraq’s geopolitical status as a trade corridor and provide financial returns, reducing the state’s reliance on hydrocarbons. However, the project faces obstacles, including challenges of financing and implementation, widespread corruption, the potential for insecurity and instability in Iraq, and the fact that rival transborder projects in the region mean countries may work against its success.

Project of the Development Road

The basis of this project is linked with the Al-Faw Port project. This is one of the important projects implemented by the Iraqi government to improve the country’s infrastructure and promote economic development. Located in southern Iraq, close to the Persian Gulf, and serving as a crucial channel connecting the Persian Gulf to the Mediterranean Sea, the port project is expected to require an investment of up to $1.2 billion. Overall, this project includes the construction of a new port capable of accommodating large vessels, complete logistics facilities, and related infrastructure. The port’s annual throughput is expected to reach 12 million tons. Upon completion, the aim of the Al-Faw Port project is to enhance Iraq’s port transportation capabilities, reduce logistics costs, further promote the country’s economic development, economic exchange and cooperation with neighboring countries, such as Türkiye, an important neighbor of Iraq. Therefore, the economic cooperation between the two countries has always been a concern.

Complementarily, as designed, this Development Road project consists of a 1,190-kilometer (approximately 740-mile) trucking road and a dual rail line for passenger and freight trains. It begins at the Port of Faw, traverses ten governorates, and ends at Faysh Khabur on the border between Iraq and Türkiye, before connecting to Türkiye’s rail and road network. By 2028, at the end of the first phase of the project, the freight train’s capacity is expected to reach 3.5 million containers and 22 million tons of bulk cargo per year. Ten years later, it is projected that it will increase to 7.5 million containers and 33 million tons of cargo, and by 2050, at the end of the second phase, it will reach 40 million tons of cargo. For the passenger train, the initial capacity of the high-speed train is expected to accommodate 13.8 million passengers per year.

Development Road Project History

Initially, at the end of May 2023, Iraq launched a $17 billion infrastructure project, whose main aim was to strengthen regional cooperation. Iraqi Prime Minister Mohammed Shia al-Sudani announced the project at a one-day conference in Baghdad attended by officials from the Gulf Cooperation Council (GCC), Türkiye, Iran, Syria, and Jordan. The project, called the Development Road, was meant to connect Asia and Europe.

As such, the project starts at the Grand Faw Port in the Gulf of Iraq and ends at the port of Mersin in Türkiye, where it will enter the European continent. It will span 1,200 kilometers of rail, highway, pipeline and road infrastructure. Therefore, as an alternative to the heavily congested Suez Canal, it will provide a direct travel route from the Gulf to Türkiye.

In late August 2023, the trade ministers of the two countries met to discuss bilateral economic and trade relations and to place the Road to Development project on the agenda. After meeting with Turkish Trade Minister Omer Bolat and his large business delegation on August 29, 2023, Iraqi Prime Minister Al-Sudani said, “We are pleased with Türkiye’s seriousness in the Road to Development project, as Turkish companies have great potential to realize Iraq’s development and play an important role in our infrastructure projects.”

Port Project’s Impact on the Economic Cooperation between Iraq and Türkiye

1. Geopolitical Aspects

The Al-Faw Port project, being in a strategically important region, offers an opportunity for Iraq and Türkiye to strengthen their coordination and cooperation in regional affairs. The project depicts the influence of both countries on the international stage and contributes to regional peace and stability.

2. Infrastructure Construction

As one of Iraq’s key infrastructure projects, the Al-Faw Port project will require a significant amount of infrastructure development, including roads, railways, and power supply. The construction of these facilities will improve Iraq’s overall transportation capacity and reduce logistics costs, creating favorable conditions for the country’s economic development. Türkiye, as an important participant in the project, will also benefit by enhancing its infrastructure.

3. Trade

With the completion of the Al-Faw Port project, Iraq’s port transportation capacity will be greatly enhanced, facilitating trade between the two countries. Iraq’s rich oil, natural gas, and agricultural resources will be transported more efficiently to Türkiye and Europe through the Al-Faw Port. Conversely, Turkish goods and services will also find it easier to access the Iraqi market, bringing more business opportunities and profits to companies in both countries.

4. Investment Cooperation

The implementation of the Al-Faw Port project will create more investment opportunities for Iraq and Türkiye. Thus, the improved port and logistics facilities will attract domestic and international investors, promoting cooperation in areas such as port logistics, warehousing, and processing. Additionally, the project will facilitate technological, human, and managerial expertise exchange between the two countries, enhancing overall competitiveness.

Challenges and Strategies during the Implementation of the Al-Faw Port Project

1. Funding Issues

The Al-Faw Port project requires an investment of $1.2 billion, posing a significant funding challenge. As such, ensuring the smooth progress of the project while addressing the funding issue is crucial.

On one hand, the Iraqi government can actively seek support from international financial institutions, such as the World Bank and the Development Bank, to obtain low-interest loans or grants. On the other hand, it can attract domestic and international investors to participate in the project investment, adopting Public-Private Partnership (PPP) models and sharing investment risks and returns with partners.

Also, the UAE and Qatar, both oil and gas majors, are expected to provide strong financial support for the project. Other financing options are also being considered, including loans from European banks, oil payments, and Türkiye’s own investments.

2. Technical and Management Issues

The Al-Faw Port project demands high levels of technology and management. Ensuring the project’s effectiveness and achieving the expected results is key to its success through, firstly, the import of advanced technology and management experience, strengthened cooperation and exchange with foreign enterprises and academic institutions, and secondly, by strengthening talent training, selecting outstanding personnel, and improving the level of domestic project management.

3. Geopolitical Risks

Given the project’s location in the strategically sensitive Middle East region, geopolitical risks are a concern. Ensuring regional peace and stability during the project’s implementation is vital. It is necessary to strengthen communication and coordination with regional countries to jointly maintain peace and stability, and fully consider the interests and concerns of neighboring countries during project implementation to minimize the project’s impact on the regional political landscape.

Also, the Al-Faw Port/Iraq-Türkiye Corridor not only strengthens Iraq’s ties with neighboring Türkiye, but also deepens its engagement with the wider region. This underscores its geopolitical importance. By providing a vital linking bridge between Iraq and Türkiye, this project has fostered closer economic and political cooperation between the two countries. This strengthened partnership contributes to the broader stability and security of the Middle East region, fostering mutual trust and cooperation between the two sides.

In addition, the corridor is expected to be integrated into broader regional initiatives, such as the Belt and Road Initiative, thereby enhancing Iraq’s geopolitical significance. As a participant in the Belt and Road Initiative, Iraq will benefit from closer ties, infrastructure development and investment opportunities. This will not only enhance Iraq’s economic prospects, but also its diplomatic standing in the international arena. This will enable it to play a more important role in regional affairs.

In general, since the Al-Faw Port project has significant implications for economic cooperation between Iraq and Türkiye, it is expected to enhance cooperation in infrastructure construction, trade, and investment, and promote regional economic development. However, challenges related to funding, technology, and geopolitical risks may arise during implementation. To ensure the smooth progress of the project, all parties must work together to address these challenges and promote the successful implementation of the project.

Development Road Project Significance

1. Regional Connectivity through Türkiye

As indicated before, the route for the entire Development Road Project will be an alternative to the heavily congested Suez Canal, providing a direct route from the Gulf to Türkiye, thus linking Türkiye with Basra, Baghdad and Mosul in Iraq. It will also facilitate the overall passage from Iraq to Türkiye, shortening the distance over which goods and people can be transported.

The first stage is planned to last five years, and at the end of the first stage, 3.5 million tons of cargo are expected to be transported along this route. At the end of the second phase, which is being built in three subsidiary stages, the volume of goods transported is expected to increase to 7.5 million tons. According to official Iraqi government sources, construction was delayed and will begin in 2025 and continue until 2050.

Before, President Erdoğan expressed Türkiye’s determination to cooperate on the project after his March 21, 2023 meeting with the Iraqi Prime Minister. Speaking at a joint press conference, President Erdoğan said, “We know that other brotherly countries are also very interested in this project, which will strengthen regional cooperation, promote our trade and consolidate our social relations.”

In the past, bilateral trade between the two countries reached $24.2 billion in 2022 and was expected to grow further, as both countries were willing to expand their cooperation through the Development Road project.

2. Gateway to Europe

Since the Iraqi territory has endured a decade-long conflict, many of its road and rail networks are in poor condition, increasing trade costs and hindering Iraq’s integration into regional and global markets. As a result, during Sultani’s visit to Ankara on March 21, 2023, Turkish President Recep Tayyip Erdogan said the project would help open Iraq to Europe and the world, aiding Iraq’s trade objectives.

When completed, the project will be the shortest route connecting the Gulf to Europe. As the highway project passes through Türkiye, other Gulf countries, as well as Jordan and Iran, will also be connected to Europe.

3. Türkiye as an Energy Hub

Overall, on one hand, Iraq is a country rich in oil and gas reserves, but it has encountered problems in the transportation and marketing of its resources because of the maritime boundary problem with Kuwait.

The Umm Qasr Port, located in the city of Umm Qasr, is Iraq’s only deep-water port. Crude oil and goods pass through the port, but it is heavily congested and faces other problems, including the fact that the width of the inlet to the port is too small, blocking access to the waters of the Gulf. Consequently, the highway project offers an attractive alternative.

On the other hand, Türkiye has already played a crucial role in transporting energy resources from the Caucasus and Russia to energy-hungry European markets. Now, through this highway, it will serve as a transit point for Gulf energy shipments to Europe, connecting Iraq to international markets by land. Ultimately, it will provide a low-cost route not only for Iraqi oil and gas, but also for Iranian and Qatari oil and gas.

Moreover, Türkiye already has oil and gas pipelines and transmission lines passing through the region. The Iraq-Türkiye Crude Oil Pipeline, which transports oil produced in Kirkuk, Iraq (locally administered by the Kurdistan Regional Government (KRG)), to Ceyhan, Türkiye, and the Eastern Anatolia Gas Trunk Line Pipeline, which transports Iranian natural gas to Türkiye, are two projects initiated by Türkiye that have now been completed.

However, this Iraqi project has not been operational since March 25, 2023, after the International Chamber of Commerce (ICC) took into account the arbitration rules of the Iraqi federal government that claimed the move was illegal. The resumption of Iraqi Kurdish oil exports through the Turkish port of Ceyhan was also on the agenda at a recent high-level meeting on August 29, 2023.

Through the new project, the government of Iraq envisages the construction of high-speed trains on this route, connecting local industrial centers and energy pipelines to facilitate energy trade.

Potential Obstacles on the Road to Development

If the Development Road has been seen by Iraq’s leaders as a panacea for the country’s many problems, it is these very problems that may contribute to hindering or preventing the project’s implementation. Among them, there are inefficiency and corruption issues within government bodies, which impede implementation of Iraqi megaprojects and hijack the large sums of money required for their financing. A second potential problem is insecurity and political instability, which may not only hinder completion of the venture, but also its attractiveness for customers and investors. And third, there is significant geoeconomic and geopolitical competition over regional trade connectivity projects, so that some countries either oppose the Development Road or remain unsupportive of it.

Since the idea of transforming borders into connecting points between countries and continents has flourished in recent years, there will be constant monitoring of this project’s future progress, in the hope of realizing the strategic value of this pathway.

China’s Participation in the Construction of the Al-Faw Port and the Development Road Project

China’s Belt and Road Initiative had won wide recognition around the world. China, with its strong capacity and rich experience in infrastructure development, is an ideal partner for Iraq in the implementation of the “Road to Development” program.

According to Turkish authorities, the country is willing to strengthen cooperation with China in infrastructure development. They are negotiating with the Chinese side on the financing of several new railroad lines, while also inviting Japan to provide financing. Ozel also called at the forum for Türkiye to further strengthen connectivity along its “Middle Corridor” in the face of new transportation corridor projects. The latter is in deep cooperation with the Belt and Road Initiative. Still, Türkiye has a limited contribution to the project. According to a study by the Carnegie Endowment for International Peace, Beijing’s investment in Türkiye through the Belt and Road Initiative amounted to about $4 billion (RM 18.757 billion), or just 1.3 percent of the total.

Conclusion

Overall, the Al-Faw Port/Iraq-Türkiye project is important for promoting regional integration, economic growth and geopolitical stability. The construction of this corridor not only provides an important link between Iraq and Türkiye, but also brings many benefits and opportunities to the region as a whole. Moreover, it is not only an important step towards regional economic integration and development, but also contributes to the promotion of regional peace and stability. By strengthening trade links, fostering bilateral relations and promoting prosperity and development in the wider region, the project makes an important contribution to the sustainable development of the region.

Taking these factors into account, although the Al-Faw Port/Iraq-Türkiye project is expected to play a positive role in regional connectivity and economic development, its feasibility and difficulty of implementation still face significant challenges. Therefore, there is a need to strengthen communication and coordination among all parties in the planning and implementation of the project and to find more sustainable and robust solutions to ensure the long-term success and continued development of the project.

 

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