Iraq's 'Development Road' project has the potential to position the country as a key player in regional trade and energy transportation.
Ali Noureddine
This article was translated from Arabic to English
The Iraqi government has set forth an ambitious plan to transform Iraq into a regional hub for the transportation of goods and energy resources. The plan capitalizes on Iraq’s strategic location, which enables it to connect the Gulf states and Iran, major energy producers, with Turkiye, a crucial junction for the redistribution of energy resources to Europe.
Thus, this expansive Iraqi initiative aligns with Turkish President Recep Tayyip Erdogan’s aspirations for Ankara to assume a pivotal role in the oil and gas markets.
Simultaneously, Iraq will be able to connect the markets of India and East Asia, known for their production of various consumer goods, with Turkiye and Europe, where demand for these goods is high. This aspect of the Iraqi plan aligns with China’s “Belt and Road Initiative,” aimed at bolstering China’s international commercial relations through an extensive network of infrastructure projects.
Moreover, this development will enable the transportation of European goods in the opposite direction, catering to the consumption needs of Gulf countries.
However, the crux of the matter lies in the escalating international competition for infrastructure projects in Iraq since the Iraqi government’s unveiling of its strategic role in the next phase.
Currently, China, Turkiye, Qatar and Saudi Arabia are at the forefront of countries seeking to contribute to and invest in Iraq’s ambitious role.
Iran, meanwhile, is biding its time before rendering a verdict on the new Iraqi project as, although it has the potential to facilitate Iran’s trade with the rest of the world, it will also compete with an Iranian project with similar goals.
Good timing and favorable regional factors
This project will significantly bolster Iraq’s economic and geopolitical significance in the long run. Some analysts have even drawn parallels between the project’s anticipated role and the historical strategic and logistical significance of the Suez Canal, as both serve as crucial transit points.
In fact, while representatives from all other regional countries attended the conference held in Baghdad to announce this project, Egypt was conspicuously absent, raising concerns regarding how the Iraqi project competed with the role of the Suez Canal.
The Iraqi government’s choice of May 27, 2023, a the day to announce the project was strategic, as it coincided with the reconciliation between the Kingdom of Saudi Arabia and Iran earlier in the same month, resulting in the restoration of diplomatic ties between the two nations.
By capitalizing on the stability resulting from this regional settlement, Iraqi Prime Minister Mohammad Shia’ al-Sudani sought to foster a local Iraqi consensus on the new mega project. It should be noted that internal Iraqi political dynamics are often influenced by the positions and disagreements of regional parties, especially Iran and the Gulf states, each of which holds varying degrees of influence over Iraqi political forces.
Furthermore, al-Sudani made significant efforts to personally mediate and facilitate the Iranian-Saudi reconciliation, recognizing that the success of major strategic plans, particularly those positioning Iraq at the center of regional geopolitical equations, would be hindered by the ramifications of Iranian-Saudi tensions on the internal Iraqi political landscape. Al-Sudani acknowledges that Iran, in particular, wields the greatest influence over the political coalition that formed his government, known as the “coordinating framework.”
The Iraqi “Development Road” project
The Iraqi endeavor, named the “Development Road” project, aims to establish a transportation route for the movement of goods and energy resources from the south of the country to its north.
The term “road” here encompasses an extensive array of investments, including the development of railways and land transport infrastructure. The initiative also involves the expansion of the large Faw port in the country’s south and the establishment of new industrial and residential cities. Drawing a parallel to the concept of a dry canal, the government likens the project to signify the pivotal role of the track in connecting regions, similar to renowned water canals such as the Panama Canal and the Suez Canal.
The projected cost of the initiative is estimated at approximately $17 billion, with implementation scheduled between 2024 and 2028.
Out of this total, $10.5 billion has been allocated for constructing railway lines, while the Iraqi government has dedicated approximately $6.5 billion for constructing land roads along the designated path. The remaining components of the project, including industrial and residential cities, as well as energy storage and transmission centers, will rely on private sector initiatives that will leverage the connectivity provided by the land roads.
It is expected that the project will generate an annual revenue of around $4 billion for Iraq, derived from transit fees for goods transported in both directions, as well as fees and taxes resulting from industrial activities along the route. Moreover, the Iraqi government anticipates the creation of approximately 100,000 local job opportunities in the next phase. The total length of the route is projected to span approximately 1,200 km, commencing from the Faw port in the south and concluding at the Turkish border.
Despite the higher cost of land transport via railways compared to sea transport, the Iraqi authorities are determined to attract commercial traffic through the project by reducing the duration of commercial trips between East Asia and Europe by half.
For instance, a typical sea voyage from the Chinese port of Shanghai to the Dutch port of Rotterdam takes approximately 33 days. However, by resorting to land transport from China to the Pakistani port of Gwadar, then to the large port of Faw, and finally through the “Development Road” project to Europe, this period can be reduced to just 15 days.
The Iraqi government is also counting on the tourism sector, and aims to draw visitors from European countries and the Gulf region through railway trips. The Iraqi government’s current plans include the implementation of high-speed trains that can travel at speeds up to 300 kilometers per hour for individual transportation, as well as commercial trains traveling at a speed of 140 kilometers per hour.
Based on these plans, individual trains will be capable of crossing the entire route from northern to southern Iraq within four hours, while commercial trains will require eight hours to complete the journey.
One of the most significant aspects of the Iraqi project is its potential to serve as a route for the transfer of oil and liquefied gas produced in the Arab Gulf region to Europe through Turkiye, which is investing heavily in order to establish itself as a hub for the redistribution of energy resources to the European market.
It is worth noting that since 2022, Europe has increased its reliance on Qatari liquefied gas as an alternative to Russian gas following the outbreak of the war in Ukraine and the subsequent cutoff of Russian gas supplies to Europe.
These areas are expected to experience significant industrial growth, leveraging the ease of shipping goods, services and raw materials facilitated by the “Development Road” project. Iraq also expects to become a major commercial center for the oil and gas markets due to its capacity to purchase, store and sell these commodities to the European market in accordance with the specific demands of each country.
International competition to invest in Iraq
Numerous countries have recognized the significant investment opportunities presented by the new Iraq project, particularly for oil and gas producing nations seeking to enhance their petroleum export capabilities.
A mere three weeks after the announcement of the “Development Road” project, Qatar’s Emir Tamim bin Hamad paid an official visit to Iraq during which he signed several investment agreements and memorandums of cooperation, underscoring Qatar’s commitment to invest $5 billion in various sectors.
The majority of Qatari investment memorandums of understanding with Iraq focused on projects complementing the “Development Road” project and revolved primarily around the energy sector, including plans for liquefied gas supply, crude oil refining and re-export ventures. Anticipated completion for all these projects is set for 2028, coinciding with the conclusion of the “Development Road” project.
For its part, the Kingdom of Saudi Arabia promptly joined the competition with Qatar in this field. Concurrently with the unveiling of the “Development Road” project, a summit between Saudi Arabia and Iraq was hosted in Jeddah and saw the signing of agreements and memorandums of understanding pertaining to the oil, gas and transportation sectors. Moreover, an investment partnership was formed to facilitate logistical services projects for oil companies.
Also announced during the summit was the establishment of the “Saudi Iraqi Company,” which will serve as an arm of the Saudi Public Investment Fund focusing on investing in Iraq’s infrastructure, mining and real estate development sectors. Clearly, these investments align with the objectives of the “Development Road” project, particularly in terms of creating the necessary infrastructure to facilitate energy transportation throughout Iraq.
Regarding China, non-Arab countries have shown significant interest in this project, aligning with China’s “Belt and Road” initiative. It also streamlines the process of exporting Chinese goods to Europe. In light of this, the Chinese ambassador to Iraq, Cui Wei, promptly visited al-Sudani within a week of the project’s announcement. The purpose was to express China’s interest in exploring investment opportunities in the “Development Road” project and offering technical advice to the Iraqi government.
Shortly after this meeting, high-ranking officials from Iraq and China convened a series of discussions to explore the potential development of an “Oil-for-Infrastructure” mechanism. This would enable Chinese companies to invest in infrastructure related to the “Development Road” project, while China would benefit from Iraqi oil in return.
Turkiye, on the other hand, became the first regional country to show support and interest in investing in this project. Ankara recognizes the long-term benefits of accessing energy resources from the Gulf via Iraq and subsequently exporting them to Europe, which is why President Recep Tayyip Erdogan treated the Iraqi project as if it were a Turkish initiative. Following a meeting with al-Sudani, he assigned his ministers to collaborate with their Iraqi counterparts and work toward the successful completion of the project.
Notably absent from the picture is Iran, the country with the most influence on the situation within Iraq. Iran has its own special project that aims to connect its southern shores overlooking the Gulf of Oman with the Caspian Sea, establishing a trade route with goals similar to those of the Iraqi project.
Consequently, Iran may perceive the Iraqi project as potential threat to its interests, and could interfere by leveraging its influence over Iraq and its ability to sway Shiite political parties. It is worth noting that Iran could benefit from the Iraqi project by exporting oil and liquefied gas to Turkiye and Europe. However, this is contingent on the lifting of sanctions on Tehran and reaching a new understanding regarding the Iranian nuclear program.