GCC Railway Project: On the Right Track?

Author: Ali Noureddine
Edited by: Erik Prins

In 2009, the Gulf Cooperation Council (GCC) during its summit initially mandated the Gulf transport ministers to accelerate implementation of the GCC Railway. It based its decision on economic feasibility studies dating back to 2003, initiated at the GCC Summit that year. Despite its potential, further integrating the regional bloc, including commercial benefits and broader geopolitical objectives, various political and economic challenges have hindered its progress since then.

However, in 2023, for the first time in years, the GCC took serious steps to speed up the project. In October of that year, GCC transport ministers set up administrative, legal, and financial rules governing the GCC Railway Authority, tasked with managing the project. The GCC members also approved the Authority’s budget. They agreed on a completion deadline of December 2030 and ratified the project’s general agreement, outlining member states’ obligations and responsibilities.

In April 2024, Hafeet Rail announced it entered into the implementation phase of the project connecting Oman with the UAE as part of the GCC Railway network. The company has secured binding contracts through a UAE-Omani alliance involving companies from both nations, marking the realisation of linking the GCC countries by railway.

According to a project map from the GCC, the railway network will begin in Kuwait and extend to Dammam on Saudi Arabia’s eastern coast. From there, the network will split into two directions: one towards Bahrain and then Qatar via two sea bridges, and the other towards the southern Saudi coast, following the eastern shores of the Kingdom.

The two routes are planned to converge at Salwa Port on the border between Saudi Arabia and Qatar. From there, the network continues southward along the UAE coast, reaching Abu Dhabi, then extending southward into the desert towards al-Ain on the UAE-Oman border, and further on to Sohar and Muscat on the Gulf of Oman’s shores.

The entire route will span 2,117 km, facilitating the transportation of goods and passengers from Kuwait in the north to Muscat in the south. According to the GCC’s plan, passenger trains will travel at speeds up to 220 km/hour, while freight trains will operate at speeds ranging from 80 to 120 km/hour. The estimated total cost for completing the network could amount to approximately 15 billion US dollars, as projected by the GCC’s economy ministers.

Existing and planned railways in the Gulf region, including the GCC Railway stretching from Kuwait City to the Omani port town of Sohar. Sources: Etihad Rail, GCC website, Saudi Public Transport Authority

According to the project agreement, each GCC country will fund the construction within its own territory and will have the authority to decide whether private or government entities will build, operate, and invest in their railways. The bridge linking Saudi Arabia and Bahrain will be a joint venture between both countries, involving the private sector. While this part of the project has been in the planning phase for years, no specific investment commitments have been finalised yet.

This means that the GCC did not oblige member states to adopt a specific partnership or uniform investment model for railway management or construction. Instead, it granted each country’s local authorities the autonomy to manage investments according to their own regulations.

The GCC Railway Authority’s role will primarily involve receiving and coordinating work plans from member states, aligning schedules, ensuring the project adheres to unified technical specifications and standards, and guaranteeing the network’s completion within the agreed-upon deadline.

Once the network is operational, the GCC Railway Authority will coordinate passenger and freight transportation schedules across GCC countries. Local authorities will retain responsibility for maintaining and overseeing railway operations and receiving transit fees from network users. In any case, the agreement does not restrict any country from outsourcing this sector through public-private partnerships or even full privatisation.

For instance, the section between Sohar (Oman) and Abu Dhabi (UAE) has been entrusted to Hafeet Rail, which took its name from Jebel Hafeet, a mountain along the border between Oman and UAE. Hafeet Rail has been authorised to subcontract railway operations between the two countries to private firms.

It is worth noting that a significant section of the railway network within the GCC Railway project comprises local initiatives as part of each country’s railway plans, whether completed or in progress. These local projects have played a crucial role in advancing the broader GCC Railway initiative, which is evident when reviewing the project’s progress.

For instance, Saudi Arabia has completed a significant segment of its eastern coast railways, linking Ras al-Khair and Dammam over a stretch of about 200 km. This segment is actually part of Saudi Arabia’s local network, connecting it internally to cities like Riyadh, Jeddah, and Rabigh, and extending to the Jordanian border. This integration will facilitate a connection between GCC countries on the eastern Arabian Peninsula (Qatar, UAE, Oman, Kuwait) and the western and central regions of Saudi Arabia.

Similarly, the UAE has finalised its railway route towards the Saudi border as part of the UAE National Railway, which links all seven emirates from the Saudi border to Fujairah port in the east. This sets the stage for the UAE to integrate its portion of the GCC Railway project once the section linking Abu Dhabi to Sohar is completed, currently underway by Hafeet Rail.

Qatar already has a modern railway network meeting the GCC Railway project standards. To complete its involvement in the project, Qatar needs to connect its network to Dammam in Saudi Arabia via Salwa port. Bahrain’s part, with a light rail transit system in the planning stage, involves linking its network with Qatar and Saudi Arabia via sea bridges.

In November 2023, Bahrain and Qatar agreed to revive the Friendship Bridge project, which will link them by rail. Bahrain is already linked to Saudi Arabia via the King Fahd Causeway, which supports railway connectivity between the two countries by creating a new path alongside the existing bridge.

Lastly, Kuwait plans a modern railway network that will facilitate its connection to Saudi Arabia. Once the railway between Kuwait’s Nuwaiseeb port and Saudi Arabia’s al-Khafji region to the south is completed, this connection will be established. In June 2023, Kuwait and Saudi Arabia signed an agreement to enable this link, and adopted the results of a feasibility study in July 2024.

Hence, Saudi Arabia and the UAE have completed crucial segments of the regional railway network by finalising their internal networks that will eventually link GCC countries along the eastern Arabian Peninsula coast. The full connection will occur when Saudi Arabia and the UAE link their networks with those of neighbouring countries, similar to the ongoing project linking Abu Dhabi with Oman.

The Hafeet Rail Project, linking Abu Dhabi to Sohar, marks the initial phase of the GCC Railway project, having reached the contracting and implementation stage. It is set to become the first cross-border railway connection among the GCC states. The project’s estimated cost is approximately $3 billion, with the Hafeet Rail’s board of directors currently setting timelines for implementation, which will be conducted by Emirati and Omani contractors who have been awarded the project works.

It was clear that the authorities of the two countries insisted on keeping the ownership, management, and financing of the project in the hands of three Emirati and Omani companies. Mubadala Investment Company, the primary sovereign and investment fund for the oil-producing Emirate of Abu Dhabi, Oman Rail, an Omani public company; and Etihad Rail, an Emirati public company.

It is unsurprising that this segment of the GCC Railway project is the first to be implemented, given its clear economic viability and minimal political complexities. Trade figures underscore the substantial commercial link between the UAE and Oman, surpassing $111.1 billion in 2023 alone. The UAE was the destination for over 20% of Oman’s exports, while providing 40% of Oman’s imports. This robust economic relationship establishes the UAE as Oman’s foremost economic partner among all nations.

Upon completion of the project, Etihad Rail forecasts a 50% reduction in freight travel time between the UAE and Oman compared to current land transport methods, along with a 40% reduction in costs. The railway is expected to span over 303 km, stretching from Abu Dhabi towards al-Ain on the UAE-Oman border, and onward to Sohar on Oman’s shores. Connecting Sohar to Muscat remains the sole responsibility of Omani authorities.

Since 2003, when feasibility studies were commissioned, the Gulf railway project has been a focal point for GCC decision makers and economists due to its strategic and economic significance. Nevertheless, various political, financial, and economic factors over the past two decades have hindered its completion.

Following approval of the project at the 2009 GCC summit, the aftermath of the global economic crisis of 2008 caused delays in numerous infrastructure projects across the GCC region, including railways. GCC sovereign funds experienced significant losses, estimated between $450 billion and $600 billion, due to declines in the value of investment assets or their loss of creditworthiness during that economic downturn.

Financial systems in the GCC, like all global economies, faced liquidity crises that hindered their ability to finance mega projects. These challenges coincided with a substantial decline in global oil prices, crucial for Gulf economies. Consequently, GCC countries endured economic repercussions for several years before observing signs of a gradual recovery in global and GCC financial markets.

Subsequent economic obstacles emerged at other stages, such as in 2015 following the decline in global oil prices. That year, the combined budgets of GCC states recorded a deficit of nearly $160 billion, according to figures from Kamco Investment Company.

Annual revenues for oil-exporting countries in the Middle East and North Africa also dropped by approximately $390 billion compared to 2014, as estimated by the International Monetary Fund. These financial challenges resurfaced more severely between 2020 and 2021 due to the financial impact of the COVID-19 pandemic, which affected numerous strategic projects in the Gulf region.

Political obstacles also delayed the project. In 2014, Saudi Arabia, Bahrain, and the UAE withdrew their ambassadors from Qatar, citing Doha’s alleged interference in GCC states’ internal affairs, “posing threats to security and political stability.” The diplomatic rift stemmed from disagreements among GCC states on external matters, including their approach to issues like the Muslim Brotherhood and their stance on Egypt’s President Abdel Fattah al-Sisi following the ousting of elected President Mohamed Morsi.

In 2014, the three ambassadors returned to Doha following a GCC summit aimed at resetting relations between Qatar and its neighbours. However, tensions escalated dramatically in 2017 when these GCC states, along with Egypt and other allies, imposed a blockade on Qatar, cutting off land, sea, and air routes and severing diplomatic ties. This crisis persisted until 2021 when a “solidarity and stability” agreement was signed, leading to reconciliation and the resolution of the dispute.

Given the political and economic crises between 2009 and 2023, completing such an ambitious project in the GCC states seemed unlikely at the time.

Since 2023, there has been a resurgence of interest to push forward the GCC Railway project, and turn it into reality. In 2023, intra-regional trade among GCC countries was projected to exceed $107 billion annually, comprising around 9% of the GCC countries’ total foreign trade.

This marks a significant increase from less than $15 billion in 2002, gradually rising since 2003 alongside the establishment of a unified Customs Union among the Gulf states. With this rise in intra-GCC trade volume, the economic viability of the GCC Railway project, aimed at enhancing commercial shipping services between these nations, has become more apparent.

Some experts estimate that over 80% of intra-regional trade value within the GCC markets is conducted via land routes. The GCC Railway project is expected to reduce shipping costs significantly for a substantial portion of goods traded within the GCC market that currently rely on land transport. Moreover, it will foster greater economic integration among the GCC countries.

The industrial sectors, in particular, stand to gain from reduced production costs as more cost-effective transportation links are established across the GCC countries. This aligns with the Customs Union’s goal of eliminating trade barriers and facilitating a smoother flow of goods throughout the GCC nations to enhance economic integration. The GCC Railway project supports the economic transformation strategies of Saudi Arabia and the UAE, which include developing free economic zones to attract significant industrial projects.

Over the past decade, Qatar, Saudi Arabia, Kuwait, and Oman have focused on developing their tourism sectors as part of efforts to diversify their economies, following the UAE’s pioneering example since the 1990s. Thus, in 2024, international tourist spending across the GCC states is projected to reach $151.1 billion, marking an 11.6% increase from the previous year, according to the World Travel and Tourism Council.

This emphasis on tourism has underscored the significance of the GCC Railway project, which can lower transportation costs for GCC and international tourists travelling between various tourist destinations across the region. Saudi Arabia has been particularly successful in using trains for long-distance travel, as railway passenger numbers in 2023 increased by 55% compared to 2022, reaching 11.2 million passengers.

In this context, the GCC Railway project aligns with the unified GCC visa initiative set to be operational in 2025, enabling foreign tourists with residence permits or visas for one GCC country to travel freely across others. GCC tourists already benefit from seamless travel among GCC nations using a smart ID card for identity verification, eliminating the need for residence permits or visas. Part of the demand for the GCC Railway is anticipated from Gulf pilgrims making annual religious journeys to Mecca.

At this stage, the shared interests of all GCC states have aligned with the development of domestic railway transportation and freight service companies over the past two decades. This progress has made it feasible to revive the old GCC Railway project by establishing limited connections along the eastern coasts of the Arabian Peninsula.

Today, the project is more realistic, adaptable, and cost-effective compared to its proposal over two decades ago in 2003. The current economic stability in GCC countries has enabled them to invest their financial surpluses into such infrastructure projects.

Apart from local economic objectives and policies, the GCC Railway project integrates with several regional projects and strategic goals, serving the interests of GCC member states.

For instance, Iraq launched the “Development Road” project in July 2023, which aims to turn Iraq into a corridor for transporting goods and energy resources from Kuwait in the south to Turkey in the north, continuing to Europe. The project will rely on a comprehensive network of railways, oil and gas pipelines, and private sector initiatives to develop industrial cities, storage facilities, and transshipment centres along the corridor. The project feasibility lies in bridging Europe, a major industrial exporter, with the GCC states, a significant energy exporter.

Thus, the GCC Railway project is set to become an integral component of a trade route extending to the northern borders of the European Union via Iraq. This perspective clarifies the keen interest of all GCC states in supporting the Iraqi project and securing the necessary investments for its completion.

Moreover, this alignment underscores renewed European and Gulf interest in reviving discussions on trade liberalisation between the European Union and the GCC countries, a topic reintroduced in May 2024 after having been dormant since the 1980s. In essence, the Iraqi project has significantly enhanced the appeal and strategic importance of the GCC Railway project by aligning its goals towards linking the Gulf region with the European market.

Another strategic project that aligns with the GCC Railway project is the India-Middle East-Europe Economic Corridor (IMEC) project, initiated during the G20 summit in September 2022. This ambitious initiative aims to establish a commercial link between India and Europe, passing through a network of ports, railways, and logistics centres across the UAE, Saudi Arabia, and Israel.

While connecting the UAE to India and Israel to Europe currently primarily relies on maritime shipping infrastructure, the commercial link from UAE to Israel will heavily depend on land transportation, specifically through railways.

Thus, the GCC Railway project will play a pivotal role in establishing the necessary transportation infrastructure between the UAE and the eastern coast of Saudi Arabia. Saudi Arabia’s existing internal railway network facilitates the movement of goods up to the Jordanian border, making the GCC Railway an integral component of the broader IMEC project.

The latter will definitely require additional investments in storage and transshipment facilities along its route. The announcement of the IMEC project at the G20 meeting has revitalised interest in the GCC Railway project. Consequently, Saudi Arabia has shown increased commitment to facilitating the completion of the GCC Railway within the framework of the GCC.

At the moment, the IMEC project holds significant strategic sensitivity, particularly due to its connections with other issues such as Saudi Arabia’s normalisation efforts with Israel, the US-Saudi defence treaty, and Saudi Arabia’s role in Gaza following the ongoing aggression. These issues collectively form a comprehensive set of regional understandings that US foreign policy has been actively promoting since 2023.

Besides these strategic projects, the GCC Railway project also achieves significant goals related to collective Gulf security. This project will establish a sustainable trade corridor linking GCC markets directly to Muscat, and, in a later stage, the Omani ports of Duqm and Salalah, without needing to pass through the Strait of Hormuz.

This should reduce GCC countries’ exposure to potential future disruptions that could affect commercial supply lines within the GCC or in the Strait of Hormuz. In essence, the project will help diversify supply routes, thereby reducing dependence on Iranian-controlled areas within the GCC and the Strait of Hormuz.

For Saudi Arabia, the GCC Railway holds strategic significance by linking its strategic projects on the Red Sea shores with the ports of the UAE and Oman. These major Saudi projects include NEOM and the industrial clusters surrounding it, in addition to the resorts and tourist complexes being built there.

Through the GCC Railway project, Saudi Arabia will be able to connect these major projects to additional sea lanes that are not subject to the influence of the Houthis, who are currently demonstrating their capabilities through naval operations in the southern Red Sea.

Finally, despite the strong push to implement the GCC Railway project, several challenges could impede its progress in the near future. This will hinge on the GCC countries maintaining the current level of political stability among each other. Any resurgence of political tensions, similar to those in 2014 and 2017, could significantly hinder the project’s momentum.

Currently, there is concern that competition between the UAE and Saudi Arabia, particularly economic competition, may impact projects aimed at fostering economic integration within the GCC countries.