Could railways remake land+sea logistics of the Middle East?

There aren’t many negatives that one can say about transporting freight by train in context of sustainability, carbon emissions and impact on the environment.?After all, an average freight train can carry the same load as 76 heavy goods vehicles, meaning operating costs are much lower and CO2 emissions per shipment are reduced by 76%.

The issue of distance and crossing of national borders is negligeable. After all, the China-Europe transcontinental freight trains cover 6,800 miles (11,000 km) across territories of 5 countries before the EU's border in Poland, and a few more countries within Europe as well. Coordination of railway transport along the China-Europe trade lane brought the countries closer together, enabled technical and logistical collaboration, and facilitated new international trade options that were uneconomical before.

Permit system for new connections works very well, and so does the access slot coordination between national rail managers. On the infrastructure side, switching between rail gauges is not a problem, as efficient dry ports on the China-Kazakhstan and Belarus-Poland borders can swap a typical 50 car block train within 2 hours. All in all, while more expensive than sending cargo by ships, sending the rail freight over a contiguous landmass, instead of circuitous route by seas and canals, proved to be faster, cleaner and more sustainable.

Developments on the Arabian Peninsula

There are plenty of railway projects throughout the region over the last few years. Examples include the Gulf Cooperation Council (GCC) area which has seen unprecedented development across its transport network. The network connects key four ports in the UAE, as well as logistics hubs, and comprises of 593 bridges and crossings, 6 tunnels, and a fleet of 38 locomotives, linking all seven emirates of the UAE. Similarly, Saudi Arabia made significant investments in railway infrastructure connecting major ports with the hinterland.

Of all new construction projects critical to freight, the most important is the one connecting Qatar with Saudi Arabia. In fact, we are talking about a line connecting GCC countries end to end. The Gulf Railway covers 2,177 km. The project, expected to cost US$250 billion, was originally scheduled to be completed by 2023, but 2027 looks more realistic.

What will be possible once the rail connections are in place?

Let’s use an imaginary importer/exporter in United Arab Emirates trading with their partners in Germany. Today, they would rely exclusively on seafreight and airfreight. For simplicity sake, say that they use Hamburg (Germany) as the nearest port in Europe. The freight will travel about 7,000 miles (about 11,000 km) port-to-port. A similar move over land would cover 4,000 miles (6,500 km) crossing into Europe in Istanbul and connecting with E.U.’s Orient/East Med TEN-T transport corridor. That’s a substantial difference in distance and significantly reduced time in transit. Would rail freight option be available to our Abu Dhabi-based trader?

The map below shows the state of the rail connectivity across the region. Using publicly available announcements of plans and announcements of specific projects, I created a map including existing and future links (in white dotted lines) to help my trader to decide. All these links reflect real cargo flows, both imports and exports, bulk and containerized. For this reason alone, many links run from the ports of each country into their hinterland, rather than all the way to the borders allowing the freight trains to easily cross over to other nations.

Micro view - Dubai to/from Germany

Setting off from Jebel Ali (Dubai), the freight train would cross into Saudi Arabia at Al Ghuwaifat. Connection of the UAE network with the Saudi Arabia network creates two options.

One is to continue north, along the coast, toward Kuwait. The high capacity freight line already connects ports of Danmam and Ras Al Khair. Beyond this point, GCC proposed extending the rail to Al Khafji (Saudi Arabia)/Nuwaiseb (Kuwait), while Kuwait had begun construction of a 111-km line from Nuwaiseb to Kuwait City, but at this point there is no contiguous rail link.

The other option is to continue along the Saudi South-North line running north-east toward its terminus at Al Haditha on the border with Jordan. Here, our rail freight would have to be re-loaded onto tracks and transferred across Jordan to the border with Israel at the Jordan River Crossing (Sheikh Hussein Bridge). In Israel, 20 km from the border, there lies the terminus of a standard gauge line connecting to port of Haifa, but a better option would be to utilize connections from the port of Beirut (Lebanon) or Mersin (Turkey) to leverage Ro-Ro transport freight connecting those ports to Gioia Tauro (Italy), a major seafreight and intermodal freight hub for MSC connected to the E.U. Scandinavian-Mediterranean TEN-T corridor.

The obvious “rail connectivity” problem is in Jordan. Not only the country lacks proper infrastructure, but it also requires that freight crossing Jordan is re-loaded into Jordanian containers. The existing Jordan’s [narrow gauge] rail connection runs south-north connecting port of Aqaba and border with Syria. For a contiguous east-west rail connection, a brand new standard gauge line would need to be built connecting Al Haditha (Saudi Arabia)/Al Oman (Jordan) with Jordan River Crossing (Sheikh Hussein Bridge) to enable operation of a typical 1,500-meter train with a 30 tonnes axle load capable of speeds up to120 km/h. Interestingly, the cross-Jordan link between Israel and Saudi Arabia has been floated by Israel’s Foreign Minister Yisrael Katz (since replaced by Gabi Ashkenazi). Such link could be a game changer not only for our UAE trader, but also for the whole region. However, ongoing military conflicts render this option highly unlikely.

But the Beirut port connection is another story. Since the tragic explosion affected port of Beirut, MSC doubled up on helping with the recovery and maintained presence in the port. If Lebanon could join the railway networks of their neighbours, the trade could flow through either Ro-Ro port connecting with either ends of the TEN-T network.

Also, connectivity to the Turkish border and then to the major Turkish port of Mersin would work equally well.

Macro view – regional trade

If you analyze the trade volumes, you realize that countries of this region don’t really trade that much among themselves. They are much more likely to import and export to far flung places, which makes the seafreight and airfreight their natural choice of transport, but at the cost of long lead times or high logistics costs. Consider what an integrated network could do for all countries connected by reliable rail freight service. It could spur development of more active region-wide economy. It is easy to imagine net new growth in trade and opportunities to bring logistics, services and manufacturing jobs to cities serviced by the trains.

On the eastern end of our connection, beyond Jebel Ali (Dubai), Dubai is already developing line to another port in Fujairah. Next door, Oman announced building rail connection from Sohar port to connect with the Saudi network.

I previously mentioned Kuwait, another economy that could benefit from the east-west trade lane. Kuwait's investment in railway could turn it a major transshipment hub to provide land-only bridge to Europe through Baghdad (Iraq), but also land-only bridge to China via Iran. The Kuwait-Iraq connection would require new tracks being laid toward Jordan (announced) and upgrade of the line to Turkey.

Another natural railway corridor could link ports of western Saudi Arabia (Jeddah, Yanbu) to the ports of Mediterranean coast. There is a business case here, as Jeddah-Amman (Jordan) connection via Medina already exists, but it is oriented toward passenger traffic. However, just north of Jeddah lies the port of Yanbu, a key Saudi gateway for Saudi oil shipments to Jordan via port of Aqaba. From Aqaba, the imported oil products are trucked 300 km north towards the industrial region of Amman. All that generates high logistics cost. Why not send all those oil products by train instead of by ships? More economical, safer and environmentally friendly.

The north-south connectivity could lead to expansion of an interesting new trade lane stretching from the Middle East to Scandinavia. How would this work? Currently, ports of Gdansk and Gdynia (Poland) are working on faster rail connectivity to the Black Sea port of Yuzhny (Ukraine) near Odessa through Kyiv, connecting onward with the Ro-Ro service to ports in Turkiye. From here, existing rail freight connections link Turkiye to Iran, Iraq, and Syria. Imagine trade growth, if those rail lines were also linking Saudi Arabia and the UAE via either Kuwait, Iraq, or Jordan.

Then there is the case of trade with China. Middle East countries are big importers of containerized goods from China. Those goods are shipped from manufacturing centers across China to ports in Shanghai or Shenzen, from where they travel to the Middle East, often through multiple transshipment ports. But Iran is already connected to the China-Europe rail, and all it would take to receive imports via rail is for the GCC network to interconnect via Kuwait to the Iranian network.

Importance of digitalization

The UAE trader from my earlier example will hesitate to use rail, if they face significant obstacles in arranging the shipments. Building of tracks will not suffice, unless accompanied by extensive digitalization of trade. A single window for train service permits and slots, common capacity booking platform, unified cargo transport documentation integrating rail and ports, customs/quarantine visibility are a must. At this moment, the digitalized services are highly fragmented and differ by level of sophistication from country to country.

China has demonstrated with Logink what combining logistics data and transport infrastructure data can achieve in informing the trading parties of existing flows and developing patterns. But that is a data collection and business intelligence platform. There is still the need to create trade logistics execution platform. Obviously, shipment and equipment digital traceability and physical security enabled by digitalization are indispensable, and there are very good solutions available to fulfill this requirement. Full interchangeability of equipment must be in place to eliminate unnecessary costs and creation of bottlenecks at the dry ports. Without those automation and digital solutions shippers will not elect to move their freight by rail and will continue to preference trucking or seafreight.

The key to success of any international trade and logistics corridor is to think global, not just regional and definitely not just national. There are plenty of benefits to accrue to every participating country giving me confidence that the railways have a great chance to remake the Middle East.

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