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MANTRAYA ANALYSIS#24: 27 APRIL 2018

Five Nations Railway Corridor Project: Increasing Connectivity & Chinese Dominance in Afghanistan

Bibhu Prasad Routray & Sayantan Haldar

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Abstract

The Five Nations Railway Corridor (FNRC) is yet another connectivity project sought to be implemented in Afghanistan and has been embraced as an a potential game changer for the conflict ravaged country. While the economic windfalls that the project can bring about for the participating states is undeniable, its timely implementation and the ascending Chinese influence over Afghanistan are associated concerns. Can New Delhi provide an alternative by demonstrating its strategic intent is a question begging for an answer.           

 FNRC (Routes of the FNRC and other connectivity projects running through Afghanistan.
Photo Courtesy: Railway Pro) 

Introduction

As Afghanistan looks at alternate pathways to emerge from the trough of violence and instability, yet another infrastructure and connectivity project has gained traction within and outside the country. The Five Nations Railway Corridor (FNRC) is being prescribed as a game changing Eurasian rail corridor whose projected economic gains will benefit this war torn country. How correct, however, is the projection, and how likely is it that the proposed project will take off? And is it an indication, as India views it, that Afghanistan is slowly sliding under the Chinese dominance?

The Project

A preliminary agreement for developing the FNRC project was signed in the Tajik capital Dushanbe in December 2014 and has moved sluggishly since then. The project with a length of 2100 kilometres will run through five countries- China, Tajikistan, Kyrgyzstan, Afghanistan, and Iran, connecting China with the Iranian ports of Chabahar and Bandar Abbas. About 50 percent of the total railway line, roughly 1148 kilometres, will cross through Afghanistan’s Kunduz, Balkh, Jawozjan, Faryab, Badghis, and Herat provinces. The estimated value of the project exceeds US$2 billion and the institutional partners are the Bank of China, Kyrgyz Republic, Tajikistan, Afghanistan, Iran, the Asia Development Bank, World Bank, and the United States. The Afghan section of the rail line will be partially funded by the Asian Development Bank (ADB).

According to the initial agreement, the railway line would have been laid in five years, i.e. by the end of 2019. By the middle of 2016, all participating countries should have conducted technical and economic feasibility studies on this project so that, practical work could start on this project. In September 2017, Afghanistan Railway Authority announced that the second meeting of representatives from regional countries will take place within the next two months in Iran to discuss progress of the FNRC project.  Technical and economic assessments of the first and second phases of the railway line in Afghanistan have been completed and that construction work is scheduled to start soon. As per status report in November 2017, Afghanistan is still searching for partners to finance the project and its hopes are hinged on efforts made by other four countries involved in the project. In February 2018, Afghanistan National Railway Authority (ANRA) officials said that the technical and economic survey for the establishment of the multinational railway project is about 50 percent complete. Out of the 1148 kilometres, Afghanistan plans, over the 12 months, to complete  feasibility study and preliminary design for the initial 654 kilometre segment. Between 2018 and 2020, it aims to complete construction for the entire 1148 kilometres. Given the instability in the country and the increasing difficulty facing the country in securing resources, these are optimistic goal posts.

The Stakes involved

Economic experts have heralded the FNRC project as a milestone to further boost economic cooperation in the region. The project would not only boost transportation capacity of the involved countries, but also energize the growth of their national economies, expand their trade exchanges and promote tourism ties. In addition, it will reduce the distance for commercial transport between the East (from China to Iran) and the West (toward Western Europe) and help connect member countries to the free waters of the Persian Gulf through Iran. In addition, costs of cargo along this route, due to shortening of distance and time, will decrease.

For Afghanistan, in particular, the project potentially brings in a range of economic windfall by improving the country’s access to the Iranian ports of Chabahar and Bandar Abbas, thereby providing ample opportunity for another order of magnitude of trade expansion. It can increase regional commerce and spur job creation along with larger trade volumes. It will also help advance Afghan Government’s National Infrastructure Plan. In addition, via Turkey and Iran the FNRC will connect the Central Asian countries to Europe. Afghanistan, therefore, is well situated to reap significant economic benefits being at the heart of this critical Eurasian rail corridor.

For China and Central Asian States the FNRC will bring down the transit costs and time significantly. The FNRC would allow Tajikistan to reduce the country’s political reliance on Uzbekistan and Russia. Similarly, Kyrgyzstan which has been mulling construction of new rail routes, the FNRC would allow it diversify its export routes by circumventing Uzbekistan.

For Iran, the FNRC would be a parallel project to the existing railroad connecting the Turkmenistan city of Tejen to Iranian cities of Sarakhs, Mashhad, and Bafq. This railroad has reduced the cost of rail access by the Central Asian countries to the Persian Gulf and India. Iran’s Chabahar port, built with Indian investment of US$500 million, has already been handling cargo from Afghanistan to India and vice versa. The country sees a windfall of sorts through the FNRC project which will increase not just the trade volume through Chabahar, but also the Bandar Abbas port. Not surprisingly, Sediq Qasimi Zakeri, the economic advisor for the Iranian embassy in Kabul said in February 2018 that his country strongly supports the establishment of the FNRC project.

China’s overarching presence

However, beyond these natural outcomes of the connectivity project, the FNRC, for all practical purposes, is a part of the China’s One Belt One Road (OBOR) vision. While attempting to connect the existing facilities (Chabahar and Bandar Abbas) with the resources of the central Asian republics, it does herald the spectre of creating significant infrastructure within Afghanistan. At the same time, it indirectly advances Beijing’s own economic as well as strategic goals in the region. The China Pakistan Economic Corridor (CPEC) project is being extended into Afghanistan through a set of six proposed projects including the Turkmenistan-Afghanistan-Pakistan energy transmission line; a motorway or rail connection from Peshawar in Pakistan to Kunduz and extending into Central Asia; a motorway project between Peshawar and Kabul; a road link between Torkham and Kabul to join an existing road with Pakistan; railway lines linking Pakistan’s Landi-Kotal with Jalalabad and Pakistan’s Chaman to Speen Boldak.

China is Afghanistan’s largest investor. China’s presence and influence in the country has grown significantly in the past years. But the economic projects that are supposed to reflect the Chinese commitment to contributing to Afghan economy have mostly remained in their infancy. Two examples would be sufficient to back this assertion. In 2007, China was awarded the mining rights from the copper producing Mes Aynak for 30 years. The deal was worth US$3 billion and was the largest FDI in the country at that time. The Afghan government provided security to the mining operation. However, even after a decade since the deal was inked, a single gram of copper is yet to be mined. Interestingly, in April 2017, an executive of the state-owned China Metallurgical Group Corp (MCC) who was in charge of the 2007 deal was expelled from the Chinese Communist Party for corruption at home, although his downfall was not linked to the mine contract.

The second example is that of the railway linkages between Afghanistan and China. The bilateral economic linkages between the two countries were said to have been firmed up by the arrival of a 45-wagon cargo train in September 2016. The train travelled from the eastern Chinese city of Nantong through Kazakhstan and Uzbekistan to reach Hairatan in Afghanistan’s Balkh province after 14 days. While the train could have been the single most important trade link between both countries, no other train from China, has ever arrived in Hairatan since then.

Poor progress has been the feature of other Chinese projects which include the 2011 contract awarded to China National Petroleum Corp to develop oil wells in northern Afghanistan and the US$ 205 billion deal in 2017 with the state-run China Road and Bridge to build a 187-kilometre road in central Afghanistan. Security concerns may have played some role in the delaying progress of these projects. However, given Pakistan’s influence over Taliban, China is the least vulnerable country in Afghanistan facing the extremist threat.

Kabul’s China fixation is not without reasons. Afghan traders desperately want to export products to the Central Asian states as well as China. The country needs these connectivity projects to succeed and deliver so that economic prosperity can become an anti-dote to the unceasing terrorist violence. With the international community gradually losing interest and reducing their roles to merely aid-providing entities and country like India battling its own geographical challenges and bureaucratic inertia, the country has little option but to depend upon Chinese projects, which at least do not face the Pakistani hurdle.  However, given the history of Chinese commitment and how projects like Mes Anyak have fallen off its radar, the expectations from new projects like the FNRC or CPEC/OBOR needs to be moderated.

Moreover, Kabul will have to find resources to implement the FNRC. Currently pegged at US$ 2 billion, the project will eventually run into delays thereby taking the costs higher. While the ADB may finance a part of it, getting funders for the rest of the project may prove to be difficult. The FNRC is one of the multiple projects Kabul is seeking to implement to unleash its economic potential. The Lapis-Lazuli corridor agreement that’s seeks to further regional economic cooperation between Afghanistan, Turkmenistan, Azerbaijan, Georgia and Turkey will cost US$2 billion. The FNRC may force Kabul to lapse under the Chinese debt trap.

Indian Alternative

China’s Border Road Initiative (BRI)/OBOR and the CPEC projects have been opposed by India for lacking in transparency and violating national sovereignty. The recent ‘reset’ in its relations with Beijing notwithstanding, India can neither be expected to be a part of this geo-economic/strategic project, nor would the Chinese moves to increase its profile in Afghanistan through connectivity projects would please New Delhi. However, there is little that it can do about these projects in which most South Asian nations have evinced interest. What it, however, can certainly do is to focus on the efficient implementation of its own connectivity projects through Afghanistan to complement as well as to provide an alternative to the OBOR.

The International North-South Transport Corridor (INSTC) project, in a way, may rival and even, complement the FNRC. The 7200 kilometre-long multi-modal project, which connects India with Russia, for which a dry run was conducted in 2014, still languishes with delays in implementation. There are still gaps, especially in the Astara-Rasht section in Iran, that must be covered with trucks. On 28 March 2018, Azerbaijan and Iran signed the “Agreement on Financing the Construction of the Astara-Rasht Railway in the Territory of Iran” in Baku. According to the Japan External Trade Organization, compared with the traditional route through the Suez Canal, the completed corridor will reduce the transport time between Mumbai and Moscow to about 20 days, from the current 40 days. It is therefore imperative that India devotes greater energy and takes the lead in completing the INSTC project.

With the existing infrastructure within Afghanistan, the INSTC, more importantly, will provide it the same benefits as the FNRC, probably with greater ease of finding resources to implement the project and without the strings, conditionalities, perils of being sucked into a debt trap, and save it from an endless wait for the project to be completed. And at the same time, for New Delhi, which has done well in Chabahar and few other connectivity projects including establishing an air corridor with Afghanistan, it is yet another test case for demonstrating its strategic and investment intent, rather than becoming a mere spectator to the surge of Chinese influence in the region.

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References

“Central Asia has huge unrealized potential”, The Economic Times, 12 November 2017, https://economictimes.indiatimes.com/news/politics-and-nation/central-asia-has-huge-unrealized-potential-uzbek-president-shavkat-mirziyoyev/articleshow/61618291.cms. Accessed 23 April 2018.

Farzad Ramezani Bonesh, “Various Benefits of Rail Route Connecting Iran to Afghanistan, Tajikistan, Kyrgyzstan and China”, Iran Review, 25 January 2016, http://www.iranreview.org/content/Documents/Various-Benefits-of-Rail-Route-Connecting-Iran-to-Afghanistan-Tajikistan-Kyrgyzstan-and-China.htm. Accessed 22 April 2018.

“Five Asian countries to implement new railway corridor”, Railway Pro, 5 September 2017 https://www.railwaypro.com/wp/five-asian-countries-implement-new-railway-corridor/. Accessed 22 April 2018.

Kiran Sharma & Akihoro Sano, “India and China jostle for influence in Iran and Central Asia”, Nikkei Asian Review, 24 April 2018, https://asia.nikkei.com/Spotlight/Asia-Insight/India-and-China-jostle-for-influence-in-Iran-and-Central-Asia. Accessed 24 April 2018.

Azim Wardak, Infrastructure Connectivity in Afghanistan, Economic Cooperation Department, Ministry of Foreign Affairs of Afghanistan, 6 September 2017, http://www.unescap.org/sites/default/files/Afghanistan_10.pdf. Accessed 23 April 2018.

Saibal Daspgupta, “Afghanistan may be a major jewel in China’s Belt and Road Initiative”, The National, 14 May 2017, https://www.thenational.ae/business/afghanistan-may-be-a-major-jewel-in-china-s-belt-and-road-initiative-1.23848. Accessed 22 April 2018.

Zabihulla Jahanmal, Five Nations Railway Corridor to Power Regional Economies, Tolo News, 14 February 2018, https://www.tolonews.com/afghanistan/five-nations-railway-corridor-power-regional-economies. Accessed 22 April 2018.

(Dr. Bibhu Prasad Routray is Director, Mantraya. Sayantan Haldar is a final year Under Graduate student of Political Science at Presidency University, Kolkata. This brief is published as part of Mantraya.org’s ongoing ‘China and South Asia’ and ‘Regional Economic Cooperation and Connectivity’ projects. All Mantraya publications are peer reviewed.

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