US sanctions preventing banks providing letters of credit (L/Cs) for deals involving Iran is one of the factors jeopardising the resumption of the much-stalled Istanbul-Tehran-Islamabad (ITI) freight train project.

The train, also called the ECO Container Train because it was conceived as a project under the Economic Cooperation Organisation (ECO), a 10-member Asian trade bloc, was launched in 2009.

But even though the route is recognised by the UN as an international rail corridor between the three countries, it has so far only been used for test journeys. It is scheduled to begin commercial operations in 2021.

L/C concerns

Potential large users with high value cargoes say they hesitate to use the freight train because their usual banks will not provide L/Cs for business involving Iran due to US-imposed sanctions. They say they would rather ship goods between Turkey and Pakistan by sea so they avoid travelling through Iran.

Users with low value cargoes customers however, who are mainly commercial importers and exporters or medium-sized local companies distributing commodity-based shipments, remain less worried about threats posed by US sanctions and say they are willing to use the train.

Project stalled

One of the main reasons the ITI train project has stalled is the concerns of the Pakistan authorities regarding the weight of cargo and the type of wagons used.

While Turkey arranged the train to run on eight-wheel wagons that would carry containers weighing forty tonnes each, Pakistan disagreed with this approach and insisted on using four-wheel wagons and 20-tonne containers.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.