Haifa Bay - Persian Gulf railway moves ahead

Haifa Bay Photo: Tamar Matsafi

"The Peace Railway," backed by China, could be one of Israel's most important geopolitical projects in the coming years.

Last week's announcement by the Ministry of Transport that the rail link from "Haifa Bay to the Persian Gulf" was officially moving ahead in the National Planning Commission remained under the media radar.

The idea of such a link was first raised in 2017 by the then Minister of Transport Israel Katz who has continued promoting the plan before international organizations in his brief stint as minister of foreign affairs under the name "The Peace Railway." But now operative measures are being taken including depositing a plan for expanding and extending the existing Haifa - Beit Shean rail link on to the nearby Jordanian border at an estimated cost of NIS 3.5 billion.

Admittedly this is an eve of election announcement but beneath all the fanfare is one of the most important geopolitical measures that Israel has taken in recent years, which will not only impact our neighbors but also Israel's status in the region.

The Jordanians are staying quiet, the Egyptians are concerned

The growing trend of international rail links is gaining traction in the Middle East in recent years after decades of neglect of railway infrastructures and servicing existing local tracks due to a lack of budget, lack of economic feasibility and the political and military instability of the region.

The idea of such mega-railway projects was revived by the Chinese government, which is striving for a 'silk railroad' connecting Asia and Europe and over the past decade has injected hundreds of billions of dollars in building a transcontinental railway. The railway has played a vital role in trade during the Covid-19 crisis with international aviation and shipping routes disrupted.

Now the countries of the Middle East have discovered that rehabilitating their railways and integrating them into the overall plan of the Chinese government, opens up new trade opportunities connecting Europe, Asia and the Persian Gulf.

Jordan, for example, is the most important land corridor in any future railway from the Persian Gulf to Haifa Bay via Saudi Arabia, and perhaps even in the future eastwards to Iraq. Israel's Ministry of Foreign Affairs and Ministry of Transport see linking up to Jordan's infrastructure as a fait accompli but the reality is more complicated.

The first problem is logistics. Jordan's tracks and rolling stock are obsolete and rehabilitating the railway system in the Hashemite Kingdom will cost billions of dollars, which the country doesn't have. In the past three years, the Jordanian government has been trying to draft a tender for implementing the project.

According to the Jordanian plan, the national railways project will include building wide tracks for large cargo trains, up to 1.5 kilometers in length and which can travel at 120 kilometers per hour. The first preference of the Jordanians is to increase use of Aqaba port and improve its ability to transport phosphates. The first stage of the plan includes building a 400 kilometer railway from Aqaba to a 'land cargo port' near Amman.

The second stage includes a link to Amman itself and the third stage would be a railway eastwards towards Iraq. Other plans include an extension southwards to Saudi Arabia and northwards to Syria, which plans rehabilitating its railway network.

International tenders for implementing the first stage were meant to be issued in the very near future but it seems that the Jordanians are having problems in financing the project. The Jordanians have also not made any official mention of the link to Haifa. Economic-strategic cooperation with Israel remains a sensitive topic in internal Jordanian politics and is also a 'red flag' as far as Egypt is concerned, an important trade partner for Jordan, because any land connection would be a "Suez Canal bypass" and a strategic threat to Egypt's revenue.

Although the Egyptian government is staying out of the matter, among other things because it has close economic collaboration with China, the country's main media outlets have called the railway project, "economic colonialism of the Zionist State."

Saudi Arabia is also in a similar situation and for the time being has no diplomatic relations with Israel, which is still officially deemed an 'enemy state.' So officially transporting imports and exports over land via a railway infrastructure must overcome political hurdles.

In addition there are other countries interested in offering alternative routes between Asia and Europe including Turkey, which is negotiating with the Chinese on the matter, Iraq and even Iran, which is eager to rehabilitate its railways.

The Chinese are pulling the strings in the region

The Chinese media has announced on several occasions that Israel is an important hub in its plans with the new Haifa Bayport container terminal, to be operated by Shanghai International Port Group (SIPG) of China over the next 25 years. The Chinese media has even described the new Haifa port as "an important rail terminal" and links to Jordan appear on the maps of the project.

It is quite possible that the future link to Jordan was even one of the unofficial conditions of the agreement between Israel and the Chinese concession holders, and it is probably contained in the operative plans for the new port, which expects a doubling in the amount of loading and unloading of containers within a few years.

Chinese interest in Israel's railway infrastructure has been concealed in recent years but back in 2011 it was out in the open when the focus was an Eilat-Ashdod Port rail link (the Gulf wasn't an option back then). In December 2011, Minister of Transport Israel Katz spoke of signing a "sister agreement" with the Chinese Ministry of Transport for building the railway to Eilat. But the project never got off the ground.

Israel is not the only country attracting China's attention for its railway network at the moment. China Ocean Shipping Company (COSCO), which holds a controlling stake in Piraeus port recently bought a 60% stake in the Greek railway company Piraeus Europe Asia Railway Logistics (PEARL) and founded what it calls a transcontinental express line from China to Europe with branches to Central Europe and capacity for over 80,000 cargoes per year.

COSCO is a potential customer of SIPG at the new Haifa container port and the two companies have strategic agreements in many areas, which have deepened in recent months. One could imagine COSCO and SIPG bidding together for Israeli railway lines if Israel Railways ever put into practice the government's privatization plans. Regardless of China, a railway linking Haifa to the Gulf would be an attractive privatization target, if political restrictions of exports via Saudi Arabia were ever lifted.

Who would finance the project?

Connecting the railway from Beit Shean to the Jordanian border is a complicated engineering project because of the changing heights in the topography and the need to move the nearby highway, and the environmental considerations. Infrastructure experts estimate that the work would cost well over NIS 3.5 billion and with a widening fiscal deficit it is not clear if a budget would be available.

The Bank of Israel recently proposed that the EU could contribute to the project's budget but it is unclear whether that might happen. The American for their part might want to hold up any Chinese involvement in the region.

The Ministry of Transport declined to comment on this report.

Published by Globes, Israel business news - en.globes.co.il - on March 8, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Haifa Bay Photo: Tamar Matsafi
Haifa Bay Photo: Tamar Matsafi
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