Russia and Iran signed a $2.5 billion deal on Monday to start up a much-needed rail wagon production operation. The agreement was forged between the Industrial Development and Renovation Organization of Iran (IDRO) and Transmashholding, who is Russia's largest rail equipment supplier. The two sides will set up a new joint venture, which will be 80% owned — although completely funded — by the Russian partner.
Iran is currently in the midsts of what could be called an infrastructure building bonanza. Emerging from decades of sanctions which left much of the country's transportation infrastructure descending into proverbial ruins, Iran has embarked upon a near complete rebuild of its highway and rail networks. The country is expected to add on 15,000 kilometers of new rail lines in the next five years alone — a rapid expansion which is going to require 8,000-10,000 new wagons each year.
Reinvigorating the transport sector is a key part of Iran's vision to leverage its geographic position to become a vibrant hub of trans-Eurasian trade, which plugs nicely into China's Belt and Road Initiative and Russia's continued economic activity in the post-Soviet neighborhood. Iran is also a core partner, along with Russia and India, in the emerging North-South Transport Corridor, which seeks to create a multimodal trade route that would cut the lead time between cities on the west coast of India and St. Petersburg in half, and has also worked out its territorial squabbles with Russia over the Caspian Sea.