How Iran and Turkey are sabotaging their own economic prospects

As the development of trade routes between West and East is in full swing, Iran and Turkey risk being neglected due to their own policies, despite their strategic position between the two regions.

Logistics corridors for East-West trade: India – Europe (IMEC), China – Europe (BRI / the Median Corridor, the Development Road)

Some analysts perceived the resumption of the conflict in Gaza in October 2023 as a possible attempt to undermine not only the process of getting relations between Israel and Saudi Arabia back on track (the establishment of diplomatic relations seemed imminent before October 7 ), but also the India-Middle East-Europe Economic Corridor (IMEC) project. Announced at the G20 summit in September 2023 in New Delhi, this maritime and rail logistics corridor is an initiative of the United States and the European Union strategically aimed at ensuring better connections between Indian and Western markets through a logistics corridor designed as an alternative to traditional commerce. southern routes, via Bab-el-Mandeb, the Red Sea and the Suez Canal.

The IMEC would be made up of three major segments: a first maritime segment, linking India to the United Arab Emirates (UAE); a second rail segment, from the United Arab Emirates to the Israeli port of Haifa, via Saudi Arabia and Jordan; and finally, the third segment, also maritime, from Haifa to European ports. The land segment requires significant investments for the development of rail links.

Given that this logistics corridor bypasses Iran, many saw the Hamas attack of October 7, 2023 as Tehran's response to the IMEC. As Turkey was also not included in the IMEC track, Ankara's pro-Hamas statements were also seen as linked to opposition to this project.

Turkey is interested in two alternative projects: the Development Road, proposed by Iraq, and the “Middle Corridor”, which is part of China's Belt and Road Initiative (BRI).

The Development Road involves the modernization of railway infrastructure from the Iraqi port of Al-Faw (Basra, Persian Gulf), to Turkish territory bypassing Syria, and from Turkey towards Europe and the Caucasus. The stated objectives of this project include the stabilization of Iraq through economic development. However, the project will have to face problems such as insufficient funding, corruption within the Iraqi state apparatus, lack of security, but also the absence of a convincing study on the feasibility and the strategic, regional or global role of the project.

The Middle Corridor connects China to Europe via Central Asia, the Caucasus and Turkey, also by rail. However, from the perspective of China's huge economy, the middle corridor is not a particularly vital commercial objective. More than 80% of China's foreign trade is carried out by sea, and the country ranks second in the world, after Greece and ahead of Japan, in terms of the size of its commercial fleet. The world's oceans are more profitable than land routes and are better exploited by Chinese exporters, hence the interest of Chinese investors in European ports and beyond. Therefore, the value of the middle corridor for the Chinese economy must be assessed in a broader context and considered as an alternative and not as an exclusively indispensable economic objective. I think people are sort of right to view the BRI and the Middle Corridor more as an investment in regional political influence, which could also generate economic benefits for China, but especially for countries along the route like Kazakhstan, Turkmenistan, Uzbekistan, Azerbaijan or Azerbaijan. Georgia.

The BRI middle corridor is approved by China and has conditional support from the EU, but only the costs of building and operating the necessary infrastructure will ultimately determine its fate. The IMEC, on the other hand, has the advantage of being a predominantly maritime route. In addition, it benefits not only from the support of India, a country whose economy is among the world's top five, but also from the initiators of the project (European Union and United States), as well as other G20 partners. . It would not be surprising if China also became interested in this project at some point, as relations with the United States improve. IMEC's ​​only real problem is that it straddles the traditional East-West route via the Red Sea and the Suez Canal. And it would probably be more cost-effective for major global players to work together towards eliminating the threat from Shiite Houthi rebels in Yemen (Bab-el-Mandeb Strait), rather than investing large sums of money in modernizing and operate the UAE-Israel rail link.

All these logistics corridors aim to reduce the cost and time of transit of goods between Europe and Asia. An overview is provided in the map published by the Turkish Ministry of Transport and Infrastructure.

The idea that these corridors compete with each other is questionable. Rather, they can be considered as alternative routes, more or less practical for certain types of goods and traders, depending on the seasons and in specific political and security circumstances. Investments in all these connections will contribute to the development of transit countries and regions, thereby contributing to the global growth of trade flows. Countries and regions bypassed by major logistics corridors will also benefit from their benefits, although indirectly, provided that they do not hinder them, but contribute to their development and the construction of adjacent connection networks.

Strategically placed between East and West, Turkey and Iran are being sabotaged by the policies of their own leaders.

Turkey and Iran occupy a strategic position between East and West, but they are land bridges, not sea bridges. In addition, both countries face difficulties in ensuring the security of the movement of goods or the functioning of their judicial systems and the protection of citizens' rights. All of this translates into higher economic and political costs and risks. A middle corridor that would cross not Iranian or Turkish territories, but the Black Sea and the Caspian Sea, with maritime logistical links from Central Asia to the South Caucasus and Europe (Romania and Bulgaria), should be “ cheaper”, both economically and politically.

Several years after the collapse of regimes based on totalitarian ideologies, Iran continues to display totalitarian tendencies, subject to a religious nationalism which is part of the logic of a conflict with invented enemies. As a major oil and gas exporter, Iran is paying the price for its own foreign policy, which is subordinated to the ruling regime's anti-Israeli and anti-Western activism. Tehran's actions have destabilized the Middle East, leading to Western sanctions, which prevent the Iranian economy from fully accessing global markets. Instead of being included in regional and global cooperation programs, Iran is today a pariah that maintains bitter, if not outright aggressive, attitudes toward most states in the region, with a few rare exceptions. Instead of being a bridge for East-West trade, Iran has chosen to be an obstacle to be avoided. Tehran continues to respond to its exclusion from major regional agreements by intensifying its logistical and financial aid to the destabilizing actions of Hezbollah and Hamas in the west, as well as those of the Shiite Houthi rebels to the south, in Yemen, i.e. i.e. on strategic points. for world trade.

And while the world evolves thanks to commercial and intellectual exchanges, Iran continues on its road to nowhere, accompanied only by Putin's Russia and, in very rare cases, by the much more cautious China. And the situation at home isn't rosy either. If the presidential election scheduled for the day after the tragic death of President Raisi does not lead to a substantial change in Tehran's decision-making process, the regime and the ailing Ayatollah Khamenei, now 85 years old, will be faced with a resurgence of tensions that have crushed Iranian society for years. And Iran will remain an example of a global player with enormous potential, but whose own policies prevent it from being part of the normal flow of regional and global trade. “Splendid isolation” will not help Iran progress, but could instead hasten the collapse of the very regime that supported this policy.

Another important and notable example for our discussion of global trade, and in particular East-West, is that of Turkey. Its geographical position allows Turkey to play the role of bridge between East and West, provided that it actually assumes this role instead of just imitating it.

After a decade of conflicts in the South Caucasus, where Turkey has always openly supported Azerbaijan, Ankara now finds itself faced with the opportunity to opt for cooperation. Turkey should convince Iran to jointly support the Armenia-Azerbaijan peace process. A lasting peace would create favorable conditions for Baku and Yerevan to cooperate with Georgia to ensure regional stability, an essential prerequisite for attracting foreign investment.

Ankara's interest in such a positive development is actually even greater than it seems. Turkey has for many years sought to open a logistics corridor to the Turkic Central Asian states via Baku, but it must achieve this either through Iran or Armenia. The political and economic costs would be lower, and even Turkey would benefit in the long term from cooperating with Armenia. The construction of a direct corridor crossing Armenian territory (the Zangezur Corridor) from Turkey to the new Azerbaijani port of Alat, on the Caspian coast, based on an agreement between Ankara, Yerevan and Baku would benefit no only to Turkish exports to Central Asia, but also to the entire country. development of the Armenian and Azerbaijani economies. This means that Turkey could become a long-term defender and beneficiary of stability and development throughout the South Caucasus, especially if cooperation agreements included Georgia and Iran. Such an ambitious goal should guide Turkey's regional policymaking if Ankara is determined to remain an active player in global trade.

On the other hand, Ankara has opted, at least in recent years, for a rather confrontational approach, which is reflected in its skirmishes in Syria, the tensions between Turkey and Greece, the disputes over gas fields in the Eastern Mediterranean, the conflict in Northern Cyprus, its often harsh rhetoric towards its NATO partners and, last but not least, its support for Hamas, an organization hostile to two major players in the region: Israel and Egypt. National developments – an economic crisis, a regime with strong authoritarian tendencies, a judicial system suspected of being politically subordinate, an ongoing conflict with the Kurdistan Workers' Party – are equally unlikely to encourage investors.

Like Iran, Turkey could lose the development race of its own making.