New Indo-Saudi Trade Route To Bypass Iran As Transit Hub

The US, Saudi Arabia and India are mulling over a trade route between the Persian Gulf and South Asia, a rival to a similar project that involves Iran and China. 

US officials told Reuters Friday that the infrastructure deal could reconfigure the landscape of trade in the Eurasia region, linking Middle Eastern countries by a network of railways and connecting to India through shipping lanes, bypassing Iran in trade routes from Asia to Europe. 

The talks, which have also included the United Arab Emirates and Europe, may yield a concrete result in time for an announcement on the sidelines of this week's Group of 20 (G20) leaders meeting, the sources said. Axios said earlier in the week that the plan would be announced on Saturday. 

The announcement came as US President Joe Biden is on his way to the G20 conference in New Delhi, India, where he is set to meet Indian Prime Minister Narendra Modi and may also have talks with Saudi Crown Prince Mohammed bin Salman. 

The plans for a sweeping, multi-national ports and rail deal would potentially counter China's growing influence through the Belt and Road global initiative as Biden is pitching Washington as an alternative partner for an investor in developing countries at the G20, especially in the Indo-Pacific region. According to The Brookings Institution, “China’s growing role in the Middle East is positioning the rising superpower in direct confrontation with shifting US interests in the domains of energy security, Israel, and Iran.”

The project, being discussed for 18 months, is seen as a part of the Biden administration’s mega deal that would have Saudi Arabia recognize Israel. The strategic concept of the "Indo-Abrahamic Alliance" has laid the framework for the formation of the I2U2 group, a grouping of India, Israel, the United Arab Emirates, and the United States.

Biden’s national security advisor, Jake Sullivan, told reporters aboard Air Force One en route to the summit that it was an initiative the US was invested in along with its partner countries, and that there was a "broad understanding of many of the key elements.” 

"Many of the elements of a pathway to normalization are now on the table. We don't have a framework, we don't have the terms ready to be signed. There is still work to do," Sullivan added. Biden himself said in early July that Israel and Saudi Arabia were a long way from a normalization agreement that would also involve a US-Saudi defense treaty and a civilian nuclear program for the Saudis from the United States.

US officials see a potential deal between Israel and Saudi Arabia as possible after the administration of then-President Donald Trump reached similar agreements between Israel and Morocco, Sudan, Bahrain and the United Arab Emirates.

In addition to the diplomatic implications, the project could reduce shipping times, costs, the use of diesel and make trade faster and cheaper, potentially making Iran redundant in the transit of goods in the region. 

In May, Iranian lawmaker Mojtaba Yousefi admitted that Iran has been supplanted by Turkey as the region’s transport hub despite Tehran’s ambitions. Iran suffers from poor infrastructure that makes a mockery of its ambitions in recent years to be the leader. The country’s roads and railways are in need of significant upgrades, while the ports are not equipped to handle the large volumes of cargo that would be necessary for Iran to become a regional hub. Political instability and economic sanctions mean the situation is highly unlikely to improve any time soon. 

However, Tehran Times, a pro-regime publication, said in an article last year that the Russian invasion of Ukraine, “despite its grave consequences for many countries, has presented Iran with a golden opportunity to realize the long-awaited goal of becoming the global transit hub it once was,” referring to the Silk Road, an ancient network of Eurasian trade routes active from the second century BCE until the mid-15th century that span over 6,400 kilometers (about 3976.78 mi).

Hit by sanctions that severely hampered trade of Russian goods, Moscow sought alternative routes for global distribution, with a renewed focus on the International North-South Transit Corridor (INSTC), the daily claimed. The agreement for launching INSTC was signed by Iran, India, and Russia in 2000, however, despite all the hype, the project yielded no results mainly due to the US sanctions on Iran.