Iran’s railways play a modest role in China-Europe rail freight traffic, serving as an alternative route to operations through Russia and along the Middle Corridor. At the same time, Iran’s railways serve as a key part of the International North-South Transport Corridor. It connects Russia to the Indian Ocean, offering quicker access to some export markets, particularly India.

International rail operations through Iran have already been disrupted due to the ongoing war, but targeted attacks on the rail network could have a more lasting impact. Following the B1 bridge strike, Israel and the United States could target the Ghotour or the Veresk rail bridges. The former links up to Türkiye, the latter is a vital part of the INSTC’s eastern branch.

The World Bank explains that its loan will help to pay for the construction of a 127-kilometer, electrified, high-capacity rail line across the Bosphorus strait. INRAIL will also bypass the Istanbul metropolitan area, significantly improving capacity along the route.

A transformative project for Türkiye

INRAIL will be a highly impactful project for transport and the broader economy of the area, says the World Bank. “This project is a strategic and transformative investment for Turkey. By eliminating the critical railway bottleneck in the Bosphorus strait, it will enhance the resilience and efficiency of railway infrastructure, increasing Turkey’s competitiveness and strengthening its role as a logistics hub”, the Bank quotes its Türkiye Country Director, J. Humberto Lopez, as saying.

“Indeed, the project will accelerate growth, create jobs, and contribute to more sustainable transportation. Furthermore, INRAIL will benefit the wider region by enabling the transport of goods between Europe and Central Asia, connecting to other international corridors such as the Middle Corridor and the Development Route, which provides traffic between Europe and the Gulf via Iraq. In fact, this is much more than just building a bridge; it’s about connecting continents.”

In total, rail freight capacity across the Bosphorus should grow from 3 million tonnes annually to 50 million tonnes.

Kyrgyzstan is also working on other railways. Construction takes place in the area around the large Issyk-Kul lake. The country could connect this railway, which also links up to the capital city Bishkek and neighbouring Kazakhstan, to the CKU line.

“In the future, under favourable conditions, it is planned to extend it to Kara-Keche, and then also to Makmal, guaranteeing an additional rail connection between the north and south”, said Zhaparov. Makmal will be a key location on the CKU line, since China’s standard 1,435-millimetre gauge and the 1,520-millimetre gauge will meet there. Kyrgyzstan has already finished part of the railway to Kara-Keche.

The railway will have significant benefits to Kyrgyzstan and Uzbekistan. Both countries are landlocked and stand to profit from diversified trade routes. There are concerns, however, about the railway’s financial costs and benefits. Particularly Kyrgyzstan will need to take on significant debts. Meanwhile, the railway is expected to have limited capacity in the mountainous terrain.

Growth on the China-Europe route stands in relatively stark contrast to the developments seen in 2025. During that year, the total number of train trips grew by only 3.2% to approximately 20,000. At the same time, the volume transported fell by 1.3% to 2.1 million TEU. China saw fewer outbound trips (9,898 trips, -6.1%) and more inbound operations (10,100, +14.4%).

Chinese railway authorities have strengthened coordination and operations on the China-Europe route since the start of 2026, according to the state rail operator China Railway. Moreover, the company optimised scheduling to align with market demand. In addition, China has sought to optimise the digital port system to make customs clearance more efficient.

Impact of the Iran war

It is important to note that the China-Europe rail freight volume in January and February 2025 fell by 11% year-on-year. The current early-year increase is therefore a partial rebound of last year’s losses.

Meanwhile, it is useful to bear in mind that the data from January and February 2026 relate to the period preceding the Iran war. The ongoing hostilities in the Middle East have caused fuel prices to surge, which could push maritime rates up. Simultaneously, the conflict is exerting pressure on air freight operations.

This could bode well for China-Europe rail freight, which could bypass high-risk areas and is less sensitive to changes in energy prices. In other words, the early-year growth could continue in the coming months.

Middle Corridor not ready yet

For strong multi-corridor Europe-Asia connectivity it is necessary to have diversion routes that can pick up volumes in situations like the current one. For rail, this would be the Middle Corridor, a multimodal link stretching from China to Europe via Central Asia and the Caspian and Red seas.

“Disruption at sea always increases interest in rail options, including the Middle Corridor”, Clowes added, “that being said, any shift would be gradual. Capacity, border processes and transfers between networks all create pinch points.” In other words, the Middle Corridor is not (yet) ready to become the main route.

Waiting for a Red Sea crisis too?

Rail, Clowes argued, can still be useful in cases like these for “time-sensitive, higher-value cargo when schedules are under pressure”. It needs to be mentioned that, so far, the main problem resides with the Strait of Hormuz and not the Red Sea. The closure of the former ‘only’ affects trade with the Gulf countries, while another crisis in the latter might cause ships to avoid the Suez Canal, as already happened last year.

“If Asia to Europe services start diverting via the Cape of Good Hope, you can be looking at an extra 10 to 15 days”, Clowes pointed out. This is where the Middle Corridor and rail freight might be helpful, as they can provide shorter transit times, albeit with much smaller volumes. And sometimes, he added, it is not even necessary for an actual escalation. “Shippers, insurers and carriers start pricing in risk before anything formally changes”.

Can Plan B become Plan A?

Over the past few years, the routes usually considered as Plan A for trade between Asia and Europe – Trans-Siberian rail and Arabian Sea – have become somewhat problematic. Both routes have been dealing with lower volumes over the past three or four years. Due to this, interest in alternative routes such as the Middle Corridor has increased exponentially. If alternative routes are valid, they might become the norm, even once conflicts and tensions pass.

“Freight markets rarely reset overnight. Even after a conflict eases, insurers and carriers can remain cautious, and routing decisions tend to lag because everyone is reassessing risk”, Clowes said, concluding that “the longer the disruption lasts, the more likely it is that ‘Plan B’ becomes part of the permanent operating model”.

Of course, this would require valid ‘Plan B’ routes. And currently, at least for what concerns the Strait of Hormuz and the Gulf, the main option for Plan B remains the road, as the railway network in the area is still under development. CMA CGM, for example, recently said it “is deploying emergency multimodal solutions” via UAE, Saudi Arabia or Oman, but they are all trucking services.

Moreover, the costs associated with transportation on other corridors is 20-30% higher. Lead times to India and Iran could be twice as long, up to 60 days. This hurts the profitability of grain, metals and chemical exports, according to Russian media. The total financial damage of a pause in INSTC operations could be around 40-60 million US dollars monthly for Russian logistics companies.

The total turnover of freight on the Russia-INSTC route could fall by as much as 25% this year, a Russian analyst claims, depending on the length of the conflict.

The INSTC

The INSTC connects Russia to the Indian Ocean via three branches: a western branch through Azerbaijan, a central route across the Caspian Sea, and an eastern one through Kazakhstan and Turkmenistan. All three branches cross Iran before reaching Indian Ocean ports.

The western part of the route is most popular with Russian exporters of timber and grain, while the eastern part is most popular with paper, pulp, construction materials, and food products. Oil and vegetable oil are primarily shipped through the Caspian ports.

Shipments along the INSTC declined in 2025 to 9.9 million tonnes. By comparison, 12.9 million tonnes moved along the route in 2024.

When logistics follows industry again – this time from China

In 1984, six years after China launched economic reform, Volkswagen established its first joint ventures in China. That marked the beginning of decades of successful European industrial engagement with the Chinese market.

Two years later, in December 1986, DHL Express followed the same path, forming a joint venture with Sinotrans. CEVA Logistics started active operation in China around the same period.

Logistics followed industry. As European multinationals sourced from China and sold into the Chinese market, European forwarders followed their customers. They built networks, navigated regulation and became deeply embedded in their customers’ global supply chains. Over time, China has became one of the most strategically important logistics markets.

A similar dynamic is emerging again. This time, the direction runs from east to west.

Industrial upgrading and the export shift

China’s exports surplus surpassed one trillion US dollars in 2025, underlining its continued central role in global trade. Europe remains a key destination, alongside Southeast Asia, Central Asia, the Middle East and Türkiye.

The structure of exports has changed. Electric vehicles, batteries, renewable energy equipment and advanced machinery now account for a growing share of export value. These sectors were explicitly prioritised in the 2015 “Made in China 2025” strategy. The objective was clear: move up the value chain and reduce reliance on imported core technologies.

A decade later, the shift has become visible, mostly in the automotive sector. China has been the world’s largest car exporter in volume since 2023. In parallel, German carmakers’ combined sales in China have declined markedly from their 2021 peak, with total volumes down by double digits by 2025. BMW was particularly affected, with China sales falling roughly 25–27% over the same period.

In fact, according to Merics, a think-tank Berlin, the number of product categories primarily sourced from the US and EU has halved over the past two decades. This structural transformation has direct implications for logistics.

Outbound freight volumes are reinforced by higher-value industrial exports. On the China–Europe rail corridor, for instance, the imbalance between westbound and eastbound flows has widened since 2023. That year, for every eastbound container to China, roughly 1.8 containers moved westbound. In early 2024, the ratio rose to 4.8. By 2025, it approached 7.

Similar trends can be observed across multiple modes and lanes. Such asymmetry affects pricing dynamics, equipment reposition and corridor economics. If Chinese manufacturing continues to expand in Europe-facing sectors, this imbalance is unlikely to reverse in the near term.

Chinese companies expanding into Europe

Chinese products are not the only ones moving westward. Their producers are expanding into Europe as well. Trade tensions with the United States, EU anti-subsidy measures and intense domestic price competition have accelerated Chinese overseas investment.

CATL and BYD are building factories in Hungary. JD.com has moved to acquire control of Ceconomy, the parent of MediaMarkt and Saturn in Germany. Consumer brands such as Pop Mart have opened retail stores in London, Rome, Berlin and Amsterdam.

As Chinese industries expand into Europe, logistics providers follow. Just as DHL, Kuehne+Nagel and Schenker followed European manufacturers into China decades ago.

Major players such as state-owned COSCO Shipping and Sinotrans, together with Cainiao and JD Logistics, are expanding their European presence. Investments and long-term leases are visible in port terminals, warehousing facilities, distribution centres and last-mile networks. These moves support both market entry and manufacturing setups.

Implications for European rail and forwarding

For European forwarders, this represents a structural shift rather than a temporary market cycle.

In the past, a significant share of freight volumes were controlled by European manufacturers and buyers, particularly in industrial and automotive supply chains. Procurement decisions were made in European headquarters, and European forwarders benefited from established customer relations and alignment.

Today, Chinese companies increasingly drive logistics demand. Procurement power is gradually shifting from European to Chinese headquarters.

In the short term, international forwarders with established pan-European networks remain essential. Regulatory complexity, customs procedures and labour frameworks require local expertise.

Over the medium term, competitive dynamics may evolve. Chinese exporters may prefer logistics partners aligned with their language, digital systems and decision-making speed, particularly when service quality and pricing are comparable.

At the same time, Europe’s fragmented and highly regulated logistics environment creates natural barriers to rapid market capture. This opens space for both competition and cooperation.

Invest early – secure your position

When DHL entered China, it relied on Sinotrans to navigate regulation and build local networks. Chinese logistics companies expanding into Europe now face a similar reality. They bring volume, capital and close ties to headquarters in China. They will need local partners who can provide regulatory depth, network density and established customer relationships.

Those who invest early in understanding China’s industrial strategy, corporate expansion patterns and business culture may secure long-term positioning on both ends of the trade lanes.

Not every European logistics company had the opportunity to enter China in the 1980s. This time, the strategic engagement may happen at home.

China Railway Express trains are growing

Amid this decline, the total number of freight trains under the China Railway Express (CRE) in 2025 was over 20,000 units for the first time, showing a 3.2% increase. However, this growth is no longer tied to Europe. A radical redistribution has occurred, as European destinations now account for only 15.1% of cargo, while the lion’s share – 85%, goes to Russia, Central Asia, and other non-European regions. Asia was the main growth driver, as traffic in this direction grew by 27.7% to 1,13 million TEUs, which is 3.6 times higher than the volume of shipments within the EU.

No competition with the sea

The 7:1 imbalance poses a challenge for carriers, as the return of empty containers leads to serious losses, associated with shipments from China. According to analysts, one of the reasons for such a critical imbalance is the current problems in the German industrial sector. The decline of rail cargo transportations on the China-EU route is also related with general stabilisation of sea transportations (although the current chaos in the Middle East may lead to the future change of the current situation).

While sea freight rates soared in 2024 amid the attacks in the Red Sea, and rail transportations became a temporary solution, the situation normalised in 2025. The sea route became significantly cheaper again and shippers, no longer constrained by tight deadlines, returned to ports.

The situation is also complicated by technical carrying limits of the existing routes on China-EU direction, as approximately 94% of all traffic on this direction traditionally passes through Poland. The two-week blockade on the Polish-Belarusian border in September 2025 demonstrated how vulnerable this route is to any border incidents. In fact, even short stops in such corridors critically undermine customer confidence and force them to build in additional logistics reserves. Weak imports from the EU to China are also adding pressure. European exports are stagnating, and return shipments are declining, significantly worsening the economics of rail routes as a whole.

EU problems

In addition, the decline in exports from the EU, particularly from Germany, indicates that the European economy is finding it increasingly difficult to compete in Asian markets. This is also reflected by the fact that shipments of German engineering and automotive products to China by rail are declining sharply.

Most analysts do not expect a rapid recovery in EU-China transit in 2026. The most likely scenario is stagnation or a moderate decline in volumes. Growth is possible only in certain niches: e-commerce, urgent mid-price cargo, furniture, home decor, and DIY. However, even in these segments, rail transport will not regain its mass character and will remain a niche logistics solution between sea and air.

Alternative routes rising

Analysts also expect the establishment of a new logistics route: China-Central Asia-Russia-Middle East-India, as well as routes to Turkey, Iran, and the Caucasus countries. As for Russia, it is shifting from its role as a transit bridge between China and Europe to that of a major Eurasian distribution hub servicing trade within Greater Eurasia.

The most promising routes are the North-South international transport corridor, the China-Central Asia-Russia-Turkey routes, intra-Eurasian trade, and e-commerce flows. Key risks for the EU-China corridor include ongoing geopolitical instability in Eastern Europe, the possibility of new restrictions on the Polish-Belarusian border, weak economic growth in the EU, and the active development of alternative routes bypassing Russia and Belarus.

In addition, the current war in the Middle East also poses serious threats. This makes the EU-China corridor through Russia politically sensitive and strategically unstable. That also means under the current circumstances, the EU-China corridor is ceasing to be a mass transport route and is increasingly becoming a niche route for specific categories of cargo.

We have addressed virtually all previously outstanding issues, including land registration and obtaining benefits,” Tsivilyov said on the sidelines of an intergovernmental commission. “It is very complex, but we managed to resolve all the implementation issues. We can confidently say that as of April 1, we will begin the implementation phase of this large-scale infrastructure project,” he added.

Iran giving strong support to INSTC

Iranian President Masoud Pezeshkian has committed to removing all obstacles hindering the development of the INSTC by the end of March. “Relations between Iran and Russia are robust, with numerous agreements being signed and actively implemented,” Pezeshkian said. “We aim to eliminate remaining barriers by the end of the (Iranian) year so that the railway route can be completed and become operational,” he added.

Iran’s role does bring challenges.

Iran is important to North South Corridor but there are some concerns its political stance both internationally and domestically is a problem. Led by a hard line Muslim Islamic establishment it has backed many of the rebellions in the Middle East and has incurred the strong disapproval of moderate Muslim states, the West and the United States, who maintains two battleship groups in the Indian Ocean in order to bomb Iran.

Domestically a worsening economy triggered huge demonstrations across the country which were brutally crushed in January leading to widespread concerns about the stability of the regime. “Tensions between Iran and the US, particularly Trump’s policy of reimposing ‘maximum pressure’ on Iran, undoubtedly increase the risks associated with using Iranian transit routes.

Furthermore destabilisation of the domestic political situation could lead to higher insurance costs for cargo transport,” Nargiza Umarova, Head of the Center for Strategic Connectivity at the Institute for Advanced International Studies, University of World Economy and Diplomacy, Uzbekistan told RailFreight.com.

Where is the money going to come from?

One other big problem for the Corridor is finance. Iran whilst it has oil has an economy which is severely sanctioned – the consequence of years of supporting Islamic rebels and attempting to have its own nuclear weapons. “Sanctions and their tightening remain a significant constraint. Last year, for example, Washington took steps to reinstate sanctions against Iran’s only ocean port, Chabahar, which is included in many interregional transport projects. Only India, which is investing in the port’s modernization, was granted a six-month deferral that expires in April 2026,” added Umarova.

Her view is INSTC does not harm Iran’s transit capacity, but rather contributes to its expansion — especially given the increased practical significance of the project for Russia. “Following international sanctions imposed on Russia for its invasion of Ukraine, the country is reorienting its exports of raw materials towards the South Asian market. This trend has breathed new life into the INSTC,” she told RailFreight. “In 2024, for example, the volume of cargo transported along the eastern branch of this corridor, via direct rail links between Kazakhstan, Turkmenistan and Iran, nearly tripled compared to 2023, reaching 2 million tonnes”, Umarova added.

IMEC now more challenged

This is all adding to the difficulties facing IMEC the India-Middle East Corridor which India’s Prime Minister Narendra Modi announced at the September 2023 G20 Summit in New Delhi amidst broad excitement which has now gone. Not only is the IMEC route too close to both the Houthi’s in the Red Sea and the Israel-Arab War but some feel Iran’s Revolutionary Guards – who control much of Iran’s logistic industry – have a vested interest in egging the conflicts on.

“If IMEC became the standard trade route, not only Iran but also the Islamic Revolutionary Guard Corps itself stood to lose. If the Bab el-Mandab (the entrance to the Red Sea and prime Houthi territory) remained too risky or expensive to transit, Iran hoped to profit as an alternative transit route,” said Michael Rubin director of policy analysis at the Middle East Forum and a senior fellow at the American Enterprise Institute in FirstPost.com. On top of this Saudi Arabia, the effective Middle East part of IMEC, is now changing its foreign policy and pivoting towards Pakistan and possibly Turkey in what some have dubbed “the Islamic Nato,” – something that would be difficult for India.

“The signing of the EPC contract marks the transition from strategic agreements to the practical implementation of a large-scale project. We are creating a modern logistics hub that will strengthen the transit potential of Central Asia and become an important link in the Eurasian transport corridors. For us, this is not just a construction project – it is a long-term investment in the development of the regional economy and international trade”, said Silkway CA CEO Daniyar Tiesov.

Portfolio expansion

PTC Holding says that the logistics complex will strengthen the positions of Uzbekistan and Kazakhstan as key transit hubs between China, Central Asia, the Caucasus, and Europe. It will also complement PTC Holding’s international infrastructure from Dostyk TransTerminal to the multimodal terminal Poti TransTerminal.

The MPLC will occupy an area of 159.4 hectares. The completion of the first phase is scheduled for 2027 and covers an investment of 84 million dollars.