Iraq's Development Road: A Path to Regional Connectivity and Economic Growth
18/04/2024 - Written by Rim Adwan
Introduction
Iraq's Development Road Project represents one of the most ambitious infrastructure initiatives in the Middle East, aiming to establish a 1,200-kilometer transport corridor linking the Gulf to Europe via Iraq and Türkiye. With an expected cost of $17 billion and scheduled completion by 2050, this project leverages Iraq's strategic position to transform the country into a geo-economic bridge between East and West.
The Development Road comprises railways, roadways, and ports, with the centrepiece and first phase of the project being the Grand Faw Port (GFP), which is set to become the Middle East's largest container port upon completion in 2025. From this southern terminal, the corridor will traverse northward through major Iraqi cities, including Karbala, Baghdad, and Mosul before reaching the Iraqi-Turkish border at the Ovaköy-Faysh Khabur crossing, and subsequently connecting to Türkiye’s extensive transport networks and onward to Europe.
This report analyses the Development Road Project's strategic significance, stakeholders, dimensions, and challenges, whilst evaluating both opportunities and risks associated with this transformative initiative that could reshape regional connectivity and Iraq's economic future.
Contextual Analysis
The Development Road Project emerges against a backdrop of Iraq's efforts to rebuild and diversify its economy following decades of conflict, political instability, and over-reliance on oil revenues. The Development Road has gained momentum under Prime Minister Mohammed Shia al-Sudani's administration, which has identified it as a national priority.
The project unfolds within a regional context of warming relations and increased economic cooperation. Iraq is experiencing improved ties with both Türkiye and Gulf Cooperation Council (GCC) states, particularly the UAE and Qatar—both signatories to the Development Road initiative. This improvement in relations occurs alongside a broader trend of de-escalation and economic integration within the region, exemplified by the resolution of the 2017 GCC crisis in 2021 and increased Gulf investment in Iraq.
Core Arguments
The Development Road represents far more than merely an infrastructure project, it embodies Iraq's strategy to:
Diversify beyond oil dependency: By establishing Iraq as a major transit corridor, the project aims to reduce the country's overwhelming reliance on oil revenues, creating new sources of income estimated at approximately $4 billion annually.
Enhance regional integration: The project strengthens Iraq's position within the region by fostering economic interdependence with key neighbours like Türkiye and Gulf states, potentially serving as a stabilising force for Iraqi politics.
Create economic opportunities: With Iraq's rapidly growing population and an estimated 700,000 graduates entering the job market annually, the Development Road promises significant employment generation and economic stimulus.
Establish strategic independence: The project strengthens Iraq’s ability to assert its sovereignty by balancing its relationships with global powers, including the United States, China, and regional players like Iran. By creating mutual economic interests, such as trade routes, infrastructure development, and energy cooperation, through the Development Road, Iraq can foster interdependence with these countries.
Reduce transit times: The Development Road could shorten travel time between Asia and Europe by up to 15 days compared to the Suez Canal route, offering significant efficiency gains and reduced costs for global trade.
Key Players and Stakeholders
Iraq: As the primary stakeholder and host of the project, Iraq’s political stability and institutional strength are key to its success. Prime Minister al-Sudani has made the Development Road a central element of his administration's economic strategy. To protect the project from political instability, he has proposed legislation to establish it as a “state project” rather than a government initiative. The law would create an independent commission, directly accountable to the Prime Minister’s office, with full authority to oversee the project.
Türkiye: It serves as a crucial player for the project, providing the main link to European markets. With approximately 40% of Turkish exports going to EU members through its Customs Union relationship, Türkiye has strong incentives to support the Development Road. The project was finalised during Turkish President Erdoğan's visit to Baghdad in April 2024. As Iraqi Transport Minister Razzaq Muhaybis Al-Saadawi stated, "Turkey's role in the project is a main role, like Iraq's... Turkey is the door to Europe."
UAE and Qatar: The UAE and Qatar are key financial supporters of the project. Both countries have already made substantial investments in Iraq’s economy, with the UAE developing gas fields in the south and Qatar holding a 25% stake in the Gas Growth Integrated Project. The UAE’s Abu Dhabi Ports Group has also reached a preliminary agreement to develop the Grand Faw Port in partnership with Iraq’s General Company for Ports. The full extent of their financial involvement is expected to be clarified in upcoming meetings between the four signatory nations.
Kurdistan Regional Government (KRG): The Development Road’s relationship with the KRG is complex due to territorial and political issues. While the corridor will pass through Duhok (in Kurdistan) on its way to Türkiye, most of the route lies outside KRG-controlled areas. This has led to concerns within the KRG about being sidelined in a major national infrastructure project that could bring significant economic benefits. In response, the KRG has revived plans for an alternative railway connecting Iran and Türkiye through Kurdish-controlled territories.
Popular Mobilisation Forces (PMF): These Iran-backed militias have significant control over Iraq's infrastructure and borders. They influence customs operations at existing ports, diverting billions from Iraq's economy. For the Development Road to succeed, Iraq needs to manage the interests of these groups and prevent any attempts to disrupt the project.
Iraq Development Road (IDR).
External Stakeholders
Iran: Views the project with ambivalence, concerned about competition with its own ports and potential reduction in influence over Iraq, but possibly benefiting from a more prosperous neighbour. Iran's position will heavily influence the actions of allied militias in Iraq, making its tacit approval crucial for the project’s security.
Kuwait: Has concerns over maritime border disputes with Iraq and competition between the Grand Faw Port and Kuwait's Mubarak al-Kabeer Port on Boubiyan Island. This unresolved border issue stands as one of the key diplomatic challenges to developing the project's southern terminus.
Military and Security Dimensions
Security challenges represent a significant concern for the Development Road's viability:
Terrorism: While the threat from ISIS has diminished, the potential for resurgent terrorist activity remains, particularly given Syria's uncertain future following the Assad regime's fall.
Regional Conflicts: The project area includes zones of tension, including Faysh Khabur, which sits at the Iraq-Türkiye-Syria border and has been subject to Turkish military operations against the Kurdistan Workers' Party (PKK). These ongoing security operations could complicate construction and operation in border regions.
Militia Activities: Iran-aligned militias have previously attacked Turkish bases in Iraq and could potentially target Development Road infrastructure if they perceive the project as undermining their interests.
Despite these challenges, experience with Iraq's oil infrastructure demonstrates that security risks can be mitigated through proper controls and personnel deployment. Iraq's continuing counterterrorism cooperation with the United States provides additional reassurance to potential investors.
Economic Dimensions
The Development Road offers transformative economic potential:
Economic Diversification: Reducing Iraq's severe dependence on oil revenues by creating a sustainable income stream from transit fees and associated economic activities. Thus, the project also draws international investment to Iraq beyond the traditional oil sector.
Employment Generation: The project will create a lot of jobs in construction, logistics, and services for Iraq's growing workforce, helping reduce unemployment. It will also improve skills and boost Iraq's workforce.
Regional Trade Enhancement: By improving connections between the Gulf states, Iraq, Türkiye, and Europe, the corridor could boost trade within the region. It could help integrate the region’s economies by cutting transportation costs and time, making cross-border business easier.
The project's phased implementation allows for gradual economic benefits, with sections becoming operational as they are completed rather than waiting for the entire corridor to be finished. This approach enables earlier returns on investment and helps establish progress and credibility for the overall initiative.
Social Dimensions
The Development Road could have profound social implications for Iraq:
Youth Employment: Jobs created by the project could reduce social unrest and extremist recruitment among disadvantaged youth.
Regional Integration: Fostering people-to-people connections across borders as movement and trade increase could contribute to greater regional understanding and cooperation beyond purely economic relationships.
Urban Development: Stimulating growth in cities along the corridor, including Karbala, Baghdad, and Mosul. The project could drive urban regeneration, particularly in Mosul, which is still recovering from the ISIS occupation and the subsequent battles for its liberation.
Opportunities and Risks
Opportunities:
Alternative Trade Route: Amid rising maritime insecurity, such as Houthi attacks on Red Sea shipping lanes, the Development Road offers an alternative trade route for global supply chains, reducing dependence on vulnerable sea routes.
Infrastructure Development: This initiative will modernise Iraq’s transportation infrastructure, improving domestic movement of goods and people, with benefits extending beyond international transit to support internal economic growth.
Complementary Integration: While the Development Road may compete with initiatives like China's Belt and Road, it can also complement these efforts by offering additional connectivity options, alleviating bottlenecks, and enhancing regional infrastructure.
Risks:
Political Instability and Governance Issues: Iraq’s history of political instability raises concerns about long-term commitment, and corruption could hinder efficient implementation and fair distribution of benefits, as seen in previous infrastructure projects. The proposed "state project" designation aims to mitigate these risks but cannot eliminate them entirely.
Security and Territorial Disputes: The project faces security risks from armed groups, tensions with the Kurdistan Regional Government over the route, and unresolved maritime border issues with Kuwait that affect the Grand Faw Port development, potentially delaying this crucial first phase.
Geopolitical Tensions: The project may heighten competition between regional powers like Iran and Gulf states for influence in Iraq, and could worsen sectarian divisions if benefits mainly favour Shiite political groups.
Financial Sustainability: Securing the necessary international investment may be challenging due to Iraq’s high-risk profile.
Policy Recommendations
Ensure Inclusive Development: Iraq should integrate the KRG more substantially into the Development Road planning, to prevent the project from becoming a source of internal division. This could include exploring complementary routes through Kurdistan that connect to the main corridor.
Establish Transparent Governance: The independent commission overseeing the Development Road should implement rigorous transparency measures, including regular public reporting on finances, contracts, and progress.
Develop Dispute Resolution Mechanisms: Iraq, Türkiye, Qatar, and the UAE should establish dedicated channels for resolving disputes that may arise during implementation, including arbitration clauses and bilateral investment treaties to protect investors.
Address Maritime Border Issues: Iraq should prioritise resolving its maritime border dispute with Kuwait, potentially by exploring cooperative approaches where the Grand Faw Port and Mubarak al-Kabeer Port complement rather than compete with each other.
Pursue Phase-based Implementation: Continue the strategy of making sections operational as they are completed rather than waiting for the entire corridor to be finished, allowing for earlier economic returns and confidence-building.
Conclusion
The Development Road Project represents a potentially transformative initiative for Iraq and the wider region, offering a pathway to economic diversification, regional integration, and enhanced connectivity between Asia and Europe. However, the project faces significant challenges that must be addressed for successful implementation. Iraq's history of political instability, security concerns, governance issues, and complex regional dynamics all pose risks to the Development Road's viability. The approach of establishing it as a "state project" through dedicated legislation represents a promising effort to insulate the initiative from political volatility, but substantial obstacles remain.
As the first phase of implementation approaches, the coming years will prove crucial in determining whether the Development Road can overcome the challenges that have hindered previous ambitious infrastructure initiatives in Iraq and the wider region. With appropriate governance, security measures, and stakeholder coordination, this project has the potential to reshape patterns of trade and cooperation throughout the Middle East and beyond.