WHEN assessing the investment potential of a railway construction or upgrade project, investors usually focus on the likely return and how soon this will materialise. The impact of local politics is often mitigated either through guarantees provided by the state ministry involved, development banks, or blended finance contracts where local partners are willing to take on a greater debt burden. While this provides reassurance when entering a high-risk market, it is still important for investors, along with operators and suppliers, to assess the reputational risk of working in politically fragmented states where authority is divided between rival factions.
Syria and Libya are prime current examples. While each have their own unique contexts and development paths, they share a history riddled with conflict, open-ended instability, and a lack of railway development. Yet despite persistent conflict, railway construction projects continue to be planned, as rail is recognised as the most promising option for unlocking major reserves of natural resources.
However, the scale and complexity of the risks posed by investing in Syria and Libya mean that, while there has been an increasing appetite in the past decade for transport infrastructure investment across the world, both governments have found it impossible to implement projects that meet the requirements of the private sector for return and risk allocation.
Investment gap
There are four main ways in which finance can be obtained to bridge a project funding gap. Firstly, projects must be correctly structured. In riskier countries, public investment is typically needed to supplement private investment, and governments must set out specific and realistic roles for private-sector partners, whether they are financing, building or operating the railway.
“Financing an entire new railway by way of private investment is unrealistic,” says George Kaulbeck, a partner at consultancy CPCS, which specialises in railway development projects in emerging markets.
“In contrast, investing in infrastructure or rolling stock may work very well, particularly if packaged with an operating concession and backed by adequate guarantees.” He adds that high-quality feasibility studies and producing a business plan in consultation with other partners is crucial to aligning investor confidence with financing requirements.
“Think in terms of segments with bankable traffic. Identify the commodity, ring-fence the corridor, and build from there.”
George Kaulbeck, partner at CPCS consultancy
Appropriate risk allocation is also essential. Exporting, licensing and outsourcing to a third-party contractor are common ways to enter markets affected by war, and finding the right local partners can offset the financial and political risks of investing in war zones. Even so, the ethical consequences and potential reputational harm of involvement with armed groups or their associates needs to be considered.
A railway development project is likely to be more successful if new infrastructure is made available to use at an appropriate cost to all operators, such as mining companies, energy suppliers, and agricultural shippers. In Syria and Libya, recent mineral and energy projects were built with isolated logistics networks, including captive railways, locking out other operators and sectors as potential sources of revenue.
Finally, it is important to focus on easy wins. Rail freight is profitable when large and consistent volumes of heavy bulk products are moved over long distances. “In riskier projects, you have to look closely at captive demand,” Kaulbeck says. “Without a single commodity or multiple commodities driving it, a railway is not economically viable.” In high-risk markets, “don’t think in terms of networks,” he advises. “Think in terms of segments with bankable traffic. Identify the commodity, ring-fence the corridor, and build from there.”
Rebuilding Syria
Following the fall of the Assad regime, the new Syrian government led by the interim president, Ahmad Al-Sharaa, set out to repair and rehabilitate the Syrian Railways (CFS) network, which was heavily damaged by fighting and looting during the civil war. In October 2025, transport minister, Yarub Badr, announced that Syria needed $US 5.5bn to repair and upgrade its railway to international standards. He added that only 1052km of the 2800km CFS network was in service, estimating that it would take three to five years for the country’s transport infrastructure to return to full operation. At present, the journey time between Aleppo and Damascus is between 5 and 6 hours, with trains carrying up to 250 passengers and operating at up to 90km/h on infrastructure designed for a maximum speed of 120km/h.
Rolling stock is also in short supply. According to CFS director general, Osama Haddad, war damage means that only 20% of the locomotive fleet is operational, preventing the implementation of a comprehensive maintenance programme. A $US 50m funding package secured from the World Bank in February for a priority transport package will support the purchase of new locomotives as well as an assessment of the current fleet to determine maintenance and modernisation requirements.
The World Bank estimates Syria’s total reconstruction costs at $US 216bn after more than 13 years of conflict. Infrastructure has been hardest hit, accounting for 48% of total damage, and rebuilding it is a top priority in the government’s first national strategy for reconstruction, unveiled in March. International partners that have expressed an interest in rail projects in Syria include China Civil Engineering Construction Corporation (CCECC) and China Railway Construction Corporation (CRCC), which met with the Ministry of Transport in October 2025 to discuss prospects for future cooperation. In November 2025, Badr held discussions with German engineering consultancy Dorsch Global about upgrading the 290km line connecting phosphate mines at Homs with the port of Tartous, with the objective of increasing capacity to 4.3 million tonnes a year.
Libya’s long-standing objective of building a new railway network has been thwarted by unrest and civil war since the fall of the Gaddafi regime in 2011. The country is now effectively partitioned between east and west. Western Libya is controlled by the Government of National Unity in Tripoli, formed in 2021 and recognised by the United Nations (UN) and the European Union (EU). A rival government was created in Eastern Libya by the House of Representatives in 2022, located in Benghazi. The de facto leader is Khalifa Hafter, the commander of the Libyan National Army who controls the oilfields in the eastern part of the country.
In September 2008, under a $US 3.17bn contract, Russian Railways (RZD) began construction of a 550km railway along the coast of Libya from Sirte to Benghazi. Completion was expected within four years. However, after the fall of Gaddafi the contract became void. In July 2024 Libya’s deputy transport minister, Fadlallah Ashour, and the head of the Railway Project Implementation and Management Agency, Saeed Al-Kilani, met with the Russian ambassador to Libya, Aydar Aganin, to discuss reactivating the project. Progress so far remains uncertain, however.
China has also been active in Libya. In July 2025, CCECC signed a memorandum of understanding (MoU) with Libyan Railways, looking to resume work on three lines where work had come to a halt in 2011. Contracts were originally signed in 2008 for CCECC to build a 170km line from Tripoli to Ras Ajdir on the border with Tunisia, a 472km line from Tripoli to Sirte, and an 810km line from the port of Misurata to iron ore deposits near Sabha.
Local support and finance for such projects can now be provided by the Libyan Bank for Energy and Mining. Set up in Eastern Libya in August 2025 as part of the country’s reconstruction efforts, the bank is working with international development banks and private investors to facilitate large-scale infrastructure and mining projects to move beyond oil dependency. In April 2025, the UN Security Council gave its permission for Libya’s sovereign wealth fund to reinvest a portion of assets that had been frozen under sanctions imposed during the civil war in 2011, intended to prevent the Gaddafi regime from misusing the fund then valued at over $US 60bn.
China and Russia
Both China and Russia tend to invest more in riskier countries with weak institutions, low credibility and where western competitors are scarce. The usual approach adopted by Russia is to provide loans to other governments through the state bank or the state budget, regardless of the client’s ability to repay the debt. Close personal contacts are maintained with ruling elites or powerful groups, and work is provided for Russian state-owned companies such as RZD which receive preferential access to state financing. Along with political and diplomatic support, this has helped Russia offset the risks of operating in volatile host countries.
Bilateral lending under China’s flagship Belt and Road Initiative (BRI) has ebbed and flowed over the years, with lending to other countries now declining and focusing on smaller projects. Kaulbeck notes that China’s approach “tends to prioritise delivery and long-term presence, often supported by concessional financing.”
“My key recommendation for western investors interested in a railway project in a high-risk jurisdiction is to keep things simple.”
George Kaulbeck
“Their objectives are much broader than just returning a profit,” he says. “They take a much longer perspective on infrastructure than western companies, and focus more on the repair and maintenance of railways.” As a result, “they have a different risk profile.”
Countries under sanctions are a tough situation to manage from the perspective of a western investor, Kaulbeck notes, although western companies generally have the support of international development banks, which they can leverage to de-risk the project. “Or it can be an environment they simply can’t operate in because they will be punished,” Kaulbeck says.
“My key recommendation for western investors interested in a railway project in a high-risk jurisdiction is to keep things simple,” Kaulbeck says. Projects to supply new rolling stock, for example, should be avoided “if the track is worn out and there is no long-term plan to improve it or progress is very slow,” he observes. “To get value out of that requires service reliability. Otherwise, you end up in a cart-before-the-horse situation.” He recommends focusing on the repair and maintenance of infrastructure, rolling stock and signalling systems, an approach followed by Chinese and Turkish companies.
Ultimately, in countries such as Syria and Libya it is not a case of embarking on railway upgrade or construction projects merely for the sake of it. “What they need are railways that are economically viable,” Kaulbeck says. “That’s what ultimately drives sustainable growth.” Most railway projects are not financially viable on a standalone basis, he says. “Their justification comes from broader economic returns, which depend on the type of commodity the railway could potentially carry and if there is a demand for it.”
