Can the International North-South Corridor become a lifeline for Russia?

Image: David Gubler via Wikimedia Commons. David Gubler

The International North-South Transport Corridor (INSTC) linking Russia and India has made major strides in recent days. Thanks to Russia’s 4 billion dollars investment in Iranian oil fields, the corridor’s key missing link, the Rasht-Astara railway line in Iran, will receive ample funding to complete construction. This is so because the two parties will need efficient transport infrastructure in place to move oil products. 

The Rasht-Astara railway line connects the port of Shahid Rajaee in the South of Iran (on the Persian Gulf coast, next to Bandar Abbas) and the port of Rasht in the North (on the coast of the Caspian Sea).

Russia’s plan

Currently, only 70 per cent of the line is complete. With investments from Iran and Russia’s oil trade, as well as Russia’s aid, the construction period of the railway will be significantly reduced, which is expected to be finished by mid-2023.

The new funding for the project comes from an unprecedented oil trading contract. During Russian President Vladimir Putin’s visit to Tehran not long ago, Iran and Russia signed the largest strategic investment agreement in oil-related affairs in history.

Russia’s investment in the development of seven oil fields in Iran, with an initial investment of roughly 4 billion euros, in conjunction with other projects, will increase to 40 billion euros. In addition, stable and efficient transportation is obviously the key to the oil trade.

Also read: First Russia rail shipment to India reaches Mumbai with more to come

International North-South Freight Corridor

The INSTC is 7,200 kilometres long, linking India, Iran, Azerbaijan, and Russia by ship, rail, and road. The line is expected to cut the transit time between Mumbai and Moscow in half.

Agreements for the construction of the corridor have been signed by 13 countries, including Azerbaijan, Belarus, Bulgaria, Armenia, India, Iran, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, Turkey, and Ukraine. When fully completed, the corridor’s infrastructure is expected to be able to handle 15 million tonnes of cargo per year.

The corridor was originally built to provide an alternative to traditional shipping routes. With the development of geopolitics, especially the Ukrainian war and the subsequent severe sanctions in Europe and the US, this freight corridor, which has been neglected for more than 20 years, has high hopes. Some people even consider it a way for Russia to avoid the sanctions, a lifeline for strengthening trade with Asia.

Currently, merchant ships from India must cross the Arabian Sea, the Red Sea, the Mediterranean Sea, then bypass Western Europe, and finally pass through the Baltic Sea to reach St. Petersburg. With the opening of the international north-south freight corridor, the transportation time will be shortened from 40-60 days to 25-30 days, and the transportation cost will also be reduced by 30 per cent.

However, although the route avoids Europe, geopolitics is an inescapable factor. The situation along the route and practical issues, such as customs operations, are still unknown.

This article was originally published in our Chinese sister publication, RailFreight.cn

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Author: Steven Don

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