Russia's push for North-South ITC sparks Eurasian economic revival
Project paves way for enhanced trade routes & prosperity

ANALYTICS  01 April 2024 - 18:58

In recent directives from Russian First Deputy Prime Minister Andrei Belousov, a significant emphasis has been placed on bolstering the transport infrastructure along the North-South International Transport Corridor (ITC).

By May 2024, this initiative aims to increase the capacity of various transport facilities across Russian state borders, including roads, railways, seaports, and checkpoints. The economic implications of the directive were highlighted during discussions between President Vladimir Putin and Bakytzhan Sagintayev, Chairman of the Board of the Eurasian Economic Commission, on March 20, 2024.

As Russia endeavors to bolster its economic ties within the Commonwealth of Independent States (CIS) and Eurasian Economic Union (EEU) space, the North-South ITC emerges as a critical component for facilitating trade and connectivity across multiple countries. The corridor is designed to provide a strategic route connecting South Asia to Europe via Central Asia, the Caucasus, and Russia.

The journey commences with the shipment of goods from India, traversing through Iran either by sea or land. Upon reaching Iran, cargo is further transported across the Caspian Sea or via truck or rail to Southern Russia. Subsequently, commodities continue their journey by land, either by truck or rail along the Volga River, passing through Moscow en route to Northern Europe.

The inception of the agreement in 2001 between Russia, Iran, and India marked the formalization of efforts to develop this critical corridor. India, notably, has played a pivotal role in orchestrating meetings among stakeholders, including Iran, Russia, and Central Asian nations, as well as Bulgaria, to champion the project's advancement and realization.

Beyond the initial signatories, the project encompasses the active participation of Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Türkiye, Ukraine, Belarus, and Oman. The commencement of the first commercial consignment through the North-South ITC in July 2022 stands as a historic landmark, signifying the operationalization of this transformative transportation artery.

Strategic agendas between Moscow & Baku

Relevant Russian agencies have been tasked with studying the existing infrastructure in countries gravitating towards the North-South ITC, including Azerbaijan, Kazakhstan, Turkmenistan, Iran, and India. These studies aim to identify and address problematic issues in international freight transport.

The involvement of various ministries and agencies, including transport, economic development, agriculture, energy, industry and trade, the Federal Customs Service, and the Analytical Centre under the Russian government, underscores the comprehensive approach being taken to analyze and enhance the transport infrastructure along the corridor.

The directive issued by Deputy Prime Minister Belousov follows detailed discussions between Russian and Azerbaijani Prime Ministers Mikhail Mishustin and Ali Asadov respectively, highlighting cooperation in energy, industry, transport infrastructure, agriculture, and pharmaceuticals.

Special attention has been given to developing the North-South ITC and its junctions with the Azerbaijani segment and other corridors within Azerbaijan. Similar discussions align with the strategic agendas voiced during meetings between Chairman Sagintayev and President Putin, signaling a concerted effort to strengthen economic cooperation within the region.

The directive reflects Russia's proactive approach to qualitatively changing the economic landscape within the CIS/EEU space. By prioritizing the development of cooperation links, regional value chains, and transport infrastructure, Russia aims to optimize trade flows and foster economic growth.

The redeployment of staff by the Russian Customs Service to priority areas within international transport corridors demonstrates a commitment to streamlining customs procedures and enhancing efficiency in commodity flows. Additionally, businesses engaged in international activities are actively seeking new logistics options to access new markets and partners, reflecting the evolving dynamics of international trade.

Recent events, such as the Trans Russia exhibition and conference, serve as platforms for showcasing advancements in the transport sector and fostering collaboration among industry stakeholders. The participation of Azerbaijani companies, including ADY Express and Absheron Logistics Centre, underscores Azerbaijan's significant role in facilitating cargo movement along the North-South ITC corridor. Notably, the Absheron Dry Port serves as a crucial hub for transporting goods across Azerbaijan, further enhancing connectivity within the region.

Azerbaijan's railway infrastructure plays a vital role in facilitating cargo transport along the North-South. In 2023, approximately 12.5m tons of cargo were transported along the corridor, with exports experiencing a notable increase. Russian Railways' initiatives, such as modernizing car repair plants in Turkmenistan and increasing container service frequency, contribute to the seamless movement of goods within the corridor. Plans for modernizing border crossings and expanding capacity demonstrate a long-term commitment to enhancing trade and economic ties within the region.

NSTC’s importance

By offering a more direct and efficient transportation route, the NSTC helps in reducing transport costs and transit times for goods traveling between South Asia and Europe. This reduction in logistics costs can make regional trade more competitive and economically viable, stimulating greater economic activity along the corridor.

The corridor contributes to the diversification of trade routes, reducing dependence on traditional sea routes. This diversification enhances resilience in trade networks by offering alternative pathways that are less vulnerable to geopolitical tensions, piracy, or other disruptions. It also promotes economic development and integration among the countries along its route.

The NSTC has geopolitical significance as it fosters cooperation and partnership among participating countries. By working together to develop and maintain the corridor, countries can strengthen diplomatic ties and build mutual trust, contributing to regional stability and security. It also serves as an important route for transporting energy resources, particularly oil and gas, from the resource-rich regions of Central Asia and the Caspian Sea to markets in South Asia, Europe, and beyond.

India’s gateway to Europe

The North-South, heralded as India's gateway to fostering robust trade and investment ties with Eurasia, epitomizes a multi-modal transportation artery seamlessly linking the Indian Ocean and Persian Gulf to the Caspian Sea through Iran, thereby extending onwards to Northern Europe.

Beyond its logistical significance, the INSTC catalyzes bolstering India's trade ties with Eurasian nations while enhancing overall connectivity. This transformative project not only extends India's reach to its extended neighborhood but also fosters increased trade and commerce with the region, thereby contributing to regional economic integration and prosperity.

India’s active interest in pursuing the project is due to a variety of considerations. Indian goods reach Russia and Central Asia by making a lengthy journey via the Suez Canal. While the Suez Canal route takes about 45-60 days, the trans-Iranian route takes about 25-30 days. This route helps in opening up vast markets in India, Russia, and the Central Asian countries, as well as other parts of Asia and Europe. The energy-rich region of Eurasia, with its vast geography and resources, is expected to play a crucial role in the emerging new great game in the Eurasian space. The politico-economic dimension of this route will be significant in the international political scenario, given the indications of a shift in the global power base. The North-South Corridor helps to develop a web of bilateral infrastructure for trade routes in the region and for the flow of goods and people, which are otherwise impeded at the borders due to a lack of bilateral and multilateral agreements.

Conclusion

The revival of Silk Road connectivity, development of transport corridors, and improvement of links increase regional cooperation and can be considered a major tool for transport and trade developments. There is a major developed market that surrounds this region, which can be connected easily through the corridor.

Regional cooperation agreement helps in removing many potential obstacles. Transport corridors can indeed contribute significantly to developing trade and transit among regional countries. The significance of the transport corridor is that it provides a platform for improving cooperation as well as communications, and reduces barriers to permit the economies of each country to grow independently and achieve objectives for the benefit of the country and the region as a whole.

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