North-South Transport Corridor as an instrument against the Western sanctions A corridor to nowhere?

The International North-South Transport Corridor (INSTC), a 7,200 km road, rail and maritime link, runs from St Petersburg through southern Russia, Azerbaijan, and Iran, then on to Mumbai. Russia mostly served as a transit for east-west connectivity. The corridor, which includes a section across the Caspian Sea and an additional route via Kazakhstan and Turkmenistan, has been talked about for a number of years but only really gained momentum since the Ukraine War.

As a result of the invasion campaign, Russia became subject to several packages of international sanctions, which made the emergence of alternative trade routes a must. Therefore, Moscow sees the corridor as a means of replacing European trade lost to sanctions. The project substantially reduces transport costs by bypassing the Suez Canal for all those involved. The importance of the corridor dramatically increased when some long-term trade partners of Russia “postponed” some operations under the risk of being sanctioned by the West.

As such, Iran, another important partner of Russia and brother-in-sanction, also bolstered its involvement in the project in an attempt to escape the harsh repercussions of the sanctions and open up new routes for business cooperation with India, Iran and Pakistan, as well as west Asian countries. Recently, Russia revealed that it would expand its international economic connections and build new supply corridors by developing the ports of the Black Sea and the Sea of Azov.

Access to warm water ports works for both Russia and India and provides an alternative to lengthy sea routes for trade to Russia, Turkey, and the rest of Europe. The INSTC can also connect the Persian Gulf and Indian ports, given the massively increased volumes of Indian purchases of Russian oil and gas. Corridor countries are investing heavily in the enterprise, Russia and Iran reportedly to the tune of $25 billion. The first shipments began last year – the annual cargo transit target is 30 million tonnes by 2030. 

Although the project offers many prospects, serious obstacles must be addressed. First, the project remains incomplete due to the missing infrastructure. One of the main gaps is the long-delayed 164 km Rasht-Astara railway line in Iran. The Rasht - Astara railway, which is supposed to run through Azerbaijan, has faced many years of problems in its construction and implementation. The main obstacle has been financing, particularly due to the United States' sanctions on Iran. The lack of financial means on the Iranian end appeared to be a severe challenge, though Russia has apparently agreed to finance the work. As of today, Russia is the only potential sponsor of the project, and according to the Iranian media, Tehran is waiting for Russia to announce its preferred mode of financial engagement in the project, which would be in the form of a government loan, joint investment, or financing.

Also, the small size of the Iranian fleet in the Caspian Sea and the fact that the southern Russian port of Astrakhan freezes in the winter, seriously restricting access, and the lack of dredging in the Volga River and the Volga-Don Canal decreased ship-loading capacity. Nevertheless, in June 2022, Iran announced the first-ever pilot transit of goods from Russia to India using the INSTC through the port of Bandar Abbas on the Strait of Hormuz. The two containers of wood laminate have since been followed by the shipment of at least 39 more containers headed from Russia to India’s Arabian Sea port of Nhava Sheva in July 2022.

Given this indicator, Vladimir Putin, in early 2023 announced that a decision had been taken to extend the Moscow-Kazan highway to Yekaterinburg, Chelyabinsk and Tyumen, and in the future, to Irkutsk and Vladivostok, and potentially to Kazakhstan, Mongolia and China, which will expand Russia's economic ties with the markets of Southeast Asia. The logic behind the INSTC is simple. Historically, the absence of a developed land route has meant that freight from India to Russia has had to cross the Arabian Sea, Red Sea and Mediterranean Sea, then go around Western Europe and finally pass through the Baltic Sea to reach Saint Petersburg. The most crucial point of the project is that it will ease Russia and Iran's attempts to bypass Western sanctions, which will remain high on agendas in Moscow and Tehran for now. In this regard, the INSTC project appears more aspirational than possible.