Russia, Iran agree on new rail corridor via Azerbaijan

Russia and Iran have agreed to complete a railroad that would link Russia with ports on the Persian Gulf, providing a transportation lifeline – via Azerbaijan as a critical link – for the two sanctions-hit countries.

The route has gained new importance as Russia seeks to replace its former trade routes that have been cut off by Western sanctions, Joshua Kucera writes in his piece for Eurasianet. Caliber.Az reprints the article.

The presidents of Russia and Iran, Vladimir Putin and Ibrahim Raisi, signed an agreement on May 17 to build a 170-kilometer section of the railroad in northern Iran, from Astara on the Azerbaijani border to the city of Rasht.

When that section is complete – which is now scheduled for 2027 – it will allow uninterrupted rail transport along what is known as the International North-South Transportation Corridor (INTSC) aiming to connect Russia to the Indian Ocean.

The railroad has long been on the drawing board, and Azerbaijan in 2016 agreed to partially finance (along with Iran) the construction of the Astara-Rasht section. But in 2018, Baku abandoned the deal because of Western sanctions against Iran.

But the corridor got new life following the invasion of Ukraine and the resulting Western economic attempts to economically isolate Russia. 

“It wouldn’t be an exaggeration to say that the INSTC started as a far-fetched dream to connect Europe with India via a land corridor crossing Russia, Azerbaijan, Armenia, and Iran,” wrote industry publication RailFreight.com. “Nevertheless, its significance skyrocketed after Russia started scraping for new trade and transport routes following the Western sanctions in 2022.”

Now it will be Russia funding the railroad’s construction, to the tune of an interstate loan of 1.3 billion Euros. Russian and Iranian officials have both described the project’s potential in epochal terms. 

“This is truly a great event for the region, for the entire world’s transportation infrastructure,” Putin said at the signing. It will “help substantially diversify global transport flows. Shipments along the new corridor will enjoy significant competitive advantages.” He said the route should decrease cargo transit between St. Petersburg and Mumbai to ten days from the current 30-45.

Land cargo transport between Russia and Iran could reach up to 45 million metric tons by 2030, triple the current figure, Russian First Deputy Prime Minister Andrei Belousov said. 

Iran’s revenue from the project could rival its oil exports, the country’s vice president for political affairs, Mohammad Jamshidi, told media. And Iranian media have repeatedly compared the import of the project to that of the Suez Canal.

While the deal to build the Astara-Rasht section was just bilateral, between Iran and Russia, those two countries will soon sign a separate agreement with Azerbaijan on the corridor, Putin said at a May 24 summit of the Eurasian Economic Union.  

“Cooperation on this corridor is going on in close partnership with Azerbaijan, and very soon we are counting on the preparation and signing of documents in a trilateral format with the Azerbaijani side,” he said.

The response from Azerbaijan, however, has been quiet; officials have said little about the Russia-Iran deal in the week since it was signed. Generally, Baku much prefers to tout its growing role on another key transit route – the Middle Corridor, shipping goods between Europe and Asia while bypassing Russia and Iran. That route, too, has gained in importance since the Ukraine war, for the same reasons. 

The simultaneous rise of the two intersecting corridors has put Azerbaijan in a uniquely advantageous spot. Azerbaijan’s railways reported a 63 percent increase in transit traffic in 2022 compared to 2021, and that is without any significant infrastructure improvements. 

“We have been implementing projects in the field of transport for many years. The Russia-Ukraine war has enhanced the importance of our work,” Azerbaijani President Ilham Aliyev said in January in remarks to local press. “We believe that 15 million to 30 million tons of cargo can be transported from the territory of Azerbaijan through the North-South transport corridor alone. This is a very high figure. Currently, all of Azerbaijan’s transit opportunities make up a small percentage of that. Therefore, the North-South transport corridor is a project that can compete with the Middle Corridor.”

Azerbaijan’s key role in helping both Russia and Iran escape the economic isolation that Europe and the United States are trying to impose would seem to spell trouble for Baku’s ties to the West. A piece on Caliber.Az [originally published by Geopolitical Monitor], referred to the route as the “sanctions-evasion corridor.” Azerbaijan nevertheless seems to have avoided the scrutiny that other regional countries like Georgia, Armenia, and Türkiye have for facilitating post-sanctions Russian trade.

There could be other political obstacles, however: relying on an Azerbaijan-Iran link could be risky given that the two neighbors’ ties have dramatically deteriorated since 2020. There are regular spikes in tension, including threatening military exercises. Azerbaijan’s foreign ministry said in April that relations were reaching a “crisis point” following an attack on an Azerbaijani MP that Baku has blamed on Iran.

“Relations between Azerbaijan and Iran are currently quite strained, there is even a risk of direct military conflict,” wrote Haqqin.az, a website associated with Azerbaijan’s security services, in an April piece. “Taking that into consideration, it’s difficult to say how real the possibility is of Azerbaijan joining the agreement” on the railroad.

But the economic ties could, conversely, put a damper on political tensions. And Russia’s and Iran’s need for the railroad can strengthen Baku’s hand in its negotiations with its two neighbors, said Farhad Mammadov, director of the Baku think tank Center for Studies of the South Caucasus.

Mammadov noted that Russian Foreign Minister Sergey Lavrov has repeatedly expressed hope for a decrease in tensions between Azerbaijan and Iran. “The current tension between Iran and Azerbaijan isn’t connected with this [railroad] project, but it negatively affects its implementation,” Mammadov told Eurasianet. “In this context, Russia is the party most interested in this project and it is applying the maximum efforts to decrease the level of tension between Baku and Tehran.”