Context: The project was first mooted in 2000 and despite its perceived potential and the keenness shown by key powers, there was little progress on the project’s implementation for years. One of the reasons was the western sanctions on Iran over its nuclear programme. However, Russia’s February 2022 invasion of Ukraine, after which it was sanctioned by the West, seems to have brought Moscow and Tehran closer, giving a fresh impetus to the NSTC. In February this year, President Vladimir Putin said in his State of the Nation address that Russia was developing the NSTC, which would open up new routes for trade with India, Iran, Pakistan as well as Gulf countries. Recently, Mr. Putin and his Iranian counterpart Ebrahim Raisi virtually participated in a ceremony where both countries signed an agreement to develop the 162-km Rasht-Astara railway, a critical link in the NSTC.
- The INSTC is a 7,200 km-long multimodal transportation network encompassing sea, road, and rail routes to offer the shortest route of connectivity.
- It links the Indian Ocean to the Caspian Sea via the Persian Gulf onwards into Russia and Northern Europe. It is aimed at reducing the carriage cost between India and Russia by about 30 percent and bringing down the transit time by more than half.
- It was launched in 2000 with India, Russia, and Iran as its founding members and work on actualizing the corridor began in 2002.
- Since then, INSTC membership has expanded to include 10 more countries – Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, and Oman. Bulgaria has been included as an observer state. The Baltic countries like Latvia and Estonia have also expressed willingness to join the INSTC.
The INSTC spirals across the following corridor:
- Central corridor: It begins from the Jawahar Lal Nehru port in India’s western state of Maharashtra (in the Indian Ocean Region) and connects to the Bandar Abbas port on the Strait of Hormuz. It then passes through the Iranian territory via Nowshahr, Amirabad, and Bandar-e-Anzali, runs along the Caspian Sea to reach the Olya and Astrakhan Ports in Russia.
- Western corridor: It connects the railway network of Azerbaijan to that of Iran via the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran) and further to Jawaharlal Nehru port in India via sea route.
- Eastern corridor: It connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan, and Turkmenistan.
- REDUCED COST: INSTC boasts of the shortest trade route connecting India with Russia. Reports indicate INSTC was 30 percent cheaper and 40 percent shorter than the traditional Suez route, slashing the transit time to an average of 23 days for Europe-bound shipments from the 45-60 days taken by the Suez Canal route.
- INCREASED ACCESS: Cheaper cost of transport will lead to increased competitiveness of Indian exports, opening access to unfulfilled markets.
- LOGISTICS HUB: Under the agreement, Iran and Azerbaijan are expected to develop into transit hubs. In India, Nagpur and Bhiwandi from Maharashtra state are identified as potential logistics hubs.
- SUPPLY CHAINS: The creation of diverse supply chains across Eurasia might surely alter the stereotype of East as the producer and West as the consumer.
- INCREASED TRADE VOLUME: India’s trade with Russia and Central Asian countries highlight that he main reason for low trade with the landlocked Central Asian countries is lack of connectivity, which has now been taken care of with Iran’s Chabahar Port. The INSTC will not only enhance physical connectivity but will also improve knowledge and information sharing mechanisms.
- ENERGY AS A COMMODITY: As India is one of the largest consumer and is dependent on the area to meets its energy demand.
- Synchronization of INSTC with Ashgabat Agreement and Organization of the Black Sea Economic Cooperation (BSEC): Linking INSTC to existing transport initiatives in the Central Asian region like BSEC (Europe-centric) and the Ashgabat Agreement (Central Asia-centric) will expand trade linkages and opportunities in the region.
- Potential materialization of free trade agreements (FTAs) in the region: There have been talks of signing an FTA between India and the Eurasian Economic Union (EAEU): It will provide the much-needed impetus to the trade momentum between different countries in the region. Access to the EAEU nations alone will open India to a market of 173 million people.
- Possible synchronization with Baltic, Nordic, and Arctic corridors in the future: Alongside the North Sea-Baltic Corridor, INSTC may synchronize with the Scandinavian-Mediterranean (ScanMed) Corridor and the planned Arctic Corridor in the future.
CHALLENGES IN MATERIALIZATION
- Firstly, Iran wants to increase its role as a transcontinental transit country. Yet the problem is that, the infrastructure which remains hampered by US sanctions. There is also a major shortage of transit wagons and relatively poor road infrastructure which makes it difficult to sustain higher levels of traffic.
- There are other practical problems such as the lagging construction of 22 tunnels and the construction of 15 special bridges along the corridor in Iran. At the same time, there is no single railway gauge option adopted for the route. The Russian standard of gauge of railways and that in Iran is different. Obviously, this would make the operation of the INSTC less smooth.
- The financial situation in both countries remain heavily sanctioned. While the Ukraine conflict continues and Iran’s nuclear negotiations remain stymied, Western restrictions are likely to remain in place. In normal times Russia is arguably the only power which would be able to finance the remaining Rasht-Astara railway section. With the sanctions the prospects seem less promising.
- Further tensions are also persistent in Azerbaijan-Russia relations. Amid the Ukraine conflict and Azerbaijan’s increasingly coercive position toward Armenia, Baku’s push to have Russian peacekeeping forces withdrawn from Nagorno-Karabakh by 2025 becomes ever more evident.
- Iran is also suspicious about Russia’s strategic goals and interests in the South Caucasus and the Middle East. Even on such issues as the provision of Iranian military drones to Russia, Iranian politicians appears deeply divided.