Iran and Russia have agreed to transit 10 million tons of goods along the International North-South Transit Corridor.
The agreement was made during a meeting of the two sides’ transportation officials in Moscow on June 28 and 29, the news portal of Iran’s Ministry of Roads and Urban Development reported on Saturday.
The Iranian side was led by deputy minister of roads and urban development, Shahriyar Afandizadeh. He was accompanied by deputies and managers of the Civil Aviation Organization of Iran, Ports and Maritime Organization, and the Construction and Development of Transportation Infrastructures Company as well as representatives of private sector in marine and road transportation.
The Russian side was led by Deputy Transport Minister Dmitry Zverev.
Afandizadeh and his Russian counterpart signed a protocol for their agreement.
A wide range of subjects related to cooperation in transit and transportation were discussed during the two days of meeting, but the transit 10 million tons of goods along the International North-South Transit Corridor was the main issue.
INSTC is a major transit route designed to facilitate the transportation of goods from Mumbai in India to Helsinki in Finland, using Iranian ports and railroads, which the Islamic Republic plans to connect to those of Azerbaijan and Russia.
The corridor, which will connect Iran with Russia’s Baltic ports and give Russia rail connectivity to both the Persian Gulf and the Indian rail network, was high on the agenda of Iran’s Minister of Roads and Urban Development Rostam Qasemi during his recent visit to Moscow.
With the operationalization of the corridor, goods could be carried from Mumbai to the Iranian port of Bandar Abbas and further to Baku. They could then pass across the Russian border into Astrakhan before proceeding to Moscow and St. Petersburg, before entering Europe.
INSTC would substantially cut the travel time for everything from Asian consumer goods to Central Eurasia’s natural resources to advanced European exports.
INSTC Trial Run Launched
The Islamic Republic of Iran Shipping Lines recently began piloting multimodal transit of cargo along the INSTC carrying goods from Russia to India, according to the head of Solaynka Port in Russia’s city of Astrakhan.
“The consignments are two 40-feet containers of wood laminates weighing a total of 41 tons. The containers were loaded at St. Petersburg and are heading toward Astrakhan where they will be loaded again at Solyanka Port. They will then traverse the Caspian Sea to reach Iran’s Anzali Port where they are scheduled to be transported to Bandar Abbas port city in the south of the country via trucks. The two containers will then be dispatched to Jawaharlal Nehru, India’s largest container port,” Darioush Jamali, an IRISL official, was quoted as saying by IRNA.
The official estimated that the transit of this first trial consignment, as part of collaboration between the Islamic Republic of Iran Shipping Lines’ representative logistic companies in Russia and India, will take less than 25 days.
“The shipments will be using one-way bill along their journey. We hope that this first transit on INSTC will lead to considerable revenues and a boost in transit and logistics in Iran, Russia and India.”
Solyanka is one of the 15 ports located in Astrakhan’s Economic zone and is considered the busiest. Some 53% of Solyanka Port’s shares belong to Islamic Republic of Iran Shipping Lines.
The Russian port of Astrakhan is a hub for commercial activities of nearly 200 Iranian firms, making the port the largest center of Iranians’ economic activities in Russia.
Iran’s first House of Commerce was inaugurated in Astrakhan in October 2017 with the aim of boosting and facilitating trade between Iran and Russia.
Russia to Invest in Iran’s Logistic Hubs
Russia agreed in Moscow meetings to invest in Iran’s logistic hubs, particularly in Shahid Rajaee and Chabahar, to increase the two ports’ transit capacity along INSTC.
Shahid Rajaee Special Economic Zone, located in the southern Hormozgan Province, accounts for the biggest share of all goods exported from and imported to Iran.
The economic zone, which has a loading/unloading capacity of 100 million tons per year, accounts for over half of Iran's trade and about two-thirds of total freight transit through the country.
The lion’s share of Iran's containers are handled in Shahid Rajaee Port Complex.
With 18 gantry cranes and 40 berths, Rajaee is the most advanced container port of Iran.
Launched in 1985, the port has expanded every year. Today it is connected to 80 ports worldwide.
The significance of this port lies in its large capacity, including its location in the Persian Gulf, container terminal, fuel bunkering, access to 24 kilometers of railroads and round-the-clock truck transportation.
In terms of transit, again Shahid Rajaee Special Economic Zone tops the list of Iranian customs terminals.
The location of Chabahar Port has strategic advantage and high potential to provide connectivity among India, Iran, Afghanistan, Uzbekistan and other Commonwealth of Independent States countries, especially eastern CIS nations, and boost trade.
According to the Diplomat, the port has a number of distinguishing features that make it attractive from both a domestic and international perspective. Located on the edge of the Indian Ocean, it is the only deep-sea port in Iran with direct ocean access. Its geographic proximity to countries such as Afghanistan, Pakistan and India, as well as its status as a key transit center on the burgeoning International North-South Transport Corridor, gives it the potential to develop into one of the most important commercial hubs in the region.
Chabahar Port has the capacity to transform trade in South and Central Asia. The proposed land-based trade routes linked to the port would facilitate greater access to the Afghan and Central Asian markets. The impact of this increased connectivity has enormous implications for Afghanistan in particular, although the fallout from the Taliban’s rapid takeover of the country could jeopardize these plans moving forward. Currently, Afghanistan conducts most of its trade via routes through Pakistan; Chabahar Port could provide an alternative trade outlet for the country. In turn, Chabahar has the potential to generate massive economic growth in Afghanistan, as it would allow goods from other countries to more easily enter the country and bolster its export potential.
Chabahar is Iran’s only oceanic port.
Iran Gains as Ukraine Conflict Diverts European Trade to INSTC
The Ukraine conflict has resulted in unexpected increases in trade flows east, with one of the beneficiaries being Iran. This is because the International North-South Transportation Corridor, originally intended as a link to boost India-Iran trade, has now become a key part of the far wider southern route between Europe and Asia as the EU’s northern border with Russia remains closed, according to Silk Road Briefing.
The INSTC runs north-south across Iran and connects the Caspian Sea to the Persian Gulf, allowing European goods transit east from the EU’s southern ports in Italy and Greece, in addition to the Bulgarian and Romanian Black Sea ports access via Turkey and Georgia to Azerbaijan’s Port at Baku.
From there, Iran’s INSTC route takes them south and to markets in East Africa, the Middle East, Pakistan, India and South Asia.
At present, the Iranian INSTC is a multimodal road-rail connection, however rail construction is continuing and should be fully completed next year. This is having a significant impact on how Iran is now being seen as a vital link between Europe and Asia.
To help speed up delivery times, Iran’s international cargo transportation through its airports increased by 128%, in the first month of the current fiscal year (March 21 through April 20), according to statistics of the Iranian Airports and Air Navigation Company.
About 4,100 tons of cargo were transported internationally through Iranian airports in that month compared to 1,800 tons in the same month of last year. The increase has also been reflected in passenger traffic, with international passenger transits through Iranian airports rising fourfold to 202,000 for the same period, as opposed to 48,700 in the previous year.
Iran’s airports are also undergoing significant upgrades, with both Chinese and Russian contractors commissioned to develop 116 Iranian airports in stages over the next two decades. Both China and Russia signed off 25- and 20-year investment and development agreements with Iran last year.
This ongoing trend saw Iranian goods transit increase by 52% in March and creates something of a political quandary for both the European Union and United States, as Iran, like Russia is also under US sanctions. Washington would prefer not to see any Iranian international trade or the facilitation of this, whereas Europe needs this access route to Asia following Russian sanctions.
At some point, the United States is going to make a call whether attaching the European Union to its own North American supply chains is more desirable than allowing Iranian trade to flourish. For now, Iran is being tolerated, however one can expect gradual, possibly decade-long sustained pressure to see that this is eventually reversed, and that North American trade routes eventually take priority for the EU over Iranian and Asian ones.
The big attraction of INSTC is its key hub, namely Chabahar, on the Sea of Oman opening out into the wider Indian Ocean. INSTC was also presented as a transit option via Russia offering routes running from and to European ports, including Helsinki. But, given current events, it has now become a key part of the southern route running between Europe and Asia, according to bne IntelliNews.
