Domestic Economy

Iran, Russia Sign Agreement to Build INSTC’s Missing Rail Link

With the completion of the missing 162-kilometer railroad section between the city of Rasht, the capital city of Gilan Province, and the city of Astara in the same province that borders Azerbaijan, trains can travel from St. Petersburg to the Persian Gulf
Iran, Russia Sign Agreement to  Build INSTC’s Missing Rail Link
Iran, Russia Sign Agreement to  Build INSTC’s Missing Rail Link

Iran and Russia have signed an agreement to complete the construction of the missing rail link along the International North-South Transportation Corridor.
The agreement was signed by Iran’s Minister of Roads and Urban Development Mehrdad Bazrpash and Russia’s Deputy Prime Minister Alexander Novak in Tehran on Wednesday, after presidents of the two countries declared their approval in a video-conference, IRNA reported.
“The North-South corridor will benefit the entire region. From East and South Asia to Caucasia and North Europe, the route is a manifestation of friendship, convergence and economic partnership among all regional countries,” Iranian President Ebrahim Raisi said.
He added that preliminary negotiations to complete the corridor dates back to two decades and that intense diplomacy during his presidency has accelerated work on the project.
Russian President Vladimir Putin stressed the importance of the agreement and said, “The Rasht-Astara railroad will give us an opportunity to transform and diversify global transportation routes. It will create competition to boost transit capacities in the region.”
According to Putin, the North-South corridor plays a vital role in meeting the food security of Iran and the littoral state of the Persian Gulf.
The missing link is a 162-kilometer railroad between the city of Rasht, the capital city of Gilan Province, and the city of Astara in the namesake province on the border with Azerbaijan.
With the completion of this section, trains can travel from St. Petersburg to Persian Gulf. 
The Astara–Rasht–Qazvin railroad, which will wind along the southwestern corner of the Caspian Sea, forms a central link of the longer International North-South Transportation Corridor, a multimodal route linking India, Iran, Azerbaijan, Russia and Europe. 
The cross-border Astara (Iran)–Astara (Azerbaijan) section of the railroad was officially inaugurated on March 29, 2018, while the Rasht–Qazvin section inside Iran was implemented on March 6, 2019. Therefore, the only remaining gap is a 164-kilometer railroad section from Rasht to Astara. Until this railroad segment is completed, freight moving by train must be transferred to trucks and then back again. 
“The corridor has enormous potential to create sustainable revenues that can rival our oil exports,” Mohammad Jamshidi, vice president for political affairs, said on Tuesday.



Project’s Benefits

According to Deputy Roads Minister Kheirollah Khademi, after the signing of the agreement, the project will take off with €1.5 billion of Russian funding.
Echoing Jamshidi’s remarks about the project, Khademi said, “Its completion can bring in enormous revenues by increasing the volume of goods transited through Iran. The route can attract the lion’s share of cargo transported between Russia and India, or East Europe and India.”
The deputy minister referred to the passage of Rasht-Astara railroad through farms along 50% of the route as a significant hurdle to the completion of the project.
“We need to purchase these farms and after that, build bridges to preserve the nature. So far, we have designed bridges along 52 kilometers of the way,” he said.
Kazem Jalali, Iran’s ambassador to Russia, earlier said construction work is expected to begin soon.
“The project will be transferred to an operational, practical level. I think that within three to four months, maximum until October, the executive part of implementing the project of the North-South Transport Corridor will begin," Jalali said at the Caucasus Region Investment Exhibition.
In March, Sergey Pavlov, the first deputy head of Russian Railways, also told reporters that the Russian Ministry of Transport was preparing two intergovernmental agreements: Iran-Russia and trilateral Azerbaijan-Russia-Iran.
There are plans to build both narrow and wide-gauge tracks in this section.
"There were negotiations, including at the highest level, and a decision was made to build a section of the Rasht-Astara line on a combined gauge. That is, they plan to lay both 1435 mm rails, the current standard in Iran, and 1520 mm rails, the Russian gauge. But first, 1435 mm rails will be laid in order to use the existing infrastructure and move as quickly as possible," he said.
The main obstacle in the way of the project to date has been financing, particularly due to the United States’ sanctions on Iran. 
According to an earlier agreement between Iran and the Republic of Azerbaijan, both sides pledged to provide $500 million each to build the Rasht–Astara railroad. And in 2016, the International Bank of Azerbaijan signed a deal with Iran on the allocation of a $500 million loan for this purpose. However, in practice, this agreement and the loan were never implemented due to the comprehensive US sanctions on Iran’s banking network.



Significance of the Project Explained

What is the importance and necessity of the rapid construction and completion of the Rasht-Astara rail project? Why do Iran and Russia have to cooperate with each other in this project? 
Vali Kaleji, a Tehran-based expert on Central Asia and Caucasian Studies, has sought to answer these queries in an article he wrote for Valdai Club, as follows:
1. Following the first trilateral meeting of Iran, Azerbaijan and Russia on the prospects of the International North-South Transportation Corridor on Sept. 8, 2022, in Baku, Azerbaijan, the three states signed a trilateral statement for the development of INSTC. They agreed to increase freight transit through INSTC to 30 million tons by 2030. 
Trade turnover between Russia and Iran during January-October 2022 surpassed trade volumes during the whole of 2021 and totaled $4 billion, Russian exports to Iran increased by 27%, while imports hiked by 10%, the deputy head of FCS, Vladimir Ivin, told the publication. 
Since the major part of Iran's trade with Russia takes place from the western, more densely-populated part of this country, including the cities of Moscow, Saint Petersburg, Kazan, Rostov and the North Caucasus, the main route of trade and transit between the two countries passes through the Republic of Azerbaijan. Given these circumstances, the lack of the 164-kilometer Rasht-Astara rail route has had a very negative impact on the volume and pace of trade along the main transit route linking Iran, Azerbaijan and Russia, especially at the Astara-Astara border crossing. From here, trucks and containers are transported to Azerbaijan and Russia via the 287-kilometer Astara-Baku national highway.
On average, a truck crosses the Astara border every seven minutes. This issue causes heavy traffic and in some cases disruptions and long stops at the Astara (Iran)-Astara (Azerbaijan) border crossing, as well as the Samur border crossing on the border of Azerbaijan and Russia, that reduced the volume and speed of the transfer of goods via the corridor. The stoppage and several kilometers-long queues of trucks at the border crossing of Astara in January 2023 are the latest example of problems at this border crossing. In fact, the increase in the volume of export, import and transit of goods, in a situation where there is only one 80-year-old metal border bridge between the two countries, has caused long queues of trucks and trailers at the Astara border. To solve this problem, Iran and Azerbaijan signed an MoU on January 26, 2022, to build the new “Astarachay Bridge” with four lanes that can facilitate the process of transit between the two countries.
However, despite the construction of this bridge, the problem of traffic and long stops of trucks at the border terminals of Astara-Astara and Samour will not be completely solved. There are two solutions to this problem. First, expanding maritime trade and transit between Iranian ports in the Caspian Sea (Astara, Anzali, Caspian, Noshahr and Amirabad) with the Baku Port in Azerbaijan, as well as Makhachkala, Olya, Astrakhan, Solyanka and Lagan - the main Russian ports in the Caspian Sea. It could reduce part of the traffic load of the land route in Astara-Astara-Baku-Dagestan. The second solution is construction of the 164-kilometer Rasht-Astara rail route that will reduce the time needed to transport cargo from Russia to Iran’s southern ports on the Persian Gulf and on the Sea of Oman by 20 days. 
2. The lack of this railroad connection has made it inevitable that freight trains at the Astara Train Station on the Iranian side will be transferred to trucks, or vice versa. It is clear that this slows down trade and transit between Iran-Azerbaijan-Russia. If the 164-kilometer Rasht-Astara rail route is completed, cargoes and containers from Moscow and St. Petersburg can be transported directly and non-stop to Bandar Abbas in southern Iran in the Persian Gulf. On the other hand, goods imported by Russia from India, Arab countries and Iran can also be transferred to the Republic of Azerbaijan and Russia with speed, low cost and high volume from the southern ports of Iran in the Persian Gulf. But at present, the 164-kilometer Rasht-Astara rail route is the only remaining rail part of INSTC and the missing link for the direct rail link from the Persian Gulf to Moscow and St. Petersburg. 
3. Another important necessity of construction in the 164-kilometer Rasht-Astara rail route is the EEU-Iran Preferential Trade Agreement, which was implemented on October 27, 2019, and can be upgraded to a full free trade agreement. It is expected to become operational by late September 2023 after being approved by the IAEA member countries. Since the free trade agreement involves more than 7,500 types of commodities, it is obvious that this trade regime naturally need more rapid and extensive facilitation of the movement of goods between Iran and the EEU, especially with the Russian Federation. Under the circumstances, there is no doubt that the land route of Astara-Astara-Baku-Dagestan cannot cope with the increasing volume of Iran's exports and imports with the EEU, especially Russia. The stoppage and queue of several kilometers of trucks at the border crossing of Astara in January 2023 was a serious alert for Iran, Azerbaijan and Russia. Therefore, in the process of free trade, in parallel with the development of the land route and border terminals as well as sea trade in the Caspian Sea, the construction and completion of the 164-kilometer Rasht-Astara rail route should be considered a strategic and important priority for Tehran, Baku and Moscow. Streamlining and facilitating trade and transit benefit the three countries and there is no loser in this process.
4. Two complementary railroads for the Rasht-Astara rail line are under construction in northern and southern Iran. First, the 35-km Rasht-Caspian railroad in Iran’s northern Gilan Province to the Caspian port, which is a seaport located in the Anzali Trade-Industrial Free Zone. If the 164-km Rasht-Astara railroad is completed, Astara Port in Gilan Province will also be connected to the Iranian rail network. At present, construction work has been completed on the first 11 km of the 35-km stretch of the Rasht-Caspian railroad and the remaining 24 km should be completed in 2023. The second complementary rail line is the 628-kilometer rail project, which is aimed at connecting Chabahar Port to Zahedan (the capital city of southeastern Sistan-Baluchestan Province). Iran hopes it can be completed by the end of the current fiscal year ending March 20, 2024. If the 164-km Rasht-Astara rail route and the 625-km Chabahar-Zahedan rail route are built and completed, it will be possible to transfer cargo and containers from Chabahar Port - as the only oceanic port of Iran - directly to Azerbaijan and Russia. Currently, due to the non-completion of the Chabahar-Zahedan railroad, there is a possibility of exporting and importing from Bandar Abbas, which is connected to Iran's rail network.
5. The construction of the 164-kilometer Rasht-Astara rail route is very important in transit and trade among India, Iran and Russia, the three countries that founded INSTC on May 16, 2002. Indeed, India has a key role in the Chabahar Transit Project that was created among India, Iran and Afghanistan on May 24, 2016. Recently, Uzbekistan joined it. 
Although India has always been one of Russia's main trading partners, according to trade, transit and financial sanctions levied against Russia by the West, the volume of trade and transit exchanges between India and Russia has increased significantly. Under the circumstances, Iran's rail network connected to Bandar Abbas is one of the most important transit options in India, which can transport goods to Rasht in the north of Iran. 
However, the lack of the Rasht-Astara rail route causes trains at the Rasht Train Station to transfer goods to trucks, and vice versa in Astara, Azerbaijan. Therefore, the non-completion of this rail route is considered an inhibiting factor in the development of trade and transit between India and Russia, especially given the current situation.
In general, although the Rasht-Astara rail route is comparatively short, it has great strategic and transit importance. It can play a very important role in increasing trade and transit among India, Iran, Azerbaijan and Russia. This rail route can also connect Bandar Abbas and other Iranian ports in the Persian Gulf to Russia, especially Moscow and St. Petersburg, which can lead to increasing trade and transit between Arab countries, such as the UAE, Qatar, Oman, and Russia. The completion of the Rasht-Astara rail route, as the only remaining rail section of INSTC will help this corridor achieve its desired goals of creating a “multifaceted corridor” and “combined network” of ships, rails and road freight routes, two decades after its formation in 2002.

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