The International North-South Transportation Corridor is considered one of Iran’s most important connectivity projects that was not fully implemented 20 years after it was first introduced and so far no detailed assessment has been made on its geopolitical and geoeconomic dimensions, according to a study conducted by the Iran Chamber of Commerce, Industries, Mines and Agriculture’s Research Center. Below are highlights of the study’s findings:
The main advantage of the corridor is the reduction of transit time and cost. Compared to the 11,000-km-long Suez Canal and Baltic Sea, INSTC is shorter, 7,200 km, and takes about 18 days to move goods on this route. In terms of cost, studies have shown that the transfer of each 15-ton container along this corridor is $2,500 cheaper than the standard route from Mumbai to Moscow. Therefore, the transfer of goods through the North-South Corridor is 30% cheaper and 40% faster than the normal route.
Geopolitical, Geoeconomic Dimensions
In terms of geopolitics, INSTC has considerable potentials for Iran, especially with regard to Tehran’s relations with India and Russia, and in view of regional security entities such as the [Persian] Gulf Cooperation Council, Eurasian Economic Union and Shanghai Cooperation Organization.
INSTC is one of the most frequently-cited keywords of the last decade in Iranian politics and business, and in recent years, many discussions and studies have been conducted about the project’s geopolitical value with focus on its significance for regional countries, especially India, Iran and Russia.
Some of the discussions have underlined the geoeconomic dimensions of the project and considered INSTC a special economic opportunity for Iran, highlighting its potential to boost transit revenues and expand bilateral trade with countries situated along the route.
A Project Involving 13 Countries
The idea of the International North-South Transportation Corridor dates back to the year 2000, when Iran, Russia and India signed a tripartite agreement to establish a transit route from the west coast of India to Russia in the first place and then to Eastern Europe.
Currently, the project includes 13 countries: Republic of Azerbaijan, Belarus, Bulgaria, Armenia, India, Iran, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, Turkey and Ukraine. The main target behind the establishment of the route was to reduce the transit time of goods and transportation costs.
As far as its operation is concerned, the latest development related to the transportation corridor is the Iran-Russia agreement to complete the last unfinished section of the Rasht-Astara railroad in Iran. In this regard, an agreement for the construction of the railroad, with a length of 164 kilometers, was signed between Iran and Russia in May 2022 for which, according to IRNA, Russia will invest €1.6 billion to complete the corridor.
As India, Russia and Iran are the most important players in the North-South Corridor, Iran will gain access to 10 Russian cities with a population of over one million people on the banks of the Volga River. This corridor will be a potential connectivity route for Central Asian and Eurasian Economic Union countries, as well as Iran, which will link Azerbaijan to the Port of Aktau in Kazakhstan and the ports of Georgia in the Black Sea, which potentially provide an opportunity for Iran to gain direct access to the European markets.
Cementing Iran’s Regional Position
INSTC, with the centrality of Iran, will not only enable more interaction between the Persian Gulf and Eurasian countries, but will also strengthen mutual dependence in the region and create motivation for gaining more stability.
With Iran’s membership in the Shanghai Cooperation Organization and the fact that a large number of the most important members of the organization are also members of the North-South Corridor, the development of the corridor and the strengthening of its role in Iran’s regional relations will provide a more prominent role to the country.
Challenges Ahead
Regardless of all its potential opportunities for member countries, there are a number of challenges on the way of the INSTC project’s completion and implementation.
The most important challenge, in terms of Iran’s interests, is the type of cooperation among other countries in the development of the rail routes. Iran is considered a key player along INSTC and in connecting Russia, Central Asia and India to each other, but historically, those countries have always avoided participation in the development of the corridor through Iran.
Among other challenges, reference could be made to the customs procedures of countries situated on the transit route, which are still not very coordinated. In addition, the lack of adoption of international transportation standards, including those created by the International Organization for Standardization, is behind the absence of the formation of uniform procedures among the countries concerned.
Last but not least is the dearth of soft infrastructure for INSTC, such as the rules, regulations and a legal framework suitable for the exchange of goods, labor force and the required data.
Of all the members, Russia seems more inclined to develop the corridor, but due to the unclear picture of the war’s outcome in Ukraine, in addition to the likelihood of the removal of sanctions against Russian, INSTC may probably lose its attraction for Moscow. In other words, the total dependence of the corridor on Russia will make it highly vulnerable.
