Economy, Business And Markets

Azerbaijan Courting Iran, Russia on INSTC

Azerbaijan Courting Iran, Russia on INSTC
Azerbaijan Courting Iran, Russia on INSTC

The balance in the Caucasus is changing. With Iran emerging from the malaise of sanctions, it is reaching north and becoming more assertive. Russia, too, is changing tack, aligning with Azerbaijan instead of Armenia in the long-running Nagorno-Karabakh conflict.

In early August, Azerbaijan made a bid to capitalize on these changes by hosting the presidents of Iran and Russia for a summit in Baku. The meeting featured discussions of counterterrorism initiatives and of the negotiations on Nagorno-Karabakh and Caspian Sea disputes.

But it was regional connectivity — not conflict — that topped the agenda, specifically the so-called International North-South Transport Corridor (INSTC) and its railway construction component, reads an article published by US-based global intelligence company, Strategic Forecasting, Inc. otherwise known as Stratfor. Below are excerpts.

The 7,200-kilometer INSTC was first discussed in 2008. It would involve building railway, road and shipping infrastructure stretching from Iran to Russia through Azerbaijan. Actually implementing the project, however, would be difficult — it involves a dizzying array of stakeholders and a $400 million price tag.

If realized, the corridor would have a strong effect on the region’s geopolitical order. It would connect Iran with Russia’s Baltic ports and give Russia rail connectivity to both the Persian Gulf and the Indian rail network. At least on paper, this would mean that goods could be carried from Mumbai to the Iranian port of Bandar Abbas and further to Baku. They could then pass over the Russian border into Astrakhan before going on to Moscow and St. Petersburg, then onward into Europe. And the project has been progressing — railway connections between Iran and Azerbaijan are under construction, even connecting into the Russian system.

 Azeri Asset

While regional heavyweights stand to accrue economic benefits from the project, the transportation corridor would be a major geopolitical asset for Azerbaijan in particular. Much to the chagrin of Tehran and Moscow, Baku has shown a willingness to cooperate with the West. The Azerbaijani government has participated in western projects, such as the Baku-Tbilisi-Ceyhan pipeline, and signaled it wants to participate in the Trans-Anatolian pipeline and the Baku-Tbilisi-Kars railway. These would connect the Caspian and the Black seas. Azerbaijan’s prominent role in the INSTC would give it an advantage, in particular, over its major rival, Armenia.

But it is not the only prospective rail project for the Caucasus region. Two others have been floated: One from Russia through the breakaway Georgian region of South Ossetia and into Armenia and another through Abkhazia. Azerbaijan does not want Armenia to have a direct rail link with Russia, mostly for military reasons, though there are economic reasons as well.

The INSTC would further isolate Armenia because it would allow Iran to connect with eastern Turkey via the Baku-Tbilisi-Kars railway. This link with Georgia’s Black Sea ports would bypass Armenia entirely, partly sidelining its ambitions for greater regional connectivity while enhancing Baku’s standing, the article concludes.

From Iran’s perspective, the INSTC is deemed as the key to realization of the country’s ambition to become a transit hub in the region, which would in turn guarantee that future attempts to isolate it would be too costly.