Renewed interest in 'sanction-proof' Russia-Iran-India trade belt

Russian President Vladimir Putin (centre) speaks to Iranian President Ebrahim Raisi at the 6th Caspian Summit in Turkmenistan in June 2022. PHOTO: AFP

NEW DELHI - In July, 39 containers of wooden laminate sheets were sent by train from Russia through Turkmenistan and into Iran.

The containers are now moving from Iran by sea to the port city of Mumbai in India.

Under normal circumstances, this shipment would have caused little excitement.

But it is being followed closely as it is the first large shipment via the International North-South Transport Corridor (INSTC), a 7,200km network of railroads, highways and maritime routes connecting Russia and Iran to India.

Envisaged by the three nations in 2000, this underutilised trade route has received a fillip, as Russia increasingly turns to Asia after being cut off from Europe following its invasion of Ukraine.

The original route entailed sea links from Mumbai in India to the Bandar Abbas Port in Iran, and then the Astrakhan port in southern Russia. From there, goods could move to different parts of Russia and into Europe.

It aimed to cut the 40-day transit of goods between Russia and India by half.

Over the years, nine other countries including Turkey and Belarus signed on to the INSTC, adding or building myriad multimodal connectivity links.

Sanctions on Iran for its nuclear programme and then Russia for its annexation of Crimea were setbacks for the INSTC, noted Mr Nandan Unnikrishnan, a distinguished fellow at Observer Research Foundation.

China's Belt and Road Initiative also took the focus for the Central Asian countries involved away from the corridor.

But there is now renewed interest.

Speaking at the Caspian Sea Summit in June, Russian President Vladimir Putin said his country would pay more attention to the INSTC to improve transport and logistics in the region.

The focus on the corridor - which the Tehran Times recently called a "sanction-proof route" - comes at a time when India-Russia trade has seen a substantial increase on the back of India buying discounted oil from Russia.

India's imports from Russia, mainly crude oil, jumped nearly five times to more than US$15 billion (S$20.7 billion) from the time Russia invaded Ukraine in February to July, Reuters reported.

Russian President Vladimir Putin said at the Caspian Summit (above) that his country would pay more attention to the INSTC to improve transport and logistics in the region. PHOTO: AFP

Russia has said it is seeking to increase trade and commerce linkages with Asian countries, even as it has increased exports of oil and coal to countries like India and China.

India sees multiple benefits to the trade route, including unlocking access to landlocked Central Asian countries. The INSTC will also let it brand its own alternative to China's Belt and Road project in Central Asia.

It is helping Iran build the Chabahar Port, which it hopes will become the heart of the corridor.

Mr Unnikrishnan said: "India can even build a railway stretch in Iran."

The Federation of Freight Forwarders' Associations in India (FFFAI), which has conducted dry runs through the corridor over the years, estimates that the corridor would reduce cost of container delivery by 30 per cent and transit time between Russia and India by 40 per cent compared to the crowded Suez Canal.

However, FFFAI chairman Shankar Shinde said: "A lot of work is required. The infrastructure is largely good, but the problem is that at present, everyone is working in isolation...

"There is a need to aggregate information and aggregate cargo. It needs a portal or some mechanism."

He urged closer cooperation between governments.

Mr Unnikrishnan said: "Right now, the corridor is working in fits and starts... The issue is that Russia has always exported more to India. (But) if a container is coming through, it should not go back empty."

The route "is working, but not at its full potential", said Dr Meena Singh Roy at the Manohar Parrikar Institute for Defence Studies and Analyses based in New Delhi.

The INSTC has the potential to not only bolster trade among the countries involved, but also provide another option for goods movement to Europe in the West and South-east Asia in the East, she said.

"Today, the buzzword is diversification. The Ukraine war and the pandemic have given a signal to the smaller states not to put all your eggs in one basket," added Dr Roy.

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