INTERNATIONAL NORTH - SOUTH TRANSPORT CORRIDOR (INSTC)
- INTERNATIONAL
News: North-South
Transport Corridor | Connecting continents
What's in the news?
● The
ambitious 7,200-km-long trade corridor
seeks to link Russia’s Baltic Sea coast to India’s western ports in the Arabian
Sea through Azerbaijan and Iran.
Backdrop of INSTC:
● It
was first mooted in 2000.
● The
idea was to build a transport corridor linking Russia’s Baltic Sea coast to
India’s western ports in the Arabian Sea via Iran.
Members:
● Russia,
India and Iran signed preliminary agreements to develop the 7,200-km-long
International North-South Transport Corridor (NSTC) in 2002.
● Three
years later, Azerbaijan signed up for the project.
● This
agreement was eventually ratified by 13
countries — India, Russia, Iran, Azerbaijan, Belarus, Bulgaria, Armenia,
Kazakhstan, Kyrgyzstan, Oman, Tajikistan, Turkey and Ukraine.
Features:
● It
is a 7,200-km-long multi-modal
connectivity project to establish transport networks (ship, rail, and road
route).
● It
will be used for moving freight between India,
Russia, Iran, Europe, and Central Asia.
● It
will cut costs and time in moving cargo.
According
to the original plan, the corridor has several branches.
● On
the western side of the Caspian Sea, it would link Russia to Iran through
Azerbaijan.
● The
eastern branch runs along the eastern coast of the Caspian Sea and links the
main corridor to different road and rail networks of Central Asian countries
such as Turkmenistan and Kazakhstan.
● The corridor is 30%
cheaper and 40% shorter than the current traditional route.
Boost to the project:
● Russia’s
February 2022 invasion of Ukraine, after which it was sanctioned by the West,
seems to have brought Moscow and Tehran closer, giving a fresh impetus to the
NSTC.
● In
February this year, President Vladimir Putin said in his State of the Nation
address that Russia was developing the NSTC, which would open up new routes for
trade with India, Iran, Pakistan as well as Gulf countries.
● Last
week, Mr. Putin and his Iranian counterpart Ebrahim Raisi virtually
participated in a ceremony where both countries signed an agreement to develop
the 162-km Rasht-Astara railway, a
critical link in the eastern network of the NSTC.
○ In
the western branch, which is the faster route, the Rasht-Astara railway would
link Iranian railways up with Azerbaijan’s railways, opening a direct corridor
from St. Petersburg to Bandar Abbas on the Gulf, Iran’s busiest port.
Significance to India:
1. Increase in Bilateral Trade:
● It
has been predicted that improved transport connectivity will increase bilateral
trade volumes between Russia, Central Asia, Iran, and India.
● The
corridor can also boost trade between India and Central Asia. India is now
asking for the Chabahar, the Iranian port it is developing, to be connected to
the corridor.
2. Shorter and Cheaper Route:
● As
per the study by the Federation of Freight Forwarders’ Associations in India,
INSTC route is 30% cheaper and 40% shorter than the current traditional route.
○ The
traditional route to move goods from Russia or Europe to India is through the
Suez Canal - the Baltic Sea - North Sea - Mediterranean - Arabian Sea route is
more costlier than INSTC.
3. Alternative to China’s Belt and Road Initiative:
● INSTC
has economic and strategic relevance to India due to China’s ambitious One
Belt, One Road Initiative.
● Hence,
the proposed INSTC trade corridor could help
India secure its interests in Central Asia and beyond.
4. Integration with Ashgabat Agreement:
● When
looked at in sync with the Ashgabat Agreement, the INSTC could be the key to India’s “Connect Central Asia’’
policy.
● India
joined the Ashgabat Agreement in 2018. The INSTC can integrate with the
Ashgabat agreement.
5. Avenues for India's Energy Security:
● For
India, a country that’s dependent on imports for about 80% of its energy
requirements, this corridor would open fresh avenues for energy security. India
has substantially increased its energy ties with Russia over the past year.
6. Bypassing Pakistan:
● India
can now bypass Pakistan to access
Afghanistan, Central Asia and beyond.
7. Alternative to Suez Canal:
● It
is a better alternative to the Suez Canal, which will save time, freight
charges & easy exports.
8. Infrastructural investments:
● The
INSTC provides an opportunity for the internationalization of India’s
infrastructural state, with state-run businesses taking the lead and paving the
way for private companies.
9. Increased Market Access:
● The
cheaper transport cost will lead to increased competitiveness of Indian
exports, opening access to unfulfilled markets.
Issues:
But despite its perceived potential and the keenness shown by key powers, there was little progress on the project’s implementation for years.
1. Western sanctions on Iran over its nuclear
programme:
● Other
countries and their private corporations were reluctant to make large
investments in the Islamic Republic, fearing
third party sanctions from the U.S.
2. Financial issues:
● Unlike
the Belt and Road Initiative (BRI),
which has been pushed forward by China
and supported by dedicated financial institutions, INSTC is proceeding in
an ad-hoc manner, without any long-term strategy.
● Both
Russia and Iran would find it difficult to raise enough funds to finance the
project as they are grappling with sanctions, while third parties remain
reluctant to make investments in Iran.
3. Practical issues:
● While
it has great potential on paper, the project still faces a lot of challenges.
● Construction
of the Rasht-Astara railway, along the Caspian Sea, has been lagging for years
because of both financial and practical reasons. The link will have 22 tunnels
and 15 special bridges and there is no guarantee that it will be finished as
per schedule in 48 months.
4. Strained relationship between the countries:
● Iran’s relationship with
Azerbaijan remains tense.
● Azerbaijan
has repeatedly accused Iran of interference in its internal matters, and the
war between Azerbaijan and Armenia has complicated the geopolitics of the
Caucasus.
However,
despite the challenges, the Russians and the Iranians seem determined to go
ahead as they see the corridor as a potential
game changer in their plans for Eurasian economic integration.