Geopolitical Report ISSN 2785-2598 Volume 29 Issue 6
Author: Silvia Boltuc
The International North-South Transport Corridor (INSTC) might contribute to connecting Russia with India and other regional markets and diversifying its trade partners. This strategic goal has become more significant since the beginning of the Ukraine conflict and the imposition of Western sanctions against Moscow.
The INSTC is a multi-mode network of ship, rail and road routes whose purpose is to connect Russia with India through the Caspian Sea region (Iran and Azerbaijan) and increase trade connectivity between major cities such as Moscow, Astrakhan, Baku, Tehran, Bandar Abbas, Bandar Anzali, and Mumbai.
SpecialEurasia discussed with Alexandr Sharov, General Director of the transport company LLC Neftekhimtrans, Group of companies Rusiranexpo, the current geopolitical significance of the INSTC and possible future developments and impact in the Eurasian strategic chessboard.
What is Russia’s strategy favouring the International North-South Transport Corridor (ITC)? Which programs have the Astrakhan region to facilitate connections in the Caspian Sea and along the entire transport line?
“First of all, it should be noted that Russia is implementing the only correct strategy in the current conditions to transfer its export flows to the INSTC to enter the Indian Ocean and the Persian Gulf by the shortest route. There is an objective economic feasibility in this.
Also, through the development of this transport route, Russia facilitates the work of the Eastern Polygon (Far East) ports, mainly focusing on China. According to various studies, up to 30-60 million tons of cargo can be transported by 2030 thanks to the INSTC. If it is possible to reach the maximum figure of 60 million tons, then the growth from today’s volumes will be 500%, i.e. five times. At the same time, Russia is more interested in the transhipment of its cargo on the INSTC.
The Astrakhan Region Strategy is fully integrated into the national policy. For centuries, Astrakhan has historically been Russia’s gateway to the East, Iran and India. The Iranian side traditionally actively uses the Astrakhan port to trade with Russia. For Tehran, this is a well-known direction in which they have long and actively traded with our country, even though Makhachkala and Baku are geographically closer to the Iranian territory.
Iran also attracts the scientific potential of the region, which helps to work out the logistics of Russian-Iranian trade in the best possible way. In the current conditions, when extensive economic sanctions have been imposed on Russia, it is more convenient for Iran to work directly with Astrakhan without using Azerbaijani territory.
Another factor contributing to the development of Russian-Iranian relations through Astrakhan is the presence in the Russian region of several significant associations of representatives of transport and logistics companies, facilitating the solution of problematic issues arising within the working framework on the INSTC.“.
Can investments in the port of Makhachkala turn this infrastructure into a leading logistics hub in the Caspian Sea?
“The port of Makhachkala also has good prospects for the accelerated development of trade with Iran. Theoretically, there is no competition between the ports of Astrakhan and Makhachkala because the Dagestani port is more complementary to the existing trade relations in the Caspian Sea.
In Astrakhan, it is difficult to overload such goods as oil and coal: this aspect allows Makhachkala to close the trade in certain types of cargo and goods. The port of Makhachkala has the only railway ferry terminal on the Russian coast of the Caspian Sea, and this is a great advantage.
Therefore, Makhachkala is unlikely to become a leading logistics hub. Still, it can take a secure second place in terms of participation in Russian-Iranian trade and transit traffic along the INSTC route. In this regard, I expect the steady development of the Port of Makhachkala.“.
Given the close partnership in the energy sector between Azerbaijan and Europe and considering Russian-Azerbaijani relations, how do these two aspects affect the connection between Astrakhan and Baku? Are other Caspian littoral states participating in the INSTC corridor?
“There is practically no sea communication between Astrakhan and Baku. For Russia and Azerbaijan, it is quite enough to have a land connection, which in the current conditions is developing dynamically, ensuring stable growth of Russian-Azerbaijani trade, including along the western branch of the INSTC.
As for Kazakhstan, its vessels are now actively working on the Caspian corridor of the INSTC. Kazakh ships run directly from the ports of Aktau and Kuryk to the Iranian ports of Anzali and Amirabad and operate between the ports of Russia and Iran. For Astana, this is very profitable.
Turkmen ships have also started work today toward Russian ports in the Caspian Sea. Today they have a sufficient cargo base, which they would like to send bypassing the port of Baku to Makhachkala. Recently, there has been significant interest from the Turkmen side in launching a railway ferry on the Turkmenbashi-Makhachkala route. Turkmen carriers are often unsatisfied with certain working conditions through Baku, particularly unstable floating tariffs, so they are interested in diversifying their Caspian exports.
However, so far, Russia cannot provide this route with a sufficient number of railway ferries. Therefore, it should be expected that shortly the Russian authorities will take actions to resolve this issue, which will give a serious impetus to the development of transport links between Russia and Turkmenistan, Russia and Kazakhstan.“.
INSTC will connect the markets of Northern Europe with India. Are Indian investments planned in the Russian-Caspian region?
“India has shown great interest in participating in Caspian trade. Several companies from India are already operating on the Caspian logistics routes. Therefore, investments from India will not be long coming.
But here, we must consider that today there is a development of shipping communication between India and Russia through the ports of Novorossiysk, St. Petersburg and Nhava Sheva. Today, containers along this route are transported on national vessels of the two countries reasonably quickly – from Novorossiysk to India in 15 days and from St. Petersburg to India in 25 days.
Therefore, here the Caspian route still occupies a secondary role. However, to reduce the cost of transportation, the Caspian route of the INSTC also looks promising. Here we can discuss the available opportunities for general cargo transportation, dangerous and sanctioned goods.“.
Given the good relations between Russia and several Gulf countries and the fact that Iranian ports will be connected to the INSTC, are these participants interested in the transport corridor?
“For several years, oil products have been actively supplied to the United Arab Emirates from St. Petersburg. Petroleum products are produced in the Volga region and are sent to the Baltic Sea. However, today there are all opportunities to redirect part of these cargoes through the Volga and the Caspian Sea.
f we consider the issues of investment on the part of the Persian Gulf countries in the Caspian transport routes, this prospect looks unlikely. Judging by the participation of the Gulf countries in the Islamic summits in Kazan, so far, Arab investments are of a one-time nature. If we talk about other countries of the Caspian region, except Russia, then despite the information background, investments in Turkmenistan and other regional countries practically do not come.
There are even more significant difficulties with Iran because of the existing problems in the relations between the Arabs and the Persians. In principle, the interest of Emirati carriers in transporting goods in the Caspian Sea is noted, but it is also mainly of a one-time nature.”
The INSTC can be transformed from a transport corridor into an economic development corridor of the Eurasian Economic Union (EAEU) and the Shanghai Cooperation Organization (SCO). How will this infrastructure affect the economies of the EAEU and SCO countries? Will this contribute to expanding these structures to include other regional actors?
“We can mainly talk about the possibility of attracting investments from the financial structures of the EAEU and the SCO to Caspian projects. Periodically, the Eurasian Development Bank shows interest in developing the INSTC.
However, the practical implementation of the recommendations and initiatives developed by this financial institution has not yet come. It is premature to talk about the corridor of economic development of the Eurasian Economic Union and the Shanghai Cooperation Organization. In the long term, such a possibility should certainly not be ruled out.”.
Interview in media partnership with Kaspiskij Vestnik.