Persian Files ISSN 2975-0598 Volume 18 Issue 4
Author: Silvia Boltuc
Since the strategic role that the International North-South Transport Corridor (INSTC) plays in the Eurasian geopolitical chessboard, Iran has adopted a strategy aimed at exploiting the benefit of this logistic project and promoting national companies such as the IRISL Group.
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’s countries, particularly Iran.
The initial agreement for the creation of the INSTC project was signed in 2002 between Russia, India and Iran. The INSTC is strategic as it is the shortest route, compared to the maritime route through the Suez Canal, to enter the Indian Ocean and the Persian Gulf and thus reduce transportation costs.
The corridor has several branches: the Trans-Caspian section (via Caspian seaports), the Western section (via Azerbaijan), and the Eastern route (via Kazakhstan and Turkmenistan).
With its ports in the Caspian Sea (Astra, Anzali, Caspian, Nowshahr, and Amir Abad), and its critical location in the Persian Gulf with access to international waters, Iran plays a vital role within the international link.
At the Economic Cooperation Organisation (ECO) Summit in Tashkent on November 9th, 2023, Kazakhstan, Russia, Iran, and Turkmenistan collaborated on advancing a roadmap for the development of the INSTC. This plan outlines an increase in the logistics route’s capacity to 15 million tons by the year 2027.
Iran’s Caspian Sea Presence: Strategic Posture and Relations with Littoral Countries
- Russia: The Russian Federation has several ports in the Caspian Sea: Makhachkala, Astrakhan, Solyanka, Olya, and Lagan.
For centuries, Astrakhan has served as Russia’s gateway to the East, Iran and India. Despite Makhachkala and Baku being geographically closer to Iran, Iranian traders traditionally use the Astrakhan port for trade with Russia. At the mouth of the Volga River, indeed, there are eleven cities along the route with populations that exceed 1 million.
Furthermore, Tehran’s Free Economic Zone (FEZ) in Bandar-e Anzali and Russia’s Special Economic Zone (SEZ) LOTUS, in the Astrakhan region, hold the strategic potential to booster the Russian-Iranian trade and investments cooperation within the joint connection project.
Indeed, an existing tripartite agreement favours economic, trade, industrial, transit exchanges and port services between Anzali FEZ, Chabahar Free Trade–Industrial Zone and LOTUS SEZ. While Anzali FEZ is connected to the Bandar Abbas port and Qeshm FEZ in the Persian Gulf, LOTUS SEZ is located at the crossing of two international transport corridors: the North-South and Northern part of the Great Silk Road.
Several Iranian companies have also expressed interest in investing in Lagan Port, in the Russian Republic of Kalmykia, connected to the main Moscow line, which also connects to the Trans-Siberian rail heading east across Kazakhstan and onto China.
In addition, the port of Makhachkala holds promising potential for enhancing trade with Tehran. Astrakhan faces limitations in handling certain goods like oil and coal, which creates an opportunity for Makhachkala to handle these types of cargo. Makhachkala is Russia’s only ice-free port in the Caspian Sea and the deepest. It also boasts the only railway ferry terminal on the Russian coast of the Caspian Sea, giving it a significant advantage.
While Makhachkala might not emerge as the primary logistics hub, it stands to secure a strong second position in Russian-Iranian trade and transit traffic along the INSTC route. Makhachkala has direct rail links to the ports of Kazakhstan, Turkmenistan and Iran.
Another crucial asset for Iran is the Russian Solyanka port, which Tehran has heavily invested in.
- Kazakhstan: Kazakhstan’s ships are currently operating along the Caspian corridor of the INSTC. These Kazakh vessels travel directly from the ports of Aktau and Kuryk to Iranian ports, such as Anzali and Amir Abad (the Behshahr Amir Abad Port is the biggest port in the Caspian and has a SEZ connected to regional rails). They also facilitate trade between Russian and Iranian harbours.
During the sixth Caspian Summit in Ashgabat on June 29th, 2022, Kazakh President Kassym-Jomart Tokayev highlighted that the changing geopolitical situation has disrupted traditional trade routes. He emphasized the importance of maximising the Kazakhstan-Turkmenistan-Iran railway to advance the promising INSTC project. This railway, being the shortest route between East Asia and the Gulf countries, according to Tokayev, enables Kazakhstan to redirect its export supplies through Russia and the Black Sea to reach the Persian Gulf nations.
In June 2023, during the Kazakh-Iranian Business Forum, the speakers noted the importance of developing economic cooperation between Astana and Tehran and the high potential for expanding trade and mutual attraction of investments, considering the convenient transport and logistics capabilities of the INSTC.
According to the Kazakh Prime Minister Alikhan Smailov, agriculture and international transport corridors are the more promising cooperation fields between Tehran and Astana.
- India: On January 2023, Ministry of Ports, Shipping and Waterways, GoI, in association with India Ports Global Ltd, conducted a workshop on the ‘Linking Chabahar Port with INSTC’ in Mumbai. The Chabahar port offers significant strategic benefits to India if developed into a transshipment hub.
Because of tensions with Pakistan, India has sought an alternative route, viewing Chabahar as a crucial hub to access important Central Asian markets. INSTC will not only bolster Iran’s status as a key transit point in the region, but also strengthen India’s presence in Eurasian markets.
There are two major ports in Chabahar: the Shahid Kalantari port (developed in 1980) and the Shahid Beheshti port. Iran had offered India the project of developing the Shahid Beheshti port. The two countries signed an initial agreement in 2016 for India to develop and operate the port’s Shahid Beheshti terminal for 10 years.
- Azerbaijan: Azerbaijan is a key part of the Astara–Rasht–Qazvin railway, a transport corridor that connects the existing railways of Russia, Azerbaijan and Iran. Tehran and Baku have discussed building a cargo terminal in Astara, the linking point of Iran and Azerbaijan. Given that the Western branch of the INSTC is the most important (since the most populous provinces of Russia and Iran are primarily situated in the western regions rather than the eastern parts of their respective countries) Rasht-Astara rail route is vital.
Additionally, Baku and Tehran agreed to build road and rail infrastructure linking Azerbaijan to its Nakhchivan exclave via Iran. Notably, the project will include the construction of a road bridge and a rail bridge which will link Nakhchivan with Iranian railway infrastructure. Nakhchivan will further link to Turkey.
On August 22nd, 2022, the heads of the customs authorities of Azerbaijan, Iran, and Russia signed a MoU on the facilitation of transit traffic.
IRISL Group’s Importance in Tehran’s Strategy towards the INSTC
Iran’s strategy within the INSTC involves a multi-faceted approach centred on fostering investment, enhancing infrastructure, and optimising transport logistics. Key objectives include prioritising investments in transport infrastructure development, such as construction, modernisation, and rolling stock upgrades, to facilitate efficient cargo movement.
Identification and prioritisation of high-potential projects to attract cargoes along the INSTC are emphasised, supported by an expanded fleet of TEU (twenty-foot equivalent unit) and FEU (forty-foot equivalent unit) containers, including refrigerated units. Furthermore, Iran aims to bolster its fleet of mainline electric locomotives, freight cars, and modern container flatbeds, augmenting its transportation capacity.
Acquiring a versatile fleet of vessels, from grain carriers to Ro-Pax and river-sea navigation vessels, particularly in the Caspian Sea, remains a focal point. Strengthening transshipment facilities at key points between Iran, Azerbaijan, and Turkmenistan is a crucial aspect of Tehran’s plan. Additionally, the country pursues agreements and actions to facilitate mutual trade and establish free trade areas along the international Corridor.
Negotiations to establish standardised freight rates and the establishment of a dedicated Russian–Iranian bank for service providers highlight the Islamic Republic’s commitment to streamlining transport and forwarding services. Lastly, initiatives promoting the use of national currencies for settlements between Iranian carriers and those from other countries operating along the Iranian segments of the INSTC signify Iran’s comprehensive approach to bolstering the corridor’s efficiency and attractiveness.
With the largest shipping fleet in the Middle East and the Caspian Sea, IRISL Group (the Islamic Republic of Iran Shipping Line Group) is one of the Iranian major assets in the policy towards the development of the INSTC project.
IRISL is an entity offering extensive logistics services that span across key regions including Asia, the Pacific, CIS countries, the Indian Subcontinent, the Middle East, Europe, Turkey, Africa, and South America. With a robust global network, it specialises in multimodal transportation through sea, rail, and road, providing comprehensive services encompassing ports, insurance, marine terminals, and transit logistics.
This company boasts an owned fleet of 139 ships comprising containers, bulk carriers, multi-purpose vessels, tankers, barges, offshore vessels, landing crafts, passenger ships, and service vessels. With a carrying capacity of 5,000,000 deadweight tons (DWT), this fleet enables the company to transport various cargo types across global routes.
IRISL’s policy within the INSTC aims to strengthen ties with Russia and CIS countries while focusing on connecting Southern Iranian ports already established with China, India, and African nations to the Caspian Sea markets. The strategy involves substantial investments in enhancing the infrastructure and capabilities of the Solyanka port to further facilitate trade and transport along this corridor.
The Solyanka Port serves as Iran’s key stronghold within the INSTC, offering a secure and dependable route for the exchange of essential goods and commodities between Iran and Russia. IRISL has made significant investments totalling 10 million dollars since 2022, including the initial purchase of a 53% stake in the port. Additionally, the IRISL-affiliated Khazar Sea Shipping Lines Company acquired a 53% share of the “Astrakhanskiy Port” Company in 2010, strategically aiming to facilitate access to its vessels to Russia’s Astrakhan ports. Among the 13 ports located in Russia’s Astrakhan Economic Zone, Solyanka Port stands out as the most active and pivotal hub for transporting freight, solidifying its role as a crucial maritime trade link between Iran and Russia.
Amid today’s geopolitical instability, certain Eurasian Economic Union (EAEU) countries are adjusting their foreign trade approaches and establishing new logistical pathways. The INSTC, initially proposed by Russia, India, and Iran, aims to offer a shorter alternative to the maritime route passing through the Suez Canal. This results in quicker delivery times for goods and decreased transportation expenses during trade activities.
Moreover, as per estimates from the Eurasian Development Bank, transitioning container traffic from sea-based transportation to rail within the North-South corridor could curtail greenhouse gas emissions by a minimum of 25%.
This corridor operates using multiple modes of transportation, enabling cargo movement via road, rail, and sea, as well as utilising mixed river-sea vessels.
While China is advocating for Central Asian countries to utilise the Af-Pak corridor and Karachi port for sea access, Iran presents a more direct and safer connection. This route bypasses the turbulent Af-Pak region and avoids the challenge of Indian goods transiting through Pakistan, a historically problematic route. Pakistan’s China-funded Gwadar deep seaport, situated just 72 kilometres east of Chabahar, is part of the China-Pakistan Economic Corridor (CPEC). However, despite this, the considerable strategic advantage and appeal of Iranian ports has prompted Beijing to invest in these infrastructures too.
The emerging Caspian Sea route serves as a counterbalance to Turkey’s influence in the region. This route challenges the networks established by Ankara and the West, which aim to limit or exclude Russian influence. Iran, with its ports in the Caspian Sea, Special Economic Zones (SEZs), Free Economic Zones (FEZs), the Preferential Trade Agreement (PTA) with the Eurasian Economic Union (EAEU), and its strategically access to both the Persian Gulf and the Caspian Sea waters, has positioned itself as a pivotal hub within the INSTC and regional networks.
Compared to Pakistan and Afghanistan, Iran is perceived as more stable and secure. It maintains favourable diplomatic relations with both India and China. Consequently, Tehran is actively positioning itself as a crucial trading partner for many Central Asian countries.
The Raisi government has prioritised the Look to the East Policy and Economic Diplomacy, along with fostering regionalism, resulting in improved relations with neighbouring countries. This approach has significantly enhanced Iran’s appeal for investments from Eurasian stakeholders.
Within the INSTC, the primary foundation remains the growing cooperation agreements between Iran and Russia. Despite facing sanctions, Tehran and Moscow have collaborated to reorganise Eurasian markets and spheres of influence in a multipolar manner. The direct link between Russia and Iran also provides Moscow with an alternative route, bypassing the need to pass through Armenia or Azerbaijan. This is a significant advantage considering the occasionally challenging relationships with these two nations.
It’s crucial to note that the improved relations between Azerbaijan and Iran must be seen in the context of shared economic interests and interdependence resulting from joint infrastructure projects. Collaborative infrastructural developments could potentially reduce the risk of conflicts between the two nations. However, despite these advancements, Iran and Azerbaijan are likely to maintain a cautious approach towards each other. Lingering mistrust and ongoing geopolitical competition are expected to continue influencing their bilateral relations.
In this light, there might be a convergence of interests between Iran and Russia in establishing a direct link. Azerbaijan serves as a means for Turkey to strengthen its bloc and increase its influence in the West, mainly due to Baku’s significant gas reserves. Iran faces challenges with its Turkic-speaking population in northern Iran advocating for secession, partly influenced by Turkey’s soft power efforts in that direction. Moscow, on its part, is unlikely to view the growing Turkish influence in its sphere of influence positively, given Ankara’s volatile nature as an ally. Additionally, Iran’s ruling elite remains deeply concerned with Israel’s presence in Azerbaijan.
Nevertheless, as highlighted by the Kazakh President, regional countries are creating a novel transport network for Eurasia, a previously non-existent development. For Iran, this corridor provides access to over ten Russian cities with populations exceeding one million along the River Volga. It also establishes connections to broader Central Asia and the Black Sea region. This provides Tehran with a means to evade international isolation, bolster its national economy, and attract investments through its Free Economic Zones (FEZs) and Special Economic Zones (SEZs).
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