The International North-South Transport Corridor — (Part 5) Ikram Sehgal and Dr Bettina Robotika

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The International North-South Transport Corridor (INSTC) originated with an inter-governmental agreement between Russia, Iran, India and Azerbaijan. A total of 13 countries (including Pakistan) have since ratified the agreement. The corridor would eventually stretch from Northern Europe all the way to Southeast Asia. Being stalled for many years, the INSTC found renewed impetus in January 2016 with the lifting of UN sanctions against Iran. Carrying 11 million tonnes of goods in 2018, the corridor has an estimated annual capacity of between 20 and 30 million tonnes thanks to three main spurs.

The main spur is the 7,200-kilometres corridor between Mumbai and Saint Petersburg, based on ferry links between the ports along the Russian coast of the Caspian (Astrakhan, Olya, and Makhachkala) and the Iranian ones (Bandar-Anzali, Nowshehr, and Bandar-Amirabad). Indian goods are delivered to the Iranian port of Bandar Abbas on the Persian Gulf and shipped across the Caspian for onward rail or road transport to Russia and Europe. The Indian Federation of Freight Forwarders Associations estimates 30 per cent cost and 40 per cent transit time reductions compared to the Suez route. Dry runs conducted between 2014 and 2017 showed possible savings in the order of $2,500 per 15 tonnes of cargo, while transit time could be slashed to 25 to 30 days compared to 40 to 60 days via Suez. Shipments would take an average of 23 days, at costs ranging between $2,300 and $3,500 for a dry container and between $4,600 and $6,800 for a reefer container. For example, it would only take 19 days (as opposed to 32 to 37) to cover the route between Mumbai and Moscow, cutting the distance from around 16,112 km (8,700 nautical miles) to about 7075 km, less than half. Likewise, it would take only 21 days for shipments between India and Finland, down from about 45 days. It must be remembered that the ferry linking Mumbai to Iranian ports adds 10 days to the time and also adds to the cost of freight by about 25 per cent. Indian intransigence in solving the Kashmir problem and the unending brutality on the Kashmiri people has made relations with Pakistan intractable. This denies India land access across Pakistan to Iran and Afghanistan and denies Eurasian countries access to South Asia and South-East Asia.

Azerbaijan’s accession to the INSTC agreement in 2005 paved the way for the addition of a second spur; running west of the Caspian Sea. Linking India and Russia through Azerbaijan and Iran, the spur is likely destined to sideline the Caspian route due to its greater efficiency and interconnection with the Baku-Tbilisi-Kars rail line. Anticipating cargo transit through its territory in the range of 15 to 20 million tons at full capacity, Baku has been especially active in upgrading infrastructure and building new roads and railways. Deutsche Bahn has also shown an interest in using the route.

Caught in the crossfire of American and European sanctions, Russia has devoted sustained diplomatic energy to spearhead the INSTC.

However, several bottlenecks remain due to gaps in the Iranian rail system. The Astara (Azerbaijan)-Astara (Iran) section only opened at the end of March 2018. It runs for eight kilometres within Azerbaijan from Astara up to the border, whence it reaches Iran’s Astara city after another two kilometres across a newly built bridge over the Astarachay river. Here, Baku financed the 10-kilometre extension of its 1,524 mm gauges railway into Iran for roughly $60 million. It includes a 35-hectare transhipment facility that will be operated by Azerbaijan Railways under a 25-year build-operate-transfer (BOT) agreement with the Islamic Republic of Iran Railways (IRIR).

The second segment is entirely within Iranian territory. It covers the 164-kilometres span between Rasht and Astara via Anzali, Iran’s other major Caspian port city, and is due for completion in 2020. The line is also supposed to enable travel between Baku and Nakhchivan, an Azeri exclave sandwiched between Armenia and Iran. For this reason, Azerbaijan has agreed to jointly finance the project, with each side contributing $500 million. Baku has also provided a $1.5 billion soft loan to Iran for the construction, which was reportedly due to start in the first half of 2018. The details of the financing scheme were still being discussed in March 2019, but the latest reports indicate the line will be completed by 2022.

The third segment consists of another 164 kilometres of railway connecting the Iranian cities of Qazvin and Rasht, including 25 kilometres of tunnels and 9 kilometres of bridges. Construction of this section began in 2002, but again, political and financial hurdles, in addition to the difficult terrain, have caused substantial delays. Nonetheless, the railroad was finally launched in March 2019 after successful trial runs in November 2018.

The third spur came to fruition with the opening of the 928 kilometres of the Kazakhstan-Turkmenistan-Iran (KTI) railway in December 2014 which runs east of the Caspian Sea, connecting the cities of Uzen, Bereket, and Gorgan. In Bereket, the KTI line connects with the Trans-Caspian Railway of Tsarist times, which, travelling across Turkmenistan, reaches into Uzbekistan and Tajikistan.

India and Russia are the prime movers behind the INSTC. The targets of $30 billion set in bilateral trade by 2020 and investments of $15 billion each way by 2025 based on the 2014 Druzhba-Dosti Statement cannot happen based on Bandar Abbas only, it has to include Chabahar also. India and Iran were reportedly on track to achieving their trade goal and crossed their investment target in 2018, they resolved then to raise the bar to $50 billion by 2025. In February 2018, Russia gave its blessing to the expanded India-Central Asia ties. This means that the pair now shares an interest in fast-tracking the project, which led them to sign a Memorandum of Understanding in early 2019.

Will this be possible in the face of the developing geopolitical realities in the region? Caught in the crossfire of American and European sanctions, Russia has devoted sustained diplomatic energy to spearhead the INSTC. Together with Tehran, Moscow is the seam between two trilateral processes (the Russia-Azerbaijan-Iran and the Russia-India-Iran meetings) responsible for advancing the corridor’s implementation.

Working through RDZ (Russian Railways), Moscow financed the electrification of Iran’s 495-kilometre Garmsar-Incheboron rail line, which reaches into Turkmenistan and onwards to Kazakhstan. The upgraded line was inaugurated on July 2, 2018, to the tune of $1.39 billion. In April 2018, UTC Overseas, an international freight forwarding and cargo logistics company, a joint-venture between RDZ (Russian Railways), KTZ (Kazakhstan Temir Zholy national railway company of Kazakhstan) and BCh Bie?aruskaja ?yhunka state-owned railway national company of Belarus was formed. RDZ initiated discussions with Iran, India, and Azerbaijan’s railway companies to set up a joint operator for end-to-end logistics along the INSTC. RDZ signed separate agreements with Indian Railways to develop collaboration on automatic traffic controls and security systems and deliver 100 train cars to Indian Railways. Joint projects are under discussion with Iran include Moscow activating a $3 billion credit line for INSTC-related investments.

Iran experienced a decade of UN sanctions from 2006 to 2016, it is once again the target of United States sanctions, therefore reconnecting to the outside world is a national priority. The INSTC represents the shortest path to Russia and Europe, two of its main trading partners, with the country pledging to earmark one per cent of its oil revenues for new railway investments. Although the construction of adequate links across the country has tanked, its geographic position and excellent relations with all of the INSTC members give Tehran the unprecedented opportunity to become a major transport player. In addition to speeding up construction work in its territory, Tehran has also tasked Iranian Railways with exploring the possibility of running passenger and cargo trains between Astara (Iran) and Moscow with Azerbaijani and Russian counterparts. Iran is also pushing for the simplification of mutual customs and visa procedures and accelerating railway and cargo cooperation with its partners, as stressed at the third Russia-Iran-India triangular meeting in 2018. The INSTC could in future see a further extension, with the Shalamcheh-Basrah line possibly connecting Iran and Iraq once the remaining 32 km are completed. A feasibility study for a 200-kilometre railway between Iran and Turkey via the Maku Free Zone is also in the works.

A small quasi-landlocked country, Azerbaijan has been eyeing global transit as an opportunity for new revenues. To that end, Baku and Russia intend to increase cargo traffic via the INSTC western route and to develop the Russia-Azerbaijan-Turkey route by using the hardware of the Baku-Tbilisi-Kars railway. They are also looking at developing the transit traffic between Azerbaijan and China through Russia, as well as onward traffic from China through Russia and Azerbaijan. Moreover, as detailed above, Baku has also developed a close partnership with Iran, and, because of a further expansion of the route and an important development after the recent Azerbaijani-Armenian flare-up President Ilham Aliyev also invited Pakistan to join the project during his February 2017 visit. In fact, Pakistan is a net beneficiary as Gwadar (and now, Chabahar) is being developed by the Chinese replacing the Indians. With a massive US$ 400 billion promised in 25 years, it has now become the main hub that by itself enhances Eurasian development. This development of a railways network across Central Asia, reaching the Indian Ocean and possibly South Asia, makes it the focal point of the 21st century, being possibly the Eurasian century.

(To Be Continued)

The writer is a defence and security analyst, Chairman (Karachi Council of Foreign Affairs) and Vice-Chairman (Board of Management, Institute of Nation-Building, Quaid-e-Azam House Museum).

The writer is a former Professor of South Asian Studies, Humboldt University, Editor (Defence Journal) and a Consultant (Pathfinder Group)

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