INSTC faces opportunities, competition

ALBAWABA - A crucial overland corridor under completion, which is expected to facilitate and hike trade exchange between eastern Europe and Northern Asia, faces challenges and competition, including among some of its members.

The International North-South Transport Corridor (INSTC) was established in September 2000 by Iran, Russia, and India in St. Petersburg. But the corridor has expanded since,  accepting new members such as Azerbaijan, Belarus, Bulgaria, Armenia, Kazakhstan, Kyrgyzstan, Oman, Tajikistan, Turkey, and Ukraine.

INSTC connects India to the Caspian Sea, Russia, and Northern Europe through Iran. This trade corridor in the Caucasus (western route) and Central Asia (Eastern route) connects the Caspian Sea (central route) to Iran and then the Persian Gulf and India with the road, rail, and sea routes.

In the last two decades, the main partners of INSTC made several efforts to start this corridor in practice. Also, with the occurrence of some incidents in the Suez Canal and the crisis in Ukraine, the need for INSTC increased.

In June 2022, trade on INSTC officially started with a shipment from Russia to India via Iran.

Russia

With the North-South Corridor, Russia is trying to be a connecting hub between (SAARC), (ASEAN), Central Asia and the Middle East, the subcontinent, Iran, and North, and East Europe.

Following the imposition of extensive sanctions by European countries and the United States against Russia; the country needs the NINSTC route more than ever and is trying to increase transportation with approaches such as improving internal shipping capabilities and improving internal connections to the Caspian Sea. With the end of infrastructure, Moscow is trying to serve the Eurasian Economic Union, and the Eurasian Economic Union (EAEU) is interested in the development of transport infrastructure in this region.

India

In fact, there is wide competition between China and India in increasing influence in Central and Southwest Asia. The international North-South transport corridor is one of the important priorities of India in its competition with China.

In recent developments in international, the pursuit of INSTC is of particular importance for New Delhi. Exploring the diversity of India's trade destinations with Europe and Russia and a more direct route could translate into invulnerability. Also, facilitating the transportation of 20 to 30 million tons of goods per year will strengthen the Indian economy. In this regard, India, and Iran have accelerated negotiations on a long-term agreement to use the strategic port of Chabahar.

Iran

More than 5 international corridors pass through Iran, and perhaps the most important one is the North-South corridor. The western, central, and eastern branches of the North-South International Transport Corridor (INSTC) pass through Iran. In the western part, the cargo is transported by road through the Caucasus and Iran.

In the central part, cargo is transported through the Caspian Sea and the northern ports of Iran (Amirabad, Anzali, and Astara ports). In the eastern part, cargo is transported by rail, passing through Kazakhstan, Turkmenistan, and Iran.

Recently, Iran has made a lot of effort to regain its strategic position in the transit lines. In fact, the convenient geographical location, Iran's access to long coasts, having a special transit position in the region, and the passage of corridors through Iran have made it one of the most economical access routes of Europe’s access to Asia.

Also, Iran can have a rich income from the passage and transit of goods on rail and road lines instead of its oil income and create various opportunities for itself. Iran is a key passage for Russia to reach the south, as well as for India to reach the north.

Therefore, Iran has paid more attention to its geostrategic interests in this region by increasing the capacity of the country's southern and northern ports, the 'Northern Transit Corridor Leap' project, and the construction and completion of 5 infrastructure projects in the north-south corridor.

Advantages and importance of INSTC

As one of the ways of generating income for countries, transit has become very important. INSTC, with its strategic, geopolitical and geo-economic location, can be the most important trade link between Asia and Europe compared to traditional routes ( in terms of distance and time up to 40 percent shorter and up to 30 percent cheaper in terms of cost). For example, the length of INSTC is much shorter than the sea route of the Suez Canal for India. Or bypassing the Suez Canal could help member states avoid delays or closure of it.
In fact, the main advantage of the INSTC over the Suez Canal is the significant reduction in transit time. For example, using the Corridor route and reducing the delivery time for many products, including food, is more appropriate and vital.

If all links of the 7200 km long multi-mode network (INSTC) chain of ships, railways, and roads are activated, it can help the member countries in expanding transport relations, increasing the access of the parties to the world markets, increasing the volume of international transportation of goods and passengers, product safety, help coordinate transportation policies and...

By 2030, the total potential INSTC transport traffic, including two product types, containerized and non-containerized cargo, is expected to reach 14.6 to 24.7 million tons.

If the transportation capacity of the corridor is closer to the goals, other members will also benefit from the process of economic cooperation.

INSTC was designed before China's Belt and Road Initiative (BRI) and is coordinated with the Ashgabat Agreement (with the participation of India, Oman, Iran, Turkmenistan, Uzbekistan, and Kazakhstan) and facilitated the transportation of goods between Central Asia and southern waters.  Therefore, it is extremely important for Central Asian republics such as Kazakhstan.

In addition, the first trial transit of goods from Russia to India by using INSTC  and then a 20% discount in 2023 by Russia, Kazakhstan, Iran, and Turkmenistan to use INSTC's eastern rail routes, boosted the incentive for trade.  As a more viable alternative to China's Belt and Road Initiative (BRI), the INSTC would allow New Delhi to bypass Pakistan, compete with China's presence in the region, and strengthen ties with Russia. 

Challenges and competition with the Suez Canal

Despite the progress, technical issues related to different railway gauges in the region, lack of harmonized tariffs, paper procedures and delay in digitization, border control process, harmonization of customs procedures and tariff policies are part of the INSTC's challenges.

In addition, many goods and containers have not yet been attracted by INSTC, and there are some infrastructural problems such as lack of capacity and low speed of cargo ships in the Caspian Sea, non-completion of the Rasht to Anzali and Astara rail route, low speed of unloading and loading of goods, etc. 

Sanctions against Iran and Russia, and the disconnection of some Russian banks from the SWIFT international payment system also create obstacles. Moscow is also facing problems with major investments in other INSTC member countries. In addition, the Suez Canal is still the fastest shipping route between Europe and Asia.

Despite some blockages of the Suez Canal in the last few years, Cairo is trying to ensure the canal is the best international transportation corridor of Asia and Europe by developing the Suez Canal, preventing the old problems of the Suez Canal, reducing the transit and crossing time, etc.  In fact, Egypt, with the Suez Canal development plan until 2030, can still prevent actors from paying serious attention to INSTC.

Political and military tensions between Yerevan and Baku have caused a decrease in attention to the western route of this corridor. The cooling of Azerbaijan's relations with India is a serious obstacle to paying serious attention to INSTC.

In addition to the continuing technical and infrastructural challenges of INSTC, India's attention may be drawn more to the east of Russia or the Turkish route. Also, the existing challenges will make Russia think of paying more attention to the development of the East-West Central Corridor (Turkey-Azerbaijan-Kazakhstan agreement).

Vision:

Although the International North-South Transport Corridor (INSTC) has started working, to reach its goals, it must pass through extensive technical, political, economic, and international obstacles.

Also, while Washington wants India to be a counterweight to China, India's fundamental attention to INSTC and transition from the impact of sanctions on the corridor is important.
the challenges and barriers to accessing common goals should be reduced and a friendly and beneficial relationship should be developed within the framework of the INSTC programs. Diplomatic and political cooperation of countries can be the foundation and strengthening of economic cooperation and expand the arena within the framework of the North-South corridor.

In fact, the future of the North-South International Corridor depends to a large extent on India's approach to relations with Iran and Moscow. At the same time, the broader cooperation of the members can help to promote intra- and inter-continental communication in Eurasia. INSTC is still in its early stages compared to China's Belt and Road Initiative (BRI), but it could reach a high percentage of its total potential container traffic by 2030 compared to existing age corridors.