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MGIMO Review of International Relations. 2023. 16(2). P. 216-234 RESEARCH ARTICLE
DOI 10.24833/2071-8160-2023-2-89-216-234
H) Check for updates
The International North-South
Transport Corridor:
The Prospects and Challenges
for Connectivity between Russia and India
Aleksei Zakharov
National Research University Higher School of Economics, Russia
Abstract: Connectivity has been one of the most challenging issues for developing trade cooperation between Russia and India. Due to the geographic distance separating the two nations, along with the unstable security environment in Afghanistan and border disputes between India and Pakistan, the creation of a direct and shortest transport route has proven difficult, thereby rendering it impossible to implement crucial projects in energy infrastructure.
This paper briefly outlines the functioning logistics between Russia and India, which has relied primarily on shipping through the Suez Canal, with an emphasis on the developments in the wake of conflict in Ukraine. The author briefly explores the prospects for maritime connectivity between the Russian Far East and Indian ports, and highlights several challenges for launching a regular Vladivostok-Chennai corridor. The US and European sanctions against the Russian economy, combined with subsequent difficulties in transporting goods by sea, has reinvigorated Russia's efforts to complete the International North-South Transport Corridor (INSTC). This corridor holds significant potential for Russia to expand its reach to India, the Persian Gulf, and East Africa. Additionally, it is believed that the project may facilitate India's connectivity with countries in the Caucasus, Central Asia, and Eastern Europe. Therefore, this paper particularly examines the case of the land corridor, exploring its current progress in implementation, the geoeconomic factors involved, existing challenges, and opportunities for compatibility with other initiatives, such as the Europe-Caucasus-Asia Transport Corridor (TRACECA), the Belt and Road Initiative (BRI), and the Chabahar port. The author argues that, although the implementation of connectivity projects between the two countries will not solve structural problems in their trade relationship, both have a vested interest in promoting infrastructure development for a deeper engagement with new regions. To qualitatively boost Russian-Indian trade, affordable logistical solutions should be developed simultaneously with the resolution of other issues like the settlements for financial transactions, and the elimination of tariff and non-tariff barriers.
Keywords: INSTC, Russia, India, trade cooperation, logistics, connectivity, Eurasia
UDC 339.56(470+571+540)+656
Received: December 20, 2022
Accepted: April 17, 2023
umerous scholars have examined Eurasian connectivity through various lens-
es, such as the strategic, political, and economic interests of regional actors,
as well as its potential for regional integration. One group has focused on the importance of developing regional connectivity for the landlocked countries, particularly members of the Eurasian Economic Union (EAEU), four of which lack ocean access (Vinokurov, Ahunbaev, Zaboev 2022).
The second group emphasizes the interests of great and regional powers and argues that connectivity-related initiatives, apart from having a positive impact on regional integration, can also be a source of contestation and be utilised by some actors to increase geopolitical influence. Interestingly, while some Indian scholars posit that "New Delhi's approach towards connectivity is driven more by geostrategic sensitivities than economic considerations." (Khan 2022: 139), others believe that "[t]he INSTC will be a success only if New Delhi recognises its strategic importance as an alternative connectivity channel with Eurasia over and above its economic benefits (Purushothaman, Unnikrishnan 2019: 80)".
Several publications have examined the role of connectivity in India's bilateral relations with Russia and Iran (Lunev, Belov, Binish 2023; Roy 2012; Tourangbam 2018; Volodin, Volodina 2019), as well as with the Central Asian Republics (Joshi 2017; Mukhia, Zou 2022; Roy 2011). Many of these authors frequently emphasize connectivity as a critical issue for India's engagement with Central Asia, with Iran often viewed as a "gateway" to the region.
In recent years, the International North-South Transport Corridor (INSTC) has been in the spotlight of research on Eurasia, primarily due to its lack of progress. The literature identifies numerous factors that have hindered the corridor's implementation. In exploring the bottlenecks to INSTC progress, researchers have highlighted factors such as U.S. sanctions against Iran, missing rail sections, poor infrastructure quality along the route, customs procedures, and a lack of coordinated transport policies among participating countries (Vinokurov, Ahunbaev, Zaboev 2022; Purushothaman, Unnikrishnan 2019).
This article seeks to contribute to the research on the role of connectivity for the bilateral ties between Russia and India, with an emphasis on the Russia-Ukraine conflict's implications for the regional logistical routes. The author used the qualitative sociological methods, such as expert interviews with Russian and Indian business representatives, to identify existing challenges for the INSTC's utilization and to explore the feasibility of the corridor for promoting Russia-India trade. Additionally, secondary data from government ministries of trade and commerce, transport and maritime authorities, railway, and logistics companies were used in this study.
The article first explores maritime connectivity between Russia and India, focusing on the challenges and prospects for realizing the proposed eastern maritime corridor from Vladivostok to Chennai. The author then analyzes various routes of the International North-South Transport Corridor, identifying changes in approaches
from the Russian and Indian sides and the geoeconomic and political motives driving efforts to advance its implementation. The paper concludes with the reflection on the viability of these transport links for the Indo-Russian trade.
The maritime connectivity goes East?
In 2022, the military conflict in Ukraine resulted in increased risks associated with maritime deliveries through the Suez Canal. Shipments to and from Russia via this route became unpredictable due to the threat of sanctions and the potential for cargo seizures in European ports, as well as the tense military situation in the Azov-Black Sea region.
As a result, there has been a significant increase in demand for container shipping and coal transhipment at Russian Far Eastern ports, which highlighted two new trends. First, it became a manifestation of Russia's "turn to the East", showcasing the reorientation of Russian mineral resource and commodity exports towards Asian markets. Second, Russia is moving away from Europe and looking to China and other regional countries as key sources of goods in short supply. However, Russia's transport and logistical infrastructure was not prepared for such a rapid reorientation, which has hindered Moscow's efforts to significantly boost trade ties with its Asian partners through the Far Eastern ports and border points1.
According to the Far Eastern customs statistics, the total volume of goods turnover during the period of January to September 2022 remained largely unchanged compared to the same period in 2021, amounting to 135 million tons. The export of energy resources, including coal, oil, and gas, accounted for approximately two thirds of this volume. It is worth noting that while imports through regional transit points increased by 34%, the total export experienced a slight decrease of a few percentage points2.
Since 2014, a growing number of Indian scholars have recognized the Russian Far East (RFE) as a potential growth area for business and trade ties between India and Russia, citing "immense opportunities" for Indian oil and gas and pharmaceutical companies, diamond cutting and polishing industries and the Indian labour force working in agriculture development3. In a broader perspective, the RFE has been viewed as a hub for business, trade, and innovation, making it an important area for promoting India's geo-economic interests in the Indo-Pacific region4.
1 Zuenko I. 2022. Chto sderzhivaet logistichesliy bum na vostocnyh rubezhah Rossii? Profil. 15 September. URL: https:// profile.ru/economy/chto-sderzhivaet-logisticheskij-bum-na-vostochnyh-rubezhah-rossii-1158745/ (accessed 20.04.2023).
2 Foreign trade turnover in the Far East for 9 months of 2022 did not change and amounted to 135.5 million tons. DVTU. 2022. 25 October. URL: https://portnews.ru/news/337532/ (accessed 20.04.2023).
3 Unnikrishnan N., Purushothaman U. 2014. Russian Far East: Opportunities for India. Observer Research Foundation. URL: https://www.orfonline.org/research/russian-far-east-opportunities-for-india/ (accessed 20.04.2023).
4 Rekha C. 2017. Relevance of Russia's Far East in India's Geo-economic Interests. Centre for Air Power Studies. 1 December, 3-4.
In 2019, Prime Minister Narendra Modi's visit to Vladivostok for the Eastern Economic Forum marked a significant turning point in India's renewed interest in the Russian Far East. The summit resulted in the signing of several agreements, including a Memorandum of Intent for the development of a maritime corridor linking the ports of Vladivostok and Chennai5. This idea is not a new one, as a similar maritime route, from Vladivostok to Madras, was operational in the Cold War era, from 1967 to 1969, connecting Russia's Far East with Southeast Asia and India6. At that time, the round trip took about 90 days, whereas today it is estimated that the one-way distance may take up to 24 days. Therefore, the proposed corridor has the potential to significantly reduce cargo shipping time by almost half compared to the route via Suez and Europe, thus facilitating cargo transfers between the eastern part of Russia and the eastern coast of India7.
Although both sides have expressed hope that the launch of maritime link "will provide a fillip to the bilateral trade" and the Indian government's feasibility study of the project is "in advance stage"8, its full operationalisation has not been launched yet.
The economic viability of the maritime connectivity between Chennai and Vladivostok is often analyzed in terms of India's interests in the resource-rich Far East, which offers possibilities for importing not only hydrocarbons but also timber, nickel, gold, diamonds, and rare earth minerals. Prior to the outbreak of conflict in Ukraine, coal and oil made up 70% of exports from the RFE to India.9 Although Tata Steel, which was formerly the largest Indian importer of Russian coal, ceased purchasing the commodity in May 2022, other Indian companies increased their imports. Russia was able to redirect its coal exports from Europe to Asia and significantly increased its supplies to India, from 6.6 million tons in 2021 to about 20.1 million tons in 202210.
Currently, there are several Indian companies operating in the region. The Oil and Natural Gas Corporation (ONGC), which has held a 20% equity stake in the Sakhalin-I project since 2001, is the largest Indian investor in the RFE. Additionally, two Indian companies based in Vladivostok - KGK Group and M Suresh Group - operate in the
5 Agreements exchanged during visit of Prime Minister to Vladivostok. 2019. URL: https://mea.gov.in/bilateral-docu-ments.htm?dtl/31792/List_of_MoUsAgreements_exchanged_during_visit_of_Prime_Minister_to_Vladivostok (accessed 20.04.2023).
6 Kapoor N., Iyer G. 2020. East Meets East: An Assessment of the Proposed Chennai-Vladivostok Maritime Corridor. Occasional Paper No. 286, Observer Research Foundation. India, December, 38.
7 Baru S. 2019. The Asian Mirror for the Far East: An Indian Perspective. Valdai Papers No. 110. Valdai Discussion Club, Russia, 7.
8 Partnership for Peace, Progress and Prosperity. India-Russia Joint Statement following the visit of the President of the Russian Federation. Kremlin. 2021. 6 December. URL: http://en.kremlin.ru/supplement/5745 (accessed 29 November 2022).
9 Natural resources from Russia's Far East to fuel India's growth. MEA. 6 September 2019. URL: https://indbiz.gov.in/natu-ral-resources-from-russias-far-east-to-fuel-indias-growth/ (accessed 20.04.2023).
10 Coal Industry: Helping Asia and Survival. 2023. Roscongress. URL: http://roscongress.org/upload/medialibrary/a86/s7c-fir647cgq5ti7epqmionlt2onsr8pZUgolnaya_otrasl.pdf (accessed 20.04.2023).
diamond industry, while Artem-based Jay Tea Ltd runs the sole tea-packing factory in the region. These companies continue doing business despite the sanctions against Russia, but their cumulative investments amount to only $15.7 million11.
While the Russian motivation in attracting Indian investors is obvious, the pertinent question remains: how could the RFE gain from the enhanced connectivity with India's south-eastern regions? What could be the list of competitive Indian goods that the industries and population of the Russian eastern regions would need to import? Apart from these, there is also the challenge of underdeveloped infrastructure in Russia that impedes efforts to increase exports to Asia. The so-called "Eastern Polygon," which includes the Trans-Siberian Railroad (Transsib) and the Baikal-Amur Mainline (BAM), has limited throughput capacity, which highlights the need for either modernizing transport infrastructure or building alternative logistical routes. This must be a primary reason why the Far Eastern ports have not seen any increase in freight traffic in 2022, even though they have been used for exports of petrochemicals, coal, and coke (see Tables 1 and 2).
Table 1. The cargo traffic of the Russian sea port terminals.
Basin January - December 2022 4th quarter of 2022
Million tons % to Jan-Dec 2021 Million tons % to Q4 2021
Arctic 98,5 4,4 25,4 6,1
Baltic 245,5 -2,9 63,6 -4,8
Azov-Black 263,6 2,7 72,9 10,8
Caspian 6,0 -13,9 1,8 15,5
Far Eastern 227,8 1,5 58,5 5,8
Data source: PortN ews. 2023. Russian sea ports. 4th quarter 2022. URL: https://portnews.ru/
upload/basefiles/2732_2022Q4%20pPpochrchtpopvpachja%20chschtpachtpichschtpipkpa. pdf (accessed 5 April 2023).
Table 2 demonstrates that the export of commodities from Russian ports remained possible throughout the year of 2022, despite the exposure of some of these routes to various disruptions.
" Indiyskie kompanii priglasili k rasshireniyu investitsionnogo sotrudnichestva na Dalnem Vostoke i v Arktike. 2023. FEDC. URL: https://erdc.ru/news/indiyskie-kompanii-priglasili-k-rasshireniyu-investitsionnogo-sotrudnichestva-na-dal-nem-vostoke-i-v-/ (accessed 20.04.2023).
Table 2. The increase of cargo traffic of certain goods at the Russian sea port terminals in the 4th quarter of 2022 (in percent).
Basin Oil Petrochemicals LNG Coal, coke Containerised cargo Other Total
Arctic 3,2 -40,2 3,5 40,7 8,1 -1,8 6,1
Baltic -3,7 1,4 11,9 29,5 -81,0 -2,8 -4,8
Azov-Black 2,6 -1,1 -4,2 2,7 -14,5 37,6 10,8
Caspian -26,9 - - - 223,0 55,6 15,5
Far Eastern -7,4 -3,3 -1,1 11,7 28,2 -4,9 5,8
Data source: PortNews. 2023. Russian sea ports. 4th quarter 2022. URL: https://portnews.ru/ upload/basefiles/2732_2022Q4%20pPpochrchtpopvpachja%20chschtpachtpichschtpipkpa. pdf (accessed 5 April 2023).
For the moment, it is not clear why India and Russia would need the dedicated maritime corridor, given that there have already been occasional supplies of commodities between Russian Far Eastern ports and Chennai. For instance, India's largest steel companies and cement producers had reportedly imported Russian coal due to shortage of domestic supply and a more attractive price compared to other international exporters12. Interestingly, in some cases Indian entities paid for the import of Russian coal in yuan.
Until a detailed feasibility study is presented, the Vladivostok-Chennai maritime corridor appears to be dominated by non-containerized freight traffic and may be one-sided, with Russia's exports significantly outweighing India's ones. Arguably, to develop containerized cargo transportation, it would be reasonable to include other destinations such as Chinese or ASEAN ports in the itinerary. Otherwise, there may not be enough loading of container ships. Even during Soviet times, this was the case with the Soviet ships' port calls in Yokohama, Hong Kong, and Singapore on their way to Madras and Calcutta13.
In the near term, it seems that launching the Vladivostok-Chennai maritime route as a full-fledged corridor will be problematic due to the combination of the following reasons:
1) The enduring prevalence of economic activity in the western ("European") part of Russia over the Far Eastern regions.
2) The insufficient throughput capacity of Transsib and BAM making it difficult to increase eastbound supplies of commodities like coal.
3) The underdevelopment of port infrastructure in the Russian Far East.
4) The low volumes of shipments from Chennai to the RFE.
12 Jacob S., Jai S. 2022. Captive power units turn to Russia as domestic coal supply fails to resume. Business Standard. 15 August. URL: https://www.business-standard.com/article/economy-policy/captive-power-units-turn-to-russia-as-do-mestic-coal-supply-fails-to-resume-122081400390_1.html (accessed 20.04.2023).
13 Kapoor N., Iyer G. 2020. East Meets East: An Assessment of the Proposed Chennai-Vladivostok Maritime Corridor. Occasional Paper No. 286. Observer Research Foundation. India, December, 38.
These challenges, however, will not prevent the emergence of new shipping lines between Russia and India. FESCO, for instance, has launched several container lines to and from Nhava Sheva, shipping from major Russian cities in the Urals, West Siberia, and the Far East. The transit time from Vladivostok to Nhava Sheva is estimated to take from 28 to 33 days, with a freight rate of $5500 per TEU. The route also includes port calls to Ho Chi Minh and Chennai and in some cases extends to Pipavav and
Mundra14.
Exploring the INSTC: challenges and opportunities
The tripartite agreement for the construction of the International North-South Transport Corridor (INSTC) was signed between Russia, Iran, and India in 2000 and came into effect in 2002. Since then, the project has been progressing very slowly, despite having received support from ten more countries, and the numerous attempts by participant stakeholders to expedite its implementation. However, it is worth noting that some sections of the corridor have been utilized for cargo traffic, with the largest volumes of shipments between Russia and Azerbaijan, both by road and by rail, and between Russia and Iran via transhipment in Caspian ports (Vinokurov, Ahunbaev, Zaboev 2022: 165-166). The renewed momentum in Russia's efforts to complete the corridor can be attributed to US and European sanctions against the Russian economy, as well as subsequent difficulties with transporting goods by sea.
The INSTC is not a one-dimensional transport corridor; rather, it comprises various modes of transportation, including rail, shipping lines, and automobile highways. According to the EDB estimates, the corridor covers over 100 infrastructure investment projects in seven countries15 (Armenia, Azerbaijan, Georgia, Iran, Kazakhstan, Russia, Turkmenistan).
The INSTC is a multimodal project that includes three distinct routes, each with its own unique characteristics.
The Western route passes through the border points Samur (Russia), Yamala (Azerbaijan), Astara (Azerbaijan-Iran) and further through the Iranian railway network. Despite gaining momentum since 2018, thanks to the construction of a bridge on the Iran-Azerbaijan border and the completion of railway sections between Tehran and Qazvin, as well as Qazvin and Rasht, the railway connectivity of this route remains incomplete due to the prolonged implementation of the Rasht-Astara railroad. This missing link has led to a need for double transhipment from railway cars to trucks, increasing costs and delivery times, which makes the delivery of cargo commercially unfeasible16.
14 The presentation of FESCO representative at the TransRussia. 2023. Expo. Moscow, April 2023.
15 Vinokurov E., Ahunbaev A., Usmanov N., Zaboev A. 2022. International North-South Transport Corridor: Investments and Soft Infrastructure. Reports and Working Papers22/2. Eurasian Development Bank, Almaty, Moscow.
16 Ibid. P. 5.
Currently, motor vehicles constitute the main part of freight traffic in the Western part of the corridor and their importance is set to increase considering that the completion of Rasht - Astara segment would likely require much time. Iran's inability to complete the missing link can be attributed to two key factors: the challenging terrain and the private ownership of land along the Caspian Sea, from Anzali to Astara. Due to the recreational nature of this region, land acquisition requires substantial funding17.
The estimated cost for constructing the missing section of the railroad amounts to $2 billion. Iran's regional partners had proposed to provide assistance in completing the railway link. In 2017, Azerbaijan extended a concessional loan worth $500 million to Tehran to fund the construction of the missing segment. However, this credit line could not be implemented due to the economic sanctions imposed by the US on Iran18. Now that both Russia and Iran are facing Western sanctions, it may be assumed that Russian companies, no longer concerned about secondary sanctions, will be more open to participating in the commercial projects in Iran.
Moscow has been considering an extension of a $1.5bn loan to Tehran for the completion of railroads projects. During a visit to Tehran in July 2022, Russian President Vladimir Putin reiterated his strong commitment to accelerating the progress of stalled projects in Iranian territory, underlining that "...Russia is ready to [construct the Rasht - Astara line]" given the interest to "connect Russia's northern region, St. Petersburg, with the Persian Gulf"19. Moreover, at the meeting with the largest Russian industrialists and entrepreneurs Putin urged the government to "speed up the process" and to "form [the] pool of potential investors".20
Once the Rasht-Astara section is completed, it should enable a regular container traffic to Bandar-Abbas. However, due to the different track gauges utilized by Russia and CIS states (1520 mm) versus Iran (1435 mm), transhipment of containers at the Azerbaijan-Iran border point will still be necessary.
Reflecting on the prospects for the extension of Rasht - Astara railroad, Valentin Ivanov, the Russian Deputy Minister for Transport, stated that ".a wide gauge right to Persian Gulf ports" will be even more advantageous for Russia because this will allow to avoid unnecessary transhipment of goods. This means that, apart from aiding Iran with completing the link between Rasht and Astara, Moscow is considering the construction of a "completely new railroad directly to [Iranian] Persian Gulf ports"21.
17 Ibid. P. 20.
18 Regular Russia-Iran Container Train Services Launched. 2022. Financial Tribune. 4 November. URL https://financialtrib-une.com/articles/domestic-economy/,,5820/regular-russia-iran-container-train-services-launched (accessed 20.04.2023).
19 Vladimir Putin answered media questions. 2022. Kremlin. 19 July. URL: http://en.kremlin.ru/events/president/news/69036 (accessed 20.04.2023).
20 Plenary Session of the RSPP Congress. 2023. Kremlin. 16 March. URL: http://en.kremlin.ru/events/president/news/70688 (accessed 20.04.2023).
21 Rasht-Astara railroad may be extended to Persian Gulf ports — Russian official. 2022. TASS. 17 November. URL: https:// tass.com/economy/1538487 (accessed 20.04.2023).
Entrepreneurs hold different views on the potential utilization of the Western route. Some of them support the idea of building a completely new wide gauge rail tracks on the Iranian territory (from Astara to Bandar Abbas) arguing that the "seamless infrastructure" can boost the freight traffic up to 60-70 million tons a year, which is badly needed for the INSTC to become cost-effective. The other group, largely representing logistics companies, believe that developing railroads is a lengthy process fraught with challenges such as land rights, infrastructure ownership rights, and varying tariffs. They point out that, until the volumes of supplies increase significantly, it is more practical to invest in the new vessels and trucks. According to this viewpoint Iran's well-developed network of high-quality highways and low fuel prices make road freight forwarding a dependable option22.
The INSTC's Eastern route seemingly saw the most visible impetus in 2022 following the launch of a new Russia-India container service through territories of Kazakhstan, Turkmenistan, and Iran. Although there are still several physical and soft infrastructure projects along this route that require refurbishment and reconstruction, the freight line from Central Russia to India is fully operational, with deliveries occurring regularly once a month.
The Eastern route is considered a "unique opportunity" for delivering cargoes from West Siberia and the Urals to the Iranian port of Bandar Abbas23. This branch may be particularly attractive to Russian exporters of agricultural products, fertilizers, and petrochemical products from these regions.
According to the RZD press service, "on average the pilot runs through both Western and Eastern routes took 30-32 days", and efforts are being made to reduce this time24. For the time being, however, the cargo delivery along the Eastern route takes up not less than 37 days. The longer route passing through Turkmenistan - Iran border at Sarahs is used due to the upgrading of the Ak-Yayla / Incheh Borun railway border crossing point and the modernisation of the Garmsar - Incheh Borun railway line.
22 These views were expressed by the Russian and Indian entrepreneurs at the session on INSTC at the TransRussia. 2023. Expo. Moscow, April 2023.
23 RZD Logistics launches new railway container service on eastern branch of North-South ITC. 2022. PortNews.. 5 July. URL: https://en.portnews.ru/news/331739/ (accessed 20.04.2023).
24 Rustamova S. 2022. Kak dobratsya do Indii? Slozhnosti mezhdunarodnogo koridora Sever-Yug. NewsRu. 18 August. URL: https://news.ru/world/kak-dobratsya-do-indii-slozhnosti-mezhdunarodnogo-koridora-sever-yug/ (accessed 20.04.2023).
Figure 1. The three routes of the INSTC project and other regional transport corridors.
Data Source: Created by the author.
Other issues facing the Eastern route include the poor road network and the use of one-lane, non-electrified railways, which affects travel speeds, increases the risk of accidents, and leads to a considerably lower capacity. Almost all the lines comprising this route in Turkmenistan and most of the railway lines in Iran use diesel locomotives. To increase the speed and volumes of goods delivery along this way, it is imperative to modernize existing transport infrastructure by implementing railway electrification and constructing secondary main tracks25.
25 Vinokurov E., Ahunbaev A., Usmanov N., Zaboev A. 2022. International North-South Transport Corridor: Investments and Soft Infrastructure. Reports and Working Papers 222/2, Eurasian Development Bank. Almaty, Moscow. P. 32-33.
The third route is the Trans-Caspian, connecting the Russian Caspian ports of Olya (Astrakhan region) and Makhachkala (Republic of Dagestan) with the Iranian ports of Anzali, Nowshahr and Amirabad. This route may be particularly useful for transporting metals, timber, mineral fertilizers, grain, and containerized cargo, and it opens opportunities for transporting goods by river-sea vessels26. However, the development of a transit route through the Caspian faces several obstacles. Firstly, the double transhipment in the ports of Iran and Russia significantly affects the duration of shipments. Secondly, as the river navigation can only be used during the warm seasons, there is a need to change logistics twice a year, which limits the route's usability. Thirdly, the infrastructure of the Caspian ports is underdeveloped, and it is necessary to modernize the railway approaches to the ports and construct multifunctional port logistics complexes (e.g., in the economic zone of the Olya port in the Astrakhan region)27. Finally, some experts believe it would be promising to utilize the "river-sea" routes with entry into the Volga River for transporting bulk cargo28, but this would require the construction of universal combined river-sea navigation bulk carriers or container ships of the Volga-Don Max class, which would still be vulnerable to weather conditions.
The challenges related to the utilization of this route became apparent in early 2023, as the Russian southern ports struggled to handle the increasing cargo flow. This was due to various factors, such as the insufficient number of berths, terminals, and cranes in Astrakhan, the limited availability of ships on Iran-Russia lines, and congestion in the shallow Volga-Don Canal29.
The geoeconomic and political motives behind the INSTC project
Despite the existing challenges facing various infrastructure projects, RZD data shows that 8.8 million tons of cargo were transported via the North-South transport corridor in 2022. Of these, 7.8 million tons were delivered along the Western branch through the Samur border point, representing a 50% increase from the previous year. The Trans-Caspian route and the Eastern branch saw 0.5 million tons of freight traffic
each30.
The new momentum gained by the INSTC in 2022 can be explained by two main factors. The first and foremost is the disruption in traditional shipping lines via the Suez Canal following the start of the Russia-Ukraine military conflict in February 2022. In
26 Ibid. P. 16.
27 Ibid. P. 6.
28 Skorlygina N. 2022. Gruzy tyanut po meridianu. Kommersant. URL: https://www.kommersant.ru/doc/5633446 (accessed 20.04.2023).
29 Potaeva K. and Litova A. 2023. Koridor Sever-Yug ne spravlyaetsya s vozrosshim gruzopotokom. Vedomosti. 28 March. URL: https://www.vedomosti.ru/business/articles/2023/03/28/968353-koridor-sever-yug-ne-spravlyaetsya-s-vozrosshim-gruzopotokom (accessed 20.04.2023).
30 Volkov S. 2023. Koridor Sever - Yug. Kak rabotayut skidki i pogranperekhody. Gudok. 2 April. URL: https://www.gudok. ru/content/freighttrans/1631266/ (accessed 20.04.2023).
addition to the official restrictions adopted at a state level, many private companies from Western countries suspended their services and operations in Russia. Container shipping giants such as Denmark's Maersk, Switzerland's Mediterranean Shipping Company (MSC), France's CMA CGM Group, Germany's Hapag-Lloyd, Taiwanese Yang Ming, and Japanese Ocean Network Express halted cargo bookings and supplies to/from Russia, with the exception of some essential goods31.
This exodus of major players in the field disrupted export/import operations with Russia, causing difficulties for businesses in both Russia and India. Notably, Russia's Minister for Transport Vitaly Savelyev acknowledged that "sanctions spoiled all the logistics [in Russia] and we are forced to search for new logistical corridors."32
Interestingly, even nine months into the conflict in Ukraine, some Indian suppliers continued to rely on Western shipping lines, presumably due to better pricing rather than mistrust of Chinese competitors. As expected, goods shipped to Russia with these Western companies faced stopovers in European ports, leading to significant delays in resolving the issue33.
The instability of maritime supply chains increased the necessity of developing a land corridor as an alternative to traditional shipping lines via the Suez Canal. As the Russian First Deputy Prime Minister pointed out, the "unipolarity" of Suez Canal created risks for the world economy, while the INSTC, which provides Russia with access to Persian Gulf, Africa, India, and China, may rival its dominance in the future34.
The second factor behind the INSTC's increased momentum stems from Moscow's attempt to initiate a "Pivot to the East 2.0." After facing unprecedented international isolation from the West, Moscow sought to demonstrate that it had viable options for external trade. Russian businesses rushed to discover Asian markets, seeking ways to create new supply chains to Africa, the Persian Gulf, South Asia, and Southeast Asia. The need to bypass Europe has spurred incentives to expedite the realization of the INSTC.
The feasibility and attractiveness of the land corridor still appear to be inferior to its primary maritime competitor. According to the EDB, the average cargo fee on the India-Iran-Europe route was estimated at $2600-$3500 per TEU in 2021, while sea shipping via the Suez Canal cost $1000-$1200 (Vinokurov, Ahunbaev, Zaboev 2022: 162). The high cost of rail delivery across Iran, which can reach up to $800-$900 per TEU when crossing the country from the north to the southern ports of Bandar Abbas and Chabahar, explains the majority of this disproportion35.
31 Saul J., Jacobsen S. and Gronholt-pedersen J. 2022. World's largest container lines suspend shipping to Russia. Reuters. 1 March. URL: https://www.reuters.com/business/worlds-biggest-container-lines-suspend-shipping-russia-2022-03-01/ (accessed 20.04.2023).
32 Pashkova L. 2022. Glava Mintransa zayavil, chto sanktsii «prakticheski polomali» logistiku. RBC. 21 May. URL: https:// www.rbc.ru/politics/21/05/2022/628909be9a794737cecf7e3f (accessed 20.04.2023).
33 Author's expert interview with a Russian entrepreneur. Moscow: November 2022.
34 Dzyadko T., Anisimova N. 2022. Belousov nazval koridor «Sever — Yug» konkurentom Suetskomu kanalu. RBC. 28 October. URL: https://www.rbc.ru/politics/28/10/2022/635bdf549a79478c84141571 (accessed 20.04.2023).
35 Skorlygina N. 2022. Gruzy tyanut po meridianu. Kommersant. URL: https://www.kommersant.ru/doc/5633446 (accessed 20.04.2023).
Furthermore, the disruptions to supplies through Europe in 2022 further increased the cost of INSTC logistics, rendering it unfeasible for many businesses. At the beginning of 2023, the freight rates of the land corridors had decreased by almost half as compared to July 2022, while the cost of transportation through the Trans-Caspian route had doubled due to seasonal factors and low throughput capability36 (see Table 3).
Table 3. The estimated freight rates, delivery times and goods transported via different routes of the INSTC (as of March 2023).
The Route Delivery Time Freight Rates37 Type of Goods
Western 40 days $6500 (TEU) Fertilizers, food products
Trans-Caspian 45-60 days $6000-7000 (FEU) Grain, metal, wood, equipment
Eastern 37-45 days $7000 (TEU) Construction materials, food products, timber
Data source: Compiled by the author from different sources.
In 2022, Indo-Russian trade witnessed an unprecedented rise, surpassing the target of $30 billion and setting a new goal of reaching $50 billion. This surge was primarily due to increased imports by India, especially in terms of hydrocarbons, as Russia emerged as a major supplier, accounting for over 25% of Indian oil imports in 202238.
While the increase in bilateral trade is a positive signal, it has provided little evidence so far that businesses from both countries need the land corridor for their export/ import operations. The structure of Russia-India trade is dominated by the commodities which are unlikely to be shipped via INSTC routes for the reasons of economic feasibility, safety, and technological limitations. These include crude, petroleum oils, coal, and diamonds, which constitute 85% of India's imports from Russia (see Table 4). The remaining 15% of trade, which accounts for approximately $6 billion, consists of goods that can theoretically be shipped through INSTC.
The issue is that India's exports to Russia have not shown any increase and continue to fluctuate around $3 billion, indicating a lack of interest in the Russian market from Indian companies. Additionally, Indian business representatives have highlighted that current freight rates are too high for the shipment of goods to Russia. According to them, rates should not exceed $3000 per TEU for the INSTC routes to become a viable option39.
36 Potaeva K., Litova A. 2023. Koridor Sever-Yug ne spravlyaetsya s vozrosshim gruzopotokom. Vedomosti. 28 March. URL: https://www.vedomosti.ru/business/articles/2023/03/28/968353-koridor-sever-yug-ne-spravlyaetsya-s-vozrosshim-gruz-opotokom (accessed 20.04.2023).
37 TEU - twenty-foot equivalent unit; FEU - forty-foot equivalent unit.
38 Russia's share in Indian oil imports surpasses 25%. 2023. TASS. 13 February. URL: https://tass.com/economy/1575701 (accessed 20.04.2023).
39 Author's expert interview with an Indian entrepreneur. Mumbai, March 2023. 228 MGIMO REVIEW OF INTERNATIONAL RELATIONS • 16(2) • 2023
Table 4. The structure of India's exports to and imports from Russia (in USD billion).
Commodity Export Commodity Import
FY2021-2022 FY2022-2023 (Apr-Feb) FY2021-2022 FY2022-2023 (Apr-Feb)
Pharmaceutical products 0,4 0,4 Crude and petroleum oils 2,5 27,5
Organic chemicals 0,2 0,3 Coal 1,6 4,3
Machinery 0,3 0,3 Other petroleum oils 1,1 2,7
Crustaceans 0,1 0,1 Fertilisers 0,4 2,2
Inorganic chemicals 0,03 0,1 Diamonds 0,8 1,1
Iron and steel 0,1 0,1 Sunflower seed 0,5 0,9
Miscellaneous chemical products 0,1 0,1 Project goods 0,5 0,6
Data source: Department of Commerce (2023) Export import data bank. Ministry of Commerce and Industry, Government of India. URL: https://tradestat.commerce.gov.in/eidb/de-fault.asp (accessed 20 April 2023).
INSTC and other connectivity projects in Eurasia
The INSTC also has the potential to enhance overall transport connectivity from Europe and West Asia to China. According to Purushothaman and Unnikrishnan (2019: 80), the financial feasibility of INSTC could increase with the participation of Southeast Asian countries. Vinokurov et al. (2022: 162) estimate that interlinking INSTC with Eurasian east-west corridors could increase container freight traffic by 2.34.4 million tons.
Additionally, the TRACECA corridor is already linked to INSTC. Despite the Western sanctions and strained relations between the EU and Russia, the supplies from Europe to Russia via Turkey and Azerbaijan remain uninterrupted. Despite higher costs and longer distances, this route, which includes railways and highways, is operational and capable of facilitating exports and imports40.
The development of the INSTC should also be examined in the context of the Belt and Road Initiative (BRI) and other China-led projects. The BRI has six economic corridors: the Bangladesh-China-India-Myanmar (BCIM), China-Central Asia-West
40 Vinokurov E., Ahunbaev A., Usmanov N., Zaboev A. 2022. International North-South Transport Corridor: Investments and Soft Infrastructure. Reports and Working Papers22/2. Eurasian Development Bank. Almaty, Moscow. P. 14.
Asia (CCAWA), China-Indochina Peninsular (ICP), China-Mongolia-Russia (CMR), China-Pakistan Economic Corridor (CPEC), the Maritime Silk Route (MSR), and the New Eurasian Land Bridge (NELB) (Kunavut, Okuda, Lee 2018; Sharma 2019). The Eastern branch of INSTC overlaps with the China-Kazakhstan-Turkmenistan-Iran corridor launched in 2018, while the CCAWA may benefit from the completion of the Astara-Rasht section (Grajewski 2022: 179). The latter route, as well as the Trans-Caspian International Transport Route (TITR or the Middle Corridor), have gained traction in the wake of the ongoing crisis in Ukraine as both provide an alternative to the Sino-European land route, which previously passed through Kazakhstan, Russia, Belarus, and Poland (as part of NELB).
The growing utilisation of and investments in these routes will benefit Turkey41, Iran and the countries of Caspian region, which are emerging as important transport hubs. Establishing connections between these corridors and INSTC is feasible and may benefit not only transit states, but also the origin/destination countries of the routes such as Russia, India, and China.
There is also widespread discussion about the possibility of including Chabahar port in INSTC's and Eurasian transport network. Chabahar has two ports: Shahid Kalantari and Shahid Behesti. The former is an old port with limited waterfront and a draft of 7-8 meters suitable only for feeder vessels. The latter is a deep-draft port (16 meters draft) developed in four phases42. The first phase is completed, and the port's capacity is around 8 million tons per year. The port has been operational in the recent years for the cargo transhipment, beyond the consignments of wheat to Afghanistan. However, the total cargo traffic of the Shahid Behesti port in 2022 is estimated at 2.2 million tons per year43. The US sanctions against Iran have hindered the port's development, particularly the procurement of the necessary equipment.
Russia and other member states have supported India's proposal for connecting Chabahar with other nodal points of the INSTC44. This, however, created confusion among scholars, with some of them viewing the port developed by the Indian state entity as part of the North-South corridor's agreement (Ghiasy 2021; Mukhia, Zou 2022).
In reality, Chabahar has not been formally integrated into the corridor's framework. Furthermore, it appears that New Delhi is more interested in utilizing the project to expand its reach to Central Asia rather than Russia. The progress made in developing the Chabahar-Zahedan rail link is a positive sign and has the potential to
41 Turkish Ministry of Foreign Affairs has promoted the synergy between "the Middle Corridor" and the BRI and has highlighted the advantages of their initiative over the Trans-Siberian railway as a trade route between Europe and Asia. Tur-kiye's Multilateral Transportation Policy. URL: https://www.mfa.gov.tr/turkey_s-multilateral-transportation-policy.en.mfa (accessed 20.04.2023).
42 About Chabahar. 2021. IPGL. URL: https://www.ipgl.co.in/show_content.php?lang=1&level=1&ls_id=489&lid=65 (accessed 20.04.2023).
43 Author's expert interview with an Indian official. March 2023, Mumbai.
44 Partnership for Peace, Progress and Prosperity. India-Russia Joint Statement following the visit of the President of the Russian Federation. 2021. Kremlin. 6 December. URL: http://en.kremlin.ru/supplement/5745 (accessed 20.04.2023).
connect with Turkmenistan's railways and ultimately the INSTC's Eastern route. The railway has been seen in India mainly as a means of establishing functional connectivity with Afghanistan by bypassing Pakistan, from Zabol through the Zaranj-Delaram Highway and from Khaf to Herat (Mukhia, Zou 2022: 195).
Given the unstable security situation in Afghanistan, which hinders transport infrastructure development, it can be argued that connecting Chabahar with Turkmenistan is of greater importance to India's economic interests, as it would allow the port to link with the Eastern route of the INSTC at the Sarahs transit point. However, this would require coordinated efforts with Iran, which began construction of the Zahedan-Mashhad railroad in late December 2017 (Lunev, Belov, Binish 2023: 51), but progress has been limited thus far. The Zahedan-Zabol-Malik-Birjand railway (approximately 910 kilometers) remains incomplete, and its completion is critical not only for India's interests but could also provide Turkmenistan with access to high seas.
Conclusion
The wider repercussions of the Ukraine conflict have reshuffled the logistical routes between Russia and India, increasing the relevance of new alternative ways for cargo deliveries between the two countries. Despite the emergence of different obstacles for Russian exports of commodities since February-March 2022, the shipments of oil, coal, and fertilizers to India, which constituted the main part of bilateral trade increase in FY2022-2023, were still made through maritime corridors.
The INSTC, which is the most promising land corridor between Russia and India, is operational, but cargo supplies via this route are still irregular, quite expensive, and time-consuming. The completion of corridor's segments requires enhanced coordination between the participating parties. It would obviously take some time to harmonise the tariff policies, complete the critical infrastructure projects and eliminate other barriers that impede faster cargo flows.
It seems that, having faced unprecedented isolation from the West, Russia is keen to accelerate INSTC's completion to embrace new export destinations in Asia and Africa. This could benefit India by facilitating its trade with Central Asian republics, the Caucasus, and even Eastern Europe through improved land logistics. However, as these are not currently top markets for Indian businesses, the development of the corridor may not be a priority for New Delhi. The development of Shahid Behesti port in Chabahar and its connection with the INSTC network holds promise for boosting India's trade across Eurasia on condition that India's economic presence in the region increases and the logistics becomes cost-effective. The realization of this potential depends on several factors, as each of the corridor's routes faces various challenges.
It is also important to note that the enhanced connectivity will not automatically provide for the rise in trade cooperation between Russia and India. Although the renovation of transport infrastructure may become a prerequisite for stronger economic and business ties, their expansion will depend on the resolution of structural issues.
Given the increasing interest of Russian businesses in the Indian market and the efforts of both governments to eliminate transaction bottlenecks and tariff and non-tariff barriers, bilateral trade may indeed begin to rise. A more efficient and affordable logistics system, particularly functioning maritime routes from the Russian Far East to Indian ports and the North-South corridor, could facilitate this process. However, connectivity cannot be viewed in isolation from other factors, such as sanctions, the feasibility and tariffs of cargo supplies, and the list of products to exchange. The ultimate outcome will likely depend on the concerted efforts of both sides in all of these areas. Connectivity is only one piece of the puzzle that Moscow and New Delhi must put together to take their trade cooperation to a new level.
About the author:
Aleksei I. Zakharov - Cand.Sci. (History), Research Fellow at the International Laboratory on World Order Studies and the New Regionalism, Faculty of World Economy and International Affairs, National Research University Higher School of Economics. 20 Myasnitskaya Ulitsa, Moscow, Russia, 101000. E-mail: [email protected].
Conflict of interest:
The author declares the absence of conflict of interests.
УДК 339.56(470+571+540)+656 Поступила в редакцию: 20.12.2022 Принята к печати: 17.04.2023
Международный транспортный
коридор «Север - Юг»:
вызовы и возможности для развития
транспортной связности
между Россией и Индией
А.И. Захаров
001 10.24833/2071-8160-2023-2-89-216-234
Национальный исследовательский университет «Высшая школа экономики»
Транспортная связность - один из традиционных вызовов для развития торгового сотрудничества между Россией и Индией. Отсутствие общей границы, нестабильная обстановка в области безопасности в Афганистане и территориальные споры между Индией
и Пакистаном не позволяют создать удобный транспортный коридор между странами, а также и серьёзно затрудняют реализацию других проектов в сфере энергетики. Сегодня существует три торговых пути между Индией и Россией: 1) судоходный маршрут через Суэцкий канал; 2) периодические поставки по восточному морскому коридору Влади-восток-Ченнаи; 3) использование маршрутов международного транспортного коридора «Север-Юг». Учитывая санкционные риски при использовании морских перевозок через Европу, последний маршрут сегодня приобретает особое значение для выхода российских компаний на рынки Индии, Персидского залива и Восточной Африки. В свою очередь, для Индии развитие МТК «Север-Юг» открывает возможности увеличения торгового взаимодействия со странами Закавказья, Центральной Азии и Восточной Европы. Это обусловливает актуальность многоаспектного изучения данного транспортного коридора: сложностей в его реализации, геоэкономических факторов, оказывающих влияние на подходы стран-участников, а также его совместимости с другими региональными проектами, такими как транспортный маршрут Европа-Кавказ-Азия (ТРАСЕКА), Инициатива «Пояса и Пути» и порт Чабахар.
Вместе с тем, совершенствование транспортной инфраструктуры не разрешит всех структурных проблем в торговых отношениях России и Индии. Транспортная связность между двумя странами будет способствовать активизации торгово-экономических контактов, только если она будет развиваться одновременно с решением других задач, таких как создание надежных механизмов финансовых расчётов и устранение тарифных и нетарифных барьеров.
Ключевые слова: МТК «Север-Юг», Россия, Индия, торговое сотрудничество, логистика, транспортная связность, Евразия.
Об авторе:
Алексей Игоревич Захаров - кандидат исторических наук, научный сотрудник международной лаборатории исследований мирового порядка и нового регионализма факультета мировой экономики и мировой политики, Национальный исследовательский университет «Высшая школа экономики». 101000, Россия, Москва, улица Мясницкая, 20. E-mail: [email protected].
Конфликт интересов:
Автор заявляет об отсутствии конфликта интересов. References:
Ghiasy R. 2021. The Belt and Road Initiative in South Asia. Schneider F (ed) Global Perspectives on China's Belt and Road Initiative: Asserting Agency through Regional Connectivity. Amsterdam: Amsterdam University Press. P. 265-290.
Grajewski N. 2022. An Illusory Entente: The Myth of a Russia-China-Iran "Axis". Asian Affairs. 53(1). P. 164-183.
Joshi N. 2017. India's Engagement with Central Asian Republics: An Appraisal. Indian Foreign Affairs Journal. 12(2), April-June. P. 133-146.
Khan S. 2022. Eurasian Connectivity: Interests of Regional and Great Powers. Vestnik RUDN. International Relations. 22(1). P. 126-141.
Kunavut K., Okuda A., Lee D. 2018. Belt and Road Initiative: Enhancing ICT Connectivity in China-Central Asia Corridor. Journal of Infrastructure, Police and Development 2(1). P. 1-26.
Lunev S., Belov V., Binish B. 2023. Iran and India: Challenges of Strategic Partnership. IUP Journal of International Relations. 17(1), January. P. 42-61.
Mukhia A., Zhou X. 2022. Mapping India's Reconnection to Eurasia. Russia in Global Affairs 20(2). April/June. P. 184-204.
Purushothaman U., Unnikrishnan N. 2019. A Tale of Many Roads: India's Approach to Connectivity Projects in Eurasia. India Quarterly: A Journal of International Affairs. 75(1). P. 6986.
Roy M.S. 2011. Strategic Importance of Turkmenistan for India. Strategic Analysis. 35 (4). P. 661-682.
Roy M.S. 2012. Iran: India's Gateway to Central Asia. Strategic Analysis. 36 (6). P. 957-975.
Sharma M. 2019. India's Approach to China's Belt and Road Initiative - Opportunities and Concerns. The Chinese Journal of Global Governance. No. 5. P. 136-152.
Tourangbam M. 2018. India-Iran Relations amidst Strategic Constraints. Indian Foreign Affairs Journal 13(3). July-September. P. 183-194.
Vinokurov E.Y., Ahunbaev A. and Zaboev A.I. 2022. International North-South Transport Corridor: Boosting Russia's "pivot to the South" and Trans-Eurasian connectivity. Russian Journal of Economics. №8. P. 159-173.
Volodin A., Volodina M. 2019. North-South International Transport Corridor project as a factor for possible strengthening of Russia's Foreign Economic Relations. Outlines of Global Transformations: Politics, Economics, Law. 12(6). P. 29-42. (In Russian).
Список литературы на русском языке:
Володин А.Г., Володина М.А. 2019. Проект международного транспортного коридора «Север - Юг» как фактор возможного укрепления внешнеэкономических связей России. Контуры глобальных трансформаций: политика, экономика, право. 12(6). С. 29-42. БОТ: 10.23932/2542-0240-2019-12-6-2
