30.12.2016 Author: Dmitry Bokarev

North-South Transport Corridor: Russia is Expanding its Footprint in Asia

234213123Development of international transport corridors fosters trade and promotes political convergence of countries. Russia has long been seeking to reinforce its relations with the Middle Eastern, Central and Southeast Asian states. The routes connecting the richest Eurasian states run across the Russian Federation. Russia itself boasts a well-developed network of roads and railways. Being blessed with such a favorable geographic location, Russia can easily claim the role of a major international trade hub.

This is, in fact, a core objective of the North-South International Transport Corridor (ITC). The idea to build a route connecting the coast of the Indian Ocean to the Northern Europe, which would run across Russia and Iran, is not novel. A Freight Forwarding Agreement was signed by Russian, Indian and Iranian freight forwarding companies back in 1999. The North-South Transport Corridor project was inaugurated in 2000 and officially launched in 2002. The corridor comprises several branches. Two of them, connecting Russia and Iran, are overland (the Eastern branch runs through Azerbaijan, the Western—via Kazakhstan, Uzbekistan and Turkmenistan). Another, Trans-Caspian branch is running across the Caspian Sea. The backbone of the Russian section of the ITC is a railway route linking the Port of Astrakhan (on the Caspian Sea), Moscow, Saint-Petersburg and Buslovskay Railway Station (on the Russian-Finnish border), where the route connects to the railway and highway networks, sprawling the entire Europe.

It was anticipated that the ITC with its many benefits would transform into one of the most popular transport corridors in Eurasia. To compare to other routes connecting India to Europe, the North-South Transport Corridor is not only considerably shorter, but also runs overland materially reducing costs of transportation.

Despite all the corridor’s advantages, however, European countries for some reason have largely ignored it and continued delivering goods to India via the Mediterranean Sea (the route, which is twice as long). Encouraged by the Europe’s example, India has also opted for other routes, making Russia and Iran exclusive North-South ITC users.

Nevertheless, the route is still operating providing Russia with access not only to Iran but also to other countries of the region, including Azerbaijan, Armenia, Belarus, Kazakhstan, Oman, Syria, etc.

In August 2014, Iran, Oman, Qatar, Turkmenistan and Uzbekistan signed a Memorandum of Understanding covering the establishment of an international transport corridor connecting the Central Asia, the Persian Gulf and the Gulf of Oman. This new route has immediately become an integral part of the North-South Transport Corridor, and the two formed a single system.

ITC’s freight traffic is increasing. In 2015, it exceeded 25 mln tons. Though the North-South Transport Corridor failed to become the main route connecting the Indian Ocean to Europe at the beginning of the 2000s, it is still playing the role of a connector linking Russia and its Asian partners. Currently, Russia, Azerbaijan and Iran are undertaking to upgrade their railway infrastructures to meet the effective standards so that they can be integrated into the railway infrastructures of other countries. They are also reviewing their legislative framework to streamline customs procedures.

In recent years, due to the developments in the Asia-Pacific region and the Middle East, the North-South ITC has acquired a new meaning. Military conflicts and escalation of the terrorist threat in the countries of the Arab world have challenged the shipment of goods via the Suez Canal forcing many states to rethink their goods delivery schemes. At the same time, the lifting of international sanctions against Iran at the beginning of 2016, contributed to the growth of Iranian economy and further development of international trade. As a result, the North-South ITC’s freight traffic has also increased. India is not completely averse to the idea of shipping goods via the ITC either. Today, it is looking to diversify its delivery schemes due to the economic growth, increased demand for its goods in other countries and development of trading relations with Europe. Besides, a tense situation in the Asia-Pacific region paired with an increased maritime cooperation of India’s main competitors China and Pakistan may one day stimulate the “change of India’s heart.”

On August 8, 2016, Russian President Vladimir Putin held a meeting with Azerbaijani President Ilham Aliyev and Iranian President Hassan Rouhani. An upgraded North-South ITC project was among the main topics discussed by the participants. The three countries are still interested in the arrangement of a shipping route connecting the coast of the Indian Ocean to Scandinavia. To do that, they would need to hurdle customs and technical obstacles that crippled their plan at the beginning of the 2000s. An updated ITC—an integrated high-tech network, combining rail, road and sea routes— will connect Indian Mumbai, Iranian Bander-Abbas, Baku, Astrakhan, Moscow and St. Petersburg to Europe. It is envisaged that Russian, Azerbaijani and Iranian railroads will be integrated into a common network. When speaking about the project, Mr. Putin noted that the project would be conducive to the streamlined shipment of transit cargo from India, Iran and the Persian Gulf to Azerbaijan, Russia and further to the Northern and Western Europe.

In December 2016, Mr. Mehdi Sanai, Iranian Ambassador Extraordinary and Plenipotentiary of the Islamic Republic of Iran to Russia, made a statement in relation to the North-South ITC, where he stressed that the transport corridor between India and Russia had never been as close to its implementation as at the present time. He also underlined that in the current international and regional situation prompt finalization of the ITC had arisen as an urgent matter. All parties involved in the project are in agreement over its prompt completion. Mr. Sanai said that though Iran and Azerbaijan are making every effort to step up the ITC, they are short of investments and are in need of other assistance. The Iranian Ambassador expressed his gratitude to Indian and Azerbaijani colleagues as well as to the Russian Ministry of Transport for their inputs.

The North-South ITC promises abundant opportunities in the future. At the very least, it would foster a multi-fold increase of goods turnover between Russia and such wealthy countries as Iran and India. Looking at a larger picture, the ITC has all the chances to play the role of a factor unifying Russia, the Middle East and the Central Asia as a single economic bloc similar to the Eurasian Economic Union or the Transpacific Partnership. In fact, a common infrastructure is by far more instrumental in the reinforcement of ties between the countries of the region than their geographic proximity. China is currently implementing a similar infrastructure project, the “New Silk Road.” As for the North-South Transport Corridor, it has a great potential for Russia giving it an opportunity to expand its economic and political footprint in the entire Asian region.

Dmitry Bokarev, expert politologist, exclusively for the online magazine “New Eastern Outlook.”

 


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