The 2000 trilateral agreement between Russia, India, and Iran to develop the International North—South Transport Corridor (INSTC) is on the verge of materializing. With sanctions lifted, 2017 can be a breakthrough year for some vital Iranian components of the railroad.
The idea behind the INSTC is as intuitive as it is lucrative. Transport between Mumbai and Moscow now goes through the Suez Canal, which is both time consuming and costly. The fulfillment of the INSTC would reduce transportation time from over seven weeks to just four and would save USD2,500 per 15 tons of cargo. From Moscow, the whole European continent could be INSTC’s hinterland. With a planned annual transport volume of initially 6 million tons and ultimately up to 20 million tons, the stakes are high. Connecting remote regional cities in Iran, Azerbaijan, and Russia to each other and to trade powerhouses in the north and south, the incentives to solve the remaining weaknesses in the corridor are huge. Together with the other member states of the project, Russia and India have already made considerable progress, but Iran’s international isolation created a missing piece.
Iran is at the heart of the corridor, with the southern port of Bandar Abbas envisioned to be the hub between Central Asia and the Indian Subcontinent. Constructing new and electrifying old railways to connect Bandar Abbas all the way to Azerbaijan is critical to the viability of INSTC. It is, therefore, not surprising that the shortcomings of the passage through Iran have lately been subject of bilateral talks between Iran and its project partners. Due to Moscow’s tense relations with Europe and the embargo it imposed on food products from the EU, Russia is keener than ever to invest in new trade channels. The lifting of sanctions against Iran has now created the momentum on which Azerbaijan and Russia want to capitalize. Iran has promised to dedicate 1% of its annual oil revenues to the construction, double-tracking, and electrifying of its railroad infrastructure over the next five years, but together with its INSTC partners, it recognizes that progress at some crucial parts of the corridor has been slow due to insufficient funds. The missing links are two segments that have to connect the city of Qazvin, northeast of Tehran, to the Caspian city of Rasht, and Astara, on the border with Azerbaijan. This 369km railroad involves the construction of 22 tunnels and 15 bridges. The Qazvin-Rasht section is expected to be completed by June this year, while the Rasht-Astara segment will see construction commence this year. Azerbaijan has shown its commitment to a speedy completion of the last missing component of INSTC. It has invested in the construction of the railway station and freight terminal of Astara and granted a USD500 million loan to Iran for the construction of the Rasht-Astara section, which is projected to cost USD1.1 billion. Under the agreement, Iran is obliged to purchase the lands where the railroad will run. Russia as well is seeking involvement and has agreed to work out and submit proposals for the financing of the critical last railway section for INSTC to become operative. The issue was also addressed during President Rouhani’s official visit to Moscow in March this year. It took 17 years for the vision of three countries to materialize into a corridor that will dramatically change transportation flows. There can be no mistake about the economic significance of the corridor, and the eyes of INSTC member states will be set on Iran in the coming year. Completing the Qazvin-Rasht-Astara sections will provide its partners with tremendous trade advantages, but it is something else Rouhani’s administration is after. INSTC is the key to realizing Iran’s ambitions to become a regional transport hub, and it is about to unfold.