Russia-India Trade to Boom via Iran Using INSTC Route

International North–South Transport Corridor (INSTC) Corridor is set to revolutionize trade between India, Russia, and other key regions through a multi-modal network spanning 7,200 kilometers (4,500 miles). This expansive corridor, involving ship, rail, and road routes, is designed to streamline freight movement across India, Iran, Azerbaijan, Russia, Central Asia, and Europe, enhancing connectivity and reducing transportation costs significantly.

Objectives: The INSTC represents a transformative development in international trade logistics, offering a promising avenue for enhanced economic cooperation and growth across the involved regions. By reducing transit times and costs, the corridor is set to significantly boost trade volumes, fostering closer economic ties and mutual prosperity.

Enhancing Connectivity and Reducing Costs: Initiated to provide a more efficient alternative to traditional shipping routes, the INSTC is poised to cut both time and expenses for transporting goods. Studies indicate that the corridor can reduce transport costs by “$2,500 per 15 tons of cargo.” The route primarily navigates through India, Iran, Azerbaijan, and Russia, incorporating strategic ports and railways that form an integrated network aimed at fostering economic ties and trade efficiency.

Key Infrastructure and Developments:

a) Chabahar and Bandar Abbas Ports: India and Iran’s longstanding agreement, established in 2002, focuses on developing Chabahar into a full deep-sea port. Meanwhile, Bandar Abbas, which manages 85% of Iran’s seaborne trade, faces congestion issues that Chabahar’s development aims to alleviate.
b) Kazakhstan–Turkmenistan–Iran Railway Link: Operational since 2014, this 677-km (421 miles) railway connects Uzen in Kazakhstan to Gorgan in Iran, through Turkmenistan. It integrates into Iran’s national rail network, linking to Persian Gulf ports, thereby extending the reach of the INSTC.

Strategic Trade Moves

a) Russia’s Coal Export via INSTC: Russia is set to export coal to India using the INSTC, with cargo transiting through Iran’s Bandar Abbas port. This initiative was highlighted during the 27th Saint Petersburg International Economic Forum. By leveraging the INSTC, Russia aims to enhance the efficiency of its coal exports to India, reducing transit times from 45 days to just 15 days.

b) Maritime Collaboration: Iran and Russia are also working together in the maritime sector to utilize the Caspian Sea, further shortening the transit route between the two nations. The Islamic Republic of Iran Shipping Lines (IRISL) has allocated 300 containers for transporting goods between Russia and India, with plans to increase this number based on demand.

Future Projections and Economic Impact

a) Increased Freight Volume: In 2023, Russia transported 600,000 tons of freight through Iran. This volume is projected to surge to 4 million tons per year by 2024, underscoring the INSTC’s pivotal role in regional trade.

b) Economic Benefits for Iran: With the anticipated rise in transit traffic, Iran is poised to earn several billion dollars in transit fees, capitalizing on its strategic geographic position and extensive railway network.

c) Strengthening Bilateral Trade: Through these collaborative efforts, Russia aims to bolster its trade links with India, utilizing Iran’s strategic location to facilitate the swift and cost-effective movement of goods.
The results showed transport costs were reduced by “$2,500 per 15 tons of cargo”. Other routes under consideration include via Kazakhstan and Turkmenistan.

Russia to Export Coal to India through Iran

Russia plans to transit coal to India via the International North-South Transit Corridor (INSTC) passing through Iran, IRNA reported. According to the report, Russian coal will be shipped to India through Iran’s southern Bandar Abbas port, leveraging the INSTC’s extensive network. The corridor, which spans East, West, and Middle routes, is designed to enhance connectivity and reduce transportation time and costs.
Strategic Maritime Cooperation: In addition to utilizing land routes, Iran and Russia are cooperating in the maritime sector to use the Caspian Sea, further shortening the transit route from Russia to India. Last year, the Islamic Republic of Iran Shipping Lines (IRISL) assigned 300 containers for transporting goods between Russia and India. These containers are part of the first phase of a program aimed at facilitating the transit of Russian commodities to India via the Caspian Sea. “According to the plans made by the Islamic Republic of Iran Shipping Lines, in the first phase, 300 containers have been considered for transporting cargos to Russia, and if the demand increases, the number of these containers will increase continuously,” an IRISL statement noted.

Boosting Trade Volume between Russia & India: Russia has announced plans to export 73.2 million tonnes of coal to India through Iranian ports. The IRISL has prepared 300 vessels to facilitate this trade, which is expected to reduce the transit time for Russian goods from 45 days to just 15 days. This initiative is projected to generate several billion dollars in transit fees for Iran. In 2023, Russia transported 600,000 tons of freight through Iran, a figure expected to rise to 4 million tons per year by 2024, according to Russia’s deputy minister of transport. This significant increase highlights the strategic importance of the INSTC for regional trade and cooperation.