| By Nicola P. Contessi

The International North-South Transport Corridor (INSTC), examined in the first part of this series, has developed slowly but steadily during its twenty years of existence. Although mired by political and financial difficulties, including new sanctions on Iran (and Russia) placed by the Trump administration, the corridor will retain its potential for the actors involved. Today, the INSTC is complemented by two other initiatives: the Chabahar International Transport and Transit Corridor; and the proposed Russia-Pakistan (Ru-Pak) Corridor. The two projects are discussed below, followed by a brief evaluation of the potential impact of the full roll-out of these emerging North-South trade routes.

The International Transport and Transit Corridor

The International Transport and Transit Corridor is more commonly referred to as the Chabahar Corridor and derives its name from the Iranian port that forms its gateway. India, Iran, and Afghanistan are the three signatories to the May 2016 agreement that gave shape to this route. The document also set up a trilateral coordination council, which held its first meeting in Tehran on October 23, 2018. The sides subsequently decided to speed up work toward a protocol to harmonize transit, roads, customs, and consular matters, and agreed to allow cargo movement at Chabahar using the TIR Convention, to which India had recently acceded.

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Delhi has invested considerably in the port, which provides the main entrance for a route allowing it to reach Afghanistan and continental Asia bypassing Pakistan. From Iran’s point of view, Chabahar’s development into a fully equipped deep-sea port can help decongest Bandar Abbas, which currently handles 85 percent of the country’s seaborne trade. The port offers advantages like duty exemption on raw materials and machinery imports, as well as investment guarantees backed by the Iranian government and Iranian insurance companies. In the long term, the sides have plans to join Chabahar with the INSTC, which would turn it into a key interconnector between Afghanistan, Central Asia, South Asia, and Southeast Asia, as well as a lynchpin for Europe-Asia trade.

Delhi has already committed $500 million for the development of Chabahar. In line with collateral arrangements attached to the 2016 agreement, $85.2 million has already been spent. The sum was paid for works to create a 16.5-meter-deep basin at the Shahid Beheshti terminal for the mooring of high-tonnage ships. Inaugurated in December 2017, the terminal is presently operated by India Ports Global Limited (IPGL) on a 10-year lease at an annual cost of $22.95 million for two berths.

Chabahar received the first Afghanistan-bound shipment of wheat from India on October 29, 2017, and has since sidelined Karachi as a hub for Afghanistan’s trade, capturing nearly 80 percent of the country’s traffic, which is expected to hit $5 billion at full pace. The first shipment of goods from Afghanistan to Mumbai transited in March 2019, while India’s first rice cargo to Afghanistan arrived in May 2019. Overall cargo volumes via Chabahar for 2018 were 1.5 million tons for oil and non-oil bulk and 47,152 TEU for containers. Upon completion, annual traffic is expected to reach 82 million tons.

In addition, Delhi has invested in rail and road extensions from the port itself. In the latter case, by financing the 217-kilometer Zaranj-Delaram highway, previously the missing link between the Chabahar port and the 2100-kilometer Afghanistan ring road, which runs through 16 of the country’s 34 provinces. As for railways, Delhi plans to invest $1.6 billion to realize a line covering the 610 kilometers between Chabahar in the south and Zahedan in the north, part of the 900-kilometer Hajigak-Chabahar railway, which is currently underway, amid many difficulties.

Taking note of these developments, Uzbekistan’s new leadership has shown interest in the Chabahar Corridor, which they see as the shortest route to the oceans. During an October 2018 visit to India, Uzbek President Shavkat Mirziyoyev invited India to assist in developing a projected 650 km railway between the Afghan cities of Herat and Mazaar-i-Sharif (a mere 80 kilometers from the Afghan-Uzbek border), in which Tashkent has already invested $500 million. The same year, Tashkent and Kabul held their first trade dialogue, mulling a free trade regime between the two countries.

In response, Delhi may now become involved in the prolongation of the rail link into Central Asia, which would give the Chabahar Corridor more breadth as a further India-Europe route via Iran-Afghanistan-Uzbekistan-Central Asia and Russia. For the time being, the Uzbek Foreign Minister was invited to speak at the 2019 Raisina Dialogue in New Delhi, and in January 2020 the two countries decided to undertake a feasibility study to explore a Preferential Trade Agreement.

With so much at stake, India had to engage in extensive negotiations with the United States to have Chabahar Port exempted from new sanctions under the Iran Freedom and Counter-Proliferation Act, which threatened to jeopardize the entire project. In November 2018, the U.S. State Department agreed to certain exemptions for “the construction of an associated railway and for the shipment of non-sanctionable goods through the Port for Afghanistan’s use, as well as Afghanistan’s continued imports of Iranian petroleum products.” Indeed, Chabahar is also in America’s interest, as it can help Afghanistan lessen its dependence on foreign aid and the opium trade. Some 130 Afghan companies have already settled in the Chabahar Free Trade Industrial Zone, and Kabul now has plans for a dry port in Zaranj assorted with customs, banking, cold storage, and logistics services, which would be connected with the new Indian-built highway (see above). Despite the US waiver, the development and use of Chabahar has languished. India’s July 2019 foreign aid data shows that Delhi has not spent any of the funds allocated for Chabahar since 2017. Moreover, IPGL has struggled to find a strategic partner to operate its terminal, and in June 2019 had to scrap the third tender to that effect. The agreement with the Iranian government stipulates that IPGL would hire a private Indian firm as a partner to operate the terminal. Notwithstanding, during a December 2019 meeting held shortly after India’s Foreign Minister S. Jaishankar’s visit to Washington, Delhi and Tehran jointly pledged to speed up cooperation on Chabahar. His Iranian counterpart, J Zarif reiterated a similar message in January 2020, assuring that the project would go forward.

The Ru-Pak Corridor

More recent developments point to the embryonic development of another North-South corridor, destined, according to its initiators, to link Russia and Pakistan via Kazakhstan, Uzbekistan, and Afghanistan. Like Chabahar, the corridor would complement, and possibly expand, INSTC with a further Europe-South Asia corridor. Thus, such a route could have considerable potential for the region and for Afghanistan in particular. Moreover, for Pakistan it could complement the China-Pakistan Economic Corridor, mitigating excessive dependency on Beijing.

In December 2018, the heads of the railway administrations of Uzbekistan, Russia, Kazakhstan, Afghanistan, and Pakistan met in Tashkent to discuss the construction of what would become the key plank of the new route, the Mazar-i-Sharif-Kabul-Peshawar railway line. Estimates suggest that Afghanistan’s trade could grow almost 50 percent thanks to the railway and generate annual transit revenues of $400 to $500 million for Kabul. Moreover, the project is expected to employ 30,000 Afghans.

The new line, valued at around $3 billion, would stretch for about 2000 kilometers and is expected to carry about 5 million tons of cargo at the beginning, reaching as much as 15 million tons at full implementation. The meeting resulted in a protocol establishing a joint working group and a financial consortium responsible for raising the funds required to build the new line. The meeting further discussed the construction of high-voltage power lines, Surkhan-Puli-Khumri-Doshi-Surabai-Jalalabad -Peshawar, which, running along the proposed railway, would be instrumental to its future electrification.

Parallel to these developments, Central Asian countries have also been taking a leadership role, anticipating positive advantages from further transit diversification. Uzbekistan is actively promoting the Mazar-i-Sharif—Herat railway corridor, which they proposed to the Afghan delegation during the 2018 meeting in Tashkent. The Uzbek-led project would also play a role in extending the Chabahar corridor. In addition, Kazakhstan proposed that all Central and South Asian countries (including Afghanistan, India, and Pakistan) create a Council for the Development of Transport and Transit Corridors of Central and South Asia—an interstate advisory and coordinating body to coordinate mutual connectivity. However, following the opening of dialogues in 2018, little progress has been recorded on the Russia-Pakistan corridor.

Conclusion

The North-South corridors have been moving forward thanks to a series of intersecting bilateral and triangular meetings and summits involving India and Russia; India, Russia, and Iran; Azerbaijan, Iran, and Russia; India, Iran, and Afghanistan; and Russia and Pakistan. Other than providing political backing and teasing out financing issues, such meetings have dealt with issues like the standardization of tolls and railway tariffs, transshipment, containerization, and customs.

This diplomatic flurry of activity highlights the multilateral and multi-stakeholder footing which differentiates the North-South initiatives from the more patronage-based approach taken by China for the BRI. This is both their strength and weakness, as it makes the projects more vulnerable to external forces. Second, it gives new meaning to the India-Russia bilateral relationship, which in 2010 grew into a Special and Privileged Strategic Partnership and is at the heart of the INSTC. Both are interested in using the unfolding connectivity to expand mutual trade and hedge China’s and America’s influence in Eurasia and in the Pacific respectively. However, critics consider India and Russia’s political backing to be insufficient. Third, it underscores Iran’s significance as a key Eurasian gateway. Not only does its geographic location place the country at the heart of the INSTC routes, but it is also the crucial landing for the Chabahar corridor and could potentially serve as an alternative spur for the Ru-Pak route.

Nonetheless, clouds hang over the full development of the North-South corridors. Political difficulties surrounding Iran, stemming both from the harder U.S. stance and recent domestic volatility, may curtail that country’s ability to participate and are curbing partner countries resolve to cooperate with Tehran, as in the case of India’s plans for Chabahar. Moreover, absent a single large financial backer, the completion of key infrastructure assets is extremely slow. The lack of homogenous rules, tariffs, and other technical specifications add further hurdles—although participating countries have been taking steps to address them.

The geopolitical and geo-economic relevance of the North-South corridors is compounded by the fact that they intersect with the expanding web of East-West routes and link the Eurasian heartland’s core with the Indo-Pacific rimlands. The routes will loop-in areas that had been sidelined by Suez and maritime-centric shipping routes. In turn, those once peripheral countries could experience progress thanks to the advantages of participation in the global structure of logistics and production. Lastly, the corridors can unlock untapped trade potential by catalyzing economic growth. Afghanistan, Azerbaijan, Russia, India, Iran, Kazakhstan, and Uzbekistan, as well as Southeast Asian countries, currently have relatively small trade turnovers. However, increasing economic linkages could spur greater trade volumes and attract investment.

The sum of these factors could then accelerate the transformation of Eurasia, laying down the conditions for the emergence of a comprehensive system of exchanges that eschews the maritime control which has shaped global geopolitics since the seventeenth century. On the other hand, the consolidation of North-South routes could strengthen India’s and Russia’s respective positions in Eurasia, enabling a more balanced future evolution of the continent and the international system.

Nicola P. Contessi, PhD is an international affairs specialist with expertise in global governance, foreign and security policy, and international transport, and a Research Associate of the York Centre for Asian Research.

This is the second article in a two-part series by Nicola P. Contessi on Eurasia's North-South Corridors. In his first article, Contessi argues that while the International North-South Transport Corridor (INSTC) has been plagued by financial and political difficulties, its economic impact could be transformative if ever fully realized. Read the full article here.