In the Shadow of the Belt and Road

Eurasian Corridors on the North-South Axis

While most heads were turned to the East-West transport arteries spearheaded by China’s Belt and Road investments, activity along the lesser known North-South corridors has been slowly gaining momentum. Like their East-West cousins, the North-South routes consist of a bundle of land and sea multimodal corridors and connect South Asia to Northern Europe via the Persian Gulf and the Caspian region. Unlike the China-sponsored Belt and Road Initiative (BRI) projects, however, the development of the North-South corridors follows a more multilateral and multi-stakeholder approach.

However, advances have been hampered by the precarious situation surrounding Iran, which is the lynchpin for all of these initiatives. Longstanding delays in financing and construction there mean that the sea route through Suez between the countries involved still is three times cheaper than the land-based one through the country’s territory, despite being twice as long.

The fact remains that, in spite of their lower profile, the North-South corridors are potentially as transformational as the better-known and more lucrative East-West routes. For one thing, they allow transportation to bypass the Suez Canal, enabling considerable time and cost savings on cargoes. Furthermore, the North-South bundle complements the grid of trans-Eurasian corridors by adding a perpendicular direction connecting further points of interest. Intersecting with its East-West counterpart, the North-South routes bring greater cohesion and economic dynamism to the continent. By joining the four poles of Europe, China, India, and Russia plus the Eurasian Economic Union (EAEU), they can propel a new wave of global trade, in turn generating positive spillovers for neighboring countries. Demand for transportation can be expected to grow as a result of the activation of the free trade agreement between the EAEU and Iran at the end of October 2019, the EAEU-Singapore FTA concluded on October 1st, and the possibility of a future India-EAEU FTA whose negotiation is due to begin. This is why the emerging corridors are beginning to attract countries from the Caucasus to South, Southeast, and Central Asia, many of which are taking steps to ensure interconnection with some of the main transport initiatives along the North-South axis.

INSTCAshgabat AgreementChabaharRu-Pak
Start Year2000201120162018 (Proposal)
MembersIndia, Iran, Russia, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Belarus, Oman, SyriaKazakhstan, Uzbekistan, Turkmenistan, Iran, Pakistan, India, OmanAfghanistan, India, IranRussia, Pakistan
Main DriversIndia and Russia; Counterpart to BRILandlocked countries need for connectivityIndia’s geopolitical aspirations; Sideline Pakistan; Afghanistan regeneration; Regional countriesComplement to CPEC; Lifeline to Afghanistan
Recent DevelopmentsCompletion of Qazvin-Rasht (March 2019)India’s accession (2018)India and Iran recommitted; Uzbekistan interestedTalks initiated (2018)
ObstaclesSanctions; Transshipment; Break of gaugeBreak of gauge; Small amount of trade; Absence of prime mover Sanctions; Resources; Security fearsPolitical will; Kashmir issue; Security fears; Break of gauge

Given the considerable potential and growing relevance of trans-Eurasian transport routes, this article, the first in a two-part series, shines a light on the different projects and initiatives destined to give shape to the main routes and corridors on the North-South axis. The oldest and most-defined initiative is the International North-South Transport Corridor (INSTC), which is examined in detail in this report, including its background, rationale, and present status. The Ashgabat Agreement, which has in effect opened a third spur for the INSTC, is also included in this discussion. The second part of the series will cover two other complementary initiatives: the Chabahar International Transport and Transit Corridor; and the proposed Russia-Pakistan (Ru-Pak) Corridor.

The International North-South Transport Corridor (INSTC)

The INSTC originated with a September 2000 intergovernmental agreement between Russia, Iran, and India which entered into force two years later. A total of 13 countries have since ratified the agreement, and the corridor could eventually stretch from Northern Europe all the way to Southeast Asia. After stalling for many years, INSTC found renewed impetus with the lifting of United Nations sanctions against Iran in January 2016. Having carried 11 million tons of goods in 2018, the corridor has an estimated annual capacity between 20 and 30 million tons thanks to three main spurs.

The main spur is the 7,200-kilometer corridor between Mumbai and Saint Petersburg, based on ferry links between the ports along the Russian coast of the Caspian (Astrakhan, Olya, and Makhachkala) and the Iranian ones (Bandar-Anzali, Nowshehr, and Bandar-Amirabad). Indian goods are delivered to the Iranian port of Bandar Abbas on the Persian Gulf and shipped across the Caspian for onward rail or road transport to Russia and Europe. The Indian Federation of Freight Forwarders Associations estimates 30 percent cost and 40 percent transit time reductions compared to the Suez route. Dry runs conducted between 2014 and 2017 showed possible savings in the order of $2,500 per 15 tons of cargo, while transit time could be slashed to 25 to 30 days compared to 40 to 60 days via Suez. Shipments would take an average of 23 days, at costs ranging between $2,300 and $3,500 for a dry container and between $4,600 and $6,800 for a reefer container. For example, it would only take 19 days (as opposed to 32 to 37) to cover the route between Mumbai and Moscow, cutting the distance from around 16,112 km (8,700 nautical miles) to about 7075 km. Likewise, it would only take 21 days for shipments between India and Finland, down from about 45 days.

In 2005, Azerbaijan’s accession to the INSTC agreement paved the way for the addition of a second spur, running west of the Caspian Sea. Linking India and Russia through Azerbaijan and Iran, the spur is likely destined to sideline the Caspian route due to its greater efficiency and interconnection with the Baku-Tbilisi-Kars rail line. Anticipating cargo transit through its territory in the range of 15 to 20 million tons at full capacity, Baku has been especially active in upgrading infrastructure and building new roads and railways. Deutsche Bahn has also shown interest in using the route.

However, several bottlenecks remain due to gaps in the Iranian rail system. The Astara (Azerbaijan)-Astara (Iran) section only opened at the end of March 2018. It runs for eight kilometers within Azerbaijan from Astara up to the border, whence it reaches Iran’s homonymic port city after another two kilometers across a newly built bridge over the Astarachay river. Here, Baku financed the 10-kilometer extension of its 1,524 mm gauge railway into Iran for roughly $60 million. It includes a 35-hectare transshipment facility that will be operated by Azerbaijan Railways under a 25-year build-operate-transfer agreement with Islamic Republic of Iran Railways (IRIR).

The second segment, lying entirely within Iranian territory, covers the 164-kilometer span between Rasht and Astara via Anzali, Iran’s other major Caspian port city, and is due for completion in 2020. The line is also supposed to enable travel between Baku and Nakhchivan, an Azeri exclave sandwiched between Armenia and Iran. For this reason, Azerbaijan has agreed to jointly finance the project, with each side contributing $500 million. Baku has also provided a $1.5 billion soft loan to Iran for the construction, which was reportedly due to start in the first half of 2018. The details of the financing scheme were still being discussed in March 2019, but latest reports indicate the line will be completed by 2022.

The third segment consists of another 164 kilometers of railway connecting the Iranian cities of Qazvin and Rasht, including 25 kilometers of tunnels and 9 kilometers of bridges. Construction of this section began in 2002, but again, political and financial hurdles, in addition to the difficult terrain, have caused substantial delays. Nonetheless, the railroad was finally launched in March 2019 after successful trial runs in November 2018. However, the western route will become more attractive once the Rasht-Astara section (the second segment) is completed, putting an end to the need for road transshipments.

The third spur came to fruition with the opening of the 928 kilometers of the Kazakhstan-Turkmenistan-Iran (KTI) railway in December 2014 which runs east of the Caspian Sea, connecting the cities of Uzen, Bereket, and Gorgan. In Bereket, the KTI line connects with the Trans-Caspian Railway of Tsarist times, which, travelling across Turkmenistan, reaches into Uzbekistan and Tajikistan.

The eastern spur is not formally part of INSTC and was enhanced by the signing of the Ashgabat Agreement to facilitate multimodal international transport and transit between Central Asia and the Persian Gulf, an agreement that was concluded in 2011 between Afghanistan, Iran, Oman, Qatar, Turkmenistan, and Uzbekistan, and is synergic with the INSTC and other corridors like the Turkmenistan-Afghanistan-Tajikistan railway, the Afghanistan-Turkmenistan-Azerbaijan-Georgia-Turkey transport corridor, and TRACECA. The treaty went into force in 2013, at which point Qatar unexpectedly withdrew. Kazakhstan joined in 2015, followed by Pakistan in 2016. Although the route is currently used primarily for transit between China and Iran, India’s accession to the Ashgabat Agreement in 2018 appears destined to give it new impetus as a fully-fledged North-South corridor.

Movers and Shakers

India and Russia are the prime movers behind the INSTC. The pair has set targets of $30 billion in bilateral trade by 2020 and investments of $15 billion each way by 2025 based on the 2014 Druzhba-Dosti Statement. The two countries are reportedly on track to achieving their trade goal and crossed their investment target in 2018, when they resolved to raise the bar to $50 billion by 2025. In February 2018, Russia gave its blessing to expanded India-Central Asia ties. This means that the pair now shares an interest in fast-tracking the project, which led them to sign a Memorandum of Understanding in early 2019.

For India, the corridor is a growing priority. On one hand, it can help offset China’s BRI; on the other, it serves the more assertive and projective foreign policy stance adopted under Prime Minister Narendra Modi. India’s growing attention on Central Asia, as evidenced through the conclusion of a five-year roadmap with Kyrgyzstan, the opening of a Kazakh Invest office in New Delhi, the launch of an India-Central Asia format, and ongoing negotiations for a free trade agreement with the EAEU, is a further factor. In his address to the 2019 Shanghai Cooperation Organization (SCO) summit in Bishkek, Modi touted the corridor as a strategic artery and met with Putin to discuss the INSTC on the sidelines. Indian Railways is planning to modernize its network in partnership with RDZ Russian Railways which has required a study to upgrade the 575-kilometer Nagpur-Secunderabad line into a high-speed or a high-capacity rail.

Russia, caught in the crossfire of American and European sanctions, has devoted sustained diplomatic energy to spearhead the INSTC. Together with Tehran, Moscow is the seam between two trilateral processes (the Russia-Azerbaijan-Iran and the Russia-India-Iran meetings) responsible for advancing the corridor’s implementation.

Working through RDZ, Moscow also plays robust operational and financial roles. For example, RDZ financed the electrification of Iran’s 495-kilometer Garmsar-Incheboron rail line, which reaches into Turkmenistan and onwards to Kazakhstan, to the tune of $1.39 billion. The upgraded line was inaugurated on July 2, 2018. In April 2018, RDZ initiated discussions with Iran, India, and Azerbaijan’s railway companies to set up a joint operator for end-to-end logistics along the INSTC. Such an agreement would mirror the experience of UTC Logistics, a joint-venture between RDZ, KTZ (Kazakhstan), and BCh (Belarus) which is active on the East-West route. RDZ has also signed an agreement with Indian Railways to develop collaboration on automatic traffic controls and security systems. Under a separate agreement, RDZ is to deliver 100 train cars to Indian Railways. On the other hand, Russia has been stepping up cooperation with Iran, and joint projects are under discussion as Moscow activated a $3 billion credit line for INSTC-related investments.

For Iran, which experienced a decade of UN sanctions from 2006 to 2016 and is once again the target of United States sanctions, reconnecting to the outside world is a national priority. In fact, the country has pledged to earmark 1 percent of its oil revenues for new railway investments. The INSTC represents the shortest path to Russia and Europe, two of its main trading partners. Although the construction of adequate links across the country has tanked, its geographic position and excellent relations with all of the INSTC members give Tehran the unprecedented opportunity to become a major transport player. In addition to speeding up construction work in its own territory, Tehran has tasked IRIR with exploring the possibility of running passenger and cargo trains between Astara (Iran) and Moscow with Azerbaijani and Russian counterparts. Iran is also pushing for the simplification of mutual customs and visa procedures and accelerating railway and cargo cooperation with its partners, as stressed at the third Russia-Iran-India triangular meeting in 2018. In the more distant future, the INSTC could see a further extension, with the Shalamcheh-Basrah line possibly connecting Iran and Iraq once the remaining 32 kilometers are completed. A feasibility study for a 200-kilometer railway between Iran and Turkey via the Maku Free Zone is also in the works.

Lastly, Azerbaijan, a small quasi-landlocked country, has been eyeing global transit as an opportunity for new revenues. To that end, Baku has been expanding comprehensive cooperation in the railway sector with Russia. Both intend to increase cargo traffic via the INSTC western route and to develop the Russia-Azerbaijan-Turkey route by using the hardware of the Baku-Tbilisi-Kars railway. In addition, they are also eyeing the development of transit traffic between Azerbaijan and China through Russia, as well as onward traffic from China through Russia and Azerbaijan. Moreover, as detailed above, Baku has also developed a close partnership with Iran, and, in view of a further expansion of the route, Azerbaijani President Ilham Aliyev also invited Pakistan to join the project during a February 2017 visit to the country.

A growing caravan of partners

The INSTC is beginning to catch the attention of the international community. International lenders have been tuning in to the corridor’s potential. In December 2017, the Asian Development Bank approved a $400 million loan for INSTC-related construction in Azerbaijan, co-financed with $175 million from the French Development Agency. But, perhaps more than that, evidence of the INSTC’s promise is the fact that adjoining countries, many of which are landlocked, are increasingly being drawn to the project.

Belarus has concluded an agreement with Azerbaijan to streamline rail transport between the two countries, and the two countries have created working groups on tariffs and technology to that effect. The INSTC route carries 96 percent of their bilateral trade.

In December 2018, Kazakhstan and India agreed on a roadmap for using the corridor to increase bilateral trade from $1 billion to $5 billion. On the same occasion, KTZ Express and India’s Tuberose Logistics signed a transport and forwarding agreement. However, US sanctions on Iran have stymied the two sides’ ability to take full advantage of the corridor.

Latvia is likewise looking to link up with the INSTC. Indian firms have been using Latvia’s ports as a gateway for trade with Northern Europe for some time, but in February 2017, the President of the state-owned Latvian Railway, Edvīns Bērzinš, traveled to India to discuss an expanded role for the country within the corridor. The visit was followed by a trade delegation led by the Latvian Prime Minister, Maris Kučinskis, to further promote Latvia’s role in the INSTC and Rail Baltica, and ensure the country’s role as India’s gateway to Europe. A pilot container train from Mumbai to Riga was run in 2018 to test the link’s potential.

Ukraine has equally shown an interest in the INSTC. However, it is unwilling to cooperate with Russia. Hence, in November 2018, then First Deputy Prime Minister and Minister of Economic Development and Trade, Stepan Kubiv, and the Azerbaijani Minister of Economy, Shahin Mustafayev, met to discuss bilateral cooperation under the INSTC. Officials from Azerbaijan Railways and Azerbaijan Caspian Shipping Company were also present at the meeting, which took place in China.

For its part, Uzbekistan, mimicking an approach successfully implemented by Kazakhstan and other countries in the region, is tapping connectivity as a driver for growth as part of its new course of economic openness. As part of this strategy, Uzbekistan wishes to partner with India to position itself as a regional transit hub. Hence, Deputy Prime Minister of Uzbekistan Sukhrob Kholmuradov indicated the country’s interest in joining the INSTC in a speech given to the Eleventh Uzbek-Indian Intergovernmental Commission Meeting in August 2018.


In short, the steps by these actors underscore the still untapped potential they see in the INSTC. Nonetheless, the project’s promise should not distract from its numerous outstanding insufficiencies. From a hard infrastructure point of view, some of these include gaps in the network, which are partially due to the engineering requirements of difficult terrain and to the funding insufficiencies in Iran, which the Trump administration’s harder stance has further complicated. On the soft infrastructure side, there is a lack of common rules for border crossings, with problems affecting customs procedures and documentation, insurance, credit, language, and data exchange. Together with the break of gauge problem, all of these issues still cause slowdowns and delays to shipments. Moreover, comparatively low volumes of trade contribute to making the rail option less competitive than road transport.

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 first article in a two-part series by Nicola P. Contessi on Eurasia’s North-South Corridors. In his second article, Contessi discusses a flurry of recent diplomatic activity that highlights the multilateral and multi-stakeholder footing of Eurasia’s North-South trade and transport initiatives. While significant economic and political challenges remain, they retain the potential to transform Eurasia’s economic landscape. Read the full article here.