The 7,200 kilometers long International North South Transport Corridor (INSTC), a multi-modal transport network, was conceptualized in 2000 to move cargo through India, Iran, Azerbaijan, Russia, Central Asia, and then into Europe. The 13 partner countries (Russia, India, Iran, Turkey, Azerbaijan, Belarus, Bulgaria, Armenia, Kazakhstan, Kyrgyz Republic, Oman, Tajikistan, and Ukraine) have ratified the INSTC agreement and their representatives have met on regular basis bilaterally, trilaterally and as a grouping, to bring it to life. Notwithstanding the commitments made/announced/conveyed by these countries, the INSTC is languishing. There are at least five reasons for the current state of affairs concerning the INSTC.

First, the funding requirement for the INSTC, both as a composite project or commitments-allocations made by partner countries in their respective countries, is abysmally low. This issue is perhaps the most critical given that infrastructure development is capital intensive and the INSTC balance sheet can claim only few good stories. For instance India’s investments in the INSTC i.e. the Chabahar port and other connectivity infrastructure linked with it in Afghanistan are notable. In its budget for 2022-23, the Indian government “set aside an amount of Rs 200 crore as development assistance to Afghanistan besides allocating Rs 100 crore for the Chabahar port project”. As far as Iran is concerned, it is reeling under deep economic conditions and is not in a position to allocate the requisite funds for the INSTC, much as it would have liked to. It merits mention that Tehran has been under UN sanctions for not suspending its military nuclear programme

Second is about cost and time of transportation from Mumbai to Moscow through the INSTC vis a vis the sea route. It has been noted that the INSTC will be able to “curtail” the transit time i.e. “the 9,389 km-long New Delhi-Helsinki rail route proposed under the INSTC will take 21 days, compared to the conventional 16,129 km-long sea route, which requires 45 days. 2,200 nautical miles (4,074 kilometers) plus 3,000 kilometers (overland), requiring only 19 days”. It needs to be borne in mind that any multi-modal transport attracts additional time and cost on account of transshipment (from one mode to another i.e. loading, unloading and storage-demurrage) which add to transportation costs. Besides there are numerous safety and security risks be it on land or at sea. It is fair to assume these compound on land due to prevalent domestic political conditions through which the cargo would transit when compared to the sea route.

Third is about the throughput of cargo from the Chabahar Port. It was noted by Indian ports and shipping minister that between “2019 and 2021, only 23 vessels and 1.8 million tonnes of bulk and general cargo passed through the port and by August 2022, the terminal had handled over 4.8 million tonnes of bulk cargo, including transhipments from Bangladesh, Brazil, Australia, Germany, UAE, and Russia”. This is quite low; but the minister was positive of the port’s future and in July 2022, the first shipment from Astrakhan Port (Russia) to Mumbai (India) through the INSTC was unloaded successfully.

Fourth is about the competition from the Chinese Belt Road Initiative (BRI). It is well known that the BRI has ushered in trade and growth for economies across Europe and Asia. Since its inception in 2013, the cumulative BRI engagement in its first decade are gigantic and pegged at USD 962 billion, about USD 573 billion in construction contracts, and USD 389 billion in non-financial investments. The downside of the BRI is that the connectivity infrastructure projects (rail road and shipping) have also attracted international criticism including debt traps that some of the recipient countries have been through. There are also strategic challenges as well and a majority of the projects are viewed with suspicion given that these could be used by the Chinese military particularly the PLA Navy.

Five, the ongoing Ukraine-Russia war. The conflict has forced Russia to increase its defence budget. Although the war is a catalyst for higher industrial production in Russia, but it has “already pushed budget finances to a deficit of around $28 billion - a figure compounded by falling export revenues”. It is fair to argue that the war has, for some time at least, pushed back Moscow’s vision of the INSTC. But in June 2023, Russia and Iran signed a cooperation agreement for the construction of the Rasht-Astara railway and claim to have bridged the “missing link of the western route of the INSTC…when completed early in 2024, 10 million tons of cargo will be able to be moved, rising shortly to 15 million tons with goods moving equipment”. In fact the western sanctions on both Russia and Iran are the trigger for enhanced cooperation between the two countries and the “INSTC is important to facilitate and accelerate the process of de-dollarization and neutralize Western sanctions”. There is also the strategic angle and Russia sees the INSTC as a gateway to the Indian Ocean as also an opportunity to use the ports of Chabahar and Bandar Abbas (Iran) by the Russian Federation Navy.

Dr Vijay Sakhuja is Associated with Kalinga International Foundation, New Delhi.