Under Prime Minister Narendra Modi’s pro-active global outreach, India is expanding the scope of its engagement in all the directions. Our strategic interests in Eurasia, and the need for greater economic and energy cooperation with these countries are the reasons for Modi’s re-energised engagement in the region. This includes high-level visits, frequent bilateral meetings and sustained political dialogue between India on one hand and Eurasian countries on the other. Recently acquired membership of the Shanghai Cooperation Organization (SCO) is also a big step forward in this regard.
India’s priorities in this region include enhancing trade, energy cooperation, transport, and creating developmental partnerships with our immediate and extended neighbourhood. For achieving these objectives, Indian leadership seems to have understood the importance of sustainable connectivity. This has led to initiation and participation in number of regional connectivity projects like International North-South Transport Corridor, Chabahar Port Agreement and Ashgabat Agreement.
International North-South Transport Corridor
The inter-governmental agreement on developing the ‘International North-South Transport Corridor’ (INSTC) was first signed on September 12, 2000 in St. Petersburg between the Government of India, the Russian Federation and the Islamic Republic of Iran. Since then, 11 more countries have joined the project, namely, Armenia, Azerbaijan, Belarus, Bulgaria (observer status), Kazakhstan, Kyrgyzstan, Oman, Syria, Tajikistan, Turkey, and Ukraine. Major objective of the INSTC is to promote transportation cooperation among the member states. The corridor potentially connects the Indian Ocean and the Persian Gulf to the Eurasian countries via Iran.
“Armenia to Complete NSTC by 2019
The construction of a north-south transport corridor across Armenia will be fully completed by 2019, Armenia’s Deputy Minister of Transportation Artur Arakelyan had said during a parliamentary discussion of the 2015 draft budget.
Currently, the construction of two sections of the road — from Artashat to Ashtarak and from Ashtarak to Talin — is in progress. Negotiations with the Eurasian Development Bank (EDB) that had earlier pledged a $100 million loan for the project to support its southern section is nearing completion. A feasibility study for the southern part of the road is ready and a loan agreement is expected to be signed later this year.
The Armenian government in January 2010 approved an investment programme to build the north-south transport corridor, as well as a $500 million framework loan agreement with the Asian Development Bank.”
Iran as an Ideal Transit Country for India
Strategic location of Iran makes it a bridge between South, West and Central Asia. It is also a link between the Indian Ocean and the landlocked countries of Central Asia. It borders Pakistan and Afghanistan on the east, Turkmenistan, Armenia and Azerbaijan on the north and Iraq and Turkey on the west. In addition, it shares maritime borders with a number of the Gulf countries. Iran is one of the littoral states of the Caspian Sea, which is a landlocked water body surrounded by five countries. The country gives access to a number of other trade and transit corridors (existing and planned). Moreover, Iran is a politically stable country and one of the fast growing economies. After lifting of the western sanctions, Iran has now become an ideal destination for foreign investments and business. Considering this, Iran is undoubtedly an ideal transit country for India, and its gateway to Central Asia and Russia.
Iran has operational rail infrastructure mainly linking Bandar Abbas with the northern parts of the country. The port is connected by rail with Astara Port on the west of the Caspian Sea on the border with Azerbaijan (with only a small gap between Rasht and Astara), with Amirabad Port on the east of the Caspian Sea, with Inchebarum and Mashad on the border with Turkmenistan, and with Sarakhs that lies on the tri-junction between Iran, Turkmenistan and Afghanistan. These rail routes facilitate easy transportation of goods from Bandar Abbas to Iranian borders and further to Eurasian countries.
Existing Routes via Iran on the INSTC (Image Source: http://www.vifindia.org/article/2016/october/24/international-north-south-transit-corridor)
Caspian Sea ports of Iran like Amirabad and Astara are connected by sea route to ports like Baku (Azerbaijan), Aktau (Kazakhstan) and Astrakhan (Russia). From Astrakhan, there are well-established railway networks to Russian cities like Moscow and Bandar Abbas, and further to Europe. Iran is also linked with Turkmenistan and Kazakhstan by railway, which was inaugurated in 2014. These existing routes between Bandar Abbas and Russia establish that the INSTC can be made operational with immediate effect. However, there is need for further improvement in transport infrastructure within Iran.
“NSTC – The Game Changer
The North-South Transnational Corridor is a 677km-long railway line connecting the Central Asian countries of Kazakhstan and Turkmenistan with Iran and the Persian Gulf. It will link Uzen in Kazakhstan with Gyzylgaya-Bereket-Etrek in Turkmenistan and end at Gorgan in Iran’s Golestan province. In Iran, the railway will be linked to national network making its way to the ports of the Persian Gulf.
The project is estimated to cost $620m which is being jointly funded by the governments of Kazakhstan, Turkmenistan and Iran. Construction of the rail lines is in progress in the three countries.”
India had signed, with Iran and Afghanistan, a Trilateral Agreement to develop the Chabahar Port and to create a transport and trade corridor linking these countries. A Memorandum of Understanding was also signed between India and Iran during Prime Minister Modi’s visit to Tehran in 2016 to build a railway line from Chabahar to Zahedan. India has announced the line of credit of USD 1.6 billion for building this railway route that can further be connected with Afghanistan. If this railway is extended up to Mashad, it can provide a direct, shorter, and easier access to the Central Asian Republics (CARs), as Mashad is already connected to Sarakhs on Iran-Turkmenistan border.
Economic Significance of the INSTC
In 2014, a trial run was also conducted by Federation of Freight Forwarder’s Association of India (FFFAI) under the aegis of Indian Ministry of Commerce, which used the road transport from Bandar Abbas to Baku and sea route from Baku to Astrakhan. They estimated that INSTC will save 40 percent in time, and 30 percent in cost over the traditional route from India to Russia, which passes through the Suez Canal, the Mediterranean Sea and Europe. It can potentially reduce the distance from Mumbai to Moscow from 8,700 nautical miles to 2,200 nautical miles sea route and 3000 km land route. In terms of cost, it is likely to reduce the freight cost of a 20 feet container from USD 1400 to USD 1250. The transit time will be reduced from 32 -37 days to 19 days.
INSTC will be a game-changer in terms of enhancing India’s trade with the countries of Commonwealth of Independent States (CIS). In absence of a direct route, India’s trade volume with these countries has been miniscule. In case of Russia, while its global imports are USD 193 billion, imports from India account for only USD 1.587 billion (0.82 percent). On the other hand, CIS region had a share of 0.91 percent in India’s exports and 1.86 percent in its imports during 2015-16. Russia continues to be India’s most important trading partner in the region accounting for about 65 percent of India’s trade with the CIS.
Global imports of the CARs from all sources exceed USD 67 billion, out of which, India’s share is USD 362.5 million (0.54 percent). CARs figure marginally in India’s trade basket. During April-December 2017, India’s export to five CARs was 260 million USD, accounting for 0.12 percent share in India’s total export. During the same period, India’s import from the CARs was 961 million USD, making 0.28 percent share in India’s total imports. Out of this, 787 million USD import was from Kazakhstan alone, making the share of other four CARs marginal. Population of the CARs is about 70 million, out of which 32 million live in Uzbekistan alone. Thus, these countries are important markets for India.
It is estimated that the INSTC will facilitate carrying 20-30 million tonnes of goods per year. This will boost India’s economy, with substantial increase in Indian exports in the next couple of years. Private companies, which till now have ignored Central Asia as a prospective market for their goods, would be looking to invest more in the region. With enhancement of connectivity, India’s trade can expand in qualitative as well as quantitative terms.
“NSTC Tested Successfully
On September 22, 2016 a train departed from Mumbai, which arrived at the logistic centre “Freight Village Vorsino”, Kaluga Region on October 12, 2016. The transit time was 23 days.
New multimodal route include sea, rail and road transport. Containers with industrial radiators were sent by sea from Mumbai to the Iranian port of Bandar Abbas then transported by rail to “Rasht” station, from there delivered by road to Astara, reloaded on the railway and finally delivered to the destination in Russia.
JSC RZD Logistics with a subsidiary Far East Land Bridge (FELB) analysed the cargo base and offered to the customer alternative multimodal route on the ITC “North-South” which allows to reduce transit times by half and lower market prices by 20 percent than carriage by rail route through the Turkmenistan and Kazakhstan.
PJSC “TransContainer” has provided containers for loading in India and ensured the supply of rolling stock for railway track gauge 1520. In turn, the Iranian Railways have carried out the delivery of cargo from the port of Nava Sheva to Astara. The company ADY Express organised transportation on the route Astara-Samur, JSC RZD Logistics delivered the cargo from Yalama to Vorsino.”
Political and Strategic Angle
CARs are part of India’s extended neighbourhood, and are geo-strategically vital for us. India’s relations with these countries are based on commercial, cultural, and civilizational linkages for thousands of years. Being abundant in natural and mineral resources, CARs can be vital in India’s energy security. Moreover, our relationships based on defence, IT, education, health and counter-terrorism have set the solid foundation for further cooperation. India enjoys tremendous goodwill, trust and respect amongst these nations, where Indian movies, music, cuisine and Yoga is extremely popular. This goodwill and sound political relations can be capitalised in enhancing economic cooperation and trade, which is very low at the moment. CARs also have potential to provide a land bridge between Europe and Asia and between various regions of Asia. Strategic location of these countries can facilitate land connectivity with Eurasian region at large.
Emergence of the unfriendly state of Pakistan broke the geographical continuum that existed for centuries. This interrupted the age-old land connectivity between India and Central Asia, leading to drop in movement of men, material and ideas. Deteriorating relations between India and Pakistan, worrisome situation in Afghanistan and rising menace of terrorism and religious fundamentalism in this part of the world prompted Indian leaders to search for an alternate route to connect with the CARs. This alternative was found in Iran which is a friendly country, and India’s strategic partner. With the initiation of the Chabahar Port and the INSTC, Pakistan is no more a limiting factor in India’s links with Central Asia.
Under ‘Connect Central Asia’ policy, the CARs are given their due prominence in Indian foreign policy. This was further highlighted by Prime Minister Modi’s ‘first of its kind’ visit to all five CARs, and India’s bid to join the SCO and the Ashgabat Agreement. The approval of India’s membership by the member-states established that the CARs are looking forward to and are welcoming higher Indian engagements in their region. This situation shall be further improved with operationalisation of the INSTC.
China’s presence in the Eurasian region has increased at an alarming rate in recent years. President Xi Jinping’s announcement of the One Belt One Road (OBOR) initiative from Kazakhstan in 2013, underlined the prominence of the CARs in its development. Two of the six strands of OBOR pass through these countries. Moreover, China has also invited CARs to join the China-Pakistan Economic Corridor (CPEC) and is highlighting importance of Gwadar as an alternate gateway for CARs to reach the Indian Ocean. Chinese influence is visible mainly through infrastructure projects, pipelines, trade and investments. Traditionally, Russia has acted as the ‘security provider’ in the CARs. It continues to play pivotal role through organisations like Eurasian Economic Union (EEU) and Collective Security Treaty Organisation (CSTO). However, it seems to have taken a backseat at least in the economic terms. Possibilities of future standoff between Russia and China in Central Asia cannot be ruled out; but currently they seem to have preferred cooperation over competition.
In this backdrop, India has to balance its relationships with regional powers like Russia, Iran and the CARs. Membership of the SCO has given India a fresh opportunity to increase engagements in this region. However, Russia and China have already dominated the organisation for 17 years since its inception; and now, Pakistan has also become the member. All the CARs and Russia have endorsed the OBOR initiative and are welcoming Chinese presence. Thus, it is in best interest of India to continue its ambiguous stand on the OBOR, except for the CPEC which we have strongly opposed.
India, along with Russia and Iran, had signed the INSTC agreement in 2000. However, since then, not much has moved on ground. The first consignment of INSTC that was planned for January 2018 is being delayed for logistical reasons. Since there are existing transport networks along the INSTC, the corridor should be made operational with immediate effect. The private sector will come forward and use the corridor only when they will be fully convinced about its viability and sustainability. There is a greater need of cooperation amongst all the member-states along the INSTC and various stakeholders. India should also appeal to the strategically important CARs of Turkmenistan and Uzbekistan to join the INSTC to feel the mission link.
India has recently ratified the ‘Transports Internationaux Routiers’ (TIR) Convention, which facilitates trans-border movement of goods. Uzbekistan and Turkmenistan are also parties to the TIR convention, although they have not yet joined the INSTC. Thus, they are entitled to make use of the existing routes along the INSTC. India has joined the Ashgabat Agreement in January 2018, which envisaged creation of a transport corridor between CARs and the Persian Gulf. These initiatives shall facilitate seamless link with Eurasia and shall also diversify India’s connectivity options with Central Asia. India has recently sent its first consignment to Afghanistan through the Chabahar Port. It has also planned to construct a railway route between Chabahar to Zahedan. Subsequently, Chabahar can be made into Central Asia’s gateway to the Indian Ocean. After all, all these connectivity projects shall become part of the INSTC, which is a wider and all-inclusive project having highest number of members of the region.
[i] International North South Transport Corridor- Official Site, Accessed 08 February 2018, URL: http://www.instc-org.ir/Pages/Home_Page.aspx.
[ii] Text of the inter-governmental Agreement on INSTC, Accessed 01 February 2018, URL: http://www.instc-org.ir/Documents%20Archive/Agreement/Agreement.pdf.
[iii] Amb D. P. Srivastava, ‘International North South Transit Corridor’, Accessed 05 February 2018, URL: http://www.vifindia.org/article/2016/october/24/international-north-south-transit-corridor.
[iv] Ministry of Commerce Report on INSTC Dry Run, 2014, Accessed 02 February 2018, At http://commerce.nic.in/publications/INSTC_Dry_run_report_Final.pdf.
[vi] Amb D. P. Srivastava, No. ii.
[vii] Ministry of Commerce, Government of India, Annual Report 2016-17, Accessed 06 February 2018, URL: http://commerce.gov.in/writereaddata/uploadedfile/MOC_636281140249481285_annual_report_16_17_eng.pdf.
[viii] Ministry of Commerce Statistics, System on Foreign Trade Performance Analysis, Accessed 06 February 2018, URL: http://commerce.nic.in/ftpa/rgncnt.asp.