INSTC: Redefining International Commerce through Connectivity

The International North-South Transport Corridor (INSTC) stands at the crossroads of a transformative trade revolution. Conceived in 2000 by Iran, Russia, and India, this sprawling multi-modal network despite remarkable achievements like reduced transit times and costs, faces a formidable landscape of diplomatic complexities, financial considerations, and infrastructure challenges. This feature story delves into the past, present, and future of the INSTC, exploring its impact, potential, and the imperative need for international cooperation in navigating these uncharted trade waters.

The International North-South Transport Corridor (INSTC) is a vast and intricate multi-modal transportation established in September 2000 in St. Petersburg, by Iran, Russia, and India. The corridor, which provides the shortest multi-modal transportation route linking the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran and then onward to Europe via Russia, is purposed for promoting transportation cooperation among the member states.

Spanning 7,200 kilometers, the INSTC encompasses ship, rail, and road routes. It serves as a critical conduit for the movement of goods between India, Iran, Azerbaijan, Russia, Central Asia, and Europe. The corridor predominantly facilitates the transportation of freight originating from India, Iran, Azerbaijan, and the Russian Federation, employing a combination of maritime, rail, and road transport modes.

The INSTC aims to amplify trade connectivity, interlinking major urban centers such as Mumbai, Moscow, Tehran, Baku, Bandar Abbas, Astrakhan, Bandar Anzali, among several others. Ever since, an intergovernmental agreement was signed between the three nations, the multimodal transport corridor has seen some key milestones in its development including:

• The significant achievement of transporting the inaugural shipment of goods from India to Russia via the corridor in 2014.

• In 2017, a crucial dry run was executed, showcasing the potential of the green corridor concept during April. This trial played a pivotal role in rigorously testing and confirming the efficiency of customs facilitation processes, effectively connecting India to Russia and Europe via Iran.

• In 2019, an interim agreement on a free trade zone was signed between Iran and the Russia-led Eurasian Economic Union (EAEU).

• In 2022, Russian company RZD Logistics announced that it had completed its first transport of goods to India via the INSTC.

As this multifaceted corridor continues to evolve, it is now emerging as a budding global trade route offering a cost-effective and efficient alternative to traditional trade routes.

INSTC: The Budding Global Trade Route

INSTC – a multimodal transportation network connecting India and the Persian Gulf to Russia and Northern Europe is budding as an efficient and cost-effective alternative to trade routes.

The North-South route, according to the Federation of Freight Forwarders Association of India (FFFAI), enables lowering the transportation cost of goods by 30% and the time of plying by 40% as compared to the Suez Canal. Thus, this route provides an economic advantage of lower capital and cost due to shorter distances covered along with faster deliveries.

Dr. Pramod Sant (Former Vice President – Head of Import Export and Customs, Siemens Ltd) highlighted that the reduction of 30% in cost and 40% time will result in an estimated saving of USD2500 per 15-ton cargo and transit time of 22-23 days instead of 45-60 days.

Calling INSTC exciting news for the shipping industry, Mr Lalit Trivedi (Railway Expert and former General Manager of East Central Railway (Patna)) says, “The International North[1]South Transport Corridor (INSTC) is set to revolutionize transit times and freight costs. It avoids the congested Suez Canal which otherwise European EXIM traffic destined to Asia has to negotiate.”

Providing direct access to India in Central Asia and Russia, the INSTC compared to other routes, including the sea route through the Suez Canal, is advantageous as it cuts the delivery time to half.

“INSTC is particularly beneficial to Russia as the entire alignment of the corridor lies in its catchment area of influence and adds accessibility to an all-weather port. Russia in accessing INSTC avoids sailing through the Baltic Sea, North Sea, Mediterranean Sea, and Red Sea. It provides ways and means mainly to Russia and Iran to carry on their trading activities by majorly insulating the passage from Western intervention,” said Mr Trivedi

The development and operations of the INSTC will also benefit India. Mr Trivedi shares, that it avoids dealing with Pakistan for trade relations with Afghanistan and other land-locked central Asian countries that are rich in minerals and other natural resources and lack a port of their own in fostering trade growth.

He adds, “The corridor also provides connectivity for Indian companies to Ports located on the Baltic Sea. Land-locked Central Asian countries and Afghanistan too gain as they get access to the weather Iranian port of Chhabar (Bander Abbas) facilitating their international trade. It counters China’s BRI initiative too.”

The INSTC will also benefit the private sector of India. With Asia now projected to account for 66% of the global middle class possessing significant purchasing power, the entry into the new markets, which will be provided by the INSTC routes, is expected to benefit the private players in India.

Recently, cheap import of Russian crude by India was facilitated by this new corridor to a great extent despite Western sanctions and restrictions.

“The route is not only beneficial to Russia, Iran, Azerbaijan, and India but to most Central Asia countries which are landlocked countries but mineral-rich. Hydrocarbon, mineral, fertilizer, coal, and iron industries will be benefited. “Of course, it will be too early as the industry needs to participate and start using INSTC,” says Dr. Sant.

This is an abridged version of the story published in the October edition of the Logistics Insider Magazine. To read the complete article, click here.

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