First Coal Arrival from INSTC Marks New Era in Trade Connectivity

On a historic note, the first shipment of coal via the International North-South Transport Corridor (INSTC) has arrived, signaling a new chapter in global trade logistics. The INSTC, an ambitious project conceived in September 2000 through a collaboration between Iran and Russia, aims to create the shortest multi-modal transportation route linking the Indian Ocean and the Persian Gulf to the Caspian Sea and St. Petersburg, Russia. This corridor, stretching 7,200 kilometers and integrating ship, rail, and road networks, holds the promise of transforming freight movement across Eurasia.

The INSTC: A New Silk Road

The regions involved in the INSTC include India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia, and Europe. From St. Petersburg, Northern Europe is within easy reach via the Russian Federation, making this corridor a vital artery for trade. With an estimated capacity of 20-30 million tonnes of goods per year, the INSTC is poised to facilitate significant economic activity. The primary route involves transporting freight from India, Iran, Azerbaijan, and Russia via a combination of maritime, rail, and road transport. The objective is clear: to enhance trade connectivity between major cities such as Mumbai, Moscow, Tehran, Baku, Bandar Abbas, Astrakhan, and Bandar Anzali, among others.

Significance of the Corridor

The significance of the INSTC cannot be overstated. Conceived well before China’s Belt and Road Initiative (BRI), this corridor aims to cut costs and reduce the time required for transferring goods from India to Russia and Europe via Iran. It offers a critical alternative to existing connectivity initiatives in the Eurasian region, aligning with the Ashgabat agreement—a multimodal transport agreement involving India, Oman, Iran, Turkmenistan, Uzbekistan, and Kazakhstan. This agreement aims to create an international transport and transit corridor facilitating the movement of goods between Central Asia and the Persian Gulf.

Benefits for India: Revolutionising Trade and Strategy

The benefits of the INSTC for India are manifold. Firstly, it significantly reduces transportation costs and transit time for goods heading to Russia and Europe. Traditionally, Indian exports to Europe and Russia took a circuitous route via the Suez Canal, which was not only time-consuming but also expensive. With the INSTC, transit time is expected to be reduced by up to 40%, and transportation costs by 30%.

Secondly, the INSTC enhances India's strategic and economic engagement with Central Asia, a region rich in energy resources and other natural reserves. Access to these markets through the INSTC bolsters India's energy security and opens up new avenues for trade and investment.

Moreover, the INSTC strengthens India's position as a key player in regional connectivity. By leveraging the corridor, India can improve its trade links with Iran, Azerbaijan, and Russia, fostering stronger bilateral relations and increasing its influence in the region. This strategic advantage is crucial in countering the growing influence of China, particularly through its Belt and Road Initiative.

Additionally, the INSTC offers India an alternative to the maritime chokepoints in the Indian Ocean Region, such as the Strait of Malacca. By diversifying its trade routes, India can mitigate risks associated with geopolitical tensions and ensure a more resilient supply chain.

Challenges on the Horizon

Despite its potential, the INSTC faces significant challenges that could impact its efficacy and relevance. One of the most pressing issues is the emergence of the Pakistan-Afghanistan-Uzbekistan (PAKAFUZ) railway project. This proposed 573-kilometer railway, linking Tashkent, Kabul, and Peshawar, threatens to overshadow the INSTC, particularly concerning India’s outreach efforts in Central Asia. If PAKAFUZ becomes operational, Afghanistan’s reliance on the INSTC for access to the Indian Ocean may diminish, thereby reducing India’s strategic leverage in balancing Chinese influence in the region.

Moreover, the INSTC's reliance on political stability in the participating countries poses another challenge. Regional tensions and infrastructural bottlenecks could hinder the seamless operation of this corridor. Additionally, competing projects like China's BRI and the proposed Trans-Arabian Corridor (TAC) could divert attention and resources away from the INSTC.

India’s Strategic Recalibration

In light of these challenges, India may need to recalibrate its strategy. Rather than focusing solely on Central Asia, India could benefit from expanding its reach across the Afro-Eurasian Rimland of the Indo-Pacific, where it has more substantial opportunities. Israel’s transregional connectivity plans, the “Trans-Arabian Corridor” (TAC), and the joint Indo-Japanese Asia-Africa Growth Corridor (AAGC) present alternative avenues for enhancing India’s trade and geopolitical influence.

Furthermore, India is making strides in strengthening its connections with Russia through the Vladivostok-Chennai Maritime Corridor (VCMC), an initiative announced by Prime Minister Modi and President Putin in 2019. This corridor promises to enhance trade between India and the Russian Far East, providing another strategic alternative to the INSTC.

A Path Forward

The first coal shipment via the INSTC is a testament to the potential of this ambitious project. However, realizing its full potential requires addressing the multifaceted challenges it faces. Strategic recalibration, diversification of trade routes, and leveraging alternative connectivity projects will be crucial for India and other stakeholders in the INSTC.

As the world’s geopolitical and economic landscapes evolve, the success of the INSTC will depend on adaptability, foresight, and robust international cooperation.