First Coal Shipment from Russia to India via INSTC

First Coal Shipment from Russia to India via INSTC

Context: Recently, Russia has sent two trains carrying coal to India through the International North-South Transport Corridor (INSTC) for the first
time. The consignment will travel over 7,200 km from St. Petersburg, Russia to Mumbai port via Bandar Abbas port of Iran.

What is the International North-South Transport Corridor (INSTC)?

• The INSTC is a 7,200-kilometer multimodal transit route that links the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran
and extends to northern Europe through St. Petersburg in Russia.
• It integrates shipping, rail, and road networks to facilitate cargo movement between India,Iran, Azerbaijan, Russia, Central Asia, and Europe.
• Initiated on September 12, 2000, in St. Petersburg, the corridor was established by a trilateral agreement among Iran, Russia, and India during the Euro-Asian Conference on Transport in 2000 to enhance transportation cooperation.
• Initially consisting of three countries, the INSTC has expanded to include ten more members, totaling 13: Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, and Oman.

Modes of Transport in INSTC

• This route starts at the Jawaharlal Nehru Port in Mumbai, connecting to the Bandar Abbas port in Iran on the Strait of Hormuz. It traverses Iranian territory via Nowshahr, Amirabad, and Bandar-e-Anzali, running along the Caspian Sea to reach the Olya and Astrakhan Ports in Russia.
• This pathway links the railway networks of Azerbaijan and Iran through the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran), extending to the Jawaharlal Nehru port in India via sea.
• This route connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan, and Turkmenistan.

Significance of INSTC for India

• The corridor allows India to bypass chokepoints like the Strait of Hormuz and the Red Sea (Suez Canal route), enhancing trade security.
• The Israel-Hamas conflict and the Houthi attacks on ships in the southern Red Sea underscore the importance of alternative trade routes.
• INSTC enables India to circumvent Pakistan and unstable Afghanistan to access Central Asia.
• It connects India to markets in Russia, the Caucasus, and Eastern Europe, facilitating trade, energy cooperation, defense, counterterrorism, and cultural exchanges with Central Asian Republics through initiatives like “Connect Central Asia.”
• The corridor reduces transit time by 20 days and freight costs by 30% compared to the Suez Canal route.
• INSTC facilitates India’s access to energy resources in Russia and Central Asia, reducing reliance on the Middle East.
• Post the Russia-Ukraine war, imports of metallurgical coal from Russia have tripled, with expectations of further growth amid declining imports from Australia.
• India’s investment in the Chabahar Port in Iran’s Sistan-Balochistan province aims to facilitate trade with Central Asian countries. This port is critical for India, Iran, and Afghanistan, offering direct sea access and trade opportunities in the region.

Challenges Related to Full Utilization of INSTC

• Financial Funding: Unlike China’s Belt and Road Initiative (BRI), which has dedicated funding institutions, INSTC lacks significant financial backing from major institutions like the World Bank and Asian Development Bank.
• Sanctions on Iran: The US’s withdrawal from the JCPOA (Joint Comprehensive Plan of Action) in 2018 led to harsh sanctions on Iran, causing many global companies to pull out from infrastructure projects in the country.
• Security Threats: The presence of terrorist organizations like the Islamic State (IS) in Central Asia poses a significant security threat along the corridor, deterring investment and smooth operation.
• Regulatory Disparities: Differences in customs regulations and tariff structures across member states create complexities and delays for cargo movement.
• Infrastructure Development: The corridor’s various transport modes (ship, rail, road) face uneven infrastructure development, particularly the underdeveloped rail networks in Iran, which create bottlenecks and hinder the seamless movement of goods.
• Lack of Coordination: There is an absence of a joint work plan for developing the corridor and its business ecosystem.