The Russia, Iran INSTC Transit Roadmap Through to South Asia: Updates

Iran’s Minister of Roads and Urban Development Farzaneh Sadeghi and Russia’s Minister of Transport Roman Starovoit signed an agreement on the development of transport and transit cooperation for 2025.

The core element of the agreement, signed in Tehran on February 18, is the completion of the long-delayed Rasht-Astara railway in Iran with Russia’s assistance, according to Iran’s Mehr News Agency. This railway segment is the missing link in the International North-South Transport Corridor (INSTC), a major trade route connecting India to Russia. Iran is actively developing the INSTC, focusing on multiple routes.

The Iranian minister expressed hope that the operational contract would be signed by late March and stated that land acquisition for the railway’s construction would be completed within a year. However, to date the contract is still unsigned and negotiations continue.

Sadegh announced that a trilateral meeting with Russia and Azerbaijan will coordinate efforts to launch the corridor’s western branch. She noted that Iran and Russia are also working on developing the eastern branch, which involves Central Asian countries. The third route, via the Caspian Sea, was also discussed, with the Russian minister proposing the formation of a consortium – an idea Iran accepted. Additionally, the minister encouraged Russia to use Iran’s transit network for exports to Pakistan. Currently, much of the overland trade between Russia and Pakistan is via road.

In June 2024, on the sidelines of the St. Petersburg International Economic Forum, the Russian Ministry of Transport and the Pakistani Ministry of Railways signed a memorandum of understanding and cooperation in the field of rail transport. As part of the agreement, the parties established a working group to implement test rail transport operations using the infrastructure of the North-South International Transport Corridor. The Russian train is expected to travel through Kazakhstan, Turkmenistan, and Iran, with Taftan station in Pakistan serving as the key entry point for goods moving through the corridor. Pakistan’s accession to the transport corridor will, according to a number of estimates, reduce the total costs of the North-South Transport Corridor by 20% thanks to the through railway line in the southern section, as well as shorten delivery times for goods.

This route will allow Russia to export oil, natural gas, steel, and industrial goods directly to Pakistan, while Pakistani exporters will gain greater access to markets in Iran, Turkmenistan, Kazakhstan, and Russia for textiles, food products, and agricultural goods.

However, there may be bumps along the way. With the recent warming of relations between Moscow and Washington, the North-South Transport Corridor project may also become a key indicator of the strength of ties between Iran and Russia. Delays in the launch of the Rasht-Astara railway section, complicated by financial and technical problems, may face additional obstacles due to the tough policy of US President Donald Trump. On February 4, Donald Trump signed a National Security Presidential Memorandum (NSPM) instructing the United States to exert maximum economic pressure on the Iranian government. The White House has resumed the policy of exerting pressure on Tehran that was in place during Trump’s first term. If the US administration finds effective levers of pressure on the Iranian government, further delays in the completion of the crucial Rasht-Astara section may occur.

India also stands to benefit from the INSTC, as it allows the country to bypass Pakistan and expand trade with Afghanistan and Central Asia. So far, India has invested US$24 million into developing Iran’s Chabahar port, a key shipping centre on the Persian Gulf.

Trade between India and Russia via the INSTC doubled last year. Indian exports to Russia through the corridor include construction supplies, clothing and footwear, rice, plastics, rolled iron, confectionery, seasoning, and food concentrates. Meanwhile, Russian non-energy exports to India include paper products, lumber, hygiene products, furniture, roofing materials, as well as foods, among other goods.

According to the latest data from the Indian Ministry of Commerce and Industry, trade turnover between Russia and India exceeded a record US$70 billion last year, increasing by 9% over the year. Russian companies supplied US$65.7 billion worth of goods to the Indian market, an increase of 8.4%. Indian exports to Russia grew by 21%, amounting to US$4.9 billion. Russia and India are on track to achieve their ambitious goal of increasing trade volume to US$100 billion by 2030, with the INSTC via Iran playing a key role in achieving these goals.

The International North-South Transport Corridor (INSTC) is a multimodal route for transporting passengers and cargo, with a total length of 7,200 km from St. Petersburg to India’s west coast Mumbai ports. The legal basis for this project is the Intergovernmental Agreement on the North-South International Transport Corridor, signed by Russia, India, and Iran in St. Petersburg on September 12, 2000.

Since then, the number of participating countries has grown to 14. Russia considers the project an important transit route between the countries of Northwestern Europe, the Caspian Basin, the Persian Gulf, Central, South, and Southeast Asia, and it connects various national transport systems into a single network. The main advantages of the INSTC over other routes, and in particular over the sea route through the Suez Canal, are that it reduces the distance, meaning transport costs can be reduced by US$2,500 per 15 tons of cargo when passing between India and Russia.