India-Central Asia Connectivity and the Role of International North-South Transport Corridor (INSTC)

Introduction

Central Asia is an integral element of India’s extended neighborhood. India has enjoyed millennia old historical, cultural, economic and civilisational links with Central Asia. Although the Connect Central Asia Policy was launched in 2012, the region started attracting renewed interest and focus with the coming to power of the government led by Prime Minister Narendra Modi in 2014. PM Modi demonstrated his commitment to strengthening partnership with Central Asia by becoming the first Indian Prime Minister to visit all the five countries of the region in July 2015. Since then, he has visited the region several times more viz. Tashkent in 2016, Astana in 2017, Bishkek in 2019, and Samarkand in 2022.

The time today is opportune for providing a significant impetus to bilateral strategic, economic and commercial ties. India is today the fifth largest economy in the world, having risen to the present status from the 10^th position ten years ago. It is the fastest growing major economy in the world and likely to become the 3^rd largest global economy by 2027/’28. The MD of IMF has termed India as a ray of hope in an otherwise gloomy global economic environment.

The most serious obstacle in giving a significant impulse to bilateral economic and commercial partnership between India and Central Asia is the absence of geographical contiguity, the absence of common borders. Pakistan does not permit Indian cargo or goods to be transported directly through its territory to Central Asia or to Afghanistan. It hence becomes essential for India to reach out to Central Asia through a Connectivity Project that is fast, efficient, safe and competitive. The International North-South Transport Corridor (INSTC) which was initiated in 2000, ideally meets this requirement.

Evolution of the International North-South Transport Corridor (INSTC): Although the INSTC was launched 25 years ago, it started receiving earnest and focused attention only after the assumption of power by PM Modi in India in 2014. This period also coincided with the signing of the Iranian nuclear deal, the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 nations in 2015 which resulted in removal of sanctions on Iran for a few years. This provided a strong impulse to the development of this Project.

The Russia-Ukraine conflict in February 2022 resulting in wide-ranging sanctions on direct export of goods and commodities from Russia to Europe, made Russia look more keenly to Asia and infused further energy in this venture. The more recent Gaza conflict between Israel and the Hamas, resulting in attacks by the Houthi rebels on shipping through the Red Sea and the Suez Canal has further exacerbated the security situation in the region and added to the attractiveness of this Connectivity Corridor.

The INSTC is a multi-modal connectivity project that establishes transport networks over the ship, rail, and road routes for moving freight between India, Iran, Central Asia, Russia, and Europe. The primary goal of INSTC is to enhance connectivity and promote trade and economic cooperation among these regions. It holds the potential to reshape trade dynamics and contribute to the economic development of the participating countries while offering alternative trade routes for global commerce. However, its full realization depends on overcoming various logistical, political, and infrastructure challenges.

Progress on the route has been slow since the ratification of the agreement in 2002 primarily because Iran has been under international sanctions for much of the period. On January 18, 2012, a meeting in New Delhi discussed the various modalities to take the project forward. As a follow-up, collaboration with Central Asian nations was proposed and the group was expanded. The current members are India, Iran, Russia, Azerbaijan, Kazakhstan, Armenia, Belarus, Tajikistan, Kyrgyzstan, Oman, Syria, Turkey, Ukraine, and Bulgaria (observer). Turkmenistan currently is not a formal member but has road connectivity with the corridor, after being formally invited by PM Modi in 2015. Uzbekistan is not a formal member of the Project, but it has expressed strong interest in connecting with the Project to reach the warm waters of the Indian Ocean as it is a doubly land-locked State.

Mumbai is at the southern hub of the route. The route extends to Bandar Abbas in Iran via sea. Bandar Abbas is a sprawling port city on the southern coast of Iran, on the Persian Gulf. It occupies a strategic position on the narrow Strait of Hormuz.

The INSTC also seeks to synchronize with the Ashgabat agreement, a Multimodal transport agreement signed by India, Oman, Iran, Turkmenistan, Uzbekistan and Kazakhstan for creating an international transport and transit corridor facilitating transportation of goods between Central Asia and the Persian Gulf.

Three main routes of the INSTC have been developed including the Western route (Russia- Azerbaijan- Iran- India), Middle or Trans-Caspian route (Russia-Iran-India) and Eastern route (Russia- Central Asia-Iran-India).

The Middle Route: The Middle or Trans-Caspian Route travels from Bandar Abbas to Bandar-e-Anzali by road on the Iranian mainland. Bandar-e-Anzali is an Iranian port on the Caspian Sea. The route travels from Bandar-e-Anzali to Astrakhan by ship across the Caspian Sea. Astrakhan is a Caspian port in the Russian Federation. The city lies on the two banks of the Volga River. From Astrakhan the connectivity extends to other regions of the Russian Federation, and further into Europe by Russian Railways. The 37km of new railway line linking the provincial capital Rasht with the port of Bandar-e Anzali on the Caspian Sea was completed in June 2024. The link is expected to carry 600,000 passengers and seven million tonnes of freight a year. It connects ports on the Persian Gulf in the south of Iran with those on the Caspian Sea to the north.

The Western Route: The Western part of the INSTC through Azerbaijan has to use the Qazvin-Rasht-Astara railway. This connects the existing railways of Azerbaijan and Iran. The agreement on the route’s construction was signed by Iran, Azerbaijan and Russia in 2005. The most challenging section from an engineering point of view was the construction of the railway between Rasht and Ghazvin which started in 2009 and took nearly a decade to complete. On 22 November 2018, a test train ran for the first time on that 164 km section of the line whose formal opening ceremony was held on 6 March 2019. Connectivity between the Azerbaijani and Iranian ports of Astara was established in 2017. The first arrival of a train all the way from Russia to Iranian Astara was accomplished on February 8, 2018.

The Rasht-Astara railway is not yet operational. The construction of this railway line is expected to begin after March 2025. This is the only missing link in the uninterrupted rail connectivity between Russia and Iran. The total cost of the Rasht-Astara line is estimated at Euros 1.6 billion. Russia is expected to finance the project with an intergovernmental loan of Euros 1.3 billion. The railway line when completed would boost trade between South and Central Asia.

Dry runs of the above two routes were conducted in August 2014, the first was Mumbai to Baku via Bandar Abbas and the second was Mumbai to Astrakhan via Bandar Abbas, Tehran and Bandar Anzali. The objective of the study was to identify and address key bottlenecks. The results showed transport costs were reduced by “$2,500 per 15 tons of cargo”. A study conducted by the ‘Federation of Freight Forwarders’ Associations in India (FFFAI) found that the INSTC route was “30% cheaper and 40% shorter than the current traditional route”.

The Eastern Route: Among the above-mentioned three routes, the eastern sector of the INSTC is very important because it connects the eastern and central regions of Russia through Kazakhstan and Turkmenistan to the southern ports of Iran and also to India and Arab countries on the southern edge of the Persian Gulf. This became part of the International North-South Transport Corridor (INSTC) when it was completed and operationalized in 2014. This 677km railway line connects Uzen in Kazakhstan to Gorgan in Iran via Berket in Turkmenistan, effectively integrating into the INSTC network.

The eastern branch of the INSTC was officially launched with the first train making the journey in July 2022. The railway companies of Russia, Kazakhstan and Turkmenistan formed a new joint venture in April 2023 to operate rail freight services on the eastern branch of the Corridor. This has gradually become a preferred route considering the political turmoil and lack of infrastructure in the Caucasus region. The establishment of a joint venture indicates the trust in this route of the parties involved. The parties agreed to combine their competencies to form competitive tariff rates and seamless transportation of goods on the corridor. The agreement also includes the participation of several cities Aksaraiskaya, Ozinki, Bolashak, Inche-Boron and Sarakhs, which are situated on this route. After crossing the border at Sarakhs (on the border of Iran and Turkmenistan), the journey continues across Iran to Bandar Abbas, the South Iranian port from where vessels take the cargo to India. Six trains are currently running on the route overland, from Russia to India via Kazakhstan, Turkmenistan and Iran. These trains indicate the increased interest in transport by rail from Russia to India, as multiple routes are unfolding on the corridor.

According to recent data, around 19 million tonnes of cargo were transported along the eastern and western routes of the INSTC in 2023, signifying a significant increase in usage compared to previous years; specific data on the exact amount transported solely through the eastern route is not readily available.

Chabahar and INSTC: A look at the map of Iran would indicate that the Chabahar port in the extreme southeast of the country in Sistan and Balochistan province is much closer to India as compared to Bandar Abbas in Hormozgan province and the Strait of Hormuz. Some significant aspects however need to be noted regarding the Chabahar port.

1. The Chabahar port is the only Iranian port with direct access to the Indian Ocean. It has been called the “Golden Gate” to Afghanistan and Central Asia. Indeed, Chabahar is Iran’s first “deep-water port”. Iran has invested heavily in developing Makran beaches and Chabahar port, a combination of economic, social, and military-security programs. Iran’s efforts to implement the Chabahar port transit project seem to be part of the country’s long-term goal of becoming a regional transit hub.
2. The role and place of Chabahar port increased when India, Iran, and Afghanistan signed a historic trilateral agreement in Tehran on May 24, 2016, during the visit of Indian PM Narendra Modi to Iran to develop the strategic Iranian port of Chabahar as a key node in a “Transit and Transport Corridor.” Uzbekistan, as the only doubly land-locked Country in Central Asia soon joined this initiative. After the Iran-India-Afghanistan tripartite transit agreement, the transit capacity of Chabahar port was increased by India from 2.5 million tons to 8.5 million tons per year in 2017. In the second stage of development, the capacity of Chabahar port is to increase to 33 million tons. Although there was a short break in this agreement after the Taliban came to power in Afghanistan in August 2021, gradually this challenge has been solved, and the Islamic Emirate is trying to increase its domestic and international political legitimacy and Afghanistan’s economic situation through economic and transit projects such as the Chabahar transit project.
3. Although the Donald Trump administration in Trump 1.0 unilaterally withdrew the United States from the Iranian nuclear deal (JCPOA) on May 18, 2018, shortly after the implementation of the Indian-Iranian-Afghan agreement and imposed wide-ranging sanctions on Iran, India was able to intervene successfully to get an exemption for the Chabahar transit project from the Trump administration’s “maximum pressure policy” (2018–2020) against Tehran. The exemption of the Chabahar transit project from the unilateral US sanctions continued in the administration of Joe Biden. This was a welcome development for both Iran and Russia as both are under severe sanctions. Chabahar has however again come in the crosshairs of Trump 2.0. An Executive Order by Trump after assuming power ended the sanctions waiver for Chabahar. It is unclear whether India will be able to get this Order waived this time as it was able to in 2018.
4. Non-completion of the 628 km. long Iranian eastern railway line connecting Chabahar to Zahedan is an important constraint in the fast and easy transportation of goods and containers to Central Asia. This has resulted in the rail cargo to be transported on this route from Russia and Central Asia to Bandar Abbas in the Strait of Hormuz, which is connected to the national railway of Iran. Bandar Abbas is 680 km away from Chabahar port. If rail connectivity to Chabahar port is provided, transit from India to Afghanistan, Central Asia, and Eastern regions of Russia will be quicker, smoother and shorter at a lower cost, and at a faster speed. To overcome this challenge, the railway connectivity project was started in 2020. It is likely to be completed by end 2025. The railway will be able to annually transport 2 million passengers and 7.7 million tons of cargo.

This is part of Iran’s ambitious project for the construction and development of the railway in the east of the country. The 1350- km “Chabahar-Zahedan-Mashhad-Sarkhs” railway axis connects the extreme southeast of Iran to the northeast of the country on the border with Turkmenistan.

Challenges in Utilisation of INSTC: The primary challenges in using the INSTC include geo-strategic uncertainties, geo-political tensions between participating countries, inadequate infrastructure development along the route, complex customs procedures, security concerns in certain regions, lack of a dedicated funding mechanism, and differing tariffs across nations which can hinder smooth trade flow and overall operational efficiency.

Geo-strategic Uncertainties:

The ‘’Maximum Pressure Policy’’ against Iran launched afresh by President Trump after assumption of power in January 2025, and withdrawal of sanctions waiver from the Chabahar port has introduced huge uncertainty in the further development of the INSTC project.

Geopolitical complexities:

The corridor passes through regions with complex political dynamics, including conflicts between countries like Armenia and Azerbaijan, which can disrupt operations and deter investments.

Infrastructure gaps:

Many sections of the corridor lack necessary infrastructure like roads, railways, and ports, requiring significant investments to upgrade and develop.

Customs hurdles:

Different customs regulations across participating countries can cause delays and complexities in trade procedures.

Security concerns:

Certain regions along the corridor are prone to security threats from terrorist groups, impacting transportation safety.

Funding limitations:

Unlike initiatives like China’s Belt and Road Initiative, INSTC lacks a dedicated funding source, making it difficult to finance large-scale infrastructure projects.

Differential tariffs:

Varying tariffs across the corridor can create trade imbalances and discourage efficient utilization of the route.

Lack of coordinated strategy:

The INSTC often operates without a unified strategy or clear roadmap for development, leading to inconsistencies and delays.

Political will and cooperation:

Consistent commitment and cooperation from all participating countries are crucial for the successful implementation of the INSTC.

Conclusion: INSTC is a significant alternative route for transportation of cargo from India to Central Asia (particularly Kazakhstan and Uzbekistan since they are the largest economies and India’s main trading partners in the Region), Russia, Afghanistan and Europe. The recent geo-political challenges including the Russia-Ukraine conflict and the Israel-Hamas confrontation have significantly enhanced the imperatives of development and utilization of the INSTC. The missing transport infrastructure links like the Rasht-Astara railway link and the Chabahar-Zahedan-Sarakhs connect are likely to be realized in the coming years. The full operationalisation of the INSTC in the near future will provide a huge benefit to regional economic exchanges, particularly between India and Central Asia, and also promote political, strategic and logistical partnership between the participating countries.