India’s seamless connectivity aspirations get a huge fillip with the operationalisation of INSTC

The West has consistently ratcheted up pressure on India to discourage it from buying crude oil from Russia. Though India made its stand clear time and again, the West insisted that India tow its line. Things have come to such a pass that last week the US consulate General in Mumbai wrote directly to the Mumbai Port authority, to not allow the Russian vessels to dock at the port due to American sanctions against Russia. Taking serious objection to America’s direct letter, India asserted its sovereign right to engage with global partners for national interests.

The focus on the Ukraine issue and its plausible repercussions in the Indo-Pacific region has taken away the attention from another important development. While G7, NATO and BRICS continue to dominate the geopolitical discourse, a major economic corridor has taken shape and test trials were also launched. The 7200km long, multimodular transport corridor INSTC or simply (International North-South Transport Corridor) connecting St Petersburg to ports in Iran and India has been operationalized.

Notwithstanding the mounting pressure from the West to boycott Russia’s energy supplies, India, an energy-hungry economy started importing Ural crude. As per Department of Commerce data, Russian imports surged to $3.18 billion in the month of April-May becoming the fourth largest supplier of oil¹. The Ukraine crisis has inadvertently boosted the long overdue Indo-Russian energy cooperation.

For decades, defence cooperation has been a major pillar of the longstanding Indo-Russian partnership, to take the partnership to next level during President Putin’s visit to India in 2021, both countries have set a target of $30 billion in trade and $50 billion investment by 2025. An increase of 38% in trade in the first half of 2021 despite the pandemic restrictions, prompted both sides to objectively assess the roadblocks impeding bilateral trade². In 2020 to jointly develop multi-modal logistics services along INSTC, Indian Railways’ Container Corporation of India signed an agreement with Russian Railways (RDZ).

Among the many factors that affected Indo-Russian bilateral trade poor connectivity has been a major issue. With INSTC stalled, looking for alternative routes, countries proposed to establish a shipping corridor between Chennai and Vladivostok which can reduce shipping time to Russia’s far east by 16 days. But Russia’s military action against Ukraine has brought to fore Russia’s Kuril Islands dispute. South Korea and Japan have refused to cooperate and now the proposal is temporarily shelved. But the punitive sanctions regime has bolstered Russian resolve to address the connectivity hurdles to ramp up trade.

To facilitate seamless connectivity back in 2002, founders Russia, Iran and India signed an agreement for INSTC, a trans-continental economic corridor avoiding the circuitous Suez Canal route. The original plan which includes rail, ship, and road routes would involve moving freight from Mumbai in India to Bandar Abbas port and Port Anzali in Iran to Astrakhan along the Caspian Sea, Moscow, and St. Petersburg in Russia.

The landlocked Central Asian Republics, Caucasian and even Baltic countries showed interest in INSTC. Ten countries- Turkey, Azerbaijan, Kazakhstan, Armenia, Belarus, Tajikistan, Kyrgyzstan, Oman, Ukraine, and Syria joined INSTC with Bulgaria as an observer. Baltic countries Latvia and Estonia expressed interest to join the group. Now the Ukraine crisis has turned them anti-Russian. INSTC comprises of three branches- East, West and Central.

The Central branch begins with the Jawaharlal Nehru Port, Mumbai, and connects to Bandar Abbas port on the Straits of Hormuz and passes through Iranian territories to reach Port Anzali and runs through the Caspian Sea to reach Russian ports of Olya and Astrakhan. The Western branch comprises a rail network that connects Azerbaijan to Iran. The Eastern branch connects Russia to India through Central Asian countries- Kazakhstan, Uzbekistan and Turkmenistan. Currently, Turkmenistan is not a formal member and Prime Minister Modi has invited Ashgabat to join the INSTC.

In 2021, Russia has agreed to India’s proposal of including Iran’s Chabahar port developed by India in INSTC. Unlike Bandar Abbas port, Chabahar connects to the Indian Ocean and can handle cargo ships of 10,000 tons capacity. With the integration of Chabahar, India plans to offer INSTC membership to Afghanistan and effectively actualize the policy of “Connect Central Asia” which failed to take off due to lack of connectivity.

Over the past two decades, hit by various geopolitical storms, INSTC failed to commence. In 2014, two dry runs were conducted. The first one was from Mumbai to Baku via Bandar Abbas and the second one was from Mumbai to Astrakhan via Bandar Abbas, Tehran and Port Anzali. As against the 40 days for the shipment of goods, the dry runs took 27 days.

These direct routes reduced the travel time, reduced distances, fuel expenses and ensured faster deliveries. It was expected that the INSTC route would be up and running in six months. But Iran was soon embroiled in the sanction regime. Lack of loan facilities, inadequate insurance and irregular shipping services to Iran has delayed the process. Nevertheless, for better economic integration India signed the Double Taxation Avoidance Agreement (DTAA) and Bilateral Investment Protection Agreements (BIPA) with some member states of the INSTC.

India has developed the Chabahar port and began operating from the refurbished Shahid Chisti port in 2018 to trade with Afghanistan bypassing Pakistan. Ever since India has been steadily pushing for the operationalisation of the INSTC. Now, Western sanctions have prompted Russia to look east and diversify its trade with partners that refused to join the sanctions regime. Surrounded by adversaries, China and Pakistan, overland transport to India was risky and it could be safely reached by sea.

Till now, the India-Russia trade has largely been through sea via the Suez Canal route. But in a geopolitically charged atmosphere, trade is always the first casualty. To avert such threats, Russia gave a big push to INSTC which passes through the Caucuses, avoids narrow maritime routes with potential for political blockades and drastically reduces the transit time for goods. With Oman on INSTC board, even the military blockades are also taken off.

With Chabahar on the agenda, the Iranian foreign minister visited India on June 8^th to prepare a ground for the operationalisation of INSTC. On June 14^th commencing a trial run, two Russian consignments of 40 feet weighing 41 tonnes set off from St Petersburg. The containers reached the Mumbai port via Astrakhan, Port Anzali and Bandar Abbas after 24 days.

Following the successful dry run, at the 6^th Caspian Summit attended by the Presidents of Azerbaijan, Iran, Turkmenistan and Kazakhstan President Putin batted for “a speedy launch of NSTC”³ and described it as a “transport artery from St. Petersburg to ports in India and Iran”. With nodes in Central Asia, West Asia and Caucasia, INSTC can serve as an alternative to Suez Canal and a potential competitor to BRI. Indeed, frazzled by the operationalization of INSTC, China has dispatched Chinese defence minister Wei Fenghe to Kazakhstan, Oman, Turkmenistan and Iran to dissuade them⁴.

In 2018, when India sided with Trump’s fresh sanctions against Iran, to checkmate India’s attempts of making Chabahar central to INSTC, China roped in Iran under the BRI and signed a deal to develop Chabahar port. Also, by overseeing the Afghanistan-Pakistan Action Plan for Peace and Solidarity (APAPPS), China strengthened a cooperative mechanism of strengthening a coalition with Iran, Pakistan, Afghanistan, Central Asian countries and even extending it to Russia to isolate India⁵.

But India continued to develop strong ties with the Central Asian Republic through defence, counterterrorism, trade and energy (Uranium) cooperation. To bolster trade and investment, besides extending membership to INSTC, India resolved to sort out technicalities to ensure hassle-free movement of goods.

The Ukraine crisis has paralysed China’s BRI expansion in the Eurasian landmass. Indeed, Beijing began exploring an alternate route via Central Asia and Iran to reach European markets. Further, the slowdown of the economy due to covid, the drying up of investments has considerably slackened China’s aggressive BRI pursuits. On the contrary, reeling under sanctions, Russia gave a huge push to NSTC in the wake of the Ukraine crisis and Central Asian countries being wary of hidden debts of BRI, reposed interest in INSTC. After two decades, things seem to be finally falling in place.

After Western companies left sanctions-hit Russia, Indian retailers are seeking to replace them, INSTC can facilitate the expansion of Indian trade and business to Russia and Central Asian countries. While Iran’s trans Railway corridor and sections of the rail network in Central Asian regions are still under construction, Russia’s transit cargo meant for India reached Iran on July 14th marking the official launch of NSTC. The first rail transit cargo carrying 39 containers from Russia entered Iran through Kazakhstan and Turkmenistan and from Iran’s Bandar Abbas port, the cargo will reach Mumbai port.

Rising oil prices have forced India to purchase discounted crude from Russia which is shipped by sea. Russia is now among India’s top five oil suppliers. India has tripled its coal imports and fertilisers from Russia which can now be transported overland. INSTC will open up a slew of opportunities for India to expand its trade to Central Asian, Baltic countries, Caucasia and Russia.

Refusing to succumb to Western pressure and impressively defending its neutral stance, effectively engaging and collaborating with Western partners on various multilateral forums, India is resolutely pursuing its national interests. Being part of multiple issue-specific coalitions, extensively reaching out to multiple partners, and objecting to any breach of its sovereignty, India is deftly balancing relations with arch enemies-the US and Russia at the same time. Emphatically exercising its strategic autonomy, while awaiting the first Russia consignment via INSTC, PM Modi is exploring India’s role at the first ever I2U2 summit with Israel, UAE and the US. Displaying an energetic diplomatic elan and alacrity in responding to swift geopolitical changes, India is treading cautiously to secure its economic interests.

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