New INSTC Transport Corridor Reduces Russia’s Dependence On North Central Asian Transit

Russia’s declared “Pivot to the East” requires efficient transport corridors for trade with Asian economic partners. To the already extremely busy Trans-Siberian Railway and the Baikal-Amur Mainline (BAM), as well as the Middle Corridor routes through Kazakhstan, another route may soon be added within the framework of the International North-South Transportation Corridor (INSTC) from St. Petersburg to India.

This route has a significant feature as it doesn’t pass via Kazakhstan and reduces Russia’s reliance on its Central Asian neighbours.

Igor Babushkin, Governor of the Astrakhan Region, which lies on the Caspian Sea, has said that “We are negotiating with Turkmenistan on the creation of a shipping line between our ports and the construction of a logistics centre in the Astrakhan region. Already now we are ready to accept additional volumes of cargo from Southeast and Central Asia and ensure their transportation along the INSTC. This route has many directions, including through the territory of Kazakhstan and Iran.”

The new route can ship freight from China-Kyrgyzstan-Uzbekistan-Turkmenistan, then along the Caspian Sea to the port of Astrakhan. Thus, we are talking about the fact that the southern countries of Central Asia will build a multimodal route to Russia, bypassing their northern neighbour Kazakhstan.

Russia, Kazakhstan and Kyrgyzstan are members of the Eurasian Economic Union (EAEU) with a common border. The creation of the EAEU is based on four fundamental principles: the free movement of goods, capital, people and services. However, these principles are not always observed. In particular when it comes to difficulties with crossing the Kazakh-Kyrgyz border.

Igor Shestakov, director of the Oy Ordo Centre for Expert Initiatives from Kyrgyzstan, has stated that the issues are long-standing, with long traffic jams at this border. Freight carriers complain about the border guards of Kazakhstan and talked about the need for alternative routes for delivering goods to Russia. Since then, the situation has changed little, despite the EAEU’s involvement.

“Throughout the years of Kyrgyzstan’s independence, a problem has arisen when transport trucks have to stand in lines for up to several days, or even longer, in order to pass their cargo through the Kazakh checkpoint. It seems to me that transport problems arise because of politics. During the irrigation season, Kazakhstan needs more water for agriculture, which flows from the territory of Kyrgyzstan. Therefore, as a lever for pressure, Kazakhstani customs officers appear, who begin to detain goods,” Shestakov says.

Kazakhstan benefits from Russian transit. But, as Shestakov says, sometimes it  abuses this status. This has prompted both Kyrgyzstan and Uzbekistan, and China, to look for alternative routes for the supply of goods to Russia and further to Europe bypassing Kazakhstan.

In particular, the construction of the China-Kyrgyzstan-Uzbekistan railway should soon begin (the relevant document has already been signed). The Ministry of Foreign Affairs of Kyrgyzstan recently announced Russia’s interest in participating in this project on Kyrgyz territory. The route will make it possible to deliver goods from China via Kyrgyzstan directly to Uzbekistan, and further to Turkmenistan to Russia’s Caspian ports. The same route will be used by local producers who need to supply their products to the European part of Russia, as well as to Iran, the Caucasus or Europe. For Russia, this route is also beneficial, creating new transport corridors.

Stanislav Tkachenko, a Professor of St. Petersburg State University, and Doctor of Economics discussed why it is beneficial for Russia to use the INSTC route through the Caspian Sea when trading with China, stating “The potential of the Trans-Siberian Railway and the Baikal-Amur Mainline turned out to be clearly insufficient to solve the problems of the Russian pivot to the East. It is not always possible to carry out the transportation of containers through the ports of the Far East quickly and efficiently. Therefore, logistics routes through Central Asia will primarily focus on this high-margin area of the transport business.”

It is assumed that as Russia’s economic relations with China and other countries of the Asia-Pacific region develop, the load on existing roads in the Far East (railroads and highways) will increase. Therefore, the demand for the expansion of existing routes, as well as the construction of new ones, will persist for decades.

The integration project being implemented by Russia and the countries of Central Asia within the framework of the EAEU, as well as through Russia’s partnerships with Uzbekistan, Tajikistan and Turkmenistan, requires the modernisation of the transport network. The Central Asian states inherited an extensive network of railways and highways, as well as pipelines from the USSR. But they clearly no longer correspond to the new economic realities, including solving the problems of developing trade with non-regional players in the face of China, India, European countries, the South Caucasus, and the Middle East.

In particular, Kyrgyzstan and Uzbekistan remain among the most closed countries in the world from a transport point of view. “Both are double landlocked, while international trade between their markets and the outside world is carried out mainly along unsatisfactory roads or requires crossing several state borders, on each of which cargo can be delayed for many days” Tkachenko believes. Solving the problem of speeding up the transportation of goods and improving the quality of logistics services requires multilateral cooperation. This is exactly what Russia and China offer the region.

According to Tkachenko, the demand for alternative transport routes between China and Europe (including through Russia) is growing. “The more quality routes there are, the more likely they are to attract the attention of international carriers. For example, at the start of the COVID-19 pandemic, rates for shipping cargo from East Asia via the Suez Canal to Europe skyrocketed. If the carriers then had the opportunity to carry large volumes of cargo through Central Asia, they would have done it,” Tkachenko believes.

Finally, new routes are in demand not only purely economically, but also from a political point of view.

“The construction of a new railway from China through Kyrgyzstan to Uzbekistan and further to the coast of the Caspian Sea is an important step in minimizing the threat of dominance on these routes by individual states, depriving them of the opportunity to extract monopoly profits or geopolitical dividends from their geographical position. Russia has reason to fear that Astana will not be able to resist the United States in their demands to join the sanctions measures in trade, turning the Russian-Kazakh border into a kind of Western cordon sanitaire.” says Tkachenko.

In the event that the supply of goods important for the Russian economy can bypass Kazakhstan, the Kazakh authorities will have fewer opportunities to succumb to pressure from Washington in its sanctions war with Russia.

Meanwhile, Astrakhan has great potential as a major transport and logistics hub. Being located in the Volga delta, the Astrakhan seaport and the new Olya commercial seaport could take over a significant part of the transportation of goods along the North-South ITC. Theoretically, the potential of the two ports of the Astrakhan region is huge, and in 2022–2023 their cargo turnover shows positive dynamics. However, the real numbers are so far rather small. In 2022, they handled and transported less than 10,000 twenty-foot containers – a very weak indicator for the industry.

In order for Astrakhan’s ports, as well as future transport and logistics complexes to develop, a huge amount of work needs to be done with the participation of foreign partners. Thus far however, the contributions of Iran’s railway network, as well as the Iranian ports of Anzali (Caspian) and Bandar Abbas (Indian Ocean) for transhipment of goods are still insignificant, mainly because at present they are in strong competition with road transport. This should change however when Iran’s INSTC bottlenecks, including the Rasht-Astara railway line are completed in late 2024.

The rapidly developing infrastructure that allows cargo to be transported from Russia to Iran and India both along the western shore of the Caspian (through Azerbaijan) and along the eastern shore (through Kazakhstan and Turkmenistan) however, currently makes investments in Russian ports on the Caspian Sea risky.

The solution to the problem can be the cooperation of all interested parties, including within the framework of the EAEU and the SCO, since these two integration structures have declared the transport sector one of their development priorities. The price of this issue is measured in tens of billions of dollars, however, the successful solution of the problem of developing a transport network in Central Asia and around the Caspian requires ensuring security and stability in the region.

Source: Vzglyad

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