In recent years, the rise of Asia as the geoeconomic and geostrategic fulcrum has not only realigned global geopolitics but also reasserted the need for regional connectivity. For example, the intensified US-China competition, largely as a result of China’s assertive and seemingly unassailable influence in the Indo-Pacific and beyond, through its humungous connectivity project – the Belt and Road Initiative (BRI) – has compelled the US and its Indo-Pacific partner states to launch their own respective infrastructure initiatives, such as the US-Japan-Australia-initiated multi-stakeholder Blue Dot Network (BDN), the European Union’s Global Gateway, and the Group of Seven (G7)-led Build Back Better World (B3W). These West-led initiatives are projected as universal values-based and sustainable alternatives to China’s BRI, which has been plagued by allegations of corruption, mismanagement, and ensnaring poorer states into “debt traps”.
However, much before the West earnestly started to tap into Asia’s dynamic growth and infrastructure lacunae, Asian powers like Japan and India had envisioned harnessing the potential developmental opportunities via projects like the India-Japan-led Asia-Africa Growth Corridor (AAGC, see Map-I), Japan’s Expanded Partnership for Quality Infrastructure (EPQI), and India-Russia-led International North-South Transport Corridor (INSTC).
The INSTC, established in 2000, in particular predates the BRI and hence was not conceived as a counter to the BRI: for Russia, it was an alternative to the EU’s Transport Corridor Europe-Caucasus-Asia (TRACECA) and a means to strengthen its economic interests with an emerging India; for New Delhi, it was a means to gain access into Central Asia while bypassing Pakistan and forge connections in Europe. The intervening two decades may have irreversibly changed the geopolitical scenario, notably, with both Iran and Russia under intense Western sanctions, but the need for intra-regional connectivity has only spiked, as is evidenced by the growth in connectivity initiatives.
In the light of increasing India-China hostilities post the Galwan crisis and the debilitating current global instability due to, first, the COVID-19 pandemic, and now the Ukraine war, the INSTC has assumed greater significance as a trans-regional integration vehicle. At the same time, amid the era-defining autocracies versus democracies polarization, China’s growing bonhomie with both Iran and Russia, along with India’s closer ties with the US, has raised questions about the sustainability and viability of the INSTC.
What would be the future trajectory of the INSTC? What are China’s and Russia’s respective perspectives vis-à-vis INSTC? Could it become complementary to the BRI? Will it be more than Russia’s “escape route”? Could the INSTC be reduced from a trans-regional connectivity corridor to a corridor of power politics?
INSTC: Revitalizing India’s Eurasia connect
On September 12, 2000, India, Iran, and Russia signed the inter-governmental agreement on the INSTC at the second international Euro-Asian Conference on Transport in St. Petersburg; the agreement was ratified in 2002. Map-II below shows the proposed routes of the INSTC. The membership of the more than 7,000 km-long transport corridor has since expanded to include thirteen member states—of which eight are members of the Commonwealth of Independent States (CIS)—and one observer.
The INSTC is a multi-modal network comprising sea, rail, and road routes, and provides an inexpensive and faster alternative to connect parts of Europe, Russia, Central Asia, the Gulf region, and the Indian Ocean region. As a multi-stakeholder project, the INSTC is also a true multilateral integration initiative that aims to not only connect disparate regions but also pursue intra-regional development of diverse, dynamic, and resource-rich economies.
Although the INSTC project has been moving at a painfully slow pace and is yet to achieve its desired goals, its significance has grown tremendously, especially post the COVID-19 pandemic, when the need for alternative supply chains to reduce overdependence on China became overwhelming. Moreover, the fear of maritime blockades in a region that has multiple flashpoints—most recently the increased tensions that have induced the “new normal” in the Taiwan Strait—and multiple choke points has pushed the need to search and invest in newer routes.
Apart from the geopolitically induced stress on choke points, the stranding of the Ever Given container ship in the Suez Canal in March 2021—attributed to weather, technical faults, or human errors—which blocked cargo transit between the Mediterranean and the Red Seas for about a week, resulting in huge loss in global trade, highlighted that the choke points of international trade are in dire need of diversification.
At the same time, in the aftermath of the Ukraine war, there are also assertions that Russia intends to use the INSTC as “a potentially vital economic escape pathway route” into the wider Asian region to bypass Western sanctions that prevent the entry of Russian goods into Europe; that Ukraine is also a member of the INSTC seems moot at this juncture. The renewed urgency in INSTC operations seems to validate this: as of October, multiple Russian freight trains heading for India had crossed Iran.
In July 2022, the INSTC began operations via its eastern branch—running from Russia through Kazakhstan, Turkmenistan, and Iran to India. The first cargo with 39 containers would be transported to Bandar Abbas port in southern Iran via rail route and then to India’s Nhava Sheva Port via sea.
Moreover, the first Intermodal Digital Transports Internationaux Routiers (TIR) Pilot Transport between India and Iran, which enables seamless and paperless cross-border passage of products under the TIR system’s customs guarantee, was officially flagged off by India in September 2022, showing the immense growth of the INSTC vertical in the past year. The development of the TIR-based global road transportation system has a significant positive impact on regional trade mechanisms by facilitating cross-border trade flow, and has proven itself an effective model for lowering trade transaction costs and promoting greater growth of intra/inter-regional trade on a global scale.
By 2030, it is anticipated that the INSTC will be able to handle up to almost 14.6 to 24.7 million tonnes of freight annually; this amounts to over 70 percent of all container traffic between Eurasia, the Gulf region, and South Asia. Moreover, according to an INSTC dry run report by the government of India in 2014, the INSTC is significantly cheaper (30 percent) and faster (“doubled speed”) than the traditional Suez Canal route.
By drastically reducing transport time and costs, the INSTC will also aid India in fulfilling its energy needs, especially since the Reserve Bank of India-enabled rupee payment mechanism in global trade is expected to facilitate not only trade with Russia but also oil imports from Iran, with which India had stopped trading due to the US sanctions on Iran.
The INSTC may hold the key to India’s “Connect Central Asia” policy particularly when it is viewed in conjunction with the Ashgabat Agreement,estern corridor of the project via India, Oman, Turkmenistan, Uzbekistan, and Kazakhstan. This impetus is evidenced through India’s efforts at outreach to the region. For example, on 27 January 2022, India hosted the first India-Central Asia Summit—marking three decades of diplomatic ties—which included the presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan; connectivity and trade collaboration emerged as major areas of deliberation. Such renewed, action-driven focus on Central Asia in the past year has thus re-energized India’s “Connect Central Asia” policy.
Besides the aforementioned compelling need for diversification to avoid potential blockades of vulnerable choke points or dependencies on Chinese supply chains, the greater competition between the Russia-dominated Eurasian Economic Union (EAEU) and the EU over the economic integration of Eastern Europe as the war in Ukraine has escalated is also a factor for increased interest in the INSTC, especially for Russia.
The EAEU’s tense relations with the EU, which prefers to deal bilaterally with the states in the region rather than through the EAEU, and the EAEU’s need for exerting relevance in the face of its dominant member (Russia) facing sanctions, may catalyze the pending India-EAEU free trade agreement (FTA), which is on the cards. On the other hand, the FTA stands to boost India’s already burgeoning economy, strengthen outreach to Eurasia, and blunt China’s influence in the region.
Moreover, amid the BRI’s increasing footprint in Central Asia and Europe, the INSTC could be used as a trade balancer or leverage. All in all, the INSTC stands to benefit from the present geopolitical realignments, even as a number of security challenges, including use of these routes for terrorism or drug/weapons trafficking, and the threat of Western sanctions, continue to cloud over this valuable venture.
Will the China factor hinder INSTC growth?
The INSTC is strategically crucial for India because the corridor route circumvents Pakistan and provides Delhi access to Central Asia and Afghanistan, providing a viable counter to the controversial China-Pakistan Economic Corridor (CPEC) of the BRI (see Map-III), which India alleges violates its sovereignty. India is thus looking to expand the strategic value of the INSTC. During Prime Minister Narendra Modi’s visit to Tehran in 2016, India pledged up to USD 500 million investment, including USD 150 million line of credit from Exim Bank to Iran’s Maritime and Ports Organization for making jetties and berths, to develop Iran’s Chabahar port as a regional trade hub. This would allow for an alternative land-sea route for trade with Central Asia and is thus an integral part of the INSTC.
However, India’s rapprochement with the US, consequent compliance in stopping oil imports from Iran, and its prospective involvement in the Israeli-led “Trans-Arabian Corridor” (TAP), in tandem with China’s growing ties with Iran, have been important hindrances to such cooperation. The signing of the Iran-China partnership in 2020, in conjunction with the China-operated Gwadar port development as part of the CPEC, particularly dampened the prospects, especially amid speculations of India being “dropped” from a Chabahar-Zahedan (near the Afghanistan border) rail connectivity project. Nonetheless, in 2021, India officially asserted that it remains “engaged with Iran on the modalities of implementing the Chabahar-Zahedan railway project as well as other developmental initiatives.”
Another factor that is important in the regional geopolitical alignments is the power vacuum in Afghanistan post the US withdrawal of troops, which has resulted in a loss of influence for India amid increasing gains for China. As the Taliban have resumed power in Kabul, China has already reportedly entered talks over the CPEC’s expansion into Afghanistan, which will further threaten the INSTC’s influence projection.
Naturally, China recognizes that the INSTC will make it easier for India to enter emerging markets and provide a boost to the latter’s power projection ambitions. For instance, the digitalization of trade connectivity will enhance the development of common information-sharing systems and increase dependence on India. Besides, the creation of industrial parks and special economic zones (SEZs) for the growth of industries like pharmaceuticals and agriculture would add substantial commercial value to the connectivity corridor.
The INSTC will also provide India opportunities in bridging its energy demand-supply gap and in accessing untapped markets. Cross-border e-commerce will be another industry with the most to gain with the improvement in internet access among INSTC member nations and the wider corridor region. Such factors highlight that the intensity of competition between the multi-stakeholder INSTC and China’s BRI will only grow, especially as the latter does not intend to lose the hold it has created in the last decade over Central Asia.
China attempts to bolster its presence in Central Asia were evident through the visits by the Chinese State Councilor and Minister of National Defense Wei Fenghe to Kazakhstan, Turkmenistan, Iran, and Oman in early 2022. These trips assume greater importance as the INSTC has garnered operational significance in the wake of the Ukraine war and Western sanctions against Russia; and China as the West’s primary rival would not like to be sidelined by its ideological economic and security partners in reaping the opportunities provided by the resource-rich region.
Therefore, tempting as it is to see the BRI’s east-west axis as a complementary trans-regional developmental exercise to the INSTC, the two are unlikely to see convergence, largely due to India’s intrinsic objections to the BRI as an opaque, unilateral tool of expansion. Hence, the INSTC will serve as a counter-incentive to BRI: it will significantly check Chinese power in Central Asia, West Asia, and Eurasia. Furthermore, the corridor has the potential to expand up to the Baltic, Nordic, and even the Arctic—which will threaten China’s presence in these regions.
The INSTC also offers a chance for India’s infrastructure aims to go global, with state-run corporations leading the charge and paving the path for private businesses, which has been Xi Jinping’s mandate via the BRI. Moreover, as Russia is India’s partner in the INSTC, their bilateral ties are growing stronger which, to an extent, counterbalances Beijing’s upper-hand in its “no-limits” partnership with Russia, giving Russia a valid incentive to pursue the INSTC goals.
INSTC’s prospects amid challenges and India’s role
Nonetheless, there remain several internal and external challenges to the INSTC. In contrast to the BRI, which is supported by China’s massive resources and backed by specialized financial institutions, the INSTC is moving forward haphazardly and without a long-term plan. Regional development banks or INSTC member states provide the majority of the funding, and that is neither sustainable nor comparable to the BRI.
Furthermore, the Taliban takeover in Afghanistan has tilted the balance politically more in favor of China, which has built strong ties with the group. This will have an adverse impact on INSTC, and especially the development of Chabahar port. Moreover, even though the eastern branch of the INSTC has begun functioning, its potential remains unmet due to uneven support in the region. For instance, the Taliban has refused to participate in the quadrilateral grouping composing of India, Iran, and Uzbekistan to expand the use of Chabahar port and by extension the INSTC. For India, the push for including the port in the INSTC while expanding its membership base is “to maximize its potential” and also decrease Afghanistan’s dependence on Pakistan as an intermediary for trade with India.
At the same time, the uncertainty and repercussions due to the war in Eastern Europe has no doubt refueled the participant nations’ interest in rejuvenating the INSTC. Russia, in particular, has hailed the connectivity link as key to India-Russia ties and in turn as a trade link with the rest of the world (“a truly ambitious project” in Putin’s words). However, several issues and concerns have highlighted the tenuousness of the project:
- China’s bolstered links in Central Asia
- Continuing US sanctions against Iran
- Debilitating Western sanctions and ire against Russia
- Divergences among INSTC participants, including the ongoing war between two important members, Russia and Ukraine
- Terrorism, drug trafficking, and political instability as lingering threats
- Competing connectivity projects, besides the BRI, including the Trans-Afghan (Pakistan-Afghanistan-Uzbekistan) rail link and the US-led Quad Regional Support for Afghanistan.
Keeping the challenges in consideration, India, as a Global South leader and the current conduit between the East and the West, will need to deftly manage its foreign policy by establishing strong trade and connectivity links via the INSTC, which comprises two not-favored states by the West, while not appearing too soft on authoritarian regimes. In the long term, the INSTC needs a structured, digitalized mechanism that facilitates collaboration and congruence in policies, and thus catalyzes meaningful regional integration.
Another aspect would be to include states with credible developmental experience as observers or dialogue partners. For example, including Japan—its official development assistance in 2021 was USD 17.6 billion—in some capacity would be noteworthy; however, as the West’s stable partner, the move seems unlikely at present while the China factor may prove valuable in the future.
Most importantly, the ultimate aim of trans-regional development and cross-border flow of goods in times of energy and food insecurity cannot be sidelined in favor of power play.
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