“Walking beyond three seas” 2.0: ITC “North – South” – new opportunities

Even in turbulent logistical realities, the North-South transport corridor should not be considered only as a way out of the “plight”. These are new grandiose opportunities and prospects for the economies of Russia, the Caspian region, as well as Iran and India. The roots and prospects of this priority multimodal project were analyzed by a group of experts: Lyudmila Teselkina, member of the Expert Advisory Council for the Implementation of Customs Policy at the FCS of Russia, Valentina Dianova, Candidate of Economic Sciences, Director of the Higher Engineering School “New Materials and Technologies” at the REU named after G.V. Plekhanov, Pyotr Tokarev, Head of the Department of Commodity Expertise and Customs Affairs of the REU  named after G.V. Plekhanov.

Photo: Russian President Vladimir Putin takes part in the opening ceremony of the central section of the Western High-Speed Diameter (WHSD) highway of the North-South international transport corridor in St. Petersburg (2016). Mikhail Klimentyev / RIA Novosti

Paradigm shift

Castling of world import and export flows required new logistics. Western sanctions have shown an acute dependence on the supply chains that Russia has adhered to for the past twenty to thirty years. Restriction of cargo transportation along the highways of the European Union, a ban on service in ports for sea vessels under the flags of the Russian Federation, as well as a closed sky forced the country to turn to the North-South project.

Logistics is a “new oil” for the Russian economy. Of course, transboundary highways will not be able to provide the budget directly with the same level of income as hydrocarbons – in domestic GDP, the component of transport does not exceed 10%. However, the indirect influence of the industry on the country’s economy today reaches 30%, including the oil and gas sector. Transportation in comparison with oil has one undeniable advantage – roads do not end over the years, and with the development of infrastructure and related industries they create new points of investment application. The created transport corridors are important not only for the formation of convenient routes and effective logistics, but also for unlocking the potential of the adjacent territories of the constituent entities of the Russian Federation. Logistics has even greater political and economic prospects: in addition to attracting Russian and foreign capital, highways can become an effective tool for creating new political alliances and maintaining Russia’s influence on the world stage.

Everything old is indeed new again

Some analysts draw an interesting historical parallel: the current global project “North – South” closely resembles the path “from Varangians towards Persians to fabulous India.” The new logistics network, with some reservations, actually repeats Athanasius Nikitin’s “Walking beyond Three Seas”. In 1468, an enterprising Russian merchant with a researcher’s vein and irrepressible curiosity began his famous journey from Tver to India, which predetermined the shortest route from Europe to the Indian Peninsula along the Volga, the Caspian Sea through Persia, the Persian Gulf, and the Arabian Sea. He was the first to open this path, which was subsequently used to one degree or another by Russian and foreign merchants for centuries. And in more than 500 years it will already be called the “North-South International Transport Corridor” (ITC).

The transport artery to Russia through the Indian Ocean and Iran operated during the Second World War. Military supplies under Lend-Lease went through it to the USSR. Soviet and British forces controlled the Trans-Iranian Railway and the highways connecting the Iranian South with the North from 1941 to 1946. The throughput of this direction at that time was impressive: in 1941 – about 10 thousand tons per month, and in 1943 – already up to 100 thousand tons. Then the cargo was transferred to the ships of the Caspian flotilla and sent to the USSR.

The modern history of the North-South trade route begins at the turn of the century. In 1999, the idea of ​ ​ the ITC was taken up as an alternative to the traditional route through the Suez Canal. The main advantages: a twice shorter route and a low cost of transportation, primarily due to railways.

New reality

Today development of ITC “North – South” gained new value. If within decades, progress in its development proceeded out extremely slowly including for the political reasons, then today, in 2020-th, it became critically necessary both to participants of the “Caspian convention” which defined the status of the Caspian Sea and to majority of the states with which there are arrangements on construction of infrastructure and transportation of goods. In 2022, the need of a new way became more than obvious in conditions when India faced consequences of a pandemic and escalation of the conflict with Pakistan, while Russia and Iran faced the sanctions policy limiting delivery of goods from former partners. Thus, ITC is the requirement of time and a promising alternative to the existing trade ways.

ITC “North – South” is the topic of heated discussions between political scientists, ecologists and economists, an ambitious project to create a multimodal passenger and freight transport route from the seaport of St. Petersburg to one of the largest ports on the west coast of India – Mumbai, with a total length of 7200 km. According to the transport strategy of the Russian Federation until 2030 with a forecast for 2035, as well as the strategy for the development of railway transport until 2030, this is one of the priority areas for the development of the Russian economy.

The direction combines sea routes from the port of Mumbai to the Iranian ports of Chekhbehar and Bender Abbas, railways through Iran, Azerbaijan and Russia, sea transportation in the Caspian Sea, including the development of river routes, as well as a vertical network of highways through the territories of Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Iran and Russia. Due to geographical features, the ITC is divided into three routes: Trans-Caspian, Western and Eastern route.

As part of the development, if necessary, it is planned to reconstruct roads and railways, modernize international checkpoints and port infrastructure, as well as transport. This is necessary for a mutual increase in cargo traffic and corresponds to the current agenda of international cooperation between the countries participating in the project.

Alternative to the Suez Canal

The North-South route in the future can really become a competitor to the Suez Canal, through which 10-12% of the total world cargo turnover passes. When in March 2021 one of the world’s largest container ships ran aground in the Suez Canal and thereby created a traffic jam, every hour of delay in ships with goods on board cost world trade $350-400 million in revenue. The accident was eliminated a week later – prices for the transportation of petroleum products by sea then doubled.

Compared to the existing route through the Suez Canal, transportation of goods along the North-South corridor will reduce costs by 16-20% and reduce the delivery time by 15-20 days. Annual additional revenues from the implementation of its capabilities are estimated at $5-6 billion at least.

Interests and prospects of Russia

By offering the world (and, first of all, to itself) an alternative route, Russia wins from all sides and insures itself in case of the next logistical sanctions. The new transport corridor will expand geography and simplify transportation to India, Pakistan, the countries of the Persian Gulf, Transcaucasia and Central Asia, as well as to the countries of the Far East, Southeast Asia and South China. In addition, the route will help replace the Baltic ports for communication with African countries (through Turkish and Iranian ports) and Asia (through Iranian ports). According to the EADB, immediately after the launch of the transport corridor, cargo traffic will increase by 2-4 million tons per year – Russian metals, food, fertilizers will be added, container transportation will increase.

The development of the North-South corridor will reduce the dependence of Russian logistics on external factors. In addition to the formation of convenient routes and effective logistics, ITC is important for unlocking the potential of adjacent constituent entities of the Russian Federation. In the case of ITC, the key regions are the Astrakhan region (ports of Astrakhan and Olya) and Dagestan (port of Makhachkala). North Ossetia and Ingushetia (highways to Iran through Georgia and Azerbaijan), Kalmykia (port of Lagan in the Caspian), Volgograd (geographically convenient location for a logistics hub) will be able to use the potential of ITC for development.

Since the times of the USSR, only one narrow, highland strategic “Georgian Military Road” passed through the Caucasus Ridge, which is currently the only transport thread connecting the North Caucasus with Transcaucasia. It is surprising that I.V. Stalin did not decide on the construction of at least one more trans-Caucasus highway from Russia to Georgia. The rest of the roads and railways go along low passes along the coast of the Black and Caspian Seas at a distance of many hundreds of kilometers. In the late eighties, the USSR State Planning Commission approved the start of construction of a railway along the gorge and valley of the Assa River.

The construction of the railway connecting the Dzheyrakh district of Ingushetia and Hevsuretia in Georgia began, but was not completed due to the collapse of the USSR. We can expect with confidence that one of the challenges in creating an extensive network of North-South roads will be the creation of both Trans-Caucasus railway and road transport corridors. This will create a very favorable “new geography” for the Russian North Caucasus republics and regions, which will entail both the construction and modernization of the relevant infrastructure, and will give impetus to economic development for Dagestan, Chechnya, Ingushetia, North Ossetia and Stavropol Territory. To ensure these branches of the corridor, the construction and modernization of the corresponding infrastructure is already required.

Advantages of ITC North – South

At the moment, we are facing the formation of a new promising route, which is likely to become the basis for the creation of a large and sustainable interstate trade alliance. The IV International Foreign Economic Scientific and Practical Forum “Challenges and Solutions for Business: Synergy of Competencies”, which will be held in online and offline formats on November 23, 2023 at the Plekhanov RUE site, is devoted to a detailed discussion of the issues of ITC “North – South”.

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