Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Putin OKs Iran-India Cargo Corridor

After 18 months of high-level political negotiations and intense lobbying from shipping and transportation companies, President Vladimir Putin has finally approved an alternative transport corridor from Asia to Europe that is expected to bring Russia a new revenue stream worth billions of dollars a year.

Putin on Wednesday signed into law a bill ratifying a trilateral agreement on the development of a transport corridor from Mumbai, India, to the Caspian port of Olya in the Astrakhan region via Bandar Abbas in Iran.

"Now all three countries are close to ratifying the agreement, as India and Russia have already signed it," said Sergei Zhelanov, first vice president of the Euro-Asian Transport Union, a nongovernmental organization formed by transport companies.

Russia, India and Iran signed an agreement on the development of the North-South corridor in September 2000. It will be a channel for goods shipped to and from Russia, as well as an alternative transit route between Asia and Europe.

In terms of size and importance, "this project can be compared to the Trans-Siberian Railroad," Zhelanov said. "This is a very important step for international cooperation and Russia's integration in foreign trade."



Anil Trigunayat, a spokesman for the Indian Embassy in Moscow, said the North-South corridor would be beneficial for all countries in both a political and economic sense.

"We have tremendous potential for increasing trade in this region. Political focus is in place now, and business advantages are obvious: lower costs and less delivery time," he said.

Analysts said the cost of transportation via this corridor is likely to be the biggest lure for shippers. Most Indian cargo bound for Russia is moved either to Russia's Black Sea ports or via the Atlantic Ocean and Baltic Sea to St. Petersburg.

By Zhelanov's estimates, the new corridor will reduce delivery time by 10 to 12 days compared with the traditional routes through the Mediterranean and the Suez Canal. It will cut operation costs by about 20 percent -- or $500 -- per container.

Zhelanov said that although the corridor is already operating, its potential capacity is much larger. "The number of cargo containers going through this route annually is now about 1,000 to 1,500, which is nothing compared with our expectations," he said.

Experts estimate the annual trade turnover through the corridor could reach $10 billion per year in the future, with Russia, Iran and India the major beneficiaries.

Russia and Iran have also discussed the restoration of a direct rail link between the two countries within the framework of the transport corridor agreement.

As soon as the agreement is ratified by Iran, the three countries will be able to attract new members and sign partnership agreements with other countries that want to join the project. Zhelanov said they already have proposals from about 15 countries.

"When all the government agreements are signed, private companies will have all the necessary framework to operate through the corridor," he said. "Our main political task now is to create all the necessary conditions and infrastructure."

Zhelanov said the agreement called for the three nations to simplify the customs procedures along the route under most-favored nation status, keeping in mind the specific dangers of the region -- specifically narcotics.

Transit cargo between Europe and Asia will be subject to the least restrictions, he added.

Sergei Markov, director of the Institute for Political Research, warned that despite the benefits of the corridor to Russia, there will also be problems -- especially with Iran, which has been labeled by U.S. President George W. Bush as part of an "axis of evil" that also includes Iraq and North Korea.

"Iran is a very difficult path. We see contradictions with the United States on the increase," Markov said. "The United States is directly announcing its plans to overthrow the political regime in Iran. Political pressure will no doubt increase, so Iran is more likely to represent a problem than an opportunity," he said.