North-South ITC to compete with Suez Canal route

North-South ITC to compete with Suez Canal route

A large-scale transport project is being launched by Russia, Azerbaijan and Iran - a route of more than seven thousand kilometers will connect St. Petersburg and Mumbai. The realization of the long-planned idea was made possible because of the lifting of sanctions from Iran. The route is expected to compete with the sea route via the Suez Canal. According to Vzglyad, Russia has agreed to start substantive elaboration work for implementation of the North–South transport corridor after talks with the foreign ministers of Azerbaijan and Iran. The corridor will be routed along the western coast of the Caspian Sea, from Russia to Iran through Azerbaijan, Russian Foreign Minister Sergey Lavrov said.

"This project will involve our transport ministries, which will consider technical and financial aspects, as well as interaction between our customs and consular services. We have agreed on all of this today," Lavrov said.

"We believe that these projects will speed up cargo transit. We are discussing the final details," Iranian Foreign Minister Mohammad Javad Zarif said in turn. "We believe that this cooperation serves the interests of the peoples of Iran, Azerbaijan, and Russia and, of course, the interests of the entire region," the head of Iran’s Foreign Ministry added.

The transport corridor from Russia to Iran through Azerbaijan is an important part of a larger North–South project, which was stalled when Western sanctions were imposed on Iran. With the lifting of the  anti-Iranian sanctions this project has again become relevant.

The North–South transport corridor is a route from St. Petersburg to the Mumbai (Bombay) Port in India. It is an estimated 7200 kilometres long. The corridor is aimed at transporting goods from India, Iran and other Persian Gulf countries to Russia via the Caspian Sea and on towards Northern and Western Europe.

The current flow of goods from India towards the European part of the Russian Federation happens through maritime transport. From St. Petersburg, the cargo has to sail around the entire western part of Europe and through the Suez Canal. As a result, the estimated travel time from the Jawaharlal Nehru Port (Mumbai) to Moscow is around 40 days. The new route; from St. Petersburg to Moscow, then to Astrakhan (Russia), Baku (Azerbaijan) and Bandar Abbas (port city on the Persian Gulf in southern Iran) to Mumbai – is multimodal. It involves the use of marine, rail and road transport, and will cut transport times by over 50%, Russian Railways Logistics noted. In the long term this time can be reduced to just 14 days. The new route will eliminate the need to carry goods through the Suez Canal, which is not only overloaded, but also very expensive.

The construction of this route should be completed in 2017. An agreement about this transport corridor was signed by Russia, India and Iran in 2000, and was ratified in 2002.

In February this year, Russian Railways, Azerbaijan Railways, and ADY Express, within the framework of the North–South project, agreed attract cargo flows to the Azerbaijani and Russian Railways through the organization of transport between India - Iran - Azerbaijan – Russia, and vice versa. 

"In addition to the sea route from St. Petersburg, cargo travels to Iran also through ports in Turkmenistan and Kazakhstan; these routes being convenient for consignors and consignees located in the Urals and Siberia. In addition, there is an option of transportation via the road network of Azerbaijan," chairman of the board of directors of the 2K Engineering Company, Ivan Andrievsky, said. "However, direct rail transportation means the reduction of travel times, and thus provides good prospects for the development of trade relations, not only between Russia and Iran, but also between the countries of Eastern Europe and Iran," Andrievsky added.

"We are shipping cargo to Iran either across the Caspian Sea or across the ocean to the south of Iran; via St. Petersburg or via Novorossiysk, whichever is more convenient for the shippers. However, for Iran, it is actually more profitable to receive loads in the north; either from the Caspian Sea, or by rail, because the majority of people in Iran live in the northern part of the country. In the south, there is the Port of Bandar Abbas, and the oil fields, but few people live down there," CEO of the Infranews Agency Alexey Bezborodov explained the relevance of the new route. 

To realize this route along the west coast of the Caspian Sea, a new railway line will have to be built; from Qazvin (Iran) to Astara (Iran) to Astara (Azerbaijan). It will have to link the Azerbaijani city of Astara to the Iranian cities of Astara, Rasht, and Qazvin.

Construction of the railway section Qazvin - Rasht was completed in 2015, but construction of the Rasht (Iran) - Astara section is only at the development stage.

"The railway line from Qazvin to Astara is an infrastructure project experiencing typical delays. The main road route passes through Iran. The section was planned for completion in 2015, but then was postponed to 2016," Ivan Andrievsky said. However, the construction work is on. A railway bridge between Azerbaijan and Iran is expected to be opened on April 20, Azerbaijan’s Foreign Minister Elmar Mammadyarov said. He also said they plan to complete the railway connections between Azerbaijan and Iran’s railways by the end of 2016.

"This is a complex infrastructure project, with many of tunnels, bridges and difficult mountainous areas. Therefore, problems with the implementation of this project were to be expected. However, contractors say that this route is at a high level of completion, so we can expect the railway to be completed, and in the nearest future," Andrievsky says.

According to various sources, the estimated capacity of the railway, during the first phase, should be around 4 to 10 million tons of cargo, and this will gradually increase to between 15 and 20 million tons per year.

As for the pricing policy, the question here is not in the fees charged, Bezborodov believes. "There are no political problems here either. The sanctions against Iran were removed. For our Southern and Volga Regions, Azerbaijan is quite an adequate direction for trade with Iran," Bezborodov added.

The project can be implemented quickly and without significant additional costs because the infrastructure has already been built. "The railway line on the territory of Iran itself is not yet complete, but that is no hindrance to us, we can use trucks for transportation there. In Azerbaijan, everything has already been built. All investments have been made during the last 15 years," Alexey Bezborodov said. "In fact, all that remains is simply to launch the new route, to agree on the logistics, fees, customs and other procedures, which the three countries want to work on now."

The new corridor is important for Iranian and Russian plans to increase their volume of trade. Iran is primarily interested in buying Russian grain. Almost the entire volume of the Russian grain exports now heads to Iran. However, in terms of diversifying the range of products, by train one can also transport food products, including vegetables and fruits, as well as industrial goods, oil and oil products. Russia can begin supplying its own vehicles to Iran, where Chinese cars are now being sold; around 130-150 thousand annually. Given the large number of joint projects, in particular in the nuclear sphere, a new route can easily become fully loaded with cargo from Russia and back.