In today’s interconnected world and the ongoing transition to a new global order, trade corridors are not only vital arteries of the global economy but also strategic tools for geopolitical influence. The International North-South Transport Corridor (INSTC), a key project in Eurasia, aims to connect India to Russia via Iran, reshaping regional trade and political dynamics. This corridor, which reduces the trade costs between India and Russia by up to 55%, presents Iran with a unique opportunity to escape economic isolation and establish itself as the “Eurasian Transit Hub.” However, realizing this vision requires regional stability, international cooperation, and the resolution of domestic structural challenges.
North-South Corridor: From Dream to Reality
The North-South Corridor spans approximately 7,200 kilometers and serves as a multi-faceted trade route, passing through Iran, the Caspian Sea, and the Indian Ocean before reaching Europe. This project, initiated in 2000 through a tripartite agreement between Iran, Russia, and India, faced delays for two decades due to sanctions and a lack of investment. However, the war in Ukraine and heightened tensions between the West, Russia, and China have prompted Moscow to prioritize the development of the corridor. According to the Kazan Forum Secretariat, Russia will focus on completing the INSTC infrastructure by 2025. The Kazan Forum 2025 (held from May 13 to 18, 2025) will provide an opportunity to attract investments for crucial projects, such as completing the Rasht-Astara railway line, which will reduce transit time to Russia by 40%. Additionally, the construction of an 185-kilometer underwater tunnel between Iran and Qatar is set to revolutionize maritime links in the Persian Gulf.
Regional Stability: A Prerequisite for Success
A key precondition for the successful utilization of the North-South Corridor is regional stability, particularly in the sensitive areas of the Persian Gulf and the South Caucasus. Recent tensions in the South Caucasus, particularly the strained relations between Azerbaijan and Armenia, as well as security competitions in the Persian Gulf, have increased the risks associated with investing in the corridor. Therefore, Iran must actively engage in diplomacy, especially by de-escalating tensions with neighboring countries such as Saudi Arabia, to pave the way for the success of this project. Leveraging multilateral international institutions like the Shanghai Cooperation Organization and the Kazan Forum can be particularly effective in this regard.
China’s support for the North-South Corridor within the framework of the Belt and Road Initiative (BRI) is also of great significance. Having previously invested in the Gwadar Port in Pakistan to create an alternative to the Strait of Hormuz, China now views the corridor as a key complement to its own trade network. The convergence of interests between China, Russia, and India in this project is likely to mitigate the effects of Western sanctions on Iran, although the U.S. and EU’s reactions to these collaborations will require careful monitoring.
Economic Impact and Domestic Challenges
The Eurasian Development Bank forecasts that the INSTC will handle 30 million tons of goods annually by 2030, generating $1.5 billion in transit revenue for Iran. This income could play a pivotal role in modernizing Iran’s logistics infrastructure and improving the country’s economic outlook. However, this goal can only be realized if Iran addresses its domestic challenges. Some of these include coordination issues between various institutions, a lack of rail infrastructure, and banking difficulties due to sanctions. Successful implementation of the project requires completing the railway connection between Iran, Azerbaijan, and Armenia, as well as expanding the capacity of the Chabahar Port. Active participation from India and China in these projects could be instrumental in overcoming these hurdles.
Challenges Ahead: From Sanctions to Corridor Competition
Despite significant backing from Russia, China, and India for the North-South Corridor, competition from other transportation corridors, such as the Middle Corridor (Turkey-Azerbaijan) and the China-Pakistan Economic Corridor (CPEC), needs to be considered. These competing routes could negatively affect the success of INSTC. Furthermore, security threats along Iran’s eastern borders, particularly near Afghanistan, and the possibility of disruptions to transit routes by insurgent groups present additional challenges for the project.
On the other hand, U.S. economic sanctions on Iran pose a significant barrier to the participation of international companies in INSTC-related projects. Although Russia and China are seeking to bypass the dollar through mechanisms such as Iranian rials and cryptocurrency exchanges, the long-term effectiveness of these approaches will depend on multilateral monetary agreements.
External Threats and Challenges: Israel, Turkey, and Azerbaijan
Israel: Israel is working to strengthen the Haifa Port-UAE-India route, which could serve as an alternative to the INSTC. Iran’s involvement in a key trade route would increase Tehran’s bargaining power and reduce Israel’s influence in regional trade.
Turkey: Turkey has invested in the Middle Corridor (Trans-Caspian Corridor), which passes through Azerbaijan, the Caspian Sea, Kazakhstan, and China, bypassing the INSTC. Ankara aims to position itself as the main transit route between East and West, limiting Iran’s transit power.
Azerbaijan: By creating tensions in the South Caucasus, Azerbaijan could disrupt the INSTC route and strengthen the Turkish alternative. Azerbaijan seeks to limit Iran’s connections with Armenia and Russia.
The U.S. and EU: Sanctions and economic pressures aim to limit Iran’s role in global supply chains. Support for alternative routes via Turkey and Azerbaijan is also an effort to reduce Europe’s reliance on Russia.
Conclusion
The North-South Corridor is more than just a transit project; it represents a transformation in Iran’s international alliances. By hosting this corridor, Iran not only strengthens its ties with Russia and China but also, by attracting India as a key trade partner, can avoid overdependence on either the West or the East. The success of this project requires not only effective diplomacy but also a serious domestic commitment to improving the business environment and ensuring transparency in international agreements. If Iran can manage the challenges ahead, the INSTC could turn the country into the “logistical heartland of Eurasia,” a position that would have significant geopolitical ramifications and enhance Iran’s influence in global equations.
