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Russia-India New Trade Corridor via Iran

The International North–South Transport Corridor (INSTC) is the shortest, fastest, cheapest and most secure trade route between India and Europe.

It passes through just 2 nations—Russia, Iran, and touches Mumbai India. All of whom are essentially impervious to external pressure, the inland Caspian Sea, which is Russia’s preserve, and a short maritime run from the Persian Gulf to the Arabian Sea, which is dominated by India.

India has decided to source more crude oil from Russia at attractive, undisclosed discounts (the phrase used is ‘preferential pricing’). This is a policy shift which, when analysed in conjunction with the prospects of India also increasing crude purchases from America, means 2 things:

1 India is working towards insulating itself from the painful vagaries of price shocks; and,

2 Both America and OPEC would now be forced to offer India equally competitive rates. The customer is always right.

This option lets Russia (and India, laterally) avoid American sanctions, since crude oil (or LNG) loaded and dispatched from a Russian port directly to a port in India, and paid for in a currency other than the US Dollar, would automatically fall outside such sanction nets. The Russians have actually been working on a similar strategy with China, wherein, crude loaded from Baltic ports would use the Northern Sea Route, and payment would be in Yuan, so there is precedence. Trade via the INSTC will benefit exporters and importers in both India and Russia by lowering transit time and cost of transportation compared to the existing route via the Suez Canal. It will also cut down the shipping time sharply, to 25-28 days from the current 40 or so.

The two countries have decided to increase trade along the International North-South Transport Corridor (INST), which runs over sea and land from India, through Iran, the Caucuses (specifically through Armenia and Georgia; not Azerbaijan), into Russia.

CA Harshad Shah,


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