Europe will not be allowed to the new route yet
Moscow will give Iran 1.3 billion euros to complete the construction of the Rasht-Astara railway section, which is part of the North-South transport corridor. The long-term construction, which will soon turn 20 years old, has been moved by the sanctions: now Russia is more than ever interested in alternative routes for exports and imports. «Russian and Iranian goods will have more convenient and geographically diverse access to foreign markets,» Vladimir Putin said at the signing ceremony. However, in order for the route to operate at full capacity, Moscow urgently needs to reconcile Iran with Azerbaijan.
On May 17, Vladimir Putin got in touch with Iran, where Deputy Prime Minister Alexander Novak is now located. According to Iranian leader Ibrahim Raisi, Novak not only oversees issues of energy cooperation, but is also Putin's special assistant on transit issues. Therefore, the signing of an agreement on the completion of a section of the railway between the Iranian cities of Rasht and Astara was timed to coincide with his visit.
Why should Moscow build infrastructure on foreign territory is not an idle question in the current situation, but there is an answer to it. Since 2022, Russian exports have been actively reoriented to new markets, and the North-South corridor, which includes the Iranian section, is a key route. It allows cargo to be delivered to the countries of the Persian Gulf and to the Indian port of Mumbai, bypassing the Suez Canal.
“Transportation along the new corridor will have significant competitive advantages. In particular, the delivery of goods from St. Petersburg, say, to Mumbai will take about 10 days. For comparison, I would say that the travel time along traditional trade routes is up to 30-45 days,” Vladimir Putin explained in his speech.
He clarified that following the results of the project, the volume of goods will increase, and the cost of their transportation will decrease.
According to the GDP, the new highway is supposed to be used for the transportation of agricultural products and fertilizers, the recipients of which will be consumers in Iran, the countries of the Persian Gulf and Africa. “Thus, this transport corridor will make a tangible contribution to ensuring global food security,” the President stressed. In addition, coal and building materials will go to India by rail. And in the opposite direction — parallel imports: this is a business in which the Middle Eastern states play a significant role.
The President of Iran did not hide the fact that the project is an international long-term construction: agreements on the construction of the Rasht-Astara railway line were reached back in 2005. According to Raisi, the «iron will of the leaders of the two countries» helped to get it off the ground.
But one should not disregard the changed geopolitical conditions: if earlier Russia had other opportunities to enter foreign markets, now the North-South corridor is becoming almost an economic “lifeline”. And if so, then the money for its development is not a pity. The leaders themselves did not announce the financial terms of the project, but after signing the agreement, it became clear that Russia would give Iran 1.3 billion euros in credit, which is more than 80% of the amount required for construction. Given that the length of the route is 162 km, one kilometer will cost 9.8 million euros.
Europe will not use the new route in the foreseeable future. As Raisi stated, «the collective West wants to bypass Iranian territory on transit issues.» (Obviously, Russia will also face a similar attitude). Vladimir Putin, in turn, drew attention to the fact that the successful implementation of the project requires the participation of Azerbaijan, which is located between Iran and the Russian Federation.
In principle, Baku has already built its section of the railway to the Iranian border. But now the relations of these two countries are in a deep political and diplomatic crisis. Attempts by the Russian side to persuade Ilham Aliyev to resume cooperation have so far failed, but Moscow hopes that everything will be fixed. “We count on the soonest completion of the preparation in a trilateral format with the participation of the Azerbaijani side of an agreement on the development of railway infrastructure and freight traffic along the North-South route,” Putin said. According to him, this will allow forming a legal framework for coordinating the actions of the three countries on this route.