Iran’s objective is to improve its transportation facilities utilizing Russian money, and Moscow has little option however to bear the expense.
The North–South Corridor, a prepared train path that will link Russia to the Indian Ocean by means of Iran, is acquiring importance as a method for Moscow to move products around easily. But regardless of its potential customers, the task depends greatly on the state of affairs and facilities in Iran, which’s troublesome for the Kremlin. Iran is not able to fund the task, and the passage won’t have the ability to work without financial investment. Russia will for that reason require to invest over and over once again: in roadways, ports, depots, and extra facilities.
When Russian President Vladimir Putin gotten in touch with Russian businesses in mid-March to purchase building the Rasht–Astara line—part of the North–South Corridor in between the Iranian city of Rasht and the Azerbaijani city of Astara—there was little doubt that business owners would hearken his guidance. Yet it was revealed in May that the Russian federal government would rather be moneying the task itself, by releasing a 1.3 billion euro loan to Iran.
The Russian federal government’s choice is the latest advancement in a job that has actually been having a hard time for almost twenty years. Russia, Iran, and Azerbaijan initially signed an agreement in 2005 to build a train path linking existing lines in Iran to Astara. Given that routes in between Azerbaijan and Russia were already in location, simply 350 kilometers of extra track were required to link Russia to ports on the Indian Ocean. Construction was anticipated to take about 2 years.
Iran just started building of its part of the railway in 2009, nevertheless, and simply half of it—in between the cities of Qazvin and Rasht—has actually been finished in the previous years. The 2nd half—from Rasht to Astara—ended up being more technically requiring, needing extra financing.
A cash-strapped Iran started courting foreign financial investment. In 2017, Azerbaijan agreed to lend its next-door neighbor 500 million euros—around half the overall cost of building—just to have reservations in 2018, after the United States enforced fresh sanctions on Tehran.
Work on the Rasht–Astara area is continuous, a minimum of on paper. But Iran plainly does not have the funds and technical resources. It’s now approximately Russian monetary funds to put the task back on track.
That may be much easier said than done, as many problems loom. Firstly, a return on Russia’s financial investment stays a long method off: even if whatever goes according to strategy, the 162-kilometer-long Rasht–Astara train will just end up being functional in 2027.
Goods will likewise need to go through Azerbaijan at a time when its relations with Iran are strained. It’s far from specific that Baku will assist in the passage’s smooth operation. Furthermore, the North–South Corridor may discover itself taking on Baku’s own animal task, the Zangezur Corridor: a questionable, theoretical transportation path connecting Azerbaijan (and potentially Russia) to the Mediterranean Sea by means of Armenia and Türkiye.
Legitimate concerns have actually been raised about whether Rasht–Astara will be cost-reliable compared to Iranian roadway transportation. Not just is gas greatly subsidized in Iran, roadway facilities is considerably much better than rail. It’s plainly no coincidence that the Russian federal government needed to action in to fund the task amidst an absence of interest from personal financiers, however provided Iran’s near-empty coffers, the possibilities that Russia will get its money back are slim certainly.
The cooperation via loans is becoming the backbone of Russo-Iranian relations. In 2021, for example, Russia loaned Iran $5 billion for infrastructure projects. That same year, it emerged that Iran owed 500 million euros ($591.5 million) for the construction of the Bushehr nuclear power plant. Iran’s debts for Russian agricultural products are also rising by the month.
Russia continues to provide loans despite Iran’s ballooning debt from previous projects. Given Tehran’s financial precarity and ongoing political crisis, it’s doubtful that those loans will ever be repaid.
Of course, none of this negates that Russia sorely needs alternative transport routes, having been cut off from its traditional Western ones following its invasion of Ukraine. In terms of sanctions, a corridor through Iran looks like the safest option.
Alternative routes go through China and Türkiye, however with them would come uncertainty. Despite Putin and Xi’s “no-limits partnership,” the United States remains China’s largest economic partner, and China has proven unwilling to risk sanctions in the past. Türkiye is a NATO member and is even more closely economically integrated with the West. It has resisted many demands to crack down on Russian sanctions evasion so far, but may not remain a reliable partner for Russia for long. Heavily sanctioned Iran, on the other hand, has nothing to lose by working with Russia.
Russia has additional options requiring less coordination with intermediary countries. It could expand its Caspian cargo fleet, for example, which would be faster than building a railway. After arriving in Iran, goods could be transported across its territory by means of road or existing railroad.
Lastly, Russia could likewise reach the Persian Gulf using railways in Kazakhstan and Turkmenistan. In May of this year, Kazakh President Kassym-Jomart Tokayev proposed launching a high-speed freight line between the Russian city of Chelyabinsk and Iran, for which Kazakhstan would revamp its portion of the railway.
Granted, any of these routes would require massive investment. Iran’s largely single-track railroads would have to be expanded, and new ports constructed on the Caspian Sea, Persian Gulf, and Gulf of Oman, to say nothing of building support infrastructure.
Iran cannot accomplish that on its own. But Tehran is well aware of the situation Russia now finds itself in and why it wants the North–South Corridor. Iran’s goal, therefore, is to modernize its own infrastructure using Russian money.
Russia, for its part, seems resigned to footing the bill. In mid-May, Deputy Prime Minister Marat Khusnullin said that Russia would spend 250–280 billion rubles (about $3.5 billion) on the North–South Corridor by 2030. In all likelihood, that is a major underestimation. But Russia has no choice: it requires the North–South Corridor, and nobody else wants to purchase it.
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