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18.03.2017 - 13: 10

The railway from Russia to India reduces the attractiveness of the Suez Canal

Expansion of Central Asian transport network will help create a new global routes.

In early March, Iran and Azerbaijan inaugurated a small section of the railway that promises big prospects. Cut a length of less than 10 km it was one of the final sections of the "North - South" international transport corridor, construction of which has already lasted 17 years. The corridor connects Russia, Iran and India, and the completion of the project scheduled for this year. International Corridor not only bind to one transport network of settlements along the way, but also affect the connection between Europe and Asia.

Despite years of delays, the project is moving forward thanks to many factors. Due to international sanctions, it has become more accessible to Iran and has gained importance for Russia. Since the international sanctions were withdrawn from Iran in January 2016 years, the country has attracted foreign investors and experts to work on the expansion of its rail network. Conversely, Russia's decision to terminate the import of EU products led to a strengthening of economic relations with India, which is a major producer of agricultural products.

The emergence of other regional transport projects also contributed to the development of the corridor "North - South". In the framework of the "One Belt and One Road" China is developing a number of new land and sea routes. These projects do not compete with the transport corridor, and some of them even contribute to its development. By supporting both initiatives, Azerbaijan and Iran aspire to become regional hubs between Asia and Europe. Leaders of Asian countries are trying to make the greatest possible contribution to the development of transport networks.


The opening ceremony of the railway communication with Afghanistan near the customs post Imamnazar Turkmenistan, November, 2016 year

As a result, the attention of many statesmen from Moscow to Delhi has been riveted to the transport corridor "North-South". Russian President Vladimir Putin called the initiative "the main project," and the development of the transport corridor was one of the main subjects of discussion at the trilateral summit held last summer, in which Russia, Azerbaijan and Iran took part. In addition, Indian Prime Minister Narendra Modi discussed the project at meetings with the presidents of Russia and Iran last year. Since the launch of the project in 2000, the list of participating countries has been replenished by at least 11 points.

The importance of political support is enormous, but the fate of the transport corridor, first of all, will depend on its economic effectiveness. Tests show that the project does have potential, albeit modest. The test delivery of cargo carried out in 2014 took about half as much time as similar delivery on existing routes: the road from Mumbai to St. Petersburg took not 40, but only 20 days. Last October, the test delivery was spent 23 days, and this is in the absence of a railway connection between Azerbaijan and Iran. According to some experts, the North-South transport corridor has great economic prospects compared to some other promising land routes between Asia and Europe.

In order to become effective and take its rightful place in world trade, the project should be a convincing alternative sea routes. Most likely, will be transported agricultural products from India and raw material from Iran and Russia on a new transport corridor. As for the markets, trading companies within the country for the most part will consider a new route profitable. Nevertheless, for the vast number of products and destinations will remain relevant slower, but cheaper way.


The movement of ships through the Suez Canal

Construction of the infrastructure of the new transport corridor will be completed this year, but much work remains to be done to establish a legal basis for transport. Exporters using this route are forced to make their way through the labyrinth of various requirements that each country presents. Officials emphasize the need to create common transport documents, and the experience of trial delivery indicates this. The recent accession of India to the Customs Convention on the International Carriage of Goods was an important step forward and reduced the number of obstacles. But overall progress was limited.

The driving force is growing

In the long term, the corridor can contribute to the resumption of attempts to create local transport networks. For example, financing the accession of the Iranian southern port of Cehbehar to the country's rail network will increase. Having invested in Cehebhar, India hopes that this port will become a competitor to the Pakistani port of Gwadar. Similarly, the emergence of new railway sites will help in development. Iran seeks to build a route to Afghanistan, Iraq and Turkmenistan. Azerbaijan allocated significant funds for the development of the port and free economic zone in Baku, as well as for the construction of a new railway to Georgia and Turkey. Although each transport route individually fulfills its important function, joining a strong regional transport network will increase profitability.

Of course, the transport corridor is beneficial not all. Redirect some existing routes, it complicates the situation for those who are happy with the state of affairs, and it will affect the life of seaports. The intensity of the movement in the Suez Canal has fallen as fuel prices fell, and many ships should be over a longer path, skirting the Cape of Good Hope. Forecast of Egypt regarding the traffic in the Suez Canal proved to be overly optimistic, and new land routes and trade routes in the Arctic can only aggravate the financial position of this country.

The promising potential of a relatively small section of the railway between Iran and Azerbaijan indicates that the importance of transport networks is growing. While in Asia there are new ways, the one who can join them and take their place in a large transport network can benefit. Achieving success will not be easy, as it is necessary to work together to remove various barriers and participate in the struggle for investment and business attraction. If competition continues in the economic plan, the benefits of Asia, Europe and the rest of the world will be extremely significant.

Jonathan Hillman - Project Director for Asia reunion at the Center for Strategic and International Studies in Washington.

A source: MixedNews

Author: Translated Anton Komarov

Tags: Russia, India, Iran, Asia, Economy, Shipping, Railways, Analytics, Egypt