Russia and Iran both are the targets of USA and European countries sanctions but the reality is that new powers are emerging on the horizon of international power game. China and Russia are major players and Iran is also important part of this game. Russia and Iran both are moving towards deep, long term strategic alliance. Both countries signed a deal worth US$ 1.6 billion railway agreement. The plan is to link two Iranian cities, Rasht at Caspian Sea and Astra as the Azerbaijan border. The route will be 162 Kilometers long and possibly will be completed in two years. This project is the part of North South Corridor to create 7,200 Km of shipping lines, Roads and Railway lines. It will link the Indian Ocean to the Persian Gulf to the Caspian Sea to the St. Petersburg of Russia. The Suez makes 12% of the global trade and this strategic route of North South Corridor might be alternative to Suez. Russia is one of the largest investors in Iran having a huge investment of US$ 2.7 billion in 2022. Russia also helped Iran to get the permanent membership of Shanghai Cooperation Organization (SCO). Trade between Russia and Iran increased 20% in 2022.
Iran and Russia had collaborated on trade, energy, arms and nuclear projects for decades. Tehran and Moscow have worked together to skirt US sanctions since 2014. In January,2023, the two countries linked their banking networks to offset their cutoff from SWIFT, the global financial service that facilitate billions of dollars in transactions every day. Most Iranian banks were disconnected from SWIFT in 2019. Tehran and Moscow increasingly used national currencies rather than foreign currencies to get around sanctions. In 2022 imports and exports increased 20% from 2021 to US$ 4.6 billion. The two countries had set target of US$ 10 billion in annual trade. The expansion of the International North-South Transport Corridor, a land and sea route connecting Iran, Russia and other countries, could lead to a surge in Trade Russia has expanded in Iran’s energy and infrastructure sectors, including ports and roads. In 2022, Iran’s national Iranian Oil Company and Russia’s Gazprom committed to a US$ 40 billion deal in which Gazprom would develop two natural gas oil fields, pipe lines and other infrastructure. By 2023 Russia had overtaken China as the top foreign investor in Iran. Russian president Vladimir Putin visited Tehran in January 2022 and both sides pledged to pursue completion of the corridor. Iran hopes to see the launch of the route by 2025. So far expanding use of the corridor has already led to doubling of Cargo transportation; from January to March of 2023, Cargo Shipments exceeded 2.3 million tons. The International North South Transportation (INSTC) shortens transit time from India to Europe and can link Russian ports with the Persian Gulf and Indian Ocean. The Corridor consists of three main branches: -
Trans-Caspian, a western “branch” along the west coast of the Caspian Sea and a Central Asia route through Turkmenistan. Moreover, for Iran, the corridor opens access to ten cities populated by a million or more consumers along Volga River. It is also a link to wider Central Asia and Potentially Azeri Georgian ports on the Black Sea. International North South Corridor (NSTC) designed to significantly shorten the route by which goods are transited from India Via Iran, the Corridor is estimated to shorten the way by approximately 40 percent, and save approximately 30 percent of the cost of transit. Russian energy corporation Gazprom and the National Iranian Oil Company had signed MOU in the field of energy amounting to US$ 40 billion for the development of oil and gas fields as well as construction of gas export pipelines, Russia and Iran already agree currency swap and using rubles and Riyals in the transactions between them, and abandon US currency at the effects of western sanctions. Russia and Iran also share a common interest in limiting the political influence of the United States in Central Asia. The common interest has led the Shanghai Cooperation Organization to extend to Iran. In addition to the trade and cooperation in hydrocarbons, Iran and Russia have also expanded trade ties in many non-energy sectors of the economy, including a large agriculture agreement in January 2009 and a telecommunications contracts in December 2008. When Iranian visionary leader President Ebrahim Raisi was elected in 2021, he prioritized trade with Russia. In 2022, President Ebrahim Raisi travelled to Russia at the invitation of his Russian counterpart. He handed over Iran’s proposed draft for a 20 years cooperation agreement between Iran and Russia. On 20 March,20223 Iranian Agriculture minister Javed Sadatinejade had signed a deal in Moscow with Russia to import 20 million tons of basic goods including vegetable oil, wheat and corn. In early February,2023, Tehran and Moscow announced they fully linked the Russian Financial Messaging System of the Bank of Russia (SPFS) with Iran’s SEPAM national financial messaging service, both countries had been excluded from SWIFT.
International North South Corridor (NSTC) has three arms:
A land and sea route known as the Trans Caspian runs from northern across the Caspian Sea to Southern Iran for shipment through the Strait of Hormuz into the Arabian Sea or the India Ocean. It was first used in 2022. A rail land route known as the western branches runs from northern Russia south through Azerbaijan into northern Iran and then to a southern port on the Persian Gulf for shipment again by sea. The latest rail and road route referred to as the Eastern branch runs from northern Russia southeast through Kazakhstan and Turkmenistan to Iran for shipment to India. It was first used in 2022. The corridor will help to significantly diversify global traffic flows, and provide obvious economic benefits, derived from freight deliveries via the North-South corridor, as well as the more intensive income derived from freight deliveries via the North-South Corridor, as well as the more intensive operation of our states, ports, will help establish related businesses and facilitate their growth. Putin predicted that the project would in turn create jobs and improve the investment climate in both Russia and Iran. In 2022, annual commercial traffic on all parts of the corridor carried 20,000 containers of oil, grain, lumber, and metals totaling more than eight million tons up 65 % from 2021, according to the ministry of Transport, Russia. The corridor has a decisive role in changing the geometry of goods transiting in the region. Iran has sought new partners in trade and investment to counter the illegal, unethical and inhumane sanctions imposed by United States of American and its allies. Iran wanted to enhance its exports with ten Russian cities each with a population of more than one million, along the Volga River, an international commercial route that dates back to the Middle Ages. In late 2022, Iran had committed to building at least eleven infrastructure projects, including roads, railways and seaports totaling US$ 13 billion, which accounted for one-third of all investments by seven countries. Russia committed only slightly more. In late 2022, Iran estimated Iran could generate US$ 20 billion annually as a regional hub upon completion of the project. In 2022 Russia had committed more than US$ 13 billion to fifty-two infrastructure projects to enhance the North-South Corridor. They included roads, railways, seaports, border crossing points, maritime transport, and inland waterways. In May 2023, Putin signed an agreement to provide US$ 1.7 billion to pay for a railway connecting Iran and Azerbaijan, a main connector along the North-South Corridor.
Both the countries cooperating with each other and had successfully reduced their reliance on USA and European countries. With narrow scape from default, banking crisis, growing frustration among American youth indicate diminishing the influence of America on global affairs. It is high time that international policy makers sit together and instead of imposing sanctions resolve problems through negation increasing trade and sharing resources and power.