According to the US-based think tank The Jamestown Foundation, Russia hopes to use the International North-South Transport Corridor (INSTC) as a way to evade Western sanctions. The development of the corridor allows Russia to gain more open access to non-Western markets. Those could provide Russia with much-needed goods for its war economy.
The INSTC is not a new concept. It was coined in 1999 but remained a largely symbolic idea until a couple of years ago. Disruptions in global supply chains and geopolitical changes have given the INSTC a new impetus. Countries along the corridor, such as Kazakhstan and Kyrgyzstan, have recently called for investments in rail infrastructure along the route to match newly emerging supply chains. In 2023, 2,1 million tonnes of goods passed through the corridor via rail. By 2027, throughput capacity is supposed to grow to 10 million tonnes annually.
Russia, however, is reported to be taking an additional interest in the corridor. Western sanctions have been hurting its economy, leading to shortages in critical goods such as semiconductors. To alleviate these issues, Russia legalised so-called ‘parallel imports’ for particular types of goods in 2022. It allowed Russian companies to import sanctioned goods through third countries without prior approval from their manufacturers.
The markets for parallel imports
The INSTC is a corridor that runs along, through and past the Caspian Sea, traversing countries such as Kazakhstan, Turkmenistan, Azerbaijan and Iran. Other countries, such as Uzbekistan and Kyrgyzstan, are also involved in related infrastructure projects. The corridor connects Russia to Iran’s southern coast to the Indian Ocean.
The markets of these countries lend themselves well to Russia’s parallel imports. They cannot be monitored by the West. Moreover, the development of the INSTC increases Russia’s trade capacity with these countries. Consequently, analysts have associated the countries of the Caucasus and the Central Asian countries of Kazakhstan, Uzbekistan and Kyrgyzstan with the re-export of sanctioned Western goods to Russia during the past two years. Iran, similarly, has become an important supplier of military goods to Russia.
By now, parallel imports have grown to large volumes. In December 2023, Russia reported a total of over 70 billion dollars worth of parallel imports since the first sanctions following its invasion of Ukraine. In 2023, Eurasianet reported that parallel imports had grown to such an extent that Central Asian countries ran out of warehouse space. Russian companies have since requested to build more to remove bottlenecks.
According to the Jamestown Foundation, the INSTC, with its many infrastructure projects that connect Russia to all these countries, is poised to increase Russian competitiveness and influence over trade with these crucial markets for its parallel imports. While infrastructure progress along the corridor remains limited for now, it could increase throughput capacity manifold and allow continuous large-scale freight transport into and out of Russia.
Also read:
- Russia, China and Kazakhstan eye new transport hub near Moscow
- Rail freight volumes between Iran and Azerbaijan grow by 28%
- Russia, Kazakhstan and Turkmenistan create INSTC joint venture
