Russia and Iran are reportedly finalising an agreement for the Rasht-Astara railway. The line in northern Iran is a crucial missing piece for the western branch of the International North-South Transport Corridor (INSTC). According to the agreement, Russia will bear the brunt of the costs.
A meeting between the Iranian ambassador in Russia and a representative of Russian Railways provided hopeful news for those who stand to profit from the INSTC. Russia and Iran have reportedly reached an agreement on the completion of the Rasht-Astara railway.
The INSTC links Russia with the Indian Ocean via the western and eastern Caspian sea coasts, as well as via maritime transport across the inland sea. On the western land route, a railway between the Iranian towns of Rasht and Astara is the only missing piece of the logistical puzzle. The envisioned rail-only route along the western side of the INSTC would be the most commercially interesting connection between Russia and Iran’s southern coast.
Financing is a major obstacle
Negotiations over the route started in late 2022 and the commencement of construction works has been announced on various occasions. As recently as December 2023, Russia and Iran announced the start of the rail project for early 2024.
A major hurdle to be overcome was the question of financing. Iran made clear that it could not finance the railway alone. Simultaneously, Russia was also reluctant to pledge large sums of money. The total costs were estimated at 1,6 billion euros. According to Iranian media, Russia will fund that exact amount for the construction of the railway, meaning that it will cover the vast majority, if not all, of the costs.
What do the parties stand to gain?
Amid tough Western sanctions imposed after the invasion of Ukraine, Russia has been trying to find avenues to evade the sanctions. Earlier, a US-based think tank warned that Russia is looking to use the INSTC to that end. The corridor passes through many markets that are not easily monitored by Western governments, including Iran.
In the case of Iran, the completion of INSTC rail infrastructure would allow it to grow its role as a transit country, and to financially profit from that role. Moreover, the Iranian government is banking on the route aligning Iran’s and India’s interests as it would make Iran an increasingly important transit hub for India, according to Iranian media.
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