The second goal of the new deal is to boost rail traffic between China, Russia and Belarus. RZD and KTZ are considering the integration of a unified information system for rail transport between China, Kazakhstan, Russia and Belarus. This would happen within the ASOUP-2 (АСОУП-2) project, a single database that encompasses operational, forecast, archive, planned and regulatory information on all objects of the transportation process.

Notably, Tehran wants to create various corridors from the vital Astara hub at the Azerbaijan border to the Indian Ocean. When put into practice, such corridors would be a major development for the INSTC and ease traffic along the north – south axis. The ports to be connected include Bandar-Khomeini, Bushehr, Bandar-Abbas and Chabahar.

Delays and unexpected costs

Moreover, Iran wants to build a rail corridor along its eastern border, close to Pakistan and Afghanistan. That line could give the famously landlocked Central Asian countries access to the Indian Ocean – and earn Iran even more transit revenue by offering better connectivity on the eastern branch of the INSTC. A part of this line is already in place.

Iran says it wants to complete these projects in seven to ten years. Whether it will manage to do so remains to be seen, but rail projects are often delayed and met with unexpected costs.

A 2005 agreement, but still not building

For example, the crucial Rasht – Astara railway, the last missing rail piece for an uninterrupted western branch of the INSTC, was supposed to start construction in early 2024. However, construction has not started as of January 2025, even if an agreement to build the route was signed as early as 2005.

Similarly, a railway to the key port of Chabahar was supposed to be finished in 2024, but such a connection seems to be nowhere in sight.

Rail projects often grow significantly in costs as time passes. In Europe, Rail Baltica is a case in point: The project was initially estimated at 5,7 billion euros in 2017, by summer 2023 this number had grown to 25 billion euros.

Quarrelling with Russia

With the lack of progress on Iranian rail projects, costs will inevitably grow too. Quarrels with Russia over the Rasht – Astara railway concerned exactly that issue. Russia wants to move ahead with land surveying and purchasing, arguing that land prices will rise spectacularly if delayed. For unclear reasons, Iran does not exactly seem to be in a hurry, but that might be explained by the fact that Russia is funding the majority of the project.

There clearly are major hindrances to Iran’s rail plans, and that is even without considering the country’s dire geopolitical situation.

Tehran’s nine new rail corridors are supposed to boost Iran’s rail capacity to 60 million tonnes annually, and should cost slightly over 10 billion euros.

Oil and gas

Even without the likely cost inflation, that is no cheap price tag for a country already running a sizable budget deficit at close to 6 per cent of GDP. Unfortunately for Iran, there is no financial easing in sight in the foreseeable future. It is going through a serious economic crisis.

Even though Tehran is famously a large oil and gas exporter, sanctions have hampered the sector’s modernisation. As a result, production is seriously lagging, the country is already rationing energy and risks becoming a net importer of energy with growing domestic prices. In combination with dozens of billions of politically sensitive energy subsidies for the general population, that puts pressure on Iran’s budget – it can’t afford to free up money by making its impoverished and dissatisfied population pay more for energy.

And then there is the international arena. The USA just inaugurated a very hawkish president (at least on the topic of Iran). Experts expect the new American administration to more strictly enforce sanctions against Iran, putting additional pressure on its already troubled economy and budget.

Will the INSTC survive?

Add to that the loss of key ally Bashar al-Assad in Syria, and the door is open for arch nemesis Israel to take further action against Tehran – something that experts note is now a rather likely scenario. Iran is reportedly tripling its military budget in 2025. If accurate, it would amount to over 30 billion dollars. It seems unlikely that rail infrastructure and the associated budget will be at the top of Tehran’s minds with a looming Israeli attack.

Iran’s dire economic and geopolitical situation are likely to put a spanner in the works of its rail plans. They were already questionable before Trump took office, and now seem even more unrealistic. The game changer now is that the entire INSTC might be in trouble: without Iranian infrastructure, there is no INSTC. The question is if Iran will retain the capacity to act as a transit hub for rail freight. If so, are shippers going to be willing to send their goods through an Iran that is seriously destabilised by Washington and Israel?

ADY highlights the launch of the first Chinese container block train to Azerbaijan’s capital city Baku via the Middle Corridor: an illustrative example of its international success. The train made its way from Xi’an to Azerbaijan in 11 days. In total, 358 container block trains were sent from China on their way to Azerbaijan. More than 27,000 containers from China travelled along the Middle Corridor in 2024, which is a 25-fold increase compared to 2023, according to ADY.

International effort

The rail operator points out that it has made a major international effort to make these developments possible: participation in the Baku – Tbilisi – Kars railway, the establishment of a “Eurasian Transport Route” association, and joint ventures with Kazakhstan and Georgia all helped to turn 2024 into a success, the company says.

ADY has not been sitting still for the near future either, it explains. “The completion of the Horadiz – Aghband project, construction of a new railway between the Nakhchivan Autonomous Republic exclave and Türkiye, the modernisation of Nakhchivan’s railway network, and the establishment of a railway connection between Nakhchivan and other parts of Azerbaijan will ultimately create another branch of the Middle Corridor.”

Russia and Iran

At the same time, the company signed an agreement with Russia to develop rail infrastructure along the INSTC in December. ADY’s leadership also went on a working visit to Iran, in order to discuss the development and management of the Astara terminal, a key logistics hub along the INSTC.

The ultimate goal is to grow volumes along the East – West and North – South corridors by no less two to four times by 2030, ADY specifies. To make that happen, “ADY focuses on prioritising strategic cargo transportation, efficient customer relations, dynamic tariffs, digitalisation, supply chain expansion, new service development, market access, and forming partnerships such as associations, consortiums and joint ventures”, the rail operator says.

What’s a better way of strengthening ties other than trade? Russia has made its intentions regarding the INSTC and its future clear since it uses it (and aims to maximise its usage) as a supply chain alternative to Western sanctions and as a lever to keep regional economies under its influence in the context of global alliances like the BRICS.

In any case, the fact that cargo from Pakistan will soon make its way to Azerbaijan might also be interesting for Western countries, particularly Europe, in the sense of exploring trade possibilities if international regulations allow.

On the other hand, the service from India used an equally familiar route, which could be defined as the eastern route of the International North-South Transport Corridor (INSTC). The new container train service departs from the Indian-operated Bandar Abbas port in southern Iran, and after crossing the country’s territory, it reaches Sarakhs on the border with Turkmenistan. From there, Turkmen operators take over cargo transport to the Chukursai freight station in Tashkent, which Russian FESCO operates.

Things are moving in Asia

These two new services are significant considering the broader context in which they have been launched. The India-Uzbekistan container service is the result of multiple tests and hurdles overcome within the INSTC during the past two-and-a-half years. Apparently, as the service’s Turkmen organisers underlined, this Turkmenistan-Uzbekistan link will not only be reduced to cargo coming from India since it is also open to other ‘third countries’, hinting at Russia.

On the other hand, China’s determination to include Uzbekistan in its rail-oriented supply chains is apparent with the recently launched railway service via Kazakhstan. China is investing in the China-Kyrgyzstan-Uzbekistan line anyway. However, utilising the good synergies with KTZ until this line is available and operational indicates that Uzbekistan has a role to play in the future also in anticipation of the upcoming Trans-Afghan railway.

So far, the project’s primary focus has been filling the infrastructure gaps of countries involved in the INSTC, primarily Iranian railways, and testing the different route options crossing through Azerbaijan, the Caspian Sea, Kazakhstan, and Turkmenistan. As a result, Central Asian countries have been monopolising the interest, with Russia acting as the project’s orchestrator from the north.

From sea to sea

INSTC’s initial purpose was to provide seamless connectivity from Northern Europe and Russia to the Persian Gulf and the Indian Ocean. Although Northern Europe is not officially part of the plans at the moment, Russia seems willing to fulfil this vision. Putin’s latest statement is indicative of this will.

“Our agenda includes the […] organisation of the so-called seamless railway connection from the Baltic and the Barents Sea to the coast of the Persian Gulf and the Indian Ocean,” stated Putin during the Russian National Railway Workers’ Day last week. He also added that Russia recognises the pressing need to accelerate the building of railway infrastructure at new technological levels” primarily due to the impact of Western sanctions on the country.

But pay attention to which sea

Putin’s desire to link the Baltic Sea region to the Persian Gulf is not new. As mentioned earlier, INSTC’s initial purpose was precisely this, also considering the fact that the first test trains on the way to Iran departed from Finland around three years ago.

The most important part of his statements is his mention of the Barents Sea. For those unfamiliar with it, the Barents Sea is part of the Arctic Ocean and is located off Russia’s northern coasts. This mention did not come out of the blue. Chances are high that it relates to another major Russian-Chinese plan–the Arctic Express.

China and Russia have developed a novel transport solution that, unfortunately, benefits from climate change. Increasingly fast ice melting rates in the Arctic Ocean mean that it is more easily navigable by sea vessels, and the two countries aim to use this opportunity and route as an alternative for faster trade between them.

Rail will also be highly involved in the Arctic route. Goods heading to China will be brought to Russian seaports via rail, and Russia has already launched the first ‘Arctic Express’ service from Moscow to the northern port of Arkhangelsk, which is located on the coast of the White Sea, a southern inlet of the Barents Sea.

Here’s where the INSTC becomes relevant. Putin’s remark that the Barents Sea and the Persian Gulf/Indian Ocean could soon be linked could sound overconfident out of context, but in fact, it is a work in progress. Russia seems poised to interconnect those corridors using rail freight as the main driver while transforming its territory into an actual north-south and east-west hub. Will those plans change the scenery of inter and intracontinental logistics even more? We are just one rail service away from learning.

There are three particularly important corridors on the Eurasian continent. The Northern Corridor, the Middle Corridor and the International North-South Transport Corridor (INSTC).

The Northern Corridor connects Europe and Asia, particularly China, via the Russian railway network. By far the largest share of the corridor runs through Russia along the Trans-Siberian railway. On this corridor, trains can also transit through Mongolia before entering Russia from China. Depending on who you are asking, Kazakhstan may also be included in this corridor when trains are transiting into Russia and further into Europe. The Eurasian Development Bank calls this the Central Eurasian Corridor (see map below).

The Middle Corridor also connects China and Europe, but is located more to the south. It runs through Kazakhstan, but then crosses the Caspian Sea into the Caucasus. It traverses the Caucasian mountains in Azerbaijan and Georgia, from where it sails across the Black Sea into Romania and Bulgaria. Alternatively, trains can transit Turkey on their way to Europe.

An even more southern alternative in Central Asia also exists, running through Kyrgyzstan, Uzbekistan and Turkmenistan before crossing the Caspian. However, this route is more geographically and politically complicated and is less important than the main route through Kazakhstan.

Lastly, the INSTC connects Russia’s arctic city of Murmansk with Iran’s southern Indian Ocean coast. It has an eastern and western variant, which respectively run along the eastern and western coast of the Caspian Sea. Like the Middle Corridor, freight along the INSTC is transported across the Caspian Sea as well.

2. How do these corridors compare in length, capacity and transit time?

By far the longest corridor is the Northern Corridor. It has a length of approximately 10,000 kilometres. By comparison, the Middle Corridor and INSTC are 7,000 and 7,200 kilometres in length respectively.

However, the lengths of the corridors do not reflect transit times. While longest in distance, the Northern Corridor boasts the shortest transit times at a 14-day average. The Middle Corridor has transit times between 13 and 21 days, but is less reliable. Delays can grow transit times up to 60 days in the worst case scenario. According to Al Jazeera, the INSTC has a transit time of 25 to 30 days.

In terms of capacity, the Northern Corridor also takes the crown. The Atlantic Council reports that the corridor has an annual capacity of over 100 million tonnes. The INSTC follows at 15 million tonnes, and the Middle Corridor takes third place with 6 million tonnes. It is important to note that infrastructure works to expand capacity are ongoing at all three corridors. Russia voiced its desire to expand INSTC capacity to at least 35 million tonnes annually, for example.

3. What are the main difficulties and opportunities of these corridors?

The Northern Corridor has got a lot going for itself. It can count itself lucky with a lot of developed infrastructure. Moreover, the section through Russia is long and uninterrupted, which speeds up transit times significantly. Perhaps unsurprisingly, volumes along the route have been growing again. This follows a downturn after the start of Russia’s invasion of Ukraine, when many companies decided to avoid doing business with Russia.

As for the Middle Corridor, it is quite the opposite. It traverses many countries, which slows down transportation and raises administrative costs. It crosses mountains, and even the inland Caspian Sea, which prevents the corridor from being rail-only and makes it more expensive. By all accounts, the route is more complicated and costly than the Northern Corridor.

The INSTC also runs through many countries, but via two different branches. Moreover, it is an expensive project. The main obstacle currently is the construction of the Rasht – Astara railway, which would secure an uninterrupted railway from Russia to Iran’s southern coast once completed. However, it is a project that costs over a billion dollars.

4. Why are people interested in the development of these corridors?

This is different for each corridor. At the moment, on the China – Europe route, shippers seem to be returning to the Northern Corridor for its speed and low costs. According to Russian Railways (RZD), the Russian invasion of Ukraine temporarily shrank volumes by 35 per cent (and likely more than that), but time and the fragile situation in the Red Sea caused its popularity to grow again. RZD says that it expects 2024 to deliver a growth of up to 40 per cent compared to 2023. For Russia, the corridor is a way to generate income. For European customers and Chinese exporters, the Northern Corridor is a way to quickly and cheaply transport goods.

The Middle Corridor is gaining some traction as an alternative to the Northern Corridor. For geopolitical reasons, the EU wants an alternative to transit through Russia. It has invested no less than 10 billion euros in the development of the corridor. As many goods cannot be transported through Russia due to active sanctions, the Middle Corridor is also a necessary overland alternative to the Northern Corridor.

The INSTC is mostly championed by Russia, Iran and India. For Russia, it presents an opportunity to diversify its trade routes in an increasingly tense geopolitical world. It can also use the route to evade Western sanctions by shipping goods through non-Western markets, such as Azerbaijan, Kazakhstan and Turkmenistan.

Iran can profit from the route by becoming an important transit country, solidifying its ties with Russia and India. As for the latter, India is looking for a way to easily get Russian energy resources into its market, The INSTC helps to bypass its rival Pakistan for a more secure supply chain.

5. What is the future of these corridors?

No one can say for sure how they will develop in the future. The future of the Northern Corridor is highly dependent on the development of Russian-Western relations. However, Chinese-Russian trade can at least partially replace the loss of Western trade on the corridor. Russia is planning to spend trillions of rubles on the development of its Far East railway infrastructure in order to facilitate the expected growth in trade turnover with China. These routes should have a throughput capacity of at least 280 million tonnes annually by 2030, according to Russian plans.

Moreover, it looks like the Middle Corridor is picking up the pace. While still complex and expensive, freight volumes on the route have been growing. Trade along the corridor grew fourfold between 2021 and 2023, from approximately half a million tonnes of freight to 2,3 million tonnes. Nevertheless, the future success depends on the corridor’s ability to reduce costs and guarantee reliable services through the many diverse countries that it traverses.

Lastly, the INSTC highly depends on the political willpower of the involved countries to develop it and by how much. A continuation of the changing global trade patterns will induce countries along the INSTC to develop it. As of 2022, the Eurasian Development Bank said that approximately 40 billion dollars worth of investments were either scheduled or ongoing. It stated that up to 12 million tonnes of containerised freight could be transported along the route annually.

The Port of Aktau is located on the Caspian Sea coast. It is part of both the International North-South Transport Corridor and the Middle Corridor. For that reason, it is a strategically important asset for Kazakhstan, which seeks to become a leading freight transit country.

Moreover, Chinese company CRRC will be supplying 200 new locomotives to KTZ as part of the investment.

Chinese President Xi Jinping already hinted at both investments at a BRI cooperation forum in October 2023.

Also read:

• China, Belarus and Kazakhstan to build terminal on Belarusian-Polish border
• Kazakhstan considering the privatisation of Kazakh Railways
• Nurminen Logistics and Kazakhstan eye joint Middle Corridor investments

By introducing sliding wheelsets, there would be no need for reloading terminals in Astara. In other words, this would allow trains to run directly from St. Petersburg, in Russia, to the Iranian port of Bandar Abbas without having to reload the cargo. This project is being developed by the Russian Scientific Research Institute for Rail Transportation.

Rasht-Astara’s final look remains unknown

Despite the various projects being announced, however, the actual construction of the Rasht-Astara railway remains somewhat of a wild card. At the end of 2023, Iranian officials claimed that construction could start in early 2024, but no stone has been laid as of yet. The main prerequisites to be met before construction can start are geodetic, design and survey work. However, it seems that Iran is only willing to allow these processes to be carried out on just 20 per cent of the route, roughly 30 kilometres.

Until these initiatives are carried out across the whole area which will be covered by the new line, no contract can be signed for construction, as a representative of the Russian Ministry of Transport said to Russian media RZD Partner. This means that the specific route that the new line will follow cannot yet be drafted. Russia and Iran recently finalised an agreement concerning the financing for the construction of the Rasht-Astara railway, which envisioned Russia picking up most of the costs.

What remains now is a railway connection from Rasht to Astara on the Iran-Azerbaijan border, so a continuous railway link spanning Russia, Azerbaijan, and Iran will provide access to the Indian market. According to the latest reports, the Rasht-Astara railway is expected to be finalised in 2028, despite being initially expected to enter operations in 2024.

Also read: INSTC takes up role as energy corridor: Russian coal to head to India