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Russia, India and Iran plan a quicker and cheaper trade route

Russia, India and Iran plan a quicker and cheaper trade route
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By Charles F Moreira, Editor

Russia, India and Iran are currently planning a faster and cheaper dual-mode sea and land trade route as an alternative to the current sea route between India and Russia.

Right now, the transport of goods between India and Russia involves a long and circuitous route by sea from ports on India’s coast across the Arabian Sea, the Red Sea, the Suez Canal, the Mediterranean Sea, the North Sea and the Baltic Sea to the Port of Saint Petersburg in Russia.

According to The Geography of Transport Systems website, today’s container ships typically cruise at speeds of between 20 and 25 knots, whilst according to the web-based SeaRates distance and time calculator – when  sailing at 25 knots, a mid-sized container ship – i.e. a 8,000 Twenty-foot Equivalent Unit (TEU) vessel would take 20 days and 6 hours to travel from Mumbai to Saint Petersburg via the Suez Canal route, whilst when sailing at 20 knots, the journey would take 23 days and 7 hours.

However, the faster the ship sails the higher its fuel consumption, hence cost, and according to The Geography of Transport Systems, an 8,000 TEU container ship would consume 150 tons of bunker fuel per day when sailing at 21 knots, whilst consumption rises sharply to 255 tons per day when sailing at 24 knots.

Fuel consumption, hence cost also rises according to the size of the ship and container ships range in sized from 4,000 TEU up to over 10,000 TEU. A typical 4,000 to 5,000 TEU ship sailing at 20 knots would consume around 70 tons of fuel per day,whilst an over 10,000 TEU ship sailing at the same speed would consume around 170 tons per day.

The solution

North-South Transport Corridor - Source Alena repkina

Image: North-South Transport Corridor – Source: Alena Repkina

Russia Today of 1 November 2018 reported that officials from India, Iran and Russia would meet to negotiate a new shipment passage – i.e. the North-South Transport Corridor (INSTC), which would connect the Indian Ocean with the Persian Gulf through Iran to Russia and Europe.

“The INSTC is the shortest multimodal transportation route linking the Indian Ocean and Persian Gulf via Iran to Russia and North Europe”, said India’s Ministry of Commerce and Industry, and India’s Commerce Minister Suresh Prabhu reportedly would like the route to be operational as soon as possible.,

According to PressTV, Iran’s state-owned news outlet, the 7,200-kilometers long corridor would combine sea and rail routes, and according to Russia Insider, the proposed route between Mumbai and Saint Petersburg would cross the Arabian Sea from Mumbai to Bandar Abas in Iran, by rail then across the Caspian Sea to Baku in Azerbaijan, onward from Baku across the Caspian Sea to Astrakhan, then onward by rail to Moscow, then Saint Petersburg.

The INSTC will not only be shorter but also cheaper alternative to ship oil and other goods bypassing the Suez Canal. According to Russia Today, this proposed corridor will potentially cut shipping time and costs by up to 40% and travel time between Mumbai and Moscow reportedly can be reduced to 20 days. Annual capacity of this route is expected to reach 30 million tons.

Currently, Indian logistics companies have to route shipments through China, Europe or Iran to get an access to Central Asian markets, with both ways being long, time-consuming and expensive.

India also wants a trade route to markets in landlocked Afghanistan which bypasses Pakistan and so far, India has committed US$500 million to develop the Iranian port of Chabahar that is strategically crucial to her goal.

As for Afghanistan, the route through Chabahar is expected to bring billions of dollars in trade and cut her dependence on foreign logistics.

The ambitious INSTC project comes on the back of a broader initiative – i.e. China’s multi-trillion dollar One Belt One Road initiative to develop trade routes connecting China to Europe, Asia and Africa, and One Belt, One Road could potentially include the India-Iran-Russia route into the chain of global shipments in an enormous boon to future business and trade.

Russia – India trade

Russia’s trade with India was worth US$9 billion in 2017 and during a press conference with India’s Prime Minister Narendra Modi on 5 October 2018, Russia’s President Vladimir Putin said during his two-day official visit to India, that Russia had set a target to increase trade turnover with India to US$30 billion by 2025 and increase investments to $15 billion at the same time.

Putin said that the expansion of trade and investment interactions is a priority for both nations and that if both countries move at such pace, they will reach the target ahead of time and will continue with expansion.

Statistics show that trade between Russia and India had increased by 20% to over US$6 billion in the six months from January to July 2018.

In September 2018, India had suggested the setting up of a special economic zone for Russian companies.

Earlier, both countries had discussed the creation of a ‘green corridor’ for the smooth transit of goods. This would involve the creation of a list of entrepreneurs or companies whose goods will be exempt from regular customs inspections.

Northwards through Siberia

Meanwhile, Japan plans to conduct a logistics test using Russia’s Trans-Siberian Railway and a ferry line to connect four countries, including Russia, China, Japan, and South Korea, a Japanese official reportedly said on 30th October 2018.

More particularly, the major objective of this project is to create a new transportation corridor which connects China’s Jilin province to a ferry line that currently connects Vladivostok in Russia, Donghae in South Korea and Sakaiminato in Japan, according to Nogava Satoshi, vice governor of Japan’s Tottori prefecture, who stressed that the logistics corridor may also include other territories.

In April 2018, the ferry, dubbed DBS, called at the Russian port of Zarubino, and transported cargo freighted there to China. According to Satoshi, the delivery was significantly faster, though relevant parties need to solve some problems identified during the test delivery.

Earlier this year, Japan and Russia conducted test shipment of Japanese goods to Russia using a sea link and the Trans-Siberian Railway – Russia’s 9,289 kilometres long transport artery, which has great development potential for mutual trade between the two nations, according to Toshihiro Matsumoto, Japan’s Deputy Minister of State Lands, Infrastructure, Transport and Tourism.

Japan and Russia currently trade goods using sea and air routes. It takes up to 62 days to ship freight from Japan to Russia via the Indian Ocean. Using air-cargo makes freight transport much faster, but more expensive.

This new freight route via the railway will significantly cut transportation time between the two countries and could reduce costs by up to 40%.

 

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