South-North corridor cost-benefit analysis has changed

TEHRAN, May 20 (MNA) – Margoev says that the cost-benefit analysis of South-North corridor has changed for Russian companies now, so it makes more economic sense for them to invest in the corridor.

Russian President and his Iranian counterpart on Wednesday oversaw, via video link, the signing of a deal to finance and build the Rasht-Astara railway as part of an embryonic international North–South Transport Corridor.

The Rasht-Astara railway is seen as an important link in the corridor, intended to connect India, Iran, Russia, Azerbaijan, and other countries via railways and sea - a route that many say can rival the Suez Canal as a major global trade route.

Russian President Putin said the 162 km railway along the Caspian Sea coast would help to connect Russian ports on the Baltic Sea with Iranian ports in the Indian Ocean and the Persian Gulf.

Iranian President Raeisi also describes the project as a strategic step and said, "Without a doubt, this agreement is an important and strategic step in the direction of cooperation between Tehran and Moscow."

To shed more light on the issue, we discussed the issue with Adlan Margoev, a Research Fellow at the Moscow State Institute of International Relations (MGIMO University).

South-North corridor cost-benefit analysis has changed

Can this project affect the future world trade order?

If all the parties involved, especially Iran, Russia, and Azerbaijan, manage to build not only the physical infrastructure along the corridor but ensure conditions for quick, smooth, transparent and predictable logistics, then the North-South is capable of providing enough benefits to companies across the Eurasian continent and Africa to outcompete the Suez Canal. While thinking big when we talk about the potential development of the corridor, we have to be modest as well when we set expectations about how fast we can move forward and what we may need down the road in order to deliver on our promises.

Remember what happened with Barjam, the JCPOA? Iran rightly sold the plan as a way to strengthen the economy and secure the prosperity of the Iranians. However, the public expectations with respect to how fast the government could solve the national problems were overblown. The two years before the United States unjustly left the agreement were not enough to achieve as much as the people had expected. This is why some of those who had perceived the deal as a positive development got disappointed with the agreement and with the negotiating team that deserved praise regardless of the fate of the agreement. It is important that similar dynamics don’t take place with the North-South corridor. We have to educate people on the prospects for and challenges to its development, we have to be frank about both. Then we may avoid frustration about unmet, excessively huge expectations.

How do you see Iran's role in this project?

Iran is the bottleneck of this corridor; I cannot imagine an effective implementation of the project without full commitment and effort on the Iranian side. When my Iranian colleagues ask me where Russia has been since the year 2000 when India, Iran, and Russia first agreed to develop the corridor, I have to recall the long story of sanctions that inhibited the engagement of all foreign companies in the project: none would dare to risk so much in order to invest in a corridor that couldn’t guarantee returns for at least five years. Now that many Russian companies are under sanctions as well, the cost-benefit analysis has changed; it makes more economic sense to invest in the corridor, and even more so – a political one. I hope Iran invests its own resources as well in order to build a fully effective corridor, without just expecting Russia and other countries to weigh in. In this case, the corridor will become profitable for Iran much sooner and diversify Iran’s budget against its reliance on oil trade.

How can it affect Russia's trade and economy?

The North-South corridor will help Russia reroute supply chains in a way that better connects the country to friendly states, which means that the logistics would be less susceptible to sanctions and other hostile measures against the Russian economy. That will strengthen Russia’s economic relationships and involvement in the world economy. But as an expert on Iran-Russia relationships, I am equally positive about the prospects for our bilateral trade that the corridor creates besides the transit potential. Those Russians who want to do business with the Iranians typically face two issues: how to ship goods between the countries and how to take the money they earn in Iran back home. Before we solve both, it’s hard to imagine how we will diversify the trade: for now, more than 70% of our 4,6 bln USD trade volume comprises agricultural goods. With proper logistics and banking infrastructure, we can do at least twice as much volume-wise and be more diverse in the types of goods that we sell each other.

How can this project help stability and security in the region?

One can hardly imagine full-fledged economic prosperity during conflicts and war. The development of the North-South corridor, once it proves beneficial to states in the neighboring regions – South Asia, West Asia, Caucasus, Central Asia, and beyond – may reduce the motivation for conflicts in the region. Like with the oil trade through the Hormuz Strait, few countries would like to see this supply chain disrupted despite the heated political and security atmosphere along the strait. In a decade or two from now, the North-South corridor has the potential of becoming another valuable route for international trade. And it is both politically and economically good for Iran that the crucial part of the route passes through its territory.

Interview by Payman Yazdani

News Code 200918


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