Iran and Russia Forge Major Railroad Agreement

Towards the latter half of May, Iran and Russia reached an agreement to complete the final section of the International North-South Transport Corridor (INSTC). This is a network of rail, road, and ship routes that span over 7,000 kilometers which connects northern Europe with Southern Asia. 

This agreement will allow both sanctioned Eurasian countries to skirt sanctions and deepen their economic ties. Under this agreement, Russia will provide 1.3 billion euros in interstate loans to help fund the construction of a 162 km railway between the city of Rasht in northern Iran and Astara along the country’s border with Azerbaijan. The project is expected to be completed by 2027. 

Russia is optimistic about the project, with Deputy Prime Minister Alexander Novak lauding it as a “global change in supply chains” that he said could become an “alternative to the Suez Canal.”

Iranian President Ebrahim Raeisi and Russian President Vladimir Putin both were in attendance of the virtual signing ceremony through a video link and praised the growing friendship between the two nations.

Raeisi described the project as an “important strategic step” towards bolstering cooperation between Iran and Russia that he emphasized will benefit all of the countries involved in the INSTC.

“The Islamic Republic of Iran has great potential despite the efforts by the collective West to bypass the Iranian territories and use other transit routes,” he declared. “The route through Iran is the cheapest, most economical and closest route for commercial and transit traffic in the region.”

In Putin’s view, the project is a “major endeavor” for the region and the “global transport infrastructure” and that the corridor will facilitate the diversification of global traffic, on top of additional economic benefits in the form of greater employment and investments.

“Traffic via the new corridor will possess substantial competitive advantages. For example, it will take about 10 days to deliver consignments from St Petersburg to Mumbai. I would like to note, as a comparison, that it takes 30 to 45 days to deliver them using traditional commercial routes. In effect, this makes it possible to slash delivery deadlines and costs,” he stated.

On top of that, Putin said that the project assists with global food security, due to how it facilitates the shipment of food and other agricultural goods to the Middle East in addition to  Africa.

This corridor was first built back in 2002 when Iran, Russia, and India reached  an agreement to construct the route. Since 2022, 12 other countries also became a part of the project, which includes Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan.

For several years, however, railroad construction was put on hold due to financial, engineering and logistical problems that prevented the project from fully being realized.

Iran and Russia have been solid strategic partners since the 1990s when the United States — a country that they’ve been mutually antagonistic towards — enjoyed a unipolar status. Their ties strengthened in 2015 when they teamed up to stabilize Syria during the Syrian Civil  War and quell foreign-backed unrest and militants. This relationship tightened in the wake of the Russo-Ukrainian war, with Russia seeking to bolster ties with Eurasian countries such as Iran and China. 

Iranian and Russian officials recently held several meetings to talk about the development of 8 recently discovered oil and gas fields in Iran with certain projects said to be valued up to $40 billion.

Banking cooperation between the two sanctioned countries has quickly developed. Early in 2023, Iran and Russia hammered out an agreement that connected  their inter-bank messaging systems, covering up a hole created by both countries being kicked off of SWIFT, a Western-sponsored financial messaging service. 

This recent development came after Iran and Russia reached an agreement to de-dollarize bilateral trade and use their own currencies to conduct business transactions amongst each other.

Novak claims the agreement has been implemented, with Iran and Russia currently carrying roughly 80% of mutual settlements in national currencies, such as rubles and rials.

In addition, the two countries have been bolstering military cooperation recently, and certain reports point to Iran getting ready to receive its first SU-35 fighter aircraft in the near future, according to reports by Iranian media. 

All things considered, Russo-Iranian relations are strengthening like no other. And we can thank the US’s bone-headed foreign policy for drawing both of these countries together.

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