From Moscow to Mumbai: Russia Pivots South for Trade

Mar13,2024



Baku: For centuries, trade with Europe was a main pillar of Russia's economy. With a sharp reduction in Western sanctions and other sanctions, the war in Ukraine ended. Russia off from european market, In response, Moscow has expanded ties with countries that are more willing to trade with it – China in the east, and, through an agreement, China. southern routeIndia and countries Persian Gulf,
That southern route has now become the focus of Russian policymakers as they try to build the infrastructure for their plans to move away from the West forever. The effort faces challenges, including questions over financing, doubts about the credibility of Russia's new partners and the threat of Western sanctions targeting countries that trade with Russia.
A key part of the southern plan is the 100-mile $1.7 billion railway Construction is scheduled to begin this year on what will be the final link on the route between Russia and Iranian ports on the Persian Gulf – providing easy access to destinations such as India's commercial capital Mumbai. Russia has agreed to provide Iran with a $1.4 billion loan to finance the project.
“Since Russia's traditional trade routes were largely blocked, it had to consider other options,” said Rauf Agamirzayev, a transportation and logistics expert based in Baku, Azerbaijan, referring to the southern route.
Russia has found a number of ways to circumvent Western trade sanctions, shipping machinery from India and weapons from Iran, as well as a host of consumer goods – often via the Gulf countries and Turkey – which the government considers important to show. The Russians are confident that it can maintain living standards in time of war.
While some consumer goods still come legally from Europe, a whole range of banned or hard-to-find goods are also widely available in Russia. Oysters from France, flown in by plane to a third location, are available in a Moscow restaurant, and Italian truffles and French Champagne, the export of which was banned by the European Union, are available in a high-end grocery store chain. Can be found.
The Russian government sees the railway project through Iran – and hopes to restore another line that would provide access to Turkey – as essential to locking up and accelerating the flow of all such imports into the country. It is also considered important to increase exports of Russian natural resources which are vital to the economy.
Russian President Vladimir Putin has said that the travel time for cargo from St. Petersburg to Mumbai through the new route will now reduce from 30 to just 10 days. Russian officials are calling it a “successful revolutionary project” that will compete with the Suez Canal.
It will also complement Russia's trade routes to China, its largest trading partner, as they reach over-capacity. Russia's trade with China has increased by nearly 63% since 2021, just before the full-scale invasion of Ukraine in February 2022, according to Chinese data, to more than $240 billion in 2023.
Trade with India is also growing, reaching $65 billion, more than four times in 2021. Russia's trade with the two countries surpassed its pre-war trade with the EU in 2023, amounting to $282 billion in 2021.
The new railway will connect two Iranian cities, Astara and Rasht, to tracks between Iran and Azerbaijan in the north, and then connect to the Russian railway grid. When finished – the new link is expected to be completed in 2028 – the resulting “North-South Transport Corridor” will stretch unbroken for more than 4,300 miles, beyond the reach of Western sanctions.
From Iranian facilities on the Persian Gulf, Russian traders will have easy access to India as well as destinations in Saudi Arabia, UAE, Pakistan and beyond.
A trade route through the Caucasus and Central Asia and the Caspian Sea to Iran has already been important to Russia in recent months, according to Lloyd's List, which specializes in maritime news and intelligence. Russia is also shipping oil and products such as coking coal and fertilizers in the opposite direction.
Gagik Aghajanyan, head of Apavan, Armenia's largest freight-forwarding company, said his fleet of trucks often picks up loads of consumer goods delivered by rail from Georgia's ports on the Black Sea, and then transfers them overland north. Russia's border. Other goods that are more sensitive, such as those banned by Western states, can be shipped through Iran, which shares a border with Armenia, he said. From Iranian ports, goods can travel across the Caspian to Russia.
“Georgians say, 'These are approved items; we won't let you into Russia,'” Aghajanyan said in an interview. “And the Iranians say, 'We don't care.'”
According to Andrei Belousov, Deputy Prime Minister for the Economy of Russia, in 2023, trade volume on this route will increase by 38% compared to 2021, and could triple by 2030.
In addition to the line through Iran, Russia also wants to restore an old Soviet railway that linked Moscow to Iran and Turkey via Armenia and the Azerbaijani enclave of Nakhichevan. The railway was abandoned when war broke out between Armenia and Azerbaijan in the early 1990s.
Russia hopes to have the railway operational within a few years, but the project has become entangled in the region's complex geopolitics.
Azerbaijan is eager to complete the link, but Armenia has not committed to the project due to concerns about who will control the tracks through its territory. In Soviet times, they belonged to the Azerbaijani Railways. In 2020, Armenia signed an agreement that handed over control of it to the Russian security service.
But Russia, once closely allied with Armenia, has become increasingly friendly with Azerbaijan, essentially standing with Azerbaijan since Azerbaijan took full control over the breakaway region of Nagorno-Karabakh. Which was under the control of Armenian separatists for more than three decades. , Now, the Armenians want to control their part of the railway link, which is strategically centered on the city of Meghri, located on the border with Iran.
For now, the railway station in Meghri remains a relic of the Soviet past, its rooms filled with old railway maps and tickets hidden under dry leaves and dust. Its tracks, built by Tsarist Russia more than a century ago, have long ago been replaced by botanical gardens.
The Azerbaijani Railways Company is close to completing the extension of its tracks towards Armenia through areas it occupied before the 2020 war. From there, it can go either through Armenia or through Iran, if Armenia decides to stay away from the route.
“Russia could get a railway route to the Persian Gulf and Turkey,” said Nikita Smagin, an expert on Russian policy in the Middle East at the Russian Council on International Affairs think tank. “It can do it very quickly, in as little as two years.”
Rovshan Rustamov, head of the Azerbaijani Railways Company, said Azerbaijan's part of the project should be completed by the end of 2024. Logistics, he said, could even replace oil as the biggest driver of Azerbaijan's economy.
Azerbaijan is also hoping that the port of Baku will benefit from the country's new position as a strategic hub for freight travel between Russia and the outside world, as well as between Asia and Europe, easily bypassing Russia. Could.
After the Russian invasion of Ukraine began, authorities in Baku accelerated plans to develop a second phase of the port to cope with the expected increase in cargo traffic.
Baku Port Director General Taleh Ziyadov said, “The feasibility study we conducted earlier showed that we did not have to rush into the expansion.” “After the war, we did a new study that showed we had to put that date earlier, probably to 2024.”
While Russian officials have praised the new trade routes, some business leaders are not so convinced.
“It feels like a forced decision that was not taken for objective reasons,” said Ivan Fedyakov, who runs Infoline, a Russian market consulting company that advises companies on how to survive under the current restrictions.
Ram Ben Tzion, whose company Publican analyzes trade sanctions evasion, said, “What is being created is really a trade route for pariah people.”
This article was originally published in the new York Times,



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