Moscow and Tehran—both under harsh Western sanctions—have moved to strengthen economic ties with a new agreement to build a railway that is key to the International North-South Transit Corridor (INSTC).

The agreement was signed by Iran’s Minister of Roads and Urban Development Mehrdad Bazrpash and Russia’s Deputy Prime Minister Alexander Novak in Tehran on Wednesday after the presidents of the two countries declared their approval for the long-stalled construction of the Rasht (Iranian city on the Caspian Sea)-Astara (Azerbaijan) railway in a video conference, IRNA reported.

“The North-South corridor will benefit the entire region. From East and South Asia to Caucasia and North Europe, the route is a manifestation of friendship, convergence, and economic partnership among all regional countries,” Iranian President Ebrahim Raisi said.

Raisi thanked Putin and the Russian government for their involvement in the initiative and referred to it as an "important strategic step" in bilateral cooperation that will benefit all countries involved in the INSTC. Putin for his part called the occasion a "landmark moment for the entire global transport infrastructure."

Russian President Vladimir Putin stressed the importance of the agreement and said, “The Rasht-Astara railroad will give us an opportunity to transform and diversify global transportation routes. It will create competition to boost transit capacities in the region.”

According to Putin, the North-South corridor plays a vital role in meeting the food security of Iran and the littoral state of the Persian Gulf.

The multimodal International North-South Transportation Corridor connects India, Iran, Azerbaijan, Russia, and Europe by the Astara-Rasht-Qazvin railway, which will wind through the Caspian Sea's southwest corner.

The missing link is a 162-kilometre railroad between the city of Rasht, the capital city of Gilan Province, and the city of Astara in the namesake province on the border with Azerbaijan.

With the completion of this section, trains can travel from St. Petersburg to the Persian Gulf. 

The cross-border Astara (Iran)–Astara (Azerbaijan) section of the railroad was officially inaugurated on March 29, 2018, while the Rasht–Qazvin section inside Iran was implemented on March 6, 2019. Therefore, the only remaining gap is a 164-kilometer railroad section from Rasht to Astara. Until this railroad segment is completed, freight moving by train must be transferred to trucks and then back again. 

“The corridor has enormous potential to create sustainable revenues that can rival our oil exports,” Mohammad Jamshidi, vice president for political affairs, said on Tuesday.

The main obstacle in the way of the project to date has been financing, particularly due to the United States sanctions on Iran. Iran and the Republic of Azerbaijan had agreed to contribute $500 million each to the construction of the Rasht-Astara railway. And in 2016, the International Bank of Azerbaijan agreed to lend $500 million to Iran for this reason as part of a contract. However, due to extensive US restrictions on Iran's banking system, neither this arrangement nor the loan was ever actually put into action.

Image source: Times of India