US sanctions may affect new Russia trade route

A multination trade route being developed by India to halve shipment time for container cargo to Russia, Central Asia, and Afghanistan could be among the casualties of US President Donald Trump’s decision to end the earlier nuclear agreement with Iran.

After Tuesday’s decision by Trump to reinstate sanctions against the Iranian government, India might have to deal with a bloated import bill as global crude oil prices soar, while the budding trade opportunities between India and Iran in non-oil goods have been cut short.

Experts say we have even more to lose. The ambitious proposal for a new trade route, the International North South Transport Corridor (INSTC), might have hit yet another block.

India’s current trade with Iran takes place mostly through the choked Bandar Abbas port; it handles about 85 per cent of that country’s seaborne traffic. Delhi is betting highly on upgradation of the Chabahar port in southern Iran. This deep-sea port, having the capability of handling high tonnage vessels, is being developed by India to be the future starting point of INSTC. The latter envisages road and rail connectivity to the European markets of Russia, as well as future connections to the Central Asian nations of the Commonwealth of Independent States.

A little more than three years after the first successful dry run took place, the first shipment to Russia was sent in April last year to mark the 70 th anniversary of diplomatic and trade ties with India. While business through the new route has remained slim, it is expected to now be even more so.

“Reinstating of sanctions is

expected to reduce opportunities for private financing and investments in the port and along the route, which has become the cornerstone of our trade policy for the region,” a senior commerce ministry official said.

Data from the Directorate General of Foreign Trade shows almost all of India’s container trade with Russia still passing through the Suez Canal, moving around the European continent and through St Petersburg.

The Federation of Freight Forwarders’ Associations in India had conducted the first dry run through Azerbaijan in 2014. It had initially estimated six months as the time required to popularise the new route after it opened.