In a strategic move to mitigate the impact of sanctions related to its conflict with Ukraine, Russia has initiated the construction of two new trade routes connecting Asia and Europe.
This development comes as disruptions in the Middle East increasingly affect global trade, according to a Bloomberg report.
The new routes, which utilize maritime and rail networks through Iran and a maritime corridor in the Arctic, aim to reorient Moscow’s trade focus towards the Asian powerhouses of China and India, moving away from Europe.
These networks could potentially position Russia as a central hub in international trade, even amidst efforts by the United States and its allies to isolate President Vladimir Putin due to the ongoing war.
Bloomberg highlights that these routes offer a significant reduction in transit times, cutting them by 30 to 50% compared to the traditional Suez Canal route. Additionally, these routes avoid the security issues plaguing the Red Sea due to Houthi attacks on shipping lanes.
The report also notes the recent Iranian attack on Israel last Saturday, which has further exacerbated regional disturbances.
While the United States and its Western allies steer clear of the Russian-supported transport routes despite potential cost savings, major Asian and Gulf economies have shown interest.
However, significant challenges remain. Iran’s outdated infrastructure impedes the development of the International North-South Transport Corridor, which aims to connect India to European Russia.
Despite climate change accelerating the melting of Arctic ice and making the Northern Sea Route more viable, there are still considerable logistical challenges along Russia’s remote Arctic coast.
Russia’s “Izvestia” newspaper quoted a defense ministry official stating that Russia is preparing to invest over $25 billion to upgrade routes through Iran and enhance facilities along the Russian Arctic coast.
This includes a fleet of locally manufactured icebreakers and plans to patrol the Northern Sea Route with a network of drone bases.
Russia granted Iran a €1.3 billion ($1.4 billion) loan last May to construct a vital 162-kilometer railway link from the Caspian Sea coastal city of Rasht to the Azerbaijani border at Astara.
Upon completion, this railway will enable goods transport from St. Petersburg to Bandar Abbas, Iran’s primary export port.
During a video conference with Iranian President Ebrahim Raisi, Russian President Vladimir Putin stated, “This project will create a direct, uninterrupted rail link along the North-South route, significantly diversifying global transport flows.”
The Eurasian Development Bank projects that transport capacity along this route, which includes a longer railway line through Central Asia and a network across the Caspian Sea, could increase by 85% to 35 million tons annually by 2030.
This route will connect Russia with Iran and India and potentially extend to South Asia, the Gulf, and Africa. In August, Russia launched its first direct freight train to Saudi Arabia.
Trade with China hit a record $240 billion in 2023, more than doubling from $108 billion in 2020, driven by Russian oil sales and Chinese purchases of electronics, industrial equipment, and vehicles.
Similarly, trade with India grew to nearly $64 billion last year, up from about $10 billion three years prior, with New Delhi’s purchases of Russian oil surging since the onset of the war in Ukraine.
This growing trade with China and India has prompted the Kremlin to invest billions in upgrading its vast eastern railway lines to expand capacity on the Trans-Siberian Railway and the Baikal-Amur Mainline by 2030.
