What the North-South Transport Corridor means for Russia’s transport & logistics sector
Published on 12/05/2017
India and Russia are amongst the nation’s identified as the world-leading economies of the future. Both countries are BRICS members - and are eyeing up increased bi-lateral trade levels to boost both their political and economic cooperation to make their ascent even faster.
The trouble is India is located 5,000km away from Russia on the other side of the world. Moving goods from Mumbai to St. Petersburg is a 45-day sea journey. Container ships must travel through the Arabian Sea, traverse the Suez Canal, then through the Mediterranean, North and Baltic Seas before they reach their destination.
In October 2016, the long gestating North-South Transport Corridor (NTSC) was finally inaugurated. This 7,200km multi-modal network promises not only to change the transport operations of Russia, but also those countries along the route.
North-South Transport Corridor: cutting transit times & costs
The North-South Transport Corridor was first mooted in 2000 in a tri-lateral agreement between Russia, India, and Iran. Officially enshrined in legislature in 2002, attracting a host of regional countries as official partners, it has really only started to gain traction in 2017.
From its starting point in Mumbai on India’s western coast, the corridor begins as a maritime route. Goods enter Iran’s Bandar Abbas Arabian Sea port, before being transferred by road to Iranian rail hubs. Freight is then loaded onto wagons, ready for transport to Azerbaijan’s Capital Baku, then off to Southern Russia, onwards to Moscow, ultimately terminating at St. Petersburg.
Despite its length, this route holds incredible advantages over the current strictly maritime corridor. Firstly, it has the potential to drastically reduce logistics costs. A study from the Federation of Freight Forwarders Associations of India undertaken in 2009 predicted a 30% drop in transportation costs and a 40% drop in transit times.
A dry run of two proposed routes in 2014 (Mumbai-Bandar Abbas-Baku and Mumbai-Bandar Abbas-Tehran-Bandar Azali-Astrakhan) revealed costs of transporting goods to Russia via the NSTC could be reduced by as much as $2,500 per 15 tons of freight.
Additionally, as we briefly addressed earlier, travel times are set to be reduced considerably. It takes over a month for containers to reach St. Petersburg from Mumbai. Once completely implemented, as some countries are still building the NTSC’s required infrastructure, estimates reckon it could take just 14 days for goods to reach St. Petersburg – less than half the length of the current route.
Economic boons coming for all NSTC participants
As well as offering
faster, cheaper transportation services between Russia and Iran, the NSTC promises to boost trade throughout the region. It is estimated that it will generate an additional $1 billion a year for all of the nations along the route – plus their regional neighbours.
The main corridor is planned to be integrated into region-spanning networks, promoting further trade. As well as the big three (Russia, India, and Iran), Azerbaijan, Kazakhstan, Armenia, Belarus, Tajikistan, Kyrgyzstan, Oman, Ukraine, Bulgaria, and Estonia, are all participants in the scheme. Subsequently, the NSTC means greater levels of Russian and Indian freight can move thoroughly throughout Eastern Europe and the Middle East – and the same for its chief partners’ cargoes.
For Russia and India, the NSTC heralds a new era of deeper economic cooperation between the two states. Bi-lateral trade peaked at $11 billion in 2011. By 2016, however, this had slumped to $6.1 billion. With the opening of the NSTC mutual trade between the two states could reach $30 billion a year by 2025.
Russia will likely be sending a wide variety of goods to India via the North-South Transport Corridor.
Its automotive logistics sector may score some big wins, with greater volumes of vehicles exported to India, but other commodities eyeballed for Indian markets include construction materials, metallurgic products, grains, and energy-fuels. All of these categories are major revenue sources for Russia on global markets, hence its Columbus-esque drive to secure an easier trade passage to India.
Greater levels of freight set to hit Russian railways
Apart from the obvious economic benefits, this ongoing development will likely result in greater freight volumes travelling on Russia’s railways. As much as 25 million tons of freight will be carried along the main Mumbai-Bander Abbas-Baku-Mumbai route – that is not including the levels of freight travelling across interconnected rail links. Connecting to Iran alone could attract an extra 10 million tons of cargo to Russian rail routes annually.
NSTC infrastructure still under development
The NSTC has taken nearly two decades to reach its current status – yet it is not 100% complete. Iran is still to finish construction of some key rail links. 150 km of track, connecting Rasht to Astara in Northern Iran, has yet to be finished. While the Iranian transport ministry has pledged to have this finished by 2017, the NSTC cannot reach its full potential until it is fully completed.
For Russia, however, its infrastructure development is likely to take the form in upgrading its rail routes. While the Grand Old Man of European Railways is one of the oldest, most well-established, railways in the world, an extra 25 million tons of freight a year is doubtlessly going to require further development.
Take St. Petersburg. Despite its rail nodes being able to handle 110 million tons of cargo each year, it is forging ahead with the expansion of its Shushary Urban Freight Station. Hubs along the route, such as Moscow, Astrakhan and Olya, will have to work on similar projects to cope with the NSTC’s impact.
This creates a space for foreign rail tech, warehousing, cargo handling, and other logistics specialists, to enter the market.
Russian railways are set to enjoy a $43 billion boost in 2017, meaning more cash is coming to the sector. Intrepid international transport company and logistics companies are well suited to grabbing a slice of this substantial investment – through supplying necessary cargo handling, warehousing, and storage services, plus attended logistics and rail technologies.
Connect with Russia’s NSTC pioneers at TransRussia
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