The International Transport Corridor (INSTC) was established in September 2000 by Iran, Russia, and India in St. Petersburg. The corridor expanded with the admission of 13 major corridor member countries such as Azerbaijan, Belarus, Armenia, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, and Turkey. INSTC connects India to the Caspian Sea, Russia, and Northern Europe through Iran. By bypassing the Suez Canal, INSTC is 40% shorter and 30% cheaper than traditional routes in terms of distance and time.
Pakistan’s Approach and Opportunities in INSTC
Recently, Pakistan’s ambassador to Russia, Muhammad Khalid Jamali, announced that Pakistan has accepted President Vladimir Putin’s invitation to join the International North-South Transport Corridor (INSTC) and has initiated the membership process.
Although for the past two decades, Pakistan did not take INSTC seriously, However, current geopolitical and geo-economic shifts, alongside internal reasons, have prompted Islamabad to consider this corridor more seriously.
Since the onset of the Ukraine crisis, the importance of INSTC for Pakistan has grown significantly. Trade along the INSTC route began in June 2022.
The INSTC, with its western, eastern, and central routes utilizing road, rail, and maritime paths, offers an alternative trade route. This could reduce Pakistan’s reliance on the Suez Canal and the Red Sea for trade with Europe, thereby lowering transportation costs.
With disruptions have changed global economic outlooks, tackling future risks and challenges has become more critical. Therefore, by joining INSTC, Islamabad can diversify its logistical routes, establish multi-polar trade relations, and enhance its economic resilience.
Pakistan’s trade with Central Asian countries has significant potential due to mutual interests. Although these countries view the China-Pakistan Economic Corridor (CPEC) as an important project via Pakistan’s Gwadar port, the annual trade volume remains low at around $300 million.
Despite various challenges and the instability in Afghanistan, Pakistan has not significantly benefitted from trade opportunities, with Afghanistan acting as a barrier to Central Asian trade. Projects like the Trans-Afghan Corridor, which would connect Pakistan and Central Asia through Afghanistan, remain uncertain.
Under these circumstances, the eastern route of the INSTC (Iran-Turkmenistan-Kazakhstan-Russia) is likely the best and shortest path for Pakistan to trade with Central Asia and its rich natural resources of oil, gas, and minerals.
Furthermore, the partners utilizing INSTC are expanding, and the delivery time for goods has decreased due to more active use of the eastern rail route.
The recent signing of a roadmap and a quadrilateral agreement between Iran, Russia, Turkmenistan, and Kazakhstan regarding transit tariff adjustments on the eastern branch could be a significant incentive for Pakistan to participate more actively in INSTC.
The completion of the INSTC corridor chain and serious pursuit of projects like the Chabahar-Zahedan railway in Iran could benefit Pakistan as well.
Pakistan has made efforts to become part of the most economical transit routes.
The INSTC’s western route passes through Russia, South Caucasus, and Iran. The main connection on the western route is the Rasht-Astara link on the Caspian Sea (in northwestern Iran, 165 kilometers), which is expected to be operational by 2028 by Russia’s cooperation.
Pakistan’s trade with South Caucasus countries—Azerbaijan, Georgia, and Armenia—and Eastern Europe is relatively low. Amid efforts to strengthen these connections, INSTC remains the best route for Pakistan’s transportation to the South Caucasus. With warm and friendly relations between Baku and Islamabad, INSTC can become even more beneficial.
The middle axis reaches India through Saint Petersburg – Astrakhan – Caspian Sea – North and South ports of Iran.
In recent years, Pakistan has made significant efforts to strengthen its relations with Russia, increasing trade to around $800 million.
Key initiatives like trading in local currencies and reducing dependence on the US dollar are also gaining more attention. INSTC could indeed facilitate the import of more Russian crude oil, energy cooperation, and LNG transportation.
Recent agreements between Pakistan and Iran aim to increase bilateral trade to $10 billion over the next five years, with beneficial links between the ports of Gwadar and Chabahar. Completing the railway connection between these two ports could link INSTC and CPEC, creating a more comprehensive regional trade network.
Although Gwadar and Chabahar are competitors, potential cooperation could make them complementary.
Additionally, INSTC offers Pakistan opportunities in energy security, multilateral energy import and cooperation centered around Iran and Russia, swaps, and the transit of coal, oil, and petroleum products to India, along with expanding trade with China.
In its 2025 vision, the government of Pakistan has put the modernization of transportation and regional connectivity on its schedual.
INSTC could significantly enhance Pakistan’s exports, enabling sectors like textiles, agriculture, and manufacturing to access more lucrative markets.
Furthermore, the trade between Pakistan and India has immense potential, and cooperation within the INSTC framework, could improve political relations and foster interdependencies.
Challenges
Pakistan’s participation in INSTC requires substantial investments in modernizing infrastructure, connecting rail links between Gwadar and Chabahar, effective coordination, and addressing security challenges.
To increase of benefiting from INSTC, Pakistan needs full integration into financial transactions in logistic area, good transaction’s insurance, and regular rail, sea, and road travel.
US sanctions on Iran and Russia, along with pressure on Pakistan, could pose challenges to greater involvement in INSTC.
Trust-building measures in Pakistan-India relations have seen limited success, and India’s approach to Pakistan’s participation might challenge Pakistan’s successful involvement in INSTC.
Economic prospects in Pakistan show signs of improvement, but there are macroeconomic risks and limited foreign exchange reserves, and a debt-to-GDP ratio is over 76%. Furthermore, ongoing Armenia-Pakistan disputes could negatively impact future involvement in INSTC.
Outlook
Pakistan’s accession to INSTC holds multifaceted strategic, geopolitical, and geo-economic benefits. The country’s membership in INSTC could be in line with its participation in CPEC, and help to converge of the two corridors in regional transit, enhancing Pakistan’s role in regional trade and transforming Gwadar into an international logistics hub.
Pakistan could become a pivotal link between the Eurasian Economic Union, the Indian subcontinent, and East Asia. Pakistan’s success in joining INSTC offers significant opportunities to enhance the country’s geopolitical position, diplomatic relations, and investment prospects.
Economically, INSTC couldn’t have benefit for Pakistan as well as CPEC, but it can serve its economy and economic diplomacy, in diversifying economic partnerships, and providing a valuable route for trade with the Eurasian Economic Union and attracting foreign investment.
Farzad Bonesh ‒ geopolitical and geoeconomic analyst, researcher and writer, exclusively for the online magazine “New Eastern Outlook”.
