EurasiaNet Eurasia Insight - Trade Corridor Could Link Russian Arms to Iran and India

EURASIA INSIGHT

TRADE CORRIDOR COULD LINK RUSSIAN ARMS TO IRAN AND INDIA

Mark Berniker 7/19/02

Signs of a regional economic compact encompassing Iran and Central Asia are growing clearer. The nexus for such a compact could be the North-South trade route, a concept that Russia and Iran have been discussing since 2000. Development of such a corridor would extend the Helsinki-Petersburg-Moscow trade corridor across the Caspian Sea to Iran and India.

Kazakhstan’s President, Nursultan Nazarbayev, has already endorsed the North-South corridor in a June 3 summit with Indian Prime Minister Atal Behari Vajpayee. Azerbaijan, Armenia, Lithuania, and perhaps Turkmenistan have also expressed interest in trading along this route. Setting up transportation and services along the route could bring Caspian countries increased transit fee revenues, and access to new markets. Linking India’s port in Mumbai to Russian and Iranian ports by road and rail, the corridor can reduce shipping time by ten to twelve days for exporters who currently ship across the Mediterranean Sea and Suez Canal. These shorter delivery times may attract some companies that use the congested Suez route; they will also encourage the countries involved to compete with the European Union’s TRACECA corridor, and with plans to revive a Silk Road trade route from Asia into Central Europe.

For now, the corridor is relatively quiet. Regional transport officials have said that more than two million tonnes of cargo were shipped between Russia and Iran in 2001, worth about $700 million. According to India’s Project Monitor, Russian officials have talked about increasing the weight of transport on the corridor tenfold. However, The Hindu, a leading Indian newspaper, reported that the North-South Corridor "is still in its early stages with just 800 40-feet containers transported in 2001." Russian and Indian dreams of heavier volume, experts have suggested, could make the corridor a potent political factor.

"The idea of the Corridor has multiple purposes," says Stephen Blank, a research professor at the Strategic Studies Institute of the United States Army War College. "For Russia, it’s the opportunity to bypass the Silk Road. Iran gains political and economic benefits from trade with Russia, Central Asia and India- perhaps at the expense of Pakistan. And India gets access to Russian, Central Asian and Eastern European markets for its goods, and links to a variety of energy import sources." US observers might resist any development that could strengthen ties between Iran and Russia, which is a key ally in the war on terrorism. Smaller nations might also fret about the North-South corridor’s potential. Countries like Uzbekistan and Kazakhstan, which are struggling to develop comparable industries, might seek to discourage shippers from getting easier access to India’s cheap consumer goods.

Critics of the North-South corridor point to the shoddy condition of roads in Iran, not to mention a range of troubling issues involving customs documentation, multiple visas for each shipment, container warehousing, border inspections, and indeterminate taxes and transit fees. A "coordination council" of the North-South corridor should take up these issues in the coming months and are expected to meet in India before September, according to The Financial Express, an Indian newspaper. It’s also unclear who will pay for the infrastructure improvements the corridor will need. "For this to be a viable trade route, it will require an enormous amount of investment in the whole infrastructure from the roads to the rails, and the port facilities," Blank says, adding that he expects a variety of international lenders to provide financing for those projects. Many observers expect India and South Korea to finance the construction and repair of roads, rails and container terminals at port facilities along the corridor.

Opponents of the North-South concept also invoke darker scenarios than rutting roads. While the bulk of the trade on the North-South corridor is innocuous, some analysts have expressed concern about the potential for growing cooperation in arms trade and nuclear power development among Russia, Iran and India. Russia is a huge potential customer of imports from Indian and Iranian imports, but its economy is shaky and its primary export is arms. On July 9, Andrei Beliyaninov, director general of Russian weapons export agency Rosoboronexport, said his government would target customers like Iran as part of a program to assert itself as the world’s top arms exporter. According to the Stockholm International Peace Research Institute (SIPRI), Russia exported $4.97 billion worth of arms last year compared to $4.56 billion worth sold by the United States. While Iran is a much smaller client than India or China, the Russians could export at least $400 million worth of weapons to Iran. That prospect worries American strategists.

Any Russian assistance to Indian and Iran nuclear power plants is facing considerable resistance in Washington. In June, while border tensions seethed between India and antiterrorism ally Pakistan, the U.S. opposed Russia’s sale of uranium fuel for India’s nuclear power plants. And during the recent G-8 summit in Kananaskis, Canada, the U.S. strongly opposed Russia’s nuclear power plant construction project in Bushehr, Iran. The U.S. had already made it clear to Russia that Iran’s inclusion in "the axis of evil" makes it an undesirable trading partner. The North-South corridor could hasten a confrontation on that contention.

Editor�s Note: Mark Berniker is a freelance writer and producer who specializes in Central Asian, Caucasian and Russian economic affairs.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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