Corridor of Uncertainty

War in Iran has turned the INSTC, India’s most promising trade shortcut, into a strategic liability.

The fog of war in the Middle East has obscured more than battle lines. It has also hidden the quiet unravelling of one of Eurasia’s most ambitious trade experiments: the International North-South Transport Corridor (INSTC). Conceived at the turn of the millennium as a faster, cheaper artery linking South Asia to Europe, the corridor now finds itself a casualty as collateral damage in a widening Iran embroglio that threatens to redraw the geography of trade.

The INSTC was, on paper, an elegant solution to an old problem. Traditional sea routes from India to Russia and Europe, largely dependent on the Suez Canal, were long, costly and vulnerable to chokepoints. By contrast, the INSTC promised a multimodal shortcut: cargo would move by sea from Mumbai to Iran, then by rail and road across the Iranian plateau to the Caspian Sea, before continuing onward to Russia and beyond. In 2001, India, Iran and Russia signed the foundational agreement, later drawing in a constellation of Eurasian states from Azerbaijan and Armenia to Kazakhstan and Turkey.

The promise was not merely theoretical. When the first commercial consignment traversed the corridor in July 2022, it signalled a breakthrough. Estimates suggested that the INSTC could cut transit times by as much as 40 percent and reduce costs by roughly 30 percent. A journey from Mumbai to Moscow that once took up to two months could be completed in under three weeks. For a trading nation like India, seeking to deepen ties with Russia and Central Asia while hedging against disruptions in maritime routes, the corridor seemed transformative.

Fault Line

Yet infrastructure, however efficient, is only as stable as the geopolitics that underpins it. And here, the INSTC’s fatal vulnerability has been laid bare. Its central node – Iran - has become the epicentre of a widening conflict involving Israel and the United States. What was once envisaged as the “logistical heartland of Eurasia” now resembles a fault line.

The most immediate damage has been physical. A joint American-Israeli strike on March 18 targeted the Iranian port of Bandar Anzali on the Caspian Sea - a key transshipment hub in the INSTC network. The destruction of its customs infrastructure has effectively choked cargo flows through a corridor already struggling with bottlenecks. In a system where efficiency depends on seamless transitions between sea, rail and road, such disruptions are crippling.

The economic consequences have been swift. Shipping delays have lengthened transit times, eroding the very advantage that made the corridor attractive. Alternative routes, whether via the Suez Canal or longer overland paths, are not only slower but also 20–30 percent more expensive. Worse, they lack the capacity to absorb the displaced cargo fully. The result is a squeeze on trade volumes and a rise in costs that ripple through supply chains.

For Russia, a principal beneficiary of the corridor - particularly as it seeks to bypass Western sanctions - the financial toll is mounting. Logistics firms reportedly face monthly losses running into tens of millions of dollars. Freight turnover along the route could fall by as much as a quarter this year. For India, the implications are no less serious. The ambitious target of boosting bilateral trade with Russia to $100bn by 2030 now looks increasingly aspirational.

Insurance markets, ever sensitive to risk, have compounded the problem. The intensification of hostilities in the Gulf, coupled with threats to shipping in the Strait of Hormuz, has made underwriting cargo through Iran prohibitively expensive. Some operators have suspended services altogether. In effect, the corridor is being priced out of viability just as much as it is being bombed into disruption.

Geopolitical Statement

The strategic implications are sobering. The INSTC was never merely a trade route; it was a geopolitical statement. For India, it offered a means of asserting strategic autonomy by diversifying trade routes, deepening continental ties, and reducing dependence on maritime chokepoints dominated by rival powers. For Iran, it promised economic integration and relevance. For Russia, it provided a lifeline to global markets.

Now, that shared vision is fraying. Instead of serving as a stabilising economic link, the corridor has become a liability, exposing its users to the vagaries of conflict in one of the world’s most volatile regions. The very geography that once conferred advantage by bridging continents now amplifies risk.

What, then, is to be done? For India, the answer lies not in abandoning the project but in adapting it. A multi-pronged strategy is essential. First, there is a need to strengthen infrastructure and operational control across safer segments of the corridor, ensuring that disruptions in one node do not paralyse the entire network. Second, greater emphasis must be placed on the so-called ‘eastern route,’ which skirts some of the most volatile regions and may offer a more secure, if less direct, alternative.

Investment in technological modernisation is equally critical. Digitised logistics, real-time tracking, and streamlined customs processes can mitigate delays and enhance resilience. At the same time, India must leverage its tradition of strategic autonomy to navigate the geopolitical minefield.

Establishing credible guarantees for cargo safety, possibly through multilateral arrangements involving regional partners, will be key to restoring confidence among shippers and insurers. The involvement of additional stakeholders, from Central Asian republics to European markets, could help distribute risk and reinforce the corridor’s viability.

Finally, institutional innovation may be required. A dedicated task force, bringing together government agencies, industry players and international partners, could provide the coordination needed to respond swiftly to disruptions and chart a long-term course.

The INSTC’s troubles are a reminder that in an interconnected world, infrastructure and geopolitics are inseparable. Trade corridors do not exist in a vacuum; they are embedded in the political landscapes they traverse. When those landscapes shift, the consequences can be profound.

(The author is a retired naval aviation officer and a defence and geopolitical analyst. Views personal.)