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Despite US “Maximum Pressure” Campaign, Eurasian Integration Including Iran Proceeds

Authored by Conor Gallagher via NakedCapitalism.com

The Riyadh – Tehran detente deal could be a major win for not only the Middle East but also larger projects seeking more integration of greater Eurasia. If the deal is implemented, China’s Belt and Road Initiative could become a key component of the economic futures of both Saudi Arabia and Iran. The rapprochement could also pay dividends for the International North-South Transport Corridor (INSTC) project, which runs from St. Petersburg to Mumbai in India via Azerbaijan (or the Caspian Sea) and Iran and across the Arabian Sea. The “sanction-proof” corridor connects the Indian subcontinent with Russia without needing to go through Europe while simultaneously being 30 per cent cheaper and 40 per cent shorter than the existing routes.

The INSTC was announced back in the early 2000s, but progress was slow until recently when the West’s actions put it into overdrive. The sanctioning of Moscow and Tehran and the severing of Europe from Russian energy created the incentive to accelerate investments by key stakeholders. The authorities in Tehran realize their centrality on the India-Russia trade route, and considering that India’s imports from Russia quadrupled last year, one can deduct the potential upside for Iran. With an investment boost from Russia, Tehran has been trying to speed up the completion of improved railway networks that will connect to the existing railways of Russia and Azerbaijan and Chabahar Port in southeastern Iran.

Yet the major impediment to the INSTC reaching its full potential remains Iranian infrastructure. Much of the transit of goods on the INSTC still takes place on roads in Iran. Much of Iran’s railway is single track, and regular container train services from Moscow to Iran have to rely on transloading.

The government in Tehran is trying to prioritize the improvement of port capacity, rail and road infrastructure, transportation terminals and the modernization of its transportation fleet. The Iran Chamber of Commerce, Industries, Mines and Agriculture is also starting a new Transports Internationaux Routiers or International Road Transport centre in the southern port city of Bandar Abbas to expedite the processing of transit cargoes. However, there is a clear need for further investment in transportation infrastructure, which has been difficult due to US sanctions on Iran.

Saudi Arabia’s Finance Minister Mohammed Al-Jadaan said on March 15 that Saudi investments into Iran could happen “very quickly” following the agreement to restore diplomatic ties. He added that he does not see any impediment as long as the terms of the agreements are respected by Tehran. Any Saudi economic dealing with Iran would undercut US sanctions imposed to pressure Tehran, if not violate them outright. With tens of billions of dollars in Iranian assets blocked worldwide, the prospect of Saudi investments could jumpstart the INSTC and help maintain the peace between Riyadh and Tehran.

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Zero Hedge

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