Pakistan’s accession to the International North-South Transport Corridor (INSTC) presents significant opportunities for the country to reposition itself within the evolving regional geo-economic sphere. Prioritizing geo-economic considerations in policy formulation is crucial for Pakistan’s decision-makers, as this approach offers the most viable path to optimizing the country’s economy and setting it on a trajectory for sustainable, long-term development.
The National Security Policy (NSP) 2022-26 of Pakistan has rightly emphasized that economic security is fundamental to achieving national security. The former National Security Adviser of Pakistan (2021-22) Moeed Yusuf underscored that to improve human security, defense, and diplomacy, it is essential to prefer economic security while utilizing the advantages of a robust economy wisely.
Pakistan’s decision to join the corridor is both strategic and crucial in this context. Pakistan’s Ambassador to Russia, Khalid Jamali recently pronounced that Pakistan is in line to initiate the accession procedures to join INSTC following the acceptance of Russian President Vladimir Putin’s offer made during the State of the Union address in 2023.
Unlocking Trade Potential and Regional Connectivity
The INSTC is a transformative geopolitical initiative that integrates maritime, rail, and road routes to facilitate the movement of goods from South Asia to Europe via Central Asia, the Caucasus, and Russia.
The route mainly entails shipping commodities to Iran from India. The cargo from Iran, traveling over the Caspian Sea via ship, is transported to Southern Russia by truck or rail. From there, the items are sent to Northern Europe by train or truck, passing through Moscow and down the Volga River.
Russia, Iran, and India initially signed a deal to build the route in 2002. Subsequently, the INSTC extended to include eleven additional members namely Azerbaijan, Armenia, Turkey, Ukraine, Belarus, Oman, Syria, Bulgaria, and the Central Asian Republics of Kazakhstan, Kyrgyzstan, and Tajikistan.
Inclusion of Pakistan in this ambitious corridor will be crucial for the country to leverage its strategic position and play a significant role in regional connectivity initiatives. Pakistan needs to utilize this opportunity to boost economic growth, enhance trade potential, and strengthen relations with participating nations.
The INSTC presents a lucrative alternative to Pakistan for a more efficient and time-saving trade route with Russia and Europe thereby reducing dependency on the traditional passage of the Suez Canal. On average, the 7,200-kilometer-long transport corridor lessens travel times by 40% and shipping expenses by 30%.
In addition, this route will open new avenues of investment and give Pakistan accessibility to diverse markets. If adeptly taken advantage of, it will lead to economic stability in Pakistan. Being an energy-deficient state, Pakistan’s strategic entry into the INSTC will also be significant in linkage to resource-rich Central Asia.
Once integrated into the corridor, Pakistan’s relationship with Russia could significantly strengthen. Pakistan has applied for BRICS+ membership and is actively seeking Russian support. Amid an ongoing energy crisis and economic challenges, a robust partnership with Russia would be highly beneficial. Russia, facing a European ban on its oil and gas due to the Ukrainian invasion, is eager to find new markets. This year, Pakistan has imported one million tons of crude oil and 100,000 metric tons of Liquefied Petroleum Gas (LPG) from Russia.
Challenges Hindering Pakistan’s Effective Participation
Despite the anticipated opportunities, Pakistan cannot gain many benefits from the incorporation in this corridor unless it effectively overcomes the conceivable challenges in the path to the actual materialization of the project.
India is one of the major stakeholders in INSTC, which is directed to strengthen its economic and diplomatic clout in the region. A key consideration is how the ongoing hostile relationship between India and Pakistan might impact Pakistan’s ability to fully leverage the economic benefits of this valuable corridor. Although India’s official response has yet to come, it can have reservations about Pakistan’s inclusion in this project.
India has invested enormously in developing Chabahar port in Iran, which is seen as a likely replacement for Gwadar port and has been strategically placed to provide connectivity with Central Asia and Afghanistan. This could shift trade routes and economic opportunities away from Pakistan, potentially impeding the country’s economic growth.
Pakistan will be able to offset this threat and compete with India from a stronger position when it joins the corridor. The routes of China Pakistan Economic Corridor (CPEC) and the INSTC are complementary. The Gwadar Port can contribute substantially to the North-South Corridor by acting as a commerce hub between the regions of South Asia, Central Asia, and the Middle East.
Furthermore, by linking Gwadar to Chabahar port and the INSTC system, Pakistan may establish itself as a key transit center and generate income from transportation charges and other trade-associated purposes. Both Russia and China aim to expand their export reach and with the current trade disruption in the Red Sea after the Israeli war in Gaza, the INSTC route can serve as the desirable substitute. For this purpose, Pakistan and Iran stand at critical nodes in terms of regional integration. Nevertheless, the role played by India in this matter will be decisive.
India also has a likely fear that Pakistan, once integrated into this corridor, might obstruct the movement of goods from India, keeping in view the long history of unsuccessful execution of any transit project between both. However, as the exact route linking Pakistan to the INSTC system has still not been defined, it is too soon to predetermine how it will affect India’s regional influence entirely.
Another peril looming is the imposition of restrictions by the United States on activities with Iran as well as the sanctions inflicted on Russia by the US and like-minded European states. In recent times, we have seen the progress on the Iran-Pakistan gas pipeline has faced deferral for more than a decade due to the presence of international sanctions and the probable risk of attracting US outrage.
Among the other geopolitical impediments to the North-South Corridor is the intensifying security threat in the region. The regional conflicts, political instability, and undertakings by different terrorist outfits in areas particularly Iran, Afghanistan, and Pakistan might disrupt the proposed trade route of INSTC. Earlier, the gruesome attacks carried out by militant groups like TTP, and BLA inside Pakistan on different occasions in a bid to sabotage CPEC is an eminent instance.
Also Read: China-Pakistan Economic Corridor: Opportunities and Challenges
Pakistan needs huge investment to build the required infrastructure and facilities, for the modernization of roads, railway lines, and seaports. Additionally, harmonization of border crossing procedures, regulating tariff policies, improvement in payment methods, and coordinated management with counterparts in the INSTC are necessary for the uninterrupted flow of products. The incompetence and bottlenecks could hamper the progression of this key Eurasian transportation network.
It is noteworthy that financing has been a significant challenge for INSTC, contributing to delays in its development. The lack of support from international organization has meant that funding has largely depended on regional development initiatives and local governments. This fragmented financial backing has impeded the swift advancement of the corridor’s projects.
In a nutshell, delicately balancing relations with regional and global powers while preserving its economic interests is an urgent necessity for Pakistan. The nation needs to break down the chain of over-dependence and reliance. Pakistan must strive to resolve the problem of capital including ensuring the security of projects, and foreigners working on its side, which are indispensable to attracting foreign direct investment (FDI).
Pakistan must also conscientiously navigate the challenges if it truly wants to reap the benefits of this mega-regional connectivity project, solidify its footprint, and achieve economic stability.
**The opinions in this article are the author’s own and may not represent the views of The Diplomatic Insight. The organization does not endorse or assume responsibility for the content.
