Trade is not neutral: why Russia is investing in the International North-South Transport Corridor?

Trade is not neutral: why Russia is investing in the International North-South Transport Corridor?

Olha Konsevych

Russia is increasingly developing alternative financial and logistical mechanisms to bypass Western sanctions. Among them is the International North–South Transport Corridor (INSTC), linking Russian ports and major inland cities with Iran, the Gulf region and the Indian Ocean (launched in 2000 by Russia, length is about 7,200 km).

In Anadolu’s reporting, these tools are presented not as temporary experiments but as elements of a deliberate strategy to adapt to the sanctions regime imposed by the United States, the European Union, and their partners. The INSTC is described as an alternative to traditional routes via the Suez Canal, while trade in national currencies is framed as a way to reduce dependence on the US dollar and Western financial infrastructure.

At the same time, the emergence of the India–Middle East–Europe Economic Corridor (IMEC), alongside the INSTC, reflects a contest over trade routes. At the core of this competition lies energy diplomacy, as Gulf states reposition themselves as hubs for green hydrogen, renewable electricity and strategic logistics in a post-oil transition. Another dimension of this competition lies in security, as recent disruptions in maritime chokepoints such as the Red Sea and the Strait of Hormuz have highlighted the vulnerability of seaborne trade.

The geopolitical fragility

Despite political rhetoric portraying the INSTC as a “strategic alternative to the West,” the corridor remains geopolitically fragile. Its critical link is Iran – a country that itself has been under extensive US and EU sanctions for years. As a result, any infrastructure, financial, or logistical activity along the corridor is automatically exposed to elevated sanctions risk.

For India, this calls for a sober assessment. Short-term gains from alternative routes do not eliminate reputational, financial, and political exposure – risks that tend to accumulate over time. In a world where sanctions enforcement increasingly relies on data-sharing, digital analytics, and allied coordination, even the most sophisticated workarounds eventually become visible.

Reuters has repeatedly noted that sanctions pressure on Tehran complicates the implementation of regional trade and transport projects, limiting both financing and operational reliability. The transport projects spanning multiple sanctioned jurisdictions are structurally unstable. They depend not only on physical infrastructure but on political stability, access to finance, insurance coverage, and international service providers. In practical terms, this means that any escalation around Iran or regional instability can immediately disrupt the entire route.

The Iranian segment of the INSTC also faces chronic infrastructure constraints, including incomplete rail links, differing track standards, and congested ports. This means the INSTC is not a neutral trade artery. In practice, it is a politically loaded route, highly sensitive to regional escalation and shifts in Western sanctions policy.

Reputational risks for Indian companies

The financial dimension of Russia’s alternative schemes constitutes a separate risk zone. According to the Economic Times, Russia has acknowledged holding billions of Indian rupees that it is unable to use or convert, due to trade imbalances and currency restrictions.

In this context, reputational risk goes far beyond the prospect of fines. It includes potential loss of access to Western financing, insurance services, and investment – factors that are central to the long-term strategic planning of Indian businesses.

One of the least visible yet most critical weaknesses of sanctions-sensitive trade routes lies in insurance and legal safeguards. In maritime logistics, this problem has already become systemic.

The absence of coverage from leading Protection and Indemnity (P&I) clubs means that, in the event of accidents, seizures, or cargo detention, liability falls on carriers and end buyers. This dramatically increases both the cost and risk profile of such transactions.

Arbitration is another weak link.Sanctions are pushing contracts away from traditional arbitration hubs such as London and Singapore, reducing predictability in dispute resolution and increasing legal uncertainty for companies operating along these routes.

Sanctions evasion is never invisible

The assumption that complex sanctions-evasion schemes can remain undetected was seriously undermined in February 2026. Financial Times reported on the exposure of a network through which at least $90 billion worth of Russian oil may have been exported, including volumes linked to the Kremlin-controlled company Rosneft.

The investigation revealed that 48 formally independent companies, registered across different jurisdictions, were using the same private email server – a technical detail that ultimately exposed centralized coordination. The short life cycle of these entities and the use of third countries, including the UAE, further raised regulatory suspicion.

Russia’s alternative logistical and financial arrangements illustrate that sanctions evasion can be systematic but not without consequences. The INSTC and similar corridors are not technically neutral trade instruments; they are embedded in a broader geopolitical confrontation and carry long-term risks for all participants.

Olha Konsevych: Journalist, researcher; Vital Voices; GMF; WZB Berlin ;  Max Planck Society alumna ;Mahabahu Correspondent

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