NEW DEAL: Vajpayee with Iranian President Mohammed Khatami

Iran may be a part of the "axis of evil" for India's newfound friend US President George W. Bush, but it has not deterred Delhi from joining hands with Teheran and Moscow to forge a strategic transport link that could potentially rival the Suez Canal route. Prosaically called the north-south corridor, the route will link Mumbai with Moscow via Teheran and is set to open in St Petersburg next month. For India, the passage is expected to usher in financial gains by making its goods more competitive in the global market and facilitating cheaper and faster imports.

Says Union Shipping Minister V.P. Goel whose ministry is the Indian nodal agency for developing the link: "It gives us connectivity right up to Russia and is a welcome move considering the expanding global business climate. Whatever helps India increase its share of global trade-a measly 1 per cent at present-should be encouraged."

The link will help reduce the trading delivery time by 10-12 days compared to the routes through the Mediterranean and Suez Canal that takes 35 days, and also help cut operational cost by around 20 per cent, or $2,000 (Rs 97,000), per container. During trial operations that have been on for a year now, the route has already logged shipment of some 1,800 containers and the figure is expected to touch the 8,000 mark later this year. The corridor is expected to handle 15-20 million tonnes of freight annually, with the trade turnover pegged at $10 billion (Rs 48,500 cr). This is a conservative estimate considering that initially shipping companies would be hesitant to chart the unexplored passage.

However, this, says T.K. Bhaumik, senior adviser (policy), Confederation of Indian Industry, bodes well for the Indian industry which needed just such an infrastructure network to provide an impetus to transnational commerce. While at present the total trade between India and Iran stands at $389.4 million (Rs 1,888.59 cr), that with Russia is $1.07 billion (Rs 5,189.5 cr). The corridor now offers the opportunity of linking production centres with international markets. The route connects Mumbai port with the Iranian hub of Bandar Abbas through maritime transport, then joins the Caspian Sea ports of Bandar Anzali and Bandar Amirabad by road and rail network and ends at St Petersburg via Astrakhan port in Russia.

Moscow and Teheran too stand to gain through the transit fee that India will be charged for using the corridor. For India though, it will be a small price to pay for the connectivity it has been looking for since Independence. Though it has achieved some success on the eastern borders, India's inimical relations with Pakistan have prevented it from opening its western borders. Now, with President General Pervez Musharraf pegging the normalisation of bilateral relations on Kashmir, there is little hope of India being able to do so in the near future.

It is in this context that the route assumes importance: it allows India to skirt Pakistan and reach out to the resource-rich Central Asian republics. Waiting for Indian exports that include heavy machinery, tea, drugs, pharmaceuticals and information technology are Turkmenistan, Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan.

For India, the corridor may also turn out to be the lifeline for its energy-starved markets. With the Middle East perpetually on the boil, India has been scouring for alternative energy sources to provide stability to its markets. Central Asia has confirmed oil deposits of 13-15 billion barrels (2.7 per cent of proven global deposits) and natural gas deposits of 270-360 trillion cu ft (around 7 per cent of global reserves). While oil and gas deposits are in Kazakhstan, Turkmenistan and Uzbekistan, Kyrgyzstan and Tajikistan have huge hydel resources. These republics are thus a key to Delhi's energy needs-India will become the fourth largest energy consumer this decade-and fit into its national security calculus.

The corridor also acts as a bridge to the Caspian Sea rim states of Armenia, Azerbaijan and Georgia which can be reached through a future rail linkage. The corridor will also allow Indian goods into Scandinavian and Baltic countries through St Petersburg and Riga. For Delhi, the crucial test in terms of security will be the shipping of critical machinery for the Tamil Nadu nuclear power project from Moscow to Mumbai later this year.

Despite the obvious political risks due to Iran's involvement, the benefits of the route have fired the imagination of countries like Kazakhstan, Bulgaria, Finland, Estonia, Armenia and Romania as it will allow access to cash-rich South- East Asian economies. The modalities for transit-godown facilities for containers, port facilities, transit fees, land transportation and trans-shipment-will be decided by India, Iran and Russia at the secretary level north-south coordination council meeting to be held at St Petersburg on May 21-22.

India expects the fee to be similar to the charges levied by ASEAN countries. This will attract more freight traffic from the Far East. The current volume of trade between Asia and Europe is over $2,000 billion (Rs 97,00,000 cr) annually. If the north-south corridor attracts a fair percentage of this trade, a new southern silk route will be in the making.