Russia And Iran Invest $20 Billion In New Trade Route To Avoid Sanctions

Russia and Iran, which have grown increasingly closer in recent years, have joined forces to evade the Western sanctions on their exports by constructing a new waterway-railway route from Russia-occupied territories in Ukraine to the southernmost ports in the Islamic Republic.

Russia and Iran, united by their increasingly closer military ties and the fact that they are both pariahs in international trade due to the Western sanctions, are now looking to expand their trade ties with Asia and are expanding canals on navigable rivers and building railroads to support growing trade, Bloomberg reports. The two countries are estimated to plan to invest $20 billion in the route.

The new transcontinental route would start at the Sea of Azov, including the major Ukrainian port of Mariupol, which Russia occupied after it invaded Ukraine earlier this year.

According to vessel tracking data compiled by Bloomberg, dozens of ships, both Russian and Iranian, are already traveling up and down the route, which is much shorter than the route entirely by sea from the Russian ports on the Baltic Sea via the Mediterranean and through the Suez Canal.

“This is about establishing sanctions–proof supply chains all the way through,” Maria Shagina, an expert on sanctions and Russian foreign policy at London–based International Institute for Strategic Studies, told Bloomberg.

Iran and Russia have strengthened their ties in recent years, by signing a 20-year strategic agreement earlier this year. Apart from trade ties, the two countries have boosted military ties, including regular weapons deliveries by Tehran to Moscow, the transfer of Russian weapons to Iran, and a growing agenda of deepened security cooperation.

Reports emerged last month that Russia and Iran had signed an agreement that would allow Russia to produce Iranian-designed drones, which will be used on the battlefield in Ukraine. Russia has used hundreds of Iranian-made suicide and combat drones against Ukrainian military and civilian infrastructure in recent months. 

By Charles Kennedy for Oilprice.com

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