Russia pursues alternative financial, logistical methods to bypass Western sanctions

MOSCOW

Russia is seeking to strengthen its economic sovereignty in the face of numerous Western sanctions by pursuing new logistical and financial strategies, such as the International North-South Transport Corridor (INSTC) and the BRICS Bridge, to circumvent economic isolation.

Geopolitical tensions are disrupting traditional maritime routes in the Mediterranean, Black Sea, and Baltic Sea. Moscow is leveraging the situation by diversifying its trade towards the Middle East and Asia.

At the heart of this new pivot is the INSTC, a 7,200-kilometer (4,500-mile) sea, rail, and road network connecting Russia to India via Iran. The route is viewed as an alternative to the Suez Canal, shortening the transport distance roughly 40% and reducing shipping time from 45 days to under 25 days.

Iran is working with Russian financial backing to complete missing railway links and modernize Caspian Sea ports, which is expected to reduce container shipping costs by 30%.

Last year, some 30 million tons of cargo were estimated to have been transited through the INSTC. The official annual target capacity was set at 45 million tons by 2030.

Russia is also developing its own digital finance system to protect its trade from Western regulation and the SWIFT banking system. The BRICS Bridge is an alternative payment system that connects the central bank digital currencies of the BRICS bloc's member nations, which include Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, South Africa, and the United Arab Emirates.

The blockchain-based platform has already reached an advanced pilot stage, with controlled transactions taking place between Russia, China, the United Arab Emirates, and Iran.

The system eliminates the need for correspondent banking by enabling peer-to-peer transfers through central bank digital wallets, which can reduce transaction costs by up to 40%.

However, despite Russia's ambitious INSTC and BRICS Bridge strategies, the country’s economic fortress is facing significant geopolitical and technical challenges.

Infrastructure deficits in Iran, such as the delays in the construction of the 162-kilometer (100.6-mile) Rasht–Ashara railway line⁠, as well as regional geopolitical risks, require shipments to be made via transshipment.

Russian Energy Minister Sergey Tsivilev said in a statement on Wednesday that the agreement to start the railway line project would be signed on April 1.

On the financial front, the expansion of the BRICS Bridge system is slowed by member countries' concerns about secondary sanctions from the US.

Additionally, trading in national currencies created severe liquidity imbalances. Russia, for example, amassed unusable Indian rupees from oil sales due to a lack of reciprocal imports.

In order for this system to function, experts say all transit partners' customs bureaucracies must be rapidly digitized and modernized.

*Writing by Emir Yildirim in Istanbul