The Russian invasion of Ukraine has triggered a series of sanctions by Western states and many others that will have wide-ranging repercussions for some time to come, even in the unlikely scenario of a quick cessation of hostilities. The impact of the war and the escalation of the sanctions regime on the global economy and supply chains has already been significant, but it will have long-term implications for the geo-economy of Asia and trade between East and West, which require more careful study.
The term “geoeconomics” poorly defined in Academy. this is most often used to refer to an economy used for national security purposes. Here I use the term specifically to refer to how countries use geography to achieve their economic ambitions in light of security issues. In this sense, my definition is closer to scientists who see geoeconomics as the interaction of economics and geopolitics.
I argue that there are three interconnected and overlapping trends caused by the Russian invasion of Ukraine and the unprecedented rapid succession of Western sanctions against Moscow that have changed the trading maps in Asia. Ultimately, Iran is the main beneficiary of these changes.
New Eurasian land bridge and China’s BRI
The first two consequences are closely related to the fact that the war in Ukraine and the associated economic embargoes have created significant obstacles to the path of the New Eurasian Land Bridge (NEZB). While Beijing bases its Belt and Road Initiative (BRI) on the mystique of the ancient Silk Road, its main land route to its target markets in Western Europe goes through the NELB, which passes through Central Asia and Russia to reach the European continent. This route is so important that Chinese officials have in the past worried about over-reliance on Russia for their logistical needs.
Now these fears look prophetic. So much experts noted, the NELB route is becoming increasingly problematic. In addition to the security problems caused by the war, Western sanctions are making dealing with Russia increasingly difficult. Major logistics companies left Russia even before they were ousted by sanctions, and European countries such as Poland and Ukraine, which once had ambitions to be key nodes for the NELB, avoided economic relations with Moscow, and favored sanctions because they prioritize security needs. All these factors are forcing China to increasingly look towards the lower tier of the “Belt” passing through Iran.
This route has encountered various Problems largely due to severe economic sanctions imposed on Iran for most of the existence of the BRI. While the Chinese government has been willing to block Washington’s orders not to engage with Iran economically in many ways, the Chinese private sector and even the large state-sponsored enterprises that provide most of the Initiative’s funding and paths, not immune from sanctions pressure.
Asian countries seek East-West trade routes in Iran
The second trend, also closely related to the blockade of the NELB, is an increase in the logistical activity of other Asian countries, especially from central Asia as well as South Asiato reach their target markets in the West through Iran. Over the past few weeks there has been burst of activity around expanding trade access involving Iran and countries to its east.
This is reinforced by the Raisi administration’s desire to expand economic relations with Asian countries and pay more attention to diplomatic ties with Central Asian countries, which conservatives often accused the previous Rouhani administration of ignoring.
Russia looks to the East and to INSTC
The third and perhaps least known trend is Russia’s own pseudo-eye-east strategy to ease the effects of sanctions by diversifying its trade away from Western economies that seem increasingly interested in weaponizing interdependence. While Russia’s route to China or Central Asia is simple, its land route to India, a key trading partner that has refused to join the Western sanctions coalition, is far more difficult. India, largely surrounded on land by adversaries Pakistan and China, must be reached by sea. Although trade between India and Russia is mostly carried out by sea through the Suez Canal, the lack of a more direct route could be a vulnerability, especially in the current tense political environment.
This raises the importance belonging International North-South Transport Corridor (INSTC), which crosses the Caucasus to connect Russia with the Iranian port of Bandar Abbas in the Strait of Hormuz, from where a shorter sea route opens to India. Not only does this drastically reduce the transit time for goods moving between India and Russia, but it also avoids narrow shipping lanes potentially subject to political blockages. China, for example, famously preoccupied about over-reliance on the Straits of Malacca for maritime trade (the “Malacca dilemma”).
If the increased needs of many Asian countries and Russia lead to increased funding and use of these various trade routes, Iran could become a major global trading center. Especially if the current talks lead to a renewed lifting of sanctions under the re-created Iran nuclear deal, investment and trade interest is likely to rise sharply. It is important to note that Russia has also expressed a desire to use INSTC to connect to pakistan. This has important implications for the BRI project.
While talk of “Asia” resonates in China and is often mentioned in Chinese government statements, most important areas to the BRI were the key sub-regions of China’s near abroad: Central Asia, South Asia and Southeast Asia. BRI projects in these regions are often discussed separately and on their own terms in the scholarly literature. But Chinese officials, seeing the significant economic potential and trade complementarity between their economic investments and zones in South and Central Asia, seem increasingly interested in links between the two. This interest is highlighted China’s recent efforts build a trade route through Afghanistan that is unlikely to be viable due to security and economic governance concerns. These two regions are currently connected by a very long route through western China.
it especially problematic Considering that Chinese investment in Pakistan is mainly concentrated in the western Pakistani province of Balochistan and the port of Gwadar, which is a stone’s throw from the Iranian border, while most of the population and economic potential of Central Asia is concentrated in Uzbekistan and Kazakhstan, which border Iran . Caspian Sea.
A much more logical transit route is through eastern Iran. This route may now attract more attention due to Russia’s interest in connecting INSTC to Pakistan. Ironically, transport infrastructure in Iran is also main focus for india, which sees a connection with the southeastern Iranian port of Chabahar as the best trade route to Afghanistan and Central Asia. India’s participation in the Chabahar port project has largely been put on hold since the United States pulled out of the Iran nuclear deal in 2018, but could be revived if a new deal is struck.
There are still significant obstacles to Iran achieving its goal of becoming a key trading center, the most important of which is the renewal of the lifting of sanctions in accordance with the Joint Comprehensive Plan of Action. But Iran also needs more strategic planning and a strategy to turn trade routes into economic corridors that can benefit its own citizens. If Tehran can rise to the challenge, it will play a key role in the development of Asia and trade between East and West.