The U.S.-Israeli strikes on Iran in March and the subsequent paralysis of international commerce through the Strait of Hormuz have once again underscored the strategic importance of overland routes for interregional trade. With both Russia and Iran facing sweeping sanctions that severed their access to global markets, each has turned to alternative corridors, among others, the International North–South Transport Corridor (INSTC), to diversify their trade options. Since 2022, Russia's transport policy has been subordinated to its broader foreign policy pivot toward the east and south. In Iran, the devastating war has pushed the country's Khamenei-era "neither east nor west" doctrine toward what one policy analyst described as a "more east and no west at all" approach, one in which deeper trade ties with Russia and China are no longer optional, but vital. 

During the war, key INSTC infrastructure sustained damage, if not always by design. In the opening days of the conflict, U.S. airstrikes hit Iranian military targets near Chabahar port, the corridor's southernmost terminus on Iran's Gulf of Oman coast. On March 18, Israeli air forces bombed the port of Anzali on the Caspian Sea, a critical node for weapons transfers and bulk cargo moving between Iran and Russia. 

The war and the blockade of the Strait of Hormuz further paralyzed trade operations at Bandar Abbas, the main gateway for northbound cargo from China, India, and the Gulf states. Although vital infrastructure, including the Shahid Rajaee terminal, escaped significant physical damage, the war has cast a long shadow of unpredictability over the corridor, one that will deter the very investments Iran's transport network desperately needs.

Yet Tehran has been adept at revamping alternative routes to reduce its dependence on the Strait of Hormuz, contingency infrastructure that may well outlast the war itself. The violent clashes with the UAE, once a pragmatic trade partner in the Gulf, have rendered any easy rapprochement a remote prospect, compelling Iran to redirect parts of its maritime trade away from Dubai's Jebel Ali port toward Pakistan's Gwadar and Karachi. Tehran has also ramped up oil shipments to China via rail across Central Asia. Equally significant is the growing role of INSTC countries – Azerbaijan, Armenia, and the Central Asian states – in securing Tehran's import lifelines. While these rail corridors can hardly substitute for maritime routes when it comes to Iran's oil and petrochemical exports, they may prove indispensable for keeping strategic food imports flowing, bolstering domestic economic stability.

The INSTC comprises three major branches linking Russia's industrial heartland with Iran and, beyond it, the Gulf states and India. The western route runs through Azerbaijan, carrying the bulk of high-value containerized cargo from Moscow and grain shipments from Rostov. The central route, passing through the Caspian Sea, has proven vital for weapons transfers and for connecting Volga basin grain and metal exporters with customers to the south. The eastern route through Kazakhstan and Turkmenistan offers rail-only access for Urals and Siberian resources to reach global markets. 

In recent years, Russia and Iran have channeled growing investments into this eastern branch, drawn by its distance from active military theaters and by the relatively stable political relations among its transit states. The eastern route's appeal was further strengthened when Azerbaijan closed its borders to north-south transit cargo for two days after Iranian drones struck Nakhchivan on March 5, an episode that prompted hardline factions in Tehran to call for bypassing Azerbaijani territory altogether. 

The INSTC's viability now hinges on the fate of two flagship projects — the Rasht–Astara railroad and Chabahar port — as well as progress in soft-infrastructure cooperation among transit states. The completion of the Rasht–Astara railroad would close the final gap in connecting Iran's rail network to those of Azerbaijan and Russia, thereby reducing transit times compared with the maritime alternative through the Suez Canal. The development of Chabahar port and its integration into Iran's rail and road network, meanwhile, would provide access for Indian goods into Central Asia, the South Caucasus, and Russia. The war has dealt a serious blow to the prospects of both projects.

On the eve of the war, Russia and Iran appeared finally poised to break ground on the Rasht–Astara railroad. Agreements reached during Russian Energy Minister Sergei Tsivilev's visit to Tehran on February 18 set April 1 as the construction start date, with both sides declaring all previously pending issues resolved. Iran had completed land acquisition procedures and transferred 125 kilometers of land to the Russian contractor Caspian Servicez. The outbreak of war in March stopped both sides in their tracks. In April, Russia's Deputy Prime Minister Alexei Overchuk said work would resume "as soon as conditions permit," while Iran's Ambassador to Russia, Kazem Jalali, indicated the final construction contract would be signed before the end of 2026. The deeper question, however, is how the war has recalibrated the calculations of Moscow and Tehran, for there are serious reservations about the project on both sides.

On the Russian side, the project’s main backer, Russian Railways, is effectively bankrupt. The prioritization of military logistics and the forced reorientation of freight toward China have limited the company’s capacity to handle commercial cargo, while heavy borrowing has further weakened its balance sheet. Furthermore, a major corruption scandal in January underscored how the company’s operations have become entangled in broader intra-elite rivalries in Russia, adding another layer of uncertainty to its role in large-scale infrastructure projects. Other key stakeholders such as the Russian Union of Industrialists and Entrepreneurs (RSPP) frequently question the viability of the route for Russia’s trade with the Global South. 

In April, the head of the Union, Alexander Shokhin, said investors had withdrawn from the INSTC even before the war started because cargo flows were not visible on the route. This gloomy depiction of the route contrasts sharply with the geopolitically-minded approach of Russian political heavyweights such as Deputy Prime Minister Alexei Overchuk or Presidential Advisor Nikolai Patrushev, who support the INSTC as part of Russia’s pivot to the south.

On the Iranian side, the client for the Rasht–Astara railroad is the Construction and Development of Transportation Infrastructures Company (CDTIC), operating under the Ministry of Roads and Urban Development. One of the most persistent sticking points in Iran–Russia negotiations has been the division of labor between the IRGC-affiliated Khatam al-Anbiya Construction Headquarters and Russian contractors. Recent statements indicate that Caspian Servicez will execute the 125-kilometer stretch financed by a Russian state loan of 1.3 billion euros, while Khatam al-Anbiya will build the 11.5-kilometer section running to Astara at the Azerbaijani border, financed through an oil-barter arrangement with the Iranian government. Iran is to repay the loan at 3% interest over 10 years. Moscow, for its part, will disburse funds incrementally, tied to construction progress, a structure that raises questions about the project's trajectory given the increasingly volatile economic environment in Iran. The city of Rasht was among the Iranian cities most severely affected by the large-scale anti-government protests in January.

The agreement's payment structure may further complicate the timeline for breaking ground. A 15% advance cash payment obliges Tehran to transfer roughly 200 million euros to Caspian Servicez before any drawdowns from the 1.3 billion euro loan framework can begin, and before a single rail is laid. Whether a war-torn Iran can absorb that upfront cost remains an open question. To Iran’s mounting ire, Russia's loan requires Iran to direct 70% of the funds toward Russian goods and services. Deputy Prime Minister Vitaly Savelyev, the Kremlin's Special Presidential Representative for INSTC development, said the bulk of the financing would flow to Russian companies supplying prefabricated concrete products, locomotives, automation equipment, and signaling systems, meaning some 900 million euros of the loan is effectively earmarked for Russian industry. Finally, it remains unclear whether Iran has agreed to Russia laying a parallel 1,520 mm broad-gauge track alongside Iran's existing 1,435 mm continental gauge. Such a move would eliminate the multimodality bottleneck that has long bedeviled the corridor, but Iran would hardly concede to Russian rail infrastructure extending deep into its territory, as far as Rasht or even Bandar Abbas, and Moscow itself may balk at the steep financial costs.

When it comes to the port of Chabahar, India’s decision to temporarily withdraw from the project adds to broader uncertainty around the INSTC’s future. For years, New Delhi has seen the port as a key transit access to Afghanistan and Central Asia, bypassing Pakistan, its major regional rival. Simmering geopolitical competition with China lent Chabahar additional strategic weight, positioning it as India's answer to Beijing's expanding footprint at Pakistan's Gwadar port. In 2018, the first Trump administration exempted Indian operations at Chabahar from its sanctions regime against Iran, only to revoke that exemption in September 2025, though New Delhi secured a six-month extension. Washington declined to renew the waiver on April 26, effectively forcing India's hand. Chabahar's uncertain status now leaves the INSTC's eastern branch without a critical transit hub connecting it to and from India.

Even setting aside the U.S. sanctions regime, India's commitment to Chabahar's development over the past decade has been a subject of genuine debate. For some analysts, New Delhi's 120 million USD investment in the port and acquisition of cranes fell well short of what was needed to meaningfully improve operations at the Shahid Beheshti terminal — a reflection, in their view, of India's primary trade orientation toward the U.S.- and Israeli-backed IMEC route. New Delhi has also shown little appetite for helping Iran upgrade the broader infrastructure needed to connect Chabahar to the wider INSTC rail network. Yet some Iranian experts push back on this reading: in their account, India was fully committed to the port's development, but Tehran's failure to deliver on its own infrastructure promises, most critically, linking the port to local road and rail networks, was what ultimately discouraged New Delhi. The Chabahar–Zahedan railroad, still being built by Khatam al-Anbiya, remains only 75% complete. The absence of adequate backwater facilities at the port compounds the problem further, placing an additional drag on transit operations for Indian shippers. 

Amid the war, some circles within Iran have floated the idea of replacing India with China at Chabahar. The proposition, however, does not withstand much scrutiny. For one, China has sunk substantial investments into Gwadar port next door in Pakistan, and Beijing has long had a structural interest in undermining Chabahar as a competitor rather than bolstering it. 

For another, the mounting instability surrounding Iran is precisely the kind of environment that deters the long-term infrastructure commitments Beijing typically demands. What recent events have made clear, however, is that should Tehran pursue the China option, it would arrive at the negotiating table considerably weakened – its leverage remarkably eroded by the geopolitical turbulence of the past several months. 

The most likely near-term scenario is Iran falling back on domestic companies to build and operate the port. India Ports Global Limited (IPGL), which currently operates Chabahar, has been preparing to transfer its responsibilities to local Iranian entities, with the expectation of returning once Washington lifts sanctions. But the sheer scale of capital required for post-war reconstruction may leave the Iranian government with little fiscal room to channel meaningful investment into the port. More fundamentally, the question of who operates Chabahar is secondary to a more structural problem: without viable road and rail infrastructure embedding the port into the broader regional trade network, its strategic promise will remain largely unrealized.

The war in Iran has not derailed the INSTC so much as it has laid bare the corridor's underlying fragilities – financial, infrastructural, and geopolitical. The Rasht–Astara railroad and Chabahar port, long celebrated as the twin pillars of the route's future potential, now face an uncertain future.

Russia and Iran remain committed to the project in principle, but the gap between their strategic pivot and operational reality has rarely been wider. 

India's withdrawal from Chabahar and the prohibitive cost of post-war reconstruction further narrow Tehran's options, leaving Iran increasingly dependent on a corridor it lacks the resources to build. For Moscow, the war has made the INSTC more necessary than ever — and, paradoxically, more difficult to deliver.