Vladimir Putin is spending big on his war in Ukraine. The Russian president has disbursed over $200bn, or 10% of GDP, on the invasion, according to America’s Department of Defence. He now plans to invest heavily in infrastructure that will enable his country’s economy to flourish even while cut off from the West. Over the next decade, the Russian state expects to funnel $70bn into construction of transport routes to connect the country to important trade partners in Asia and the Middle East. Russia’s far east and high north will receive the lion’s share. A smaller sum will go on the International North-South Transport Corridor (INSTC), a project designed to link Russia and the Indian Ocean via Iran. Officials promise growth in traffic along all non-Western trade routes.

The war in Ukraine has already diverted the flow of Russian goods. Countries that have not signed up to Western sanctions, led by China and India, have replaced lost trade with the West. As patchy infrastructure in the country’s east limits exports to Asia, goods often have to go by a circuitous route, through Black Sea and Baltic ports, and via the Suez Canal. Russian officials worry about blockages along the route, and that NATO’s sway over crucial arteries, such as the Bosporus, could permit extra restrictions. In a bid to boost exports and shield commercial ties from interference, Russia is thus investing in connections with friendlier countries. “The North-South Transport Corridor should become an example of the broadest international co-operation,” Mr Putin has proclaimed.

This represents a striking change of approach. Russian officials once shied away from building infrastructure links with China and Iran, since European commerce was sufficiently lucrative. Shifting trade patterns have changed their calculations. Trade between Russia and China—boosted by Chinese demand for Russian oil—reached a record of $240bn last year, up by two-thirds since 2021. The first rail bridge across the Amur River, Russia’s natural border with China, opened in 2022. Another was given the go-ahead last year. Russia wants to lift cargo volumes on the Northern Sea Route, a shipping lane that runs along its Arctic shoreline to eastern China, from 36m to 200m tonnes by 2030.

Until a couple of years ago, Russian firms also eschewed Iran for fear of Western sanctions. Now the two outcasts are pursuing the INSTC with renewed vigour. Last year Russia agreed to finance Iran’s Rasht-Astara railway, a missing 162km leg of the corridor’s western prong, construction of which had stalled despite having been approved almost two decades ago. Mr Putin says that, once complete, the INSTC will “significantly diversify global traffic flows” by transforming Iran into an outlet for Russian goods heading for the Middle East, Asia and farther afield. India is the ultimate prize. Unlike China, its demand for coal and oil is projected to remain strong until at least 2030.

Yet Mr Putin’s plans face considerable obstacles. For a start, although trade along the new routes is growing, it is still meagre. Ice cover will limit year-round use of the Northern Sea Route until at least mid-century, when scientists expect the first ice-free summer. Just 8m tonnes of goods were transported along the INSTC by rail in 2022, well below its overall capacity of 14m tonnes. The route depends on trucks, which limits throughput. Despite surging trade with China, Russia’s eastern railroads handled 13% fewer goods than their stated capacity last year. One of them, the Baikal-Amur railway, is mostly single-track and only partly electrified. Decades of neglect have left ports and railways in eastern Russian in desperate need of repair.

Will there be sufficient funding for the job? More from elsewhere would help. In May, India signed a ten-year contract, worth $370m, to extend its control over Iran’s Chabahar Port. Azerbaijan, Kazakhstan and Uzbekistan are upgrading domestic rail and road infrastructure to help the INSTC. But Russia and Iran remain the corridor’s main funders. In 2022 they accounted for 68% of investment in the route—and cash-strapped Iran relies on Russian loans for its share. Mr Putin plans to spend heavily on infrastructure, yet his ambitions may be frustrated by the private sector’s reluctance. Sherpa Group, a Russian analytics firm, expects that private investment in Russia’s state-transport programme will fall from 927bn roubles ($10bn) in 2022 to 180bn roubles in 2026.

Even under the best conditions, Russia’s infrastructure track record is poor. In the far east, where long distances and bad weather complicate planning, it is worse. Mismanagement is routine. The transport industry is dominated by only a handful of companies. In 2019 Igor Pushkaryov, a former mayor of Vladivostok, Russia’s eastern business capital, was jailed for corruption on a road project. In the midst of a war, Russia will struggle to summon the labour and expertise it needs to upgrade its railways. Many countries involved in the INSTC are at odds with one another, which will make planning other parts of the project supremely difficult.

Sanctions are also delaying progress on sanctions-defying routes. Europe once sought to connect with China via the Russian Arctic; no more. Greater capacity depends on Arctic oil-and-gas projects coming to fruition, but the withdrawal of Western firms makes that tough. In April Novatek, Russia’s largest producer of liquefied natural gas (LNG), was forced to suspend production at its Arctic LNG 2 project owing to a lack of tanker components. Russian Railways (RZD), a state-owned firm, will struggle to replace lost suppliers. The only three makers of cassette bearings, which some cargo trains use in wagons, were joint ventures with foreign companies. Last year RZD suspended the use of 50,000 trains owing to parts shortages.

Even if Russian officials do raise capacity on the new routes, demand for goods is not certain. Roughly 150,000 containers have piled up in Russia’s far east due to an imbalance in trade between China and Russia. The INSTC could increase competition between Russia and Iran, which currently export similar products to separate markets. Countries not under sanctions will be able to drive hard bargains, taking advantage of Russia’s limited alternatives. Negotiations on the Power of Siberia 2 project, a proposed pipeline between Siberia and north-east China, have stalled over Chinese demands for subsidies. Ultimately, China and India will power Russian economic growth only if the price is right—and that is a problem for Mr Putin.