The two most sanctioned countries try to cheat the West via a logistics bridge across Caspian Sea

Astrakhan, Russia (Ports Europe) June 3, 2022 – The two most sanctioned countries in the world – Russia and Iran – are trying to improve transport links in the Caspian Sea and to increase mutual cargo turnover. Russia is trying to bypass Western sanctions via the seaport of Astrakhan on the Volga River by planning new multimodal cargo services to Southeast Asia. On June 2, the Governor of Russia’s Astrakhan region, Igor Babushkin, and the head of the Iranian Mostazafan Foundation, Sayyid Parviz Fattah, signed a cooperation agreement for the period 2022-2026. It includes a new logistics center and a refrigerator terminal in the Astrakhan port special economic zone (SEZ), developing cargo transportation, cooperation in the shipbuilding industry and agriculture. “The Islamic Republic of Iran is the leading partner of our region. We closely cooperate in the areas of trade, transport, logistics, agriculture,” Babushkin said. “More than 90% of all cargoes passing through the Astrakhan port go to Iran. More than 120 companies with Iranian capital are operating in Astrakhan, as well as a branch of an Iranian bank, and the Trade House of Iran. The Mostazafan Foundation of Islamic Revolution is the second-largest commercial enterprise in Iran behind the state-owned National Iranian Oil Company. It is also the largest holding company in the Middle East. The Foundation controls manufacturing and industrial companies. It is associated with the Islamic Revolutionary Guard Corps. Head of the Foundation is Fattah – an Iranian conservative politician, former member of Revolutionary Guard and former energy minister. Russia’s push to find a back door through western sanctions Desperately trying to avoid increasingly harsh international sanctions affecting Russian transport and logistics, Moscow is courting Iran. It is looking for ways to use the Caspian Sea as an export/import corridor, including deepening Iranian ports and dredging its own Volga-Don Canal. The visit in May of Russia’s deputy transport minister Dmitry Zverev to Tehran was an attempt to find a back door to the sanctions paralysing Russian ports. His delegation included representatives of transport and logistics organizations and the (Russian) International Road Transport Association. In a meeting with Ali Akbar Safaei, managing director of Iran’s Ports and Maritime Organization (PMO) and ports officials, Zverev underlined the new role of the north-south corridor and the use of sea, road and rail transportation between the countries. Zverev seeks quick development of cooperation, the purchase of Iranian port facilities by Russia, the possibility for Iran to provide land for the construction of container terminals on the shores of Caspian Sea and Indian Ocean. The International North-South International Transport Corridor (TITR) is a 7,200-km-long multi-mode network of ship, rail, and road route for moving freight between India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia and Europe. Astrakhan port Zverev, quoted by Iran’s media, said that deepening (dredging) of parts of the Caspian Sea is under way, especially in Russian ports. He also mentioned the little discussed fact about Iranian financing for the modernisation of the Russian sea port of Astrakhan on the Volga River. Here, Moscow wants to build new multimodal cargo facilities for export/import to Southeast Asia. According to local officials, Astrakhan’s port infrastructure has the capacity for over 16 million tonnes of cargo per year. Part of the project would be to develop capacity of the Volga-Don Canal. Russia is planning a €1 billion dredging, locks modernisation and other improvements project to guarantee all year-round navigation in the Volga-Don Canal. Currently, the canal is used on average 240 days a year. Following dredging works in the two large rivers, it could become a transport artery for some 9 million tonnes of cargo a year. The project could realistically be completed by 2030. “On behalf of the President of Russia, a landmark decision was made for dredging of the Volga-Caspian shipping canal along its entire length. By the end of 2023, the depths in the entire water area will reach 4.5 meters,” said Babushkin. “This will allow us to fully utilize the existing port facilities and those that are currently being created as part of the development of the port SEZ in Olya”, he added. “We are considering the issue of the presence of our investments in the Lotus/Lotos special economic zone, as well as in the special port economic zone,” said Mostazafan Foundation head Fattah. There is an agreement to meet the demands of the Astrakhan market for Iranian building and finishing materials and other products. We are also ready to build agricultural enterprises in the Astrakhan region and increase cargo traffic along the North-South transport corridor to the Iranian Indian Ocean Port of Chabahar and further to India”. In August 2021, Russian firm PLC Caspiy received from the Russia’s Ministry of Economic Development resident status for the port-type special economic zone (SEZ) Lotus in Olya port which is located in the Limansky District of the Astrakhan Region on the bank of Bakhtemir River connecting Volga River with the Caspian Sea. According to local officials, Astrakhan’s port infrastructure has the capacity for over 16 million tonnes of cargo per year – sufficient to turn the port into a gateway to Southeast Asia. This is something Russia currently lacks. Part of the strategy would be to develop capacity of the Volga-Don Canal, providing an import-export route for Astrakhan. The Volga-Don Canal The 101-km canal connects the Caspian Sea with the Sea of Azov. Russia decided to develop the canal after it took complete control over Azov Sea following the occupation of Ukrainian ports of Berdyansk and Mariupol in the war it started again Ukraine on February 24. The Volga–Don Canal has limited capacity and is unsuitable for larger ships. It has a depth of just 3-3.5 metres, with further summer limitations. The Lenin Volga–Don Shipping Canal connects the Volga and Don rivers (both in Russia) at their closest points. The canal, together with the lower Volga and the lower Don, provides the most direct (over 800 km long) navigable connection between the Caspian Sea and the world’s oceans via the Azov and the Black Seas. It ends at Russia’s Caspian Sea port of Astrakhan. Developing Russia’s Caspian Sea capacity In October 2020, Russia’s Ministry of Economic Development said that it planned to allocate RUB 2.8 billion (€31.6 million) for the creation of a port SEZ (special economic zone) in the Astrakhan Region in 2022. Funds will be also available in 2021-2022 for the modernisation of Olya port’s berths and construction of a new seaport. The two-phase project includes development of the existing terminals of Olya port and a second phase would be a new container terminal on the Caspian Sea. Olya (also on the Volga River) is about 100 km south-east of Astrakhan. Astrakhan is a seaport in Astrakhan Oblast, Russia. The port is located in Trusovsky District on the right shore of Volga river in the north of the Caspian Sea. There are no modern Russian container terminals on the Caspian Sea or the Volga River. This is an issue the government intends to address. The main problem for a new container terminal in Astrakhan is the lack of modern multimodal transport infrastructure. This includes highways and the integration of railway services at the river port. Experts expect that the dredging and other works on the Volga-Don Canal, as well as in both rivers, will first lead to a seven-month navigation, followed by free navigation of up to 11 months. The main issues for year-round use of the water way are ice in winter and lack of enough water in summer. Russia has to order also new icebreakers and new container ships having currently an outdated and inefficient fleet of both. Olya Port Another option is the port of Olya. It is situated at the north of the Caspian Sea on the Volga estuary, southwest of Astrakhan. The project in Olya is aimed at the development of container shipping on the International Transport Corridor North-South (INSTC) across the Astrakhan Region, linking Northern and Western Europe with India and Iran. By the end of 2023, the first stage of construction of a new container terminal in Caspian Sea port of Olya will be completed and able to handle 3 million tonnes of goods, Governor of the Astrakhan Region Babushkin told Russian President Vladimir Putin in January. He also asked Putin to instruct the Ministry of Transport to work on the deepening of the Volga-Caspian Sea Canal. Stage two of the container terminal project will see port’s capacity increased to 8 million tonnes by 2030. According to Babushkin, the planned investment in the new container terminal will be 34 billion rubles (€391 million). Babushkin insisted that in order to improve transportation of goods, it is necessary to increase the throughput of the Volga-Caspian Sea Canal, because its current depth does not meet even its officially registered depth of 4.5 meters. Currently, the depth of the canal is below 3 meters and during part of the year the canal is even shallower. The project to build a container terminal at Olya port has received official approval in June 2021. The contractor is PLC Caspiy together with Germany-based Martrade Holding. The first phase of the project would develop the current berths 8 and 9 to be followed by four new terminals. The officially released information last year was that this would increase port’s throughput to 2.2 million tonnes by 2023. A second phase of the plans involves the construction of a new port in the nearby Ilmen Zaburunny area (about 7 km from Olya port). The longer-term goal, again according to last year’s official information, is a facility with a throughput of 8 million tonnes by 2031 (a year later than the new promise of Babushkin) which would require an investment of 27 billion rubles (€310 million) – 81 million less than the new plan. Middle Corridor The Russian invasion of Ukraine has changed many plans. Traders are now looking for new East-West trade transport routes. One possibility is the Middle Corridor, also known as the Trans-Caspian International Transport Route (TITR). It combines the countries participating in the new Silk Road and important logistics players of the region. Its members are leading maritime and transport companies from Kazakhstan, Azerbaijan, Georgia, Ukraine, China and Turkey. TITR allows traders to bypass Russia, which until now sanctions the transit of certain types of goods through the country. A number of Russian entities are under sanctions from the international community following Russia’s annexation of the Crimea in 2014. The Russian invasion of Ukraine in February 2022, and the subsequent international sanctions against Russia, has worsened the situation. Traders are forced to explore East-West trade routes which avoid Russian territory. If Russia intends to spend significant sums of money on new Caspian Sea port cargo capacity, it must be confident that it can compete successfully for the business it requires to support its economy. This seems unlikely in the current political and business climate. Further Ports Europe reading: Analysis – Russia “discovers” its strategic Caspian Sea ports Russia plans steady increase in seaport capacity Analysis – Caspiy and Martrade advance plans for modernisation of berths in Olya port on the Caspian Sea News about the port of Astrakhan Copyright (C) Ports Europe. All Rights Reserved. 2022.

The two most sanctioned countries try to cheat the West via a logistics bridge across Caspian Sea

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The two most sanctioned countries try to cheat the West via a logistics bridge across Caspian Sea

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