Makhachkala, Russia (Ports Europe) December 27, 2024 – The long-delayed privatisation of Russia’s Caspian Sea port of Makhachkala has been completed, Dagestan’s Minister of Transport, Dzhambulat Salavov, said. The new majority owner is the sanctioned local billionaire Suleiman Kerimov.
Suleyman Abusaidovich Kerimov, 58 is also a Russian politician (senator) with close ties to Russian President Vladimir Putin as well as with Chechen warlord Ramzan Kadyrov. In March 2022, Kerimov was sanctioned as a Russian oligarch close to Putin, by the US, UK and the EU.
Since 1999, he has controlled Nafta Moskva, a former state oil trader and is a major stakeholder in Gazprom and Uralkali, as well as Sberbank. In 2008, his fortune was $21 billion. By 2022, after the Russian invasion of Ukraine, it had decreased to $11 billion.
“The port was fully privatized and our main investor is Kerimov,” Salavov said. “The development of the Makhachkala port has finally begun”. He added that passenger ships will be purchased soon by the port that would sail to Derbent, 120 km south of Makhachkala and Azerbaijan’s port of Baku.
Local media claims that the port is under the control of criminal gangs, different local clans and shadow businessmen.
Makhachkala is the only ice-free and deep-water (4.5 metres) Russian Caspian port and a key link in the transport system of southern Russia with the states of Central Asia, Iran and Transcaucasia. It has a dry cargo harbour, berths for general and bulk cargo, railway and car ferry terminals, and a grain terminal.
The cargo turnover of the port in 2023 increased by 5.3% to 3 million tons. The port’s capacity is 8.3 million tonnes. In the first 11 months of 2024, the port handled 3 million tonnes of cargo, 7.4% less than in January-November 2023. It is expected that the full 2024 result will be 3.3 million tonnes.
Reconstruction of the 150 years old pier in Makhachkala port
In October, anticipating the privatisation, a tender for the reconstruction by October 2028 of the southern pier of Russia’s Caspian Sea port of Makhachkala was announced by RosMorRechFlot, the country state agency for river and sea transport. The badly neglected port is a critical node in the Moscow-promoted and Western sanctions-driven International North-South Corridor (INSTC) project.
Port’s access road issue
The cost of building the hugely delayed 6.2 km access road to Russia’s Caspian Sea port of Makhachkala from the federal highway P-215 Astrakhan – Kochubey – Kizlyar – Makhachkala will be over 8 billion rubles (85 million), of which 4.8 billion will be from the federal budget, it was announced in August.
The project for the four-lane road is not expected to be completed before December 2025. Makhachkala, Russia’s only year-round ice-free Caspian port, is an important hub for transporting goods between Russia and Iran, including those of a military nature.
A road connecting the port to the federal highway in Dagestan will allow cargo to be delivered to the port during the day. Currently, cargo to and from the port is transported during the night. The project will allow the port to operate at full capacity and relieve existing highways and the road network of Dagestan’s capital.
Makhachkala port is also facing serious issues with the shrinking water level of the sea and needs constant dredging. Russia regularly uses the Caspian Sea to launch ship-based missiles against Ukraine without the danger of Ukrainian retaliations.
Capacity
In March 2023, Deputy Head of RosMorRechFlot Boris Tashimov said that the further development of the Makhachkala port is associated with an increase in its container and grain transshipment capacity due to growing demand, mostly from Iran but also from India and China.
Upon implementation of the port development project, capacity will increase by 2.3 million tonnes per year to more than 10 million tonnes per year. This will happen as part of the INSTC. In the first eight months of 2024, Makhachkala handled 2.1 million tonnes of cargo, mostly to and from Iran.
Privatisation
The long-delayed privatisation of Makhachkala port, which was to be completed by September 2021, required the private investor to pay the symbolic and reduced again price of 637.5 million rubles (6.3 million euros) for 51% of the port, it was announced in March 2023.
Makhachkala port to be cheaply privatised
There are long-standing rumours that the central government and local authorities cannot convince investors to spend money on a dilapidated port on a shrinking sea and with a heavy presence of local criminal groups. The asking price for the port in June 2021 was a rather modest 1.7 billion rubles (18 million euro).
On March 19, Russian President Vladimir Putin signed a decree, according to which the authorized capital of the Makhachkala Sea Commercial Port company of 1.25 billion rubles (12.4 million euros) will be split in two – 49% will remain state-owned and 51% will be sold to a strategic investor.
Huge tasks for the potential investor
According to the head of Dagestan, Sergei Melikov, the new investor is expected to finance the construction of a new grain terminal with a storage capacity of 100,000 tonnes and an annual transhipment capacity of 1.5 million tonnes, increasing the current capacity by a factor of seven.
As part of the development of the INSTC, which is key for Russia’s attempts to redirect its Western sanctions-hit trade southwards into Asia, the new investor will finance technical modernisation and new equipment for the port, the opening of a container terminal, and the completion of the construction of the new customs checkpoint (by 2026).
The badly neglected port also needs existing berths to be reconstructed, a railway marshalling yard that can simultaneously process 100 wagons per day completed, and a dry port with a storage area for heavy vehicles, warehouses, and refrigerated storage constructed.
“Over many years, the port has not experienced the best of times, it was transferred from management to management, it did not function at full capacity and did not develop,” Melikov said.
Makhachkala is important for Russia
Makhachkala accepts up to 150 m long ships with a claimed (unrealistic) draft of up to 4.5 m. The port infrastructure includes a dry cargo terminal with a capacity of 3 million tonnes per year, berths for general, bulk cargo and containers with a capacity of up to 1.2 million tonnes per year, a railway and auto-ferry terminal with a capacity of 1.3 million tonnes, a grain terminal with a capacity of 500,000 kg per year.
The port is also used to bypass Western sanctions with the help of Tehran. It is seen as a location that will help Iran and Russia, the two global pariah states, to jointly manufacture weapons and munitions and develop military technologies.
The economic disputes around the port have been going on for over 12 years. “In 2012, the interests of two influential financial groups converged in the port, behind which were the now convicted brothers Ziyavutdin and Magomed Magomedov, and on the other hand – Magomed Gadzhiev, who was declared by the authorities as a foreign agent.
Russian navy
The Russian navy, exposed and vulnerable in the Black Sea, is building a new base for its ships in Kaspisk, 18 km south-east of Makhachkala, it was announced in March. Officially, the base will host Russia’s Caspian flotilla. Russian navy ships can use the Volga-Caspian Sea Canal and Volga-Don Canal to go from the Caspian to the Azov and Black Seas.
Russian navy builds a new base in Caspian Makhachkala
Military builders are creating a whole complex of new hydraulic structures, including the Northern and Southern protective piers with a total length of almost 3 km, berthing and coastal infrastructure. In total, the large-scale project provides for the construction of 17 berths, three of which are floating. In 2023, four new berths were built. In February, a hydraulic launcher for launching ships was put into operation.
Second Ukrainian drone attack in a month against Kaspiysk port
The construction of a military hospital with 150 beds is also underway in Makhachkala. The total construction area of the new hospital complex is more than 27,000 sq. m. Two helipads are also built there.
Shrinking water in the Caspian Sea & Volga-Caspian Canal
The Caspian Sea water level around Makhachkala is below safety levels. This can cause incidents with ships of various types, the All-Russian Research Institute for Civil Defense and Emergencies said in April 2023.
Makhachkala port partly reopens after dredging
Sharply reduced water levels of Russia’s giant Volga and Don rivers endanger the operations of the strategic Russia Volga–Don Shipping Canal. The canal has a key role in developing trade with Asia as sanctions exclude Western markets. It fulfils this role as a key link in the INSTC.
Low water level in Volga, Don adds to Caspian Sea problem for INSTC
The river’s water level issue is compounded by the problem of a shrinking Caspian, the second key element of INSTC. The result is that most vessels in the sea are sailing only partly loaded. The river barges also can’t load to full capacity.
The sanctions-busting Caspian Sea is drying up, new ships needed
Makhachkala’s – the key node in North-South Corridor
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