Sanctions hit Russia seeks India’s help for the North-South transport corridor

Olya, Russia (Ports Europe) September 21, 2022 – Sanctions hit Russia is seeking India’s help for the North-South transport corridor. It sees India a major trading partner as it repositions its trade eastwards. India's VVDN Technologies and the Federation of Indian Export Organizations - FIEO (a leading trade promotion organization) were among the companies and organisations meeting the Minister of Industry and Natural Resources of Russia’s Astrakhan region Ilya Volynsky. This took place during his visit to India where both parties expressing readiness to partner in cargo transport via the North-South corridor. Volynsky also offered the companies the status of residents of the Lotos (Lotus) Special Economic Zone (SEZ) in the Astrakhan port of Olya. Preferential tax treatment was also raised. Russia’s Sberbank representative office in India offered assistance to local manufacturers and logistics companies to invest in the Lotos SEZ as part of transport chain along the North-South International Transport Corridor. The reconstruction of berths No. 8 and No. 9 in Olya will be completed in 2023. It will increase cargo handling capacity of the port to 3-4 million tonnes per year. Half of the capacity will be containers, Sergey Milushkin, General Director of Lotos, port’s special economic zone (SEZ) said. Special Economic Zone The construction of a SEZ is underway in the port. In accordance with previous agreements, Lotos is planning to provide a 50-hectare site for the creation of a logistics centre for landlocked Turkmenistan. Sanctions-hit Belarus is also looking for space there. The Port Special Economic Zone (SEZ) was established in the Astrakhan region in November 2020. It is part of measures to develop cargo transportation along the International North-South Transport Corridor (INSTC), which became a critical transport solution for heavily sanctioned Russia. The site is equipt for containerised cargo handling, storage facilities, and access railway lines. PLK Kaspiy The main investor in the SEZ is PLK Kaspiy which wants to build a modern port with a container terminal. It requires an investment of more than 27 billion rubles (450 million euro based on the state controlled exchange rate). It has a planned cargo capacity of 8 million tonnes by 2031. A second phase of Olya’s development is the construction of a new port in the nearby Ilmen Zaburunny area (about 7 km from Olya port). The project, when finished, is expected to cover an area of 295 hectares. International North-South Transport Corridor INSTC connects Indian Ocean, Persian Gulf and the Caspian Sea via Iran, and is then connected to Saint Petersburg, Russia. The corridor is a 7,200-km, multi-modal network of ship, rail, and road cargo route. “We are planning to fully prepare the (SEZ) territory by September for the construction of infrastructure and transfer to residents for arrangement of port activities. The container, grain and oil terminals of PLC Caspian and a potential resident with investments from Iran will be located on this territory – the company has already submitted a business plan to obtain the status,” Lotos representatives said earlier. Foreign partners were involved in the implementation of the SEZ project. However, it’s unclear whether they still participate due to the western sanctions against Russia (for its invasion in Ukraine). Most likely, financing will come from Iran, another sanctions-hit pariah state. Hamburg Port Consulting (Germany) confirmed the feasibility of construction of Olya’s port and estimated the potential freight turnover at 19 million tonnes by 2050. Nikolai Podguzov, Chairman of the EDB Management Board said earlier that “Eurasian transport corridors are a priority enshrined in the EDB’s new strategy. Russian ports on the Caspian Sea lack state-of-the-art infrastructure to handle containers, while containerised cargoes account for a significant portion of freight traffic along the International North-South Transport Corridor (INSTC). We estimate the potential for container traffic along the corridor in the range of 325,000-662,000 TEU. Linking up the North–South corridor with Eurasian latitudinal corridors would ensure around 40% of container traffic”. Russia's Gazprom is preparing to start construction of six inter-settlement gas pipelines for gasification of facilities in the Lotos SEZ. Russia has three ports on the Caspian Sea coast: Makhachkala; Olya (where a new port is being developed, is just 50 km to the north); and Astrakhan. These ports need significant investments in order to be turned into modern multimodal transport hubs. They lack developed railway and road connections, modern port-related infrastructure. Astrakhan The Astrakhan region is under heavy government pressure to become Russia’s door to Asia. The region recently announced the signing of several partnership contracts that would affect port and transport developments. This included with an alliance of more than 150 Indian companies. Russia is trying to bypass Western transport sanctions also via the seaport of Astrakhan on the Volga River where it is planning new multimodal cargo services to Southeast Asia. The port of Astrakhan is planning development and transport links with countries between Russia and the Far East. According to local officials, Astrakhan’s port infrastructure has the capacity for over 16 million tonnes of cargo per year. This is 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. In June 2022, a program of cooperation with the Iranian Mostazafan Foundation was signed. The framework is to implement a project for a logistics centre and refrigerated terminal in the poet. Iran is one of the main partners of the Astrakhan region for the development of the INSTC. Negotiations on attracting investments and shipbuilding orders are also underway with Kazakhstan and Azerbaijan. Kazakhstan considers the possibility of opening on the border of the Astrakhan and Atyrau regions of a Border Trade Center. Volga-Caspian shipping canal The Astrakhan region is also currently dredging the Volga-Caspian shipping canal to increase its depth to 4.5 m. Currently, the canal is 3.5 m deep and during part of the year it is even shallower. RosMorPort, which is part of RosMorRechFlot, is currently dredging the canal, but much more work is needed to ensure the canal width for two-way traffic and the safe movement of ships. Putin’s involvement in Caspian ports’ development Hard pressed by western sanctions for his invasion in Ukraine, Russian President Vladimir Putin urged in May country’s transport authorities to focus their efforts on the development of Caspian Sea ports of Makhachkala, Astrakhan and Olya in order to redirect trade flows from the North (Baltic Sea) towards Asia. “These are the most important points on the route of the North-South transport corridor, which involves the potential of the Volga (River) and Caspian (Sea),” Putin was quoted as saying at a meeting with transport officials. He claimed that the cargo volume in the Caspian is growing already fast, creating bottlenecks. Putin also pushed for the development of the sea ports of the Arctic, the Far East, the South and the North-West, including the modernisation of the Murmansk transport hub. “Practice shows: as soon as new corridors appear, the goods that will flow through them always appear,” he said. It remains unclear how Russia can speed up ports development while under sanctions, limiting its access to technology and western expertise. Port development also means creation of multimodal transport facilities which are expensive and with a very long return on investment period. According to Putin, timely decisions on the development of transport infrastructure – railways and roads, seaports and pipelines – made it possible to quickly rebuild logistics and expand cargo flows. He added that Russia will continue to build-up its transport potential, including building new approaches to sea terminals and increasing capacity. All these ambitious plans face serious problem with outdated Soviet era or entirely missing multimodal infrastructure connecting the ports to railway, road and air transport networks. And this is especially valid for the Caspian, Azov and Black Seas ports that are supposed to take over trade from the Baltic ports. Putin was quoted as saying that in the centre of attention, of course, is the eastern direction. As well as the development of the North-South international corridor and the ports of the Azov-Black Sea basin. This will open up opportunities for Russian companies to enter the markets of Iran, India, the countries of the Middle East and Africa. And for counter deliveries from these countries. By 2030, the total volume of cargo transportation along these routes could theoretically grow by about 60%. Western sanctions-hit Russia is in dire need of additional fleet capacity, especially in bulk, but also in the container segment. Western sanctions are starting to bite against Russia’s shipping. Isolated by the developed world for its invasion in Ukraine, Russia can’t rely on foreign vessels and its main logistics companies. The departure of Western container lines from Russian ports is forcing it to try to create its own container fleet. But this is going to take years and will cost hundreds of millions if not billions of euros. Russian logistics companies are also increasingly turning to bulk ships the previously conteinerised cargo. More Ports Europe news about Caspian Sea ports Copyright (C) Ports Europe. All Rights Reserved. 2022

Sanctions hit Russia seeks India’s help for the North-South transport corridor

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Sanctions hit Russia seeks India’s help for the North-South transport corridor

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