Makhachkala, Russia (Ports Europe) May 21, 2024 – After years of delays, the project for the construction of an access road to Russia’s Caspian Sea port of Makhachkala was sent for government approval. The road is not expected to be completed before end-2025. Makhachkala is an important hub for the transport of 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.
Background
Makhachkala is Russia’s only year-round ice-free Caspian port. In the January-April period, it handled 1.1 million tonnes of cargo, +3.5% more than in the first four months of 2023. But its facing serious issues with the shrinking water level of the sea and needs constant dredging. The Caspian Sea is regularly used by Russia to launch ship-based missiles against Ukraine without the danger of Ukrainian retaliations.
In April 2023, the head of Dagestan, Sergey Melikov, said that the funding for the design and construction of a separate access road to the Makhachkala port had been arranged. He also stressed that the authorities are counting on a significant increase in cargo traffic after the commissioning of a state border checkpoint in the port. The checkpoint is expected to become operational in 2026.
According to the Deputy Head of the Ministry of Transport and Road Facilities of Dagestan Magomed Tagirov, the key reason for delays was the inclusion in the project of an additional 742 m long overpass and the resulting increase in cost. The length of the projected four-lane road is 6.2 km, the total area covered by the road and its infrastructure is 20.4 hectares.
Road to Makhachkala to be financed by bond issue
The issuing of infrastructure bonds worth some 5 billion rubles (58 million euros) to finance the construction of the road to Makhachkala is being evaluated by the DomRf company. It is developing a master plan for the Makhachkala agglomeration in Dagestan Republic, it was announced in May 2023.
Capacity
In March 2023, Deputy Head of RosMorRechFlot (Russian state agency for river and sea transport) Boris Tashimov said that the further development of the port of Makhachkala is associated with an increase in the container and grain transshipment capacity of the Makhachkala port 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 International North-South Corridor (INSTC) project.
Privatisation
The long-delayed privatisation of Russia’s Caspian Sea port of Makhachkala, which was to be completed by the end of September 2021, is moving forward, but it’s unlikely to be completed soon. A private investor is expected 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. 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, a strategic investor for the port is expected to finance the construction of a new grain terminal with a storage capacity of 100,000 tonnes and an annual transshipment capacity of 1.5 million tonnes, increasing the current capacity by a factor of seven.
As part of the development of the International North-South Transport Corridor (INSTC), which is key for Russia’s attempts to redirect its Western sanctions-hit trade southwards into Asia, the private investor is expected to 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.
The badly neglected port also needs existing berths to be reconstructed; completion of constructing a railway marshalling yard that can simultaneously process 100 wagons per day; construction of a dry port with a storage area for heavy vehicles, warehouses and refrigerated storage.
“Over the course of 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 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.
China?
The long shadow of China looms over the potential privatisation of Makhachkala. China would benefit from an alternative transport corridor in the region, especially considering the fact that Makhachkala is an all-year-round, ice-free port. China would be opening another shorter, faster and cheaper trade corridor towards Russia facilitating its new Silk Road.
The new Silk Road (part of the Belt and Road Initiative or BRI, also known as One Belt, One Road, or OBOR) is a Chinese economic strategy to seek better access to Chinese-made products in European markets, which includes acquiring stakes in ports and other transport facilities, and cooperation agreements with countries along the Silk Road routes.
Russian navy
Russian navy builds a new base in Caspian Makhachkala
The Russian navy, exposed and vulnerable in the Black Sea, is building a new base for its ships in 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.
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. Last month, a hydraulic launcher for launching ships was put into operation.
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
Makhachkala port partly reopens after dredging
The Caspian Sea water level around the Russian port of 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.
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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