The conflict in Ukraine, extensive western sanctions against Russia, restrictions on Russian transit to Eastern Europe, the continuation of unilateral US sanctions against Iran and the uncertainty of the JCPOA revival process, the emphasis of Ebrahim Raisi government in Iran on the “Look to the East Policy” and the Preferential Trade Agreement between Iran and the Eurasian Economic Union have focused greater attention than in the past on the International North–South Transportation Corridor, in which Iran-Russia trade via the Caspian Sea is an integral part.
“According to Davoud Tafti, the head of Iran’s Khazar Sea Shipping Lines, the shipment of export container goods has risen by 120% in the Caspian Sea in the first seven months of the current Iranian year [March 21-Oct. 22, 2022] compared to the previous year,” Vali Kaleji, an expert on Central Asia and Caucasian Studies, prefaced an article he wrote for Valdai Discussion Club, a Moscow-based think tank and discussion forum, with this note. The full text is as follows:
Iran and Russia have several active ports in the northern and southern parts of the Caspian Sea. Makhachkala, Olya, Astrakhan, Solyanka and Lagan are the main Russian ports in the Caspian Sea while Astara, Anzali, Caspian, Noshahr and Amirabad are the Iranian ports.
Although the history of maritime trade between the ports of two countries has a very long history since the 15th century, 2022 was without a doubt a “turning point” in the development of maritime trade between the two countries.
On May 4, 2022, Iran’s northern port of Noshahr hosted the first Russian ro-ro cargo vessel after 21 years, Iran Chamber of Commerce, Industries, Mines and Agriculture reported.
The last time a major Russian vessel had docked at Noshahr port was in 2001 when “Mercury” unloaded its cargo in the port located along the central coast of the Caspian Sea. It was a great step in maritime trade between Iran and Russia, because “roll-on/roll-off ships are cargo ships designed to carry wheeled cargo, such as cars, trucks, semi-trailer trucks, buses, trailers and railroad cars, that are driven on and off the ship on their own wheels or using a platform vehicle, such as a self-propelled modular transporter”.
Shipbuilding Cooperation
Another important development was agreements between Iran and Russia for shipbuilding in the Caspian Sea.
On June 17, 2022, Iran and Russia reached a preliminary agreement for the establishment of a joint shipbuilding venture in the Caspian Sea region during meetings held within the framework of the 25th St. Petersburg International Economic Forum in Russia.
And on July 7, 2022, the government of Russia’s Astrakhan Region and Iran’s Mostazafan Foundation, one of the largest Iranian conglomerates, signed an agreement to establish a shipping company to develop the International North-South Transportation Corridor.
Alireza Peymanpak, the head of Iran’s Trade Promotion Organization, noted that Russia’s logistical support for Iran’s fleet of commercial ships will help plans to increase traffic along the INSTC.
In continuation of this process, Russia and Iran confirmed their readiness to develop cooperation in the field of joint manufacture of large-capacity vessels at Iranian shipyards and cargo vessels at Russian shipyards, according to a statement of the Russian government’s website following a meeting of the Russian-Iranian intergovernmental commission in Grozny, Chechnya, on Nov. 1, 2022”.
Finally, on Jan. 4, 2023, the Islamic Republic of Iran Shipping Lines ordered Russia to build a ship for use in the Solyanka Port the two countries are developing with joint investment. The ship is capable of carrying all kinds of cargo – at least 200 cargos – and, according to the contract, it should be ready in nine months. Indeed, Russia sent a ship for repair in Iran for the first time by Iran Marine Industrial Company on Dec. 28, 2022, after it hit icebergs in the Volga River.
Although cooperation between Iran and Russia to build ships and vessels in the Caspian Sea is still in its early stages, it is a new and important development in the past three decades.
Rise of Multimodal Transportation
The next important development was the rise of “multimodal transportation” among Russia, Iran and India in the Caspian Sea. In this regard, the first transit shipment from Russia to India was sent through Iran by way of the INSTC on June 11, 2022.
This shipment passed through a “multimodal route” through Astrakhan Port, especially Solyanka Port (Russia); Bandar Anzali in the Caspian Sea and Bandar Abbas and Chabahar ports in Persian Gulf and Oman Sea (Iran); and Nhava Sheva Port in the Indian Ocean (India). In this process, the Solyanka section’s role was critical: it was classified as the first among 15 ports on the Volga River and in the Republic of Dagestan in 2020.
Indeed, since a decade ago, the Islamic Republic of Iran Shipping Lines has bought 53% of Solyanka shares in Astrakhan. In this process, the Islamic Republic of Iran Shipping Lines invested $10 million in Solyanka Port. Part of this investment, which has been funded through Russian banking loans, was spent on purchasing a vessel with a capacity of 270 containers. The wharfs and inner roads of the port have also been overhauled.
Solyanka is important because the main part of Iranian sea trade is in the Caspian Sea with the Port of Astrakhan and a smaller portion of this trade is also dedicated to Makhachkala Port.
Iran’s attention to Astrakhan Port is not new and, in the past decade, has not been limited to the purchase of 53% of Solyanka shares. Iran has a consulate and a branch of Mir Business Bank in Astrakhan which, along with the Moscow and Kazan branches, is crucial for facilitating banking and financial transfers between Iran and Russia.
Likewise, the Iran Trade Center was inaugurated in Astrakhan on October 25, 2017. This 200-year-old center had been closed after the Russian Revolution of 1917.
In recent years, various Iranian companies have invested in the Lotus Special Economic Zone in Astrakhan and a tripartite agreement was signed by the Lotus SEZ, Anzali Free Zone Organization in the Caspian Sea and Chabahar Free Trade–Industrial Zone in the Sea of Oman on June 19, 2019, that has a very important role in promoting the “multimodal route” in the framework of INSTC.
The importance of transit and port trade between Anzali Port and Astrakhan Port as well as Makhachkala is also important from another aspect. Since no direct rail connection exists between Iran and the Caucasus, the Astara-Baku-Dagestan land route is considered the main transit route from Iran to Russia, which has experienced increased traffic in recent months. This condition is one of the important reasons for Iran and Russia to expand the transit capacity of the sea route through the Caspian Sea. In fact, the passage through Astrakhan, Solyanka and Makhachkala ports to Iranian ports makes it possible to re-route portions of the Caucasus traffic through the Caspian Sea.
Access to Volga River
In the process of expanding cooperation between Iran and Russia in the Caspian Sea, Ali Akbar Safaei, the head of the Iranian Ports and Maritime Organization, after a meeting with Russian Deputy Transport Minister Dmitry Azarov in Tehran in October 10, 2022, announced Moscow’s readiness to allow Iranian ships to pass through the Volga River.
It was very important, because before this, Russia did not allow foreign ships, including Iranian ships, to pass through the Volga River nor utilize the Volga-Don Canal. In fact, the Russian authorities consider this river to be an internal waterway, and due to national security considerations, Moscow did not allow foreign ships to pass through the Volga and its existing channels inside Russian territory.
Therefore, Iranian ships had to transfer their containers to Russian ships at Astrakhan Port so the shipments could reach their final destination inside Russia or move onward to the Black Sea through the Volga-Don Canal.
If such an agreement becomes final and is implemented, Iran will have access to the longest river in Europe, which begins in Tver Oblast (about 400 kilometers north of Moscow) and ends in Astrakhan (southern Russia) on the northern shore of Caspian Sea, passing through 15 Russian regions, including Samara, Nizhny Novgorod, Kazan and Volgograd.
Indeed, Iranian ships would be able to use the Volga-Don Canal, which provides the shortest navigable connection between the Caspian Sea and the Mediterranean, via the Sea of Azov and the Black Sea.
Challenges and Problems
All these developments clearly underline Russia’s more serious attention to bolstering maritime trade and shipping ties with Iran in the Caspian Sea. On the other hand, Iran is also interested in using the capacity of Caspian Sea in order to develop transit and trade relations with Russia and the Eurasian Economic Union. However, there are challenges and problems facing the two countries in this field.
The first challenge is the small number of Iranian shipping fleet in the Caspian Sea. Although 53 Iranian ships are active in the Caspian Sea, considering the increasing trend of export and import between Iran and Russia, at least 100 ships are needed. Eight new vessels were added to the fleet of Khazar Sea Shipping Lines on Dec. 10, 2022, which increase the number of Iranian ships to 61. In this regard, the construction of 5,000-ton ships is very important to increase the volume of trade between the two countries and the Russian shipbuilding industry in Astrakhan can play an important role in increasing Iran's shipping capacity in the Caspian Sea.
The second challenge is the small number of “roll-on/roll-off ships” in maritime trade between Iran and Russia in the Caspian Sea. While Russia has 19 ro-ro ships and the Republic of Azerbaijan has 10 in the Caspian Sea, Iran’s shipping lacks such a capacity. For solving this problem, a contract for the construction of two ro-ro ships was signed by Iran Marine Industrial Company on the order of Islamic Republic of Iran Shipping in July 2022.
With a capacity of 4,000 tons, the length of these ships is 140 meters, which is the maximum length for ships that can travel in the Caspian Sea and the Volga River. These multipurpose vessels can be used to transport containers, wood, cars, etc.
Although these developments are important, it is not enough considering the growing volume of trade relations between Iran and Russia in the Caspian Sea. Therefore, it is necessary to dedicate a larger part of the capacity of Russian ro-ro in the Caspian Sea to trade with Iran.
The third challenge is the time and day of the ships’ departure. The fact is that at present, land routes, including Astara-Baku-Dagestan, may be more expensive, but it is easier and more comfortable.
Regular planning of ships’ departure helps Iranian and Russian exporters and importers to use the capacity of all the ports of the two countries in the Caspian Sea. A very important point is that Iranian and Russian ships can load and unload at both the points of origin and destination. Unfortunately, in many cases, ships are only loaded in one of the ports of Iran or Russia, and return empty without cargo. Therefore, it is very important that transit maritime routes should not only be one-way, so that the cost is reduced and it is economically justifiable. It certainly will have positive impacts for increasing the volume of maritime trade between Iran and Russia in the Caspian Sea.
The fourth challenge is the situation of Astrakhan Port that freezes in the winter season. In such circumstances, there are serious restrictions for the ships to reach the port. The best alternative option for Iranian and Russian ships is the port of Makhachkala, which does not have a freezing problem in winter. In fact, Makhachkala is the only Russian port that can host Iranian ships for the whole year and the strengthening of maritime trade through this port will help reduce cost and duration of transporting goods from Iran to Moscow by more than 30% compared to road transportation through the border of Azerbaijan.
The fifth challenge is the severe lack of dredging in the Volga River and the Volga-Don Canal that has caused its waters to become more shallow, which has increased the difficulty of moving ships through the Volga and the Volga-Don Canal. For this reason, the ships have to move in draft of 3.7-meter, which led to the ships being loaded with only 70% capacity. Therefore, dredging the Volga River and the Volga-Don Canal for drafting of 4.5 meters is necessary for the traffic of ships with full capacity.
For this reason, Denis Vitsnarovsky, the deputy head of FSUE Rosmorport’s capital construction and repair division, announced on Feb. 16, 2022, that the project on reconstructing the Volga-Caspian Seaway Canal will start in 2023–24 and be completed by 2028. The preliminary scope of dredging is estimated at 15 billion cubic meters. The main goal of the program is to ensure the safe passage of vessels with a draft of up to 4.5 meters.
The sixth challenge is that unlike the ports of Astrakhan and Makhachkala, which have access to the Russian national railroad, only one Iranian port in the Caspian Sea, Amirabad in Mazandaran Province, has direct access to the rail network. Therefore, other Iranian ports suffer from the lack of access to the rail network, which is an important weakness in the “multimodal transportation”. However, Iran is trying to solve this challenge by completing 35 km of the rail route between Rasht (the capital of Gilan Province) and the Caspian port, which is a seaport located in Anzali Trade-Industrial Free Zone. The rail network can connect Anzali Port and Caspian Port to Iran’s rail network and southern Iranian ports in the Persian Gulf, especially Bandar Abbas, which will be an important development in multimodal transportation with Russian ports in the north of the Caspian Sea. If the 164-km Rasht-Astara railroad is completed, as the only part of INSTC, Astara Port in Gilan Province will also be connected to the Iranian rail network.
Iran desperately needs to complete the Rasht–Astara railroad. But since the Republic of Azerbaijan has been unable to fulfill its financial obligations due to sanctions, Tehran is turning to Moscow for support. In January 2022, President Ebrahim Raisi travelled to Moscow, where the two sides finalized a previously agreed-upon $5 billion credit line for the completion of several development projects in Iran.
Among those projects, Iranian Economy Minister Ehsan Khandouzi noted, would be the Rasht–Astara railroad. On Jan. 18, 2023, special assistant to Russian president, Igor Levitin, and his accompanying delegation visited the Resht-Astara railroad and announced that Iran and Russia have reached an agreement to build the Rasht-Astara railroad within three years.
In general, during the past year, very important and positive developments have taken place in the field of cooperation between the two countries in the Caspian Sea, which needs to be strengthened and developed. It is very important to solve the six main challenges and facilitate the logistics, bureaucratic, customs, insurance and banking procedures, following which the share of maritime trade in economic relations between Iran and Russia as well as Iran and the Eurasian Economic Union in INSTC will increase significantly and sustainably.
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