Russia and Iran have agreed to cooperate in the construction of merchant ships on May 19, 2023. Despite sanctions, the Islamic Republic has extensive experience in maintaining and expanding its industrial capacities. In addition, Russia intends to increase its resilience to sanctions by developing alternative transport corridors. However, there is a risk of ships running aground on the north-south transport route in the Volga-Caspian Sea Shipping Canal.
Political agreements and a special infrastructure characterize the international north-south transport corridor. A 170 km railway line is currently impeding the expansion of the line’s western corridor, although Russia and Iran have agreed to build it. Russian and Iranian authorities join forces to create a joint merchant fleet.
Iranian media reports that the Islamic Republic shipping company and a Russian group led by a representative of the country’s president have signed an agreement to build and purchase 20 ships. The parties have agreed to set up a joint venture to better coordinate cargo traffic along the north-south and east-west transit corridors to and from all Russian ports. Through the pact, both sides will pool their transportation and shipbuilding resources to ensure a steady flow of cargo to ports.
The seven-nation international consortium will be formed to develop the “North-South” transport corridor, announced Deputy Prime Minister Marat Chusnullin in the corridors of the international economic forum “Russia-Islamic World: KazanForum”. He stressed that Russia needs access to the countries of the Indian Ocean and the Middle East. By connecting the ports of the Caspian Sea and the railway lines circling the Caspian Sea on both sides, the transport of goods through Kazakhstan, Uzbekistan, Azerbaijan and Turkmenistan can be streamlined.
At the meeting, Renat Mistakhov, CEO of Ak Bars shipbuilding company, announced that his company is ready to build bulk carriers, tankers and various barges capable of transporting bulk cargo and containers.
An intergovernmental agreement was previously reached between the governments of Russia and Iran to cooperate in financing the design, construction and delivery of products and services for a 170 km stretch of railway between the Iranian cities of Rasht and Astara. Russian President Vladimir Putin hopes that Tehran and Baku will soon sign an agreement on cooperation in developing railway infrastructure and freight traffic along this route. This route will ultimately connect ports in Russia on the Baltic Sea and in the north with ports in Iran on the coasts of the Persian Gulf and Indian Ocean.
The total cost of the project is €1.6 billion, with €1.3 billion earmarked for the construction of the section via an intergovernmental loan. Under the terms of the agreement, Moscow and Tehran will jointly finance the design, construction and sale of products and services. It is expected that Moscow and Tehran will build the Rasht-Astara line, while Moscow, Tehran and Baku will build the Astara (Iranian city) – Astara (Azerbaijani city) line.
As explained by Putin, shipping goods from St. Petersburg to Mumbai, India, used to take 30 to 45 days. However, with the new passage, that time is reduced to just ten. According to the First Deputy Prime Minister of Russia, Andrei Belousov, the volume of goods transported via the north-south transport route could triple from 15 to 30 million tons by 2030. According to Khusnullin, around 3.7 billion US dollars will be invested in the “North-South” transport corridor by 2030.
The need for the north-south corridor
The creation of such a corridor has been discussed since 2005. Igor Levitin, a former assistant to the President and Minister of Transport, admitted that Russia was slow to develop this area and did not pay enough attention to it.
Cooperation between Russia and Iran gained momentum after sanctions made Western ports inaccessible to Russian ships. At high-level talks in Tehran in July 2022, a fundamental decision was made on joint action by Russia and Iran. Putin praised Iranian President Ebrahim Raisi and Supreme Leader Ali Khamenei for their continued focus on working with Russia.
Russia is trying to find the fastest route to India. Since corporations from countries hostile to Russia own the majority of ships for transporting containers through Europe, Russia can no longer transport containers through Europe. Russian routes and ships are not available for this purpose. The river route through canals and the Volga is only a part of the “North-South” transport corridor.
While trade volume is currently low, it is expected to increase to four times its current level with the addition of new transit routes. Recently it was decided to build a railway line through the mountains in the northern region of Iran. Due to the country’s well-developed road network with connections to the ports of the Persian Gulf, there are many options for freight transport once it reaches the border with Iran. Total travel time from anywhere in Russia to Rasht is ten days, with an additional four days required to reach the terminals.
Other routes are also being considered. There is a route between Turkmenistan, Afghanistan and Iran. Improved relations with Georgia will facilitate the establishment of a transport corridor to the Mediterranean. The Baku-Tbilisi-Kars route provides direct access to the Turkish port of Mersin. There are numerous opportunities for trade with West and East Africa. Including the passage through the Suez Canal and the Red Sea, a container today needs 45 days to travel from Novorossiysk to Dubai. The new routes will shorten the journey to two weeks and drastically change the global transportation system. It is conceivable that those airlines currently restricting Russian access to their routes will seek membership.
The route for ships from Iran to the Baltic Sea is not yet uninterrupted and hassle-free. In January, the saga of the dry cargo ship “Rasha-1” came to a successful conclusion. Landing in the Volga-Caspian Canal, it transported metal from Russia to the Iranian port of Amrabat. The Ministry of Emergency Situations of the Astrakhan Region reported that the dry cargo ship was refloated autonomously and continued its voyage.
It is expected that in 2023 the Russian dredger “Rosmorrechflot” will dredge this important section of the Volga-Caspian Canal to ensure a draft of 4.5 meters. This is necessary to allow ships to navigate the canal without incident.
Iran and Russia have significant shipbuilding capacities. The dry cargo ship “Nikolay Orlov” was launched and tested in Russia in March. It was built at the Krasnoye Sormovo shipyard in Nizhny Novgorod. The first trade voyage was to transport metal to Iran. According to experts from the United Nations Conference on Trade and Development (UNCTAD), in just five years after the first time, the potential of the merchant fleet in the Islamic Republic decreased by almost a factor of nine (and by a factor of 50 for ships). Wave of sanctions from 2005 to 2010. Iran initially bought used ships from China and Malaysia; However, since 2019 there is a state shipbuilding program for the construction of up to 200 ships of various types. The cost of the program is estimated at 300 million euros.