Russia and Iran have agreed to collaborate on building commercial ships On May 19, 2023. Despite sanctions, the Islamic Republic has extensive experience maintaining and expanding its industrial capacity. Additionally, Russia intends to increase its resilience to sanctions by developing alternative transportation corridors. However, there are hazards associated with ships running aground in the Volga-Caspian Sea shipping channel when travelling along the “North-South” transport route.
Political agreements and specialised infrastructure distinguish the “North-South” International Transport Corridor. A 170 km railway stretch currently hampers the development of the route’s western corridor, although Russia and Iran have agreed to build it. Russian and Iranian authorities are joining together to create a joint commercial fleet.
Iranian media report that the Islamic Republic’s shipping firm and a Russian group led by a representative of the country’s president have inked an agreement to build and acquire 20 ships. The parties have agreed to form a joint venture to better coordinate cargo movement along the north-south and east-west transit corridors to and from all Russian ports. As a result of the pact, both sides will pool their transportation and shipbuilding resources to guarantee a steady flow of cargo to the ports.
The international consortium consisting of seven nations is being formed to develop the “North-South” transport corridor, Deputy Prime Minister Marat Khusnullin announced 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 routes that circumnavigate the Caspian Sea on both sides, freight transportation through Kazakhstan, Uzbekistan, Azerbaijan, and Turkmenistan can be streamlined.
At the meeting, Renat Mistakhov, CEO of “Ak Bars,” a shipbuilding company, announced that his firm is ready to build bulk carriers, tankers, and a variety of barges capable of transporting bulk cargo and containers.
Previously, an intergovernmental agreement was made between the governments of Russia and Iran to cooperate in financing the design, building, and delivery of products and services for a 170 km railway segment between the Iranian cities of Rasht and Astara. Russian President Vladimir Putin is hopeful that an agreement on cooperation in developing railway infrastructure and freight transportation along this route will be signed between Tehran and Baku soon. This route will ultimately connect ports in Russia on the Baltic and Northern Seas with ports in Iran on the shores of the Persian Gulf and the Indian Ocean.
The project’s total cost is €1.6 billion, with €1.3 billion designated for the construction of the section through an intergovernmental loan. According to the terms of the agreement, Moscow and Tehran will co-finance the design, construction, and distribution of products and services. It is anticipated that Moscow and Tehran will construct the Rasht-Astara line, while Moscow, Tehran, and Baku will construct the Astara (Iranian city) – Astara (Azerbaijani city) line.
As stated by Putin, it used to take 30-45 days to ship goods from St. Petersburg to Mumbai, India. However, that time is reduced to only ten with the new passageway. According to Russian First Deputy Prime Minister Andrey Belousov, the volume of goods transported via the “North-South” transport route might treble by 2030 from 15 to 30 million tonnes. According to Khusnullin, the “North-South” transport corridor will invest roughly $3.7 billion by 2030.
The Need for the North-South Corridor
Since 2005, creating such a corridor has been a topic of discussion. Igor Levitin, a former assistant to the president and minister of transport, admitted that Russia was slow to develop this field and did not give it sufficient attention.
After sanctions made Western ports inaccessible to Russian vessels, Russia and Iran’s cooperation acquired momentum. During high-level negotiations in Tehran in July 2022, a fundamental decision was reached regarding Russia and Iran’s joint activity. Putin commended Iranian President Ebrahim Raisi and Supreme Leader Ali Khamenei for their continued focus on cooperation with Russia.
Russia is attempting to establish the quickest route to India. Because corporations from unfriendly nations to Russia own the majority of the vessels for container transport through Europe, Russia can no longer ship containers through Europe. Russian routes and vessels are not available for these purposes. The river route through canals and the Volga River is just one component of the “North-South” transport corridor.
Even if trade volume is low now, with the addition of new transit routes, it is anticipated to increase to four times its current level. It was recently decided to build a stretch of railway through the mountains in Iran’s northern region. There is a lot of opportunity for freight once they reach the border with Iran because of the country’s well-developed road network linking to Persian Gulf ports. The total travel time from anywhere in Russia to Rasht is ten days, with a further four days needed to reach the terminals.
Other routes are being considered as well. A route exists between Turkmenistan, Afghanistan, and Iran. Improved relations with Georgia will facilitate the establishment of a transport corridor to the Mediterranean Sea. The route Baku-Tbilisi-Kars provides direct access to the Turkish port of Mersin. There, numerous opportunities for commerce with West and East Africa become available. Including the passage through the Suez Canal and the Red Sea, it takes 45 days for a container to travel from Novorossiysk to Dubai today. The new routes will shorten the voyage to two weeks, drastically altering the global transport system. It is conceivable that those airlines that currently restrict Russian access to their routes will seek to join it.
The route for ships from Iran to the Baltic Sea is not yet uninterrupted and problem-free. In January, the “Rasha-1” dry cargo ship’s saga came to a successful conclusion. When grounded in the Volga-Caspian Canal, it transported metal from Russia to the Iranian port of Amrabat. The Astrakhan region’s Ministry of Emergency Situations reported that the dry cargo ship was autonomously refloated and continued its voyage.
It is expected that Russian dredger Rosmorrechflot may perform dredging in 2023 on this crucial section of the Volga-Caspian Sea Shipping Canal to ensure a 4.5-meter draught. This is necessary for ships to navigate the canal without incident.
Iran and Russia have maintained substantial shipbuilding capacities. The dry cargo ship “Nikolay Orlov” was launched and tested in Russia in March. It was constructed at the shipyard Krasnoye Sormovo in Nizhny Novgorod. Its initial commercial voyage consisted of transporting metal to Iran. According to experts from the United Nations Conference on Trade and Development (UNCTAD), the potential of the trading fleet in the Islamic Republic decreased by nearly a factor of nine (and by a factor of 50 for vessels) in just five years following the first wave of sanctions from 2005 to 2010. Iran initially purchased used ships from China and Malaysia; however, as of 2019, a state shipbuilding programme is in place to construct up to 200 ships of various varieties. The programme is estimated to cost 300 million euros.