The Russian government is analyzing the idea of creating a shipping state company for the North-South international transport corridor (ITC.) The form of such company is being discussed and variants of participation of the state and business as well as shipping companies and ship-owners are being analyzed.
Significance of Project
The North-South corridor itself is extremely important for the current situation in logistics, as it fulfills several tasks at once: unloading of overloaded Far Eastern direction, logistics bypassing European ports, direct access to promising markets of Iran, India, South-East Asia and Africa, said Vitaly Chernov, head of analytical department of PortNews industry agency.
“I am not sure that it is necessary to create a state-owned shipping company, but it makes sense to think about creating a single logistics operator together with Iranian and Azerbaijani partners,” Chernov said.
During the Verona Eurasian Economic Forum, which was held in Baku, First Deputy Prime Minister Andrei Belousov emphasized that the importance of the North-South route is related not only to the anti-Russian sanctions imposed after the start of hostilities in Ukraine, but also in general to changes in the world markets due to the shift of centers of economic activity to China, Southeast Asia and the Persian Gulf.
“Russia suggests considering the possibility of launching such a service, taking into account that the operator will also perform forwarding functions: contracting transportation services, transshipment in seaports, customs and other transportation support,” Belousov said.
North-South is Increasing Volumes
In 2021, about 14 million tons of various cargoes were transported through the international transport corridor. Transit of goods through the North-South ITC increased by 350% in the first seven months of 2022 compared to the same period last year, said Kambiza Jahanbani, head of the Iranian shipping company Khazar Sea Shipping Lines.
“The growth potential by 2030 is almost double, to 32 million tons. Reorientation of cargo flows is now the most important task, so it is necessary to strengthen the infrastructure of the ports of the Caspian basin, modernize hydraulic structures and port terminals in the Astrakhan region and Dagestan,” said Deputy Minister of Transport of the Russian Federation Alexander Poshivay.
The agreement on creating the North – South international transport corridor was signed in 2000 and ratified two years later. Belarus, Kazakhstan, Oman, Tajikistan, Azerbaijan, Armenia, Syria, Bulgaria, Kyrgyzstan and Turkey gradually joined to it.
The North-South ITC begins in St. Petersburg and ends in the Indian port of Mumbai. It is an alternative maritime route connecting Europe, the Persian Gulf countries and the Indian Ocean through the Suez Canal. The length of the North-South ITC is 7,200 km. The corridor is connected by sea, rail and road routes.
The first line is Trans-Caspian. The route runs through the Russian seaports Olya in the Astrakhan Region and Makhachkala Trade Port, as well as Iranian sea harbors: Bender-Enzeli, Nowshehr and Bender-Amirabad.
The second is the Western railway route has not yet been completed. The branch will pass through the border crossing Samur (Russia) - Yalama (Azerbaijan) with access to the Iranian border crossing Astara.
Finally, the third one is the Eastern branch of the corridor which runs by rail through Kazakhstan, Uzbekistan and Turkmenistan. The final point is the Iranian border crossings of Serakhs and Aqayla Inche Burun. Currently, cargoes in this section are transported by road, which restrains the development of the entire corridor because of the need for double transshipment of goods from one mode of transport to another.
Most of the projects of the first, priority, group are being implemented on the western route of the North-South ITC. One of them is the construction of road bypasses of Vladikavkaz, Astrakhan, Makhachkala, Derbent and Khasavyurt, modernization of the Alyat - Astara and Sumgait – Yalama railway lines.
Many facilities are also expected to be built in other countries. As a result, investments in infrastructure will be required not only in Russia, but also in Kazakhstan, Azerbaijan, Iran and other countries.
Director of Olya Commercial Seaport Alexander Melnikov suggested creating a digital model of the North-South ITC in order to clearly present the algorithm of the movement of containers along the route, to understand where the bottlenecks are, as well as how much fleet should be ordered to service the route. He also believes that this work can be entrusted to Astrakhan universities.
“It is, of course, difficult to say today what kind of fleet is needed, what kind of container capacity, what kind of storage sites and terminals should be for receiving and unloading goods. It is convenient to have a digital model to analyze the algorithm of the movement of containers along all the sections of the North-South corridor,” said Melnikov.
Such model, according to Melnikov, will also help to assess the order of investments. The Eurasian Development Bank (EDB) has calculated the infrastructure cost for the ITC and announced the sum of $38.2 billion. All the investment projects in EDB were divided into three groups according to their priority. The creation of priority facilities will require more than $10 billion. These costs will mainly rest on the shoulders of Russia.
“Establishment of a shipping state company to work in the North – South international transport corridor will be useful for such a large-scale project. There are discussions of the organizational form, who and how can participate: state or business, shipping companies, shipowners,” said the head of Rosmorrechflot Zakhary Dzhioev.
The proposal to create a joint company is more a political gesture towards neighboring countries, and there is no practical sense in such operator, says Mikhail Blinkin, Director of the Institute of Economics of Transport, National Research University Higher School of Economics.
A lot depends on the authorities in this corridor, for example, dredging of Caspian Sea ports, said Blinkin. He believes that as soon as the issue with the transport infrastructure and customs formalities is settled, the business itself will decide how to transport goods.