• 2018 August 23

    End of the Caspian Sea uncertainty

    After the collapse of the USSR, the development of transport activities in the Caspian Sea region was complicated due to its uncertain legal status. The signing of the Convention on the Status of the Caspian Sea has put an end to its "transitional" post-Soviet period. Lots of ambitious plans ahead, but there are also quite a few problems.

    Per aspera ad mare
    The signed Convention provides for the Caspian coastal nations’ right to extract aquatic biological resources within a 25nm offshore zone, while national sovereignty will extend to 15 nm, as well as ten adjacent to them areas for extraction of bioresources. The main water area of the sea is in common use of the parties to the Convention and the bed and subsoil assets are divided between the states on the basis of relevant agreements and international law. Shipping, bioresources catching, pipelines laying can be carried out on agreed routes and according to rules by those countries whose waters they will pass.

    Astrakhan, Olya and Makhachkala are the three Russian seaports located and operating in the Caspian basin. Until recently, these ports were operating in red, registering the worst performance figures in comparison with other basins. Since 2012, cargo trade flows passing through the above ports of the Caspian basin have dropped by two-fold, and its share in the total volume of Russian ports has reached the levels of statistical error.

    Nevertheless, in H1 2018 the Caspian basin seaports, the steep downward plunge was replaced by a surge in volumes, thanks to handling Kazakh crude oil at the Port of Makhachkala. A spike in dry cargo traffic in the basin was attributed to grain cargoes bound for Iran.

    New port, new chances

    From our point of view, the prospects of the basin are related to the creation of new dry cargo terminal capacity (which is still insufficient in Russia, especially in its southern regions) to handle trade flows going to Iran and India, which is a huge for Russia market but still underserved, and for handling transit transport.

    Expert estimates show that potential transit cargo flow along the North-South international transport corridor between India, Iran and the countries of Northern and Central Europe may reach 35-40 million tonnes per year, with half of the volume being containers. At the same time, to ensure such shipments profitability and competitiveness with the ports of the Azov-Black Sea basin, these vessels should be be large enough, above 1,700 TEUs. It is also necessary to create an appropriate infrastructure.

    To build these large capacity containerships for shipping in the Caspian Sea will require state financing. Currently, there are several well-proven state support scheme for newbuilding: interest rates subsidies for credit and lease payments, ship recycling subsidy.

    In November 2017, the Government of Russia approved the Strategy for the Development of the Caspian Basin Ports until 2030. The strategy includes the creation of a port in Kaspiysk. Russian President Vladimir Putin recently announced the port should be built by 2025. It will be able to accommodate vessels with total payload of 15,000 to 25,000 tonnes.

    "We support the project of the North-South international corridor, it provides for rail, ferry, road links, we would be willing to develop. The corridor launch will enable rapid cargo deliveries by 2.5 times, annually it will be up to 25 million tonnes from European countries through Iran to the Middle East, to South Asia," Vladimir Putin said.

    Kaspiysk is located in the immediate vicinity of Makhachkala, has free areas for development of stevedoring business. The site is also intended for a Caspian flotilla base of the Russian Navy.

    People and fish

    The above Strategy also provides for the creation of new passenger terminals in the ports of Astrakhan, Makhachkala and Derbent in the Caspian Sea.

    Construction of passenger ship of Project PV300 for Caspian cruises is underway at Lotos Shipyard. The ship was launched August 2016 and is the first vessel of mixed river-sea class over the past 60 years. The vessel was ordered by Moscow River Shipping Company. Two vessels of the series (lead and the serial) are scheduled for delivery in 2020. The cruise ship of PV 300 series is a new-generation four-deck vessel with a length of 141 m.

    The Iranian companies were also interested in building such vessels at Lotos Shipyard.

    The Convention on the Legal Status of the Caspian Sea provides an impetus for the development of fisheries in the area. At present, Russia is working on incentives to encourage the construction of small-tonnage fishing vessels, including those for operation in the Caspian Sea. The head of Rosrybolovstvo Ilya Shestakov says the country needs catching of sprat in the Caspian in the amount of 100 000 tonnes per year, while currently only a tenth of this volume is produced by domestic fishermen.

    Not to be overwhelmed by red tape

    To implement all these plans, get the things going it is necessary to create conditions for effective logistics. Otherwise it will be impossible to ensure the competitiveness of the Caspian routes in comparison with the existing Azov-Black Sea network. It would be important to address an issue of a single transport document, and optimization of customs procedures, the establishment of service centres, including ship repair ones, to ensure reliable shipping. In addition, it is necessary to think over measures of state support for the construction of the Caspian fleet and smooth functioning of the corresponding infrastructure.

    However, if all this is done, then the once depressed region will get a good synergy effect and an impulse to development. Moreover, all the prerequisites for this are available: the political will, the support of top officials of the country, expedite delivery, and the proximity to huge markets of Iran and India. And the legal status of the sea creates opportunities for this.

    Vitaly Chernov