#9 - JRL 7171
May 7, 2003
Russia eyes billions in transport connection
By Sergei Blagov
MOSCOW - Russia has been keen to make the North-South transport connection a viable alternative to Red Sea routes. An alternative transport link from Asia to Europe - from Mumbai, India, to the Caspian port of Olya in the Astrakhan region via Bandar Abbas in Iran - is expected to bring Russia billions of dollars in revenues.
In 2002, 7 million tons of freight were shipped through Russia along the North-South transport corridor, and this figure could reach 8 million tons this year, Deputy Transportation Minister Chingiz Izmailov told journalists in Moscow.
Russia's Transportation Ministry has suggested launching a consortium of shipping companies that would operate along the corridor. Among possible participants, Izmailov mentioned Iran's state-owned cargo fleet, the St Petersburg Port, the Olya Port near Astrakhan on the Caspian and the Free Port of Hamburg in Germany. Izmailov claimed that the consortium would be able to invest "hundreds of millions of dollars" to develop railroad, highway and river infrastructure between the Caspian Sea and St Petersburg.
Russia, India and Iran signed an agreement on the development of the North-South corridor in September 2000. In March 2002, President Vladimir Putin signed into law a bill ratifying a trilateral agreement on the development of the North-South link.
The ministry estimates that the North-South link would be able to handle some 15-20 million tons of freight per year, hence becoming a rival of the Suez Canal. The route would be a channel for goods shipped to and from Russia, as well as an alternative transit route between Asia and Europe.
Russia and other partners in the North-South link project hope to lure shippers by the low cost of transportation via this corridor. Now most South Asian cargo bound for Russia is moved either to Russia's Black Sea ports or via the Atlantic Ocean and Baltic Sea to St Petersburg.
The new corridor is expected to reduce delivery time by 10 to 12 days compared with traditional routes through the Mediterranean and the Suez Canal. The planners also hope that the link will cut operation costs by about 20 percent, or US$400, per container.
Russia's southern Astrakhan region has started building a 51-kilometer long rail link between Olya port and Privolzhye railway system. The project is estimated to cost $140 million, including $60 million loan from the European Bank for Reconstruction and Development.
The corridor has good chances to connect Asia and Western Europe, Transportation Minister Sergei Frank has argued. The Transportation Ministry estimates that the annual trade turnover through the corridor could reach $10 billion per year, with Russia, Iran and India becoming the main beneficiaries.
Russia and Iran have also discussed the restoration of a rail link between the two countries within the framework of the North-South transport corridor agreement.
Freight from Southeast Asia would travel the corridor from the Indian Ocean through the Persian Gulf, where it would be loaded onto trucks and trains in Iran. The cargo would then be shipped across the Caspian Sea into Russia, then forwarded to Western Europe.
However, millions of dollars need to be spent to make the North-South corridor a viable alternative to customary Red Sea routes. Many parts of Russia's segment of the corridor are incomplete or in disrepair, including rail links serving ports on the Caspian and roads leading through the Volga region.
Yet despite infrastructure problems and possible political risks caused by Iranian involvement, the benefits of the corridor to Russia seemingly attract some former Soviet states.
Izmailov announced that Belarus and Kazakhstan formally joined the project and claimed that another six nations could join in various capacities, naming Tajikistan and Oman as potential participants. Armenia, Azerbaijan, Bulgaria and Syria have expressed interest in writing to join the project, Izmailov stated.
Kazakhstan may join the project directly as the North-South link could include the Aktau port in western Kazakhstan. These plans involve a regular Aktau-Astrakhan ferry line, while links between Russian ports Olya, Astrakhan, Makhachkala and Kazakh port Aktau in the Caspian Sea would become important elements of the proposed North-South transportation system. Meanwhile, Belarus would remain Russia's main land connection with Western Europe.
Russia has long tried to capitalize on its unique geographical position by providing transcontinental links. However, the economic viability of these ambitious plans has yet to be tested.
For instance, theoretically Russia's Trans-Siberian Railway, which takes seven days to travel from one end to another, constitutes an ideal transcontinental link. It runs from Moscow to Vladivostok, is the longest continuous rail line on earth, of almost six thousand miles (or about ten thousand kilometers) over one third of the globe. Other possible routes to the west are Moscow to Berlin and from there to Paris, as well as St Petersburg and to Helsinki.
Russia has long hoped to develop the scheme to funnel freight between Asia and Europe through the Trans-Siberian Railway. However, the scheme so far has not been a success, mainly due to Russia's railway service's lack of reliability.
On the other hand, despite the considerable economic potential of the corridor to Russia, there will also be problems - especially with Iran, which has been labeled by US President George W Bush as part of an "axis of evil".