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Shipbuilding at the Caspian Sea: main points and patterns of industrial policy and port logistics

photo: sezlotos.ru
9 November 2023

Coordination in shipbuilding became topical for cooperation in the Caspian quite recently when an acute need to modernize the merchant fleet and increase the number of ships on the main Trans-Caspian routes arose.

By mid-2023 there appeared certainty with several projects on the development of Caspian shipbuilding discussed since 2010-2020-s. Events of the transport logistics crisis caused by the western reaction to Russias special military operation in Ukraine called for substantial reorganization of traffic flows, additional efforts by the «Caspian five» countries to increase and modernize their fleets.

The most in-demand types of new ships for the Caspian Sea to change the technological resource of the existing merchant fleet in perspective (2030-s) are as follows: oil carriers, multipurpose container carriers, mixed cargo carriers, ferries for auto and railway transportation, as well as specialized fleet (for dredging ports, channels and riverbeds).

Main missions and decisions

The main missions/decisions for Caspian shipbuilding and navigation up to 2030 are as follows:

1. Fulfillment of the Russian state order for the construction of project 00108 container carriers (12-15 such ships are expected) and 34 project RSD59 dry-cargo carriers.

2. Decision by the Government of Azerbaijan to extend capacity of the Baku Shipyard to increase the production of ships to 10-20 units per year (instead of the current 6-8).

3. Extension of the pool of private and new shipowners through the purchases of ships overseas (as an example a contract of the trading house «Made in Ulyanovsk region» for operation of 10 ships of the Dutch project Optimax assembled at the Chinese shipyard; extending the fleet of the Iranian company Khazar Sea Shipping Lines managing the Astrakhan port of Solyanka).

4. Decision by the Government of Turkmenistan on extending the production potential of the ship repair plant Balkan.

5. Under Kazakhstans national infrastructure plan, a new enterprise is to be built based on the already existing plants before 2029 in the Mangystau region. After 2025 more than 10 ships with the tonnage of 2,000 t per year are planned to be repaired there and one or two ships to be built in addition.

To a large extent shipbuilding may be compared with the military-industrial complex (MIC). Its industrial cluster amalgamates machine-building, chemical industry enterprises, metallurgical works, research institutes, design bureaus cooperating together. Only Russia has such complete combination of enterprises for national shipbuilding in the Caspian Basin. Azerbaijan also mastered complete welding of ship hulls under foreign and Soviet-Russian projects. Iran sets the tasks of increasing the capabilities of its Caspian enterprises, however the main shipbuilding base is located on the coast of the Persian Gulf. Kazakhstan and Turkmenistan are at the initial stages of national shipbuilding development. Nevertheless all «Caspian five» countries placed emphasis on fleet renewal in their economic planning.

What is meant here is both own construction/assembly and purchase of ships in the Black Sea/Mediterranean Sea and other outer basins to work in the Caspian.

Another trend is also developing conventionally referred to as «remote access» when national companies buy ships for work exclusively outside the Caspian territory.

In September 2023 a joint venture established by ASCO and SOCAR came into possession of the «Karabakh» ocean tanker with deadweight 115 thousand tons. This is the fourth tanker of the Aframax type under the Azerbaijani flag that will supply oil from the terminal in Ceyhan mostly for southern Europe and South-East Asia. Kazmortransflot (subsidiary of KazMunaiGas) began to pursue a similar policy. Jointly with Abu Dhabi Ports Group (UAE) they plan before the end of this year to replenish the pool of ocean tankers with three ships: two of the Aframax type (with deadweight 115 thousand tons) and one of the Suezmax type (with deadweight 130 thousand tons). Now the joint pool consists of four vessels (deadweight eight thousand tons) cruising in the Caspian Sea.

Fleet to cater for transportation volumes longitude-wise and latitude-wise

Concurrently with the industry development plans the «Caspian five» countries practically simultaneously took decisions on extending port infrastructures: these are the new terminals in the port of Olya; second development stage of the Baku international sea commercial port; development of the Aktau and Alyat ports.

The dynamics of movement and specifics of cargoes may be assessed by the statistics of the Caspian ports. Cargo turnover of the Russian ports in the basin during navigation of 2023 is expected to be 7.5 mln t versus 6 mln t last year. Transshipment of grain crops will be 2.6 mln t. In the recent years about 40% fell on the grain in the cargo turnover structure of Russias Caspian ports. A second cargo in volumes is the oil, its share varies within the range of 23-26%. The share of packaged goods (pallets, containers) does not exceed 12%.

The trend of expanding pair interaction between the Caspian ports along the main vectors of cargo transportation is important for shipbuilding. In particular, Astrakhan becomes a key hub for cooperation with Irans carriers. About 53% of shares of the Solyanka port in Astrakhan belongs to the Islamic Republic of Iran Shipping Line Group (IRISL). In the past two years the latter invested more than 10 million dollars into reconstruction of the said port. Plans are underway to establish an individual shipping company operating on the line Iran-Astrakhan-Volga basin ports. Given that by March 2024 one can expect zeroing of the customs duties on a wide range of mutual trade nomenclature it is possible to assume a sharp increase in container transportation.

The Baku-Aktau line is the key one for oil export as part of logistics for Trans-Caspian hydrocarbon transportation. According to the data of the Aktau port, in January-February 2023 it increased oil transshipment to 2.1 mln. t by 58% versus a similar period of 2022. For the time being, the main volume of Kazakhstans petroleum products is sent to the Russian Makhachkala. However, following the strategy of diversification of export routes SOCAR and KazMunaiGas reached an agreement in 2022 on possible oil transportation via the pipeline Baku-Tbilisi-Ceyhan with a limit of 1.5 mln t per year with a subsequent increase. Oil transportation through the Caspian Sea is supposed to be made on a parity basis by the vessels of the Caspian Shipping Company and KazMunaiGas.

Role of VTB as coordinator

It is also possible to see reliance of the Caspian states on regional coordination. They search for options for distributed placement of orders of the national operating companies at all the plants of the region (for example, leading Russian enterprises of the Volga-Caspian basin Krasnoe Sormovo Shipyard of Nizhny Novgorod and the Astrakhan shipbuilding plant Lotos| in the past one year and a half received delegations representing all shipyards and repair enterprises of the regions countries).

Let us list the most important administrative and managerial, as well as business decisions adopted by the regions countries in this field and once again pay attention to the following: serious shipbuilding dynamics generally in the Caspian region is maintained, besides the Russian enterprises, only by Baku Shipyards, while the Kazakh and Turkmenian projects are still at the initial stage. The branch of the sea and river shipbuilding in the Volga-Caspian region is developed in Russia on a larger scale.

The main event of 2023 in the industry was the nomination of VTB as the management bank of the United Shipbuilding Corporation (USC). USC shares were transferred into trust management for five years, while the banks First Deputy Chairman Andrei Puchkov was appointed as USCs General Director. It will be recalled that USC unites about 50 Russian enterprises in various branches of industry: main shipyards and ship repair enterprises, machine-building plants, leading design bureaus. At present, the biggest part of the Russian shipbuilding complex is consolidated on the base of USC.

Given that the total volume of the forthcoming investments for a decade is valued at 350 billion rubles, it is possible that VTB will agree upon USCs plans in the region offering Russias Caspian neighbors participation in the projects that may be of interest to them not only in the region, but also in the outer sea areas.

To understand the role of VTB as an infrastructure bank of the ITC «North-South» it is necessary to bear in mind that the Government of Russia approved the proposal on establishment of a project office in order to develop this transport corridor under the guidance of the banks specialists. The office will collect and analyze information of the ITC «North-South» with reference to the investment project of building a railway line (track gauge is 1520 mm) to the ports of Iran, as well as will prepare proposals to provide uninterrupted cargo turnover on the railway segments of the corridor, including the sea Trans-Caspian one Russia-Iran. The project office is also tasked with making a feasibility study report on developing the ITC «North-South», including the financial models of using the infrastructure and a number of key facilities.

Generally, new orders of Russian shipbuilding worth about 27-30 billion rubles may come to the Caspian region. For example, the cost of project 00108 container carrier is valued at 1.7 billion rubles; 12-15 such vessels are expected in the Caspian region. Krasnoe Sormovo Shipyard of Nizhny Novgorod has a firm order for building 34 dry-cargo carriers of project RSD59 up to the year 2027 (10 vessels before the end of 2024, 12 vessels before the end of September 2025 and another 12 vessels before end of 2027).

Progress Microelectronic Research Institute developing relay and signaling equipment for space vehicles will become the supplier of shipboard electrical equipment for this series. The problem of project RSD 59 is typical of the Russian machine-building generally. Despite the fact that the project was developed after 2014 under the sanctions conditions it employs many European systems and components, which delayed the construction of the series in 2022-2023. Only after the West had imposed blocking sanctions does technological sovereignty become a priority.

Astrakhan shipbuilding agglomeration

Investments into modernization of three enterprises of the Southern Center of Shipbuilding and Ship Repair (SCSR) Astrakhan Shipbuilding Production Association (ASPO), Krasnye Barrikady Shipyard and shipbuilding plant Lotos will amount to 3 billion dollars, while the workload of the enterprises since 2024 is to be 100%. The biggest part of the funds will be concentrated at the Lotos plant, which will make it possible to increase ship assembly volumes twice.

It will be recalled that the same-name special economic zone (SEC) Lotos in the Narimanovsky District of the Astrakhan region was pooled into the common cluster with the port SEC created near the port of Olya in the Limansky District. In 2024 the City of Engineers will be built nearby. This residential area project is evaluated at 40-50 billion rubles. To fulfill a large volume of orders the plant needs qualified personnel and by 2025 about 2,000 specialists are expected to work on the shipbuilding sites. Besides, port extension will also facilitate the growing strength of the staff of various companies and services. Therefore, Astrakhan is rising to a new level of development as the biggest shipbuilding and port cluster of the northern Caspian.

Owing to a number of contracts up to 2027 the Astrakhan shipyards are fully provided with orders on building special purpose vessels (dredgers, tugboats etc.). Planned investments into Russian shipbuilding take into account the need to renew about 80% of the dry-cargo ships, oil and river barges with the service period exceeding 39 years. Shipbuilders must compensate for the deficit of transport in carrying oil and containers through the system Caspian Sea-Volga, as well as have reserves, if possible, to take orders from the regional neighbors (cooperation projects). At present, 10 ships of various class and purpose are now under construction at the Astrakhan shipyards, as well as modules of the ice-resistance stationary platform for the gas field Kamennomysskoye-Sea.

Volga navigation

One of the leading factors in the Caspian shipping is the commercial transport traffic on the internal waterways of Russia, in the first place, the Volga-Don navigation. At the new stage, business showed interest to cargo transportation by river through the corridor «North-South».

In the post-Soviet period barely half of this resources capacity was used. Many river ports were in a state of decline. In the recent years the Russian Government has been paying attention not only to the ITC «North-South» but also to the port facilities of the Volga, Don, to the condition of sluices and canals.

During the Caspian Economic Forum in 2022 the construction of a multimodal river port in the Samara region was announced (completion of this project is expected before 2027). The amount of necessary investments at that time was stated at about 40 billion rubles. At the Saint-Petersburg Economic Forum in June 2023 the Governor of the Samara region Dmitri Azarov signed an agreement on building a port logistics hub in the territory of the region. At the same time it was voiced that the Togliatti port may join the project (container site for the hub may be built in the port of Syzran or in Togliatti). The Ulyanovsk region began survey in order to organize and build the infrastructure of the commodity hub «mid-Volga region-Caspian Sea». The hub is designed to be built in the territory of the Ulyanovsk region together with Tatarstan and the Penza region.

Baku shipbuilding

The most important thing in Azerbaijans shipbuilding industry in 2023 was President Ilham Alyievs decision to extend the capacity of the Baku Shipyard (BS) in order to increase the production of ships to 10-20 units per year instead of 6-8 ships (as a comparison: Russias oldest Shipyard Krasnoe Sormovo manufactures 10-11 ships per year). BS is one of the youngest such enterprises in the Caspian region. The shipyard was founded in September 2013 and has rather big development potential. Capacity of this enterprise makes it possible to process simultaneously 25,000 tons of metal which provides the construction of four tankers throughout the year. Up till now BS implemented projects related to the construction of 12 various purpose vessels (including the multi-purpose railway/auto ferry CNF18C «Azerbaijan» commissioned in 2019. The ferry was designed by the Marine Engineering Bureau in Saint-Petersburg.

The Baku Shipyard builds ships not only for the Caspian, but also for use in other seas (like the Volgo-Don Maks). In the nearest months the tanker «Zangilan» (8,000 t) is to be commissioned. She will operate in the international waters, which indicates priority of business interests over the political climate demanding that ships be made available on the internal Caspian routes (lease rates for oil tankers worldwide have increased three times since the spring of 2022).

Market situation is complicated by the fact that in 2023 the tanker fleet increased by a mere 1.5%, while in 2024, judging by the orders at the shipyards, new oil tankers may never be built. All this shows that the global market of oil transportation by tankers will face a long period of rising prices for several years to come. For this reason, SOCAR places emphasis on transportation of Azerbaijani oil from the ports Ceyhan (Turkey) and Supsa (Georgia) by its own sea and ocean-going fleet.

At the same time, transportation in the Caspian is growing too. In particular, in 2022 transshipment of cargoes through the sea ports of Azerbaijan was 11 mln 750.6 thousand tons (growth by 32.4%). In the half year of 2023 it increased by another 13%.

The prospects of BS development are attributed to the technological partnership with the leading shipbuilders of Europe. In October 2023 Baku Shipyard and the Dutch company Damen Shipyards Gorinchem B.V. signed a contract for the construction of dredger CSD 650. It will be a first attempt of joint production with the worlds leader in the industry. President Ilham Alyiyev began cooperation talks with the Dutchmen in Davos at the meeting with the Head of Damen.

If this experience proves successful and expands, Baku Shipyard, in the environment of western sanctions imposed on the RF, may become the key shipbuilder in the Caspian region receiving a part of orders from the Russian ship-owners, buying for them a part of foreign equipment and components.

In early October 2023 a scheduled inter-governmental meeting between Russia and Azerbaijan was held on the level of Vice-Premiers. During this meeting the subject of shipbuilding was specifically under discussion, among other things. This subject, including the prospects of cooperation in the transport logistics sphere, was also on the economic agenda of the recent meeting of the Azerbaijani and Russian Presidents in Bishkek.

Kazakh and Turkmenian shipbuilders

Kazakhstans shipbuilding is represented by two enterprises: Ural Plant Zenit in the city of Uralsk and Research Institute Gidropribor (JSC). Starting from 1993 when Kazakhstan launched complete shipbuilding both the enterprises built 47 various ships and vessels for the republics Navy and Coast Guard. But because of shallow depths on the Chagan and in the lower reaches of the river Ural both the enterprises have a limitation on deadweight of 500 t.

A driver for the development of Kazakh shipbuilding may be industrial cooperation with Russia if preferential credits, grants, cascade funding are used on the level of the Eurasian Economic Union. The Eurasian Commission is preparing a mechanism of preferential credits for cooperation projects in the amount of 1 bn dollars for a period of 5 years. However, the shipbuilding industry, judging by the open sources, was not included into the number of such projects. Starting from this year the Caspian fleet of Kazmortransflot has five ships. Initially those were tankers «Astana», «Aktau», and «Almaty» with deadweight 12,400 t each. In 2023 an official ceremony was held in Romania on the purchase of two oil tankers Taraz and Liwa of the same type as Caspian max (both tankers were built at the shipyard of Damen Shipyard Galati).

It is worth mentioning that the new tankers allow Astana to fully meet its obligations on annual transportation of 750 thousand tons of oil through the Caspian Sea, on further transportation of 1.5 mln tons of Kazakhstans oil to the world markets via the main pipeline Baku-Tbilisi-Ceyhan under the agreement with SOCAR.

Briefly about the Turkmenian shipbuilders. Capacity of the Balkan shipbuilding and repair plant is designed to build on average five medium range vessels per year, annual volume of processed steel is 10,000 t. It is interesting that in March 2023 a meeting was held between the directors of the Turkmenian and Azerbaijani shipbuilding enterprises. An agreement was reached that Baku Shipyard will send concrete proposals to the Turkmenian side on the areas of shipbuilding cooperation.

In conclusion, let us outline general missions of Caspian shipbuilding. It is obvious that coordinated efforts are needed on the inter-governmental level to ensure the growth and speed of transportation through the Caspian Sea by the nationally built/assembled ships. Fleet increase will have a positive effect on the freight rates and tariffs. The only solution here is to extend the list of companies involved in equipment supplies and development of assembly production lines in the Caspian shipbuilding/industrial agglomerations. Through external purchases of used ships it is possible to gain time not to stop the cargo flow. But by the time their effective operation period expires, it is necessary to prepare the production of ships at competitive prices with modern, utterly import-independent equipment that would not degrade the economy of regional transportation.

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Caspian Institute for Strategic Studies
Publications

Shipbuilding at the Caspian Sea: main points and patterns of industrial policy and port logistics

photo: sezlotos.ru
9 2023

Coordination in shipbuilding became topical for cooperation in the Caspian quite recently when an acute need to modernize the merchant fleet and increase the number of ships on the main Trans-Caspian routes arose.

By mid-2023 there appeared certainty with several projects on the development of Caspian shipbuilding discussed since 2010-2020-s. Events of the transport logistics crisis caused by the western reaction to Russias special military operation in Ukraine called for substantial reorganization of traffic flows, additional efforts by the «Caspian five» countries to increase and modernize their fleets.

The most in-demand types of new ships for the Caspian Sea to change the technological resource of the existing merchant fleet in perspective (2030-s) are as follows: oil carriers, multipurpose container carriers, mixed cargo carriers, ferries for auto and railway transportation, as well as specialized fleet (for dredging ports, channels and riverbeds).

Main missions and decisions

The main missions/decisions for Caspian shipbuilding and navigation up to 2030 are as follows:

1. Fulfillment of the Russian state order for the construction of project 00108 container carriers (12-15 such ships are expected) and 34 project RSD59 dry-cargo carriers.

2. Decision by the Government of Azerbaijan to extend capacity of the Baku Shipyard to increase the production of ships to 10-20 units per year (instead of the current 6-8).

3. Extension of the pool of private and new shipowners through the purchases of ships overseas (as an example a contract of the trading house «Made in Ulyanovsk region» for operation of 10 ships of the Dutch project Optimax assembled at the Chinese shipyard; extending the fleet of the Iranian company Khazar Sea Shipping Lines managing the Astrakhan port of Solyanka).

4. Decision by the Government of Turkmenistan on extending the production potential of the ship repair plant Balkan.

5. Under Kazakhstans national infrastructure plan, a new enterprise is to be built based on the already existing plants before 2029 in the Mangystau region. After 2025 more than 10 ships with the tonnage of 2,000 t per year are planned to be repaired there and one or two ships to be built in addition.

To a large extent shipbuilding may be compared with the military-industrial complex (MIC). Its industrial cluster amalgamates machine-building, chemical industry enterprises, metallurgical works, research institutes, design bureaus cooperating together. Only Russia has such complete combination of enterprises for national shipbuilding in the Caspian Basin. Azerbaijan also mastered complete welding of ship hulls under foreign and Soviet-Russian projects. Iran sets the tasks of increasing the capabilities of its Caspian enterprises, however the main shipbuilding base is located on the coast of the Persian Gulf. Kazakhstan and Turkmenistan are at the initial stages of national shipbuilding development. Nevertheless all «Caspian five» countries placed emphasis on fleet renewal in their economic planning.

What is meant here is both own construction/assembly and purchase of ships in the Black Sea/Mediterranean Sea and other outer basins to work in the Caspian.

Another trend is also developing conventionally referred to as «remote access» when national companies buy ships for work exclusively outside the Caspian territory.

In September 2023 a joint venture established by ASCO and SOCAR came into possession of the «Karabakh» ocean tanker with deadweight 115 thousand tons. This is the fourth tanker of the Aframax type under the Azerbaijani flag that will supply oil from the terminal in Ceyhan mostly for southern Europe and South-East Asia. Kazmortransflot (subsidiary of KazMunaiGas) began to pursue a similar policy. Jointly with Abu Dhabi Ports Group (UAE) they plan before the end of this year to replenish the pool of ocean tankers with three ships: two of the Aframax type (with deadweight 115 thousand tons) and one of the Suezmax type (with deadweight 130 thousand tons). Now the joint pool consists of four vessels (deadweight eight thousand tons) cruising in the Caspian Sea.

Fleet to cater for transportation volumes longitude-wise and latitude-wise

Concurrently with the industry development plans the «Caspian five» countries practically simultaneously took decisions on extending port infrastructures: these are the new terminals in the port of Olya; second development stage of the Baku international sea commercial port; development of the Aktau and Alyat ports.

The dynamics of movement and specifics of cargoes may be assessed by the statistics of the Caspian ports. Cargo turnover of the Russian ports in the basin during navigation of 2023 is expected to be 7.5 mln t versus 6 mln t last year. Transshipment of grain crops will be 2.6 mln t. In the recent years about 40% fell on the grain in the cargo turnover structure of Russias Caspian ports. A second cargo in volumes is the oil, its share varies within the range of 23-26%. The share of packaged goods (pallets, containers) does not exceed 12%.

The trend of expanding pair interaction between the Caspian ports along the main vectors of cargo transportation is important for shipbuilding. In particular, Astrakhan becomes a key hub for cooperation with Irans carriers. About 53% of shares of the Solyanka port in Astrakhan belongs to the Islamic Republic of Iran Shipping Line Group (IRISL). In the past two years the latter invested more than 10 million dollars into reconstruction of the said port. Plans are underway to establish an individual shipping company operating on the line Iran-Astrakhan-Volga basin ports. Given that by March 2024 one can expect zeroing of the customs duties on a wide range of mutual trade nomenclature it is possible to assume a sharp increase in container transportation.

The Baku-Aktau line is the key one for oil export as part of logistics for Trans-Caspian hydrocarbon transportation. According to the data of the Aktau port, in January-February 2023 it increased oil transshipment to 2.1 mln. t by 58% versus a similar period of 2022. For the time being, the main volume of Kazakhstans petroleum products is sent to the Russian Makhachkala. However, following the strategy of diversification of export routes SOCAR and KazMunaiGas reached an agreement in 2022 on possible oil transportation via the pipeline Baku-Tbilisi-Ceyhan with a limit of 1.5 mln t per year with a subsequent increase. Oil transportation through the Caspian Sea is supposed to be made on a parity basis by the vessels of the Caspian Shipping Company and KazMunaiGas.

Role of VTB as coordinator

It is also possible to see reliance of the Caspian states on regional coordination. They search for options for distributed placement of orders of the national operating companies at all the plants of the region (for example, leading Russian enterprises of the Volga-Caspian basin Krasnoe Sormovo Shipyard of Nizhny Novgorod and the Astrakhan shipbuilding plant Lotos| in the past one year and a half received delegations representing all shipyards and repair enterprises of the regions countries).

Let us list the most important administrative and managerial, as well as business decisions adopted by the regions countries in this field and once again pay attention to the following: serious shipbuilding dynamics generally in the Caspian region is maintained, besides the Russian enterprises, only by Baku Shipyards, while the Kazakh and Turkmenian projects are still at the initial stage. The branch of the sea and river shipbuilding in the Volga-Caspian region is developed in Russia on a larger scale.

The main event of 2023 in the industry was the nomination of VTB as the management bank of the United Shipbuilding Corporation (USC). USC shares were transferred into trust management for five years, while the banks First Deputy Chairman Andrei Puchkov was appointed as USCs General Director. It will be recalled that USC unites about 50 Russian enterprises in various branches of industry: main shipyards and ship repair enterprises, machine-building plants, leading design bureaus. At present, the biggest part of the Russian shipbuilding complex is consolidated on the base of USC.

Given that the total volume of the forthcoming investments for a decade is valued at 350 billion rubles, it is possible that VTB will agree upon USCs plans in the region offering Russias Caspian neighbors participation in the projects that may be of interest to them not only in the region, but also in the outer sea areas.

To understand the role of VTB as an infrastructure bank of the ITC «North-South» it is necessary to bear in mind that the Government of Russia approved the proposal on establishment of a project office in order to develop this transport corridor under the guidance of the banks specialists. The office will collect and analyze information of the ITC «North-South» with reference to the investment project of building a railway line (track gauge is 1520 mm) to the ports of Iran, as well as will prepare proposals to provide uninterrupted cargo turnover on the railway segments of the corridor, including the sea Trans-Caspian one Russia-Iran. The project office is also tasked with making a feasibility study report on developing the ITC «North-South», including the financial models of using the infrastructure and a number of key facilities.

Generally, new orders of Russian shipbuilding worth about 27-30 billion rubles may come to the Caspian region. For example, the cost of project 00108 container carrier is valued at 1.7 billion rubles; 12-15 such vessels are expected in the Caspian region. Krasnoe Sormovo Shipyard of Nizhny Novgorod has a firm order for building 34 dry-cargo carriers of project RSD59 up to the year 2027 (10 vessels before the end of 2024, 12 vessels before the end of September 2025 and another 12 vessels before end of 2027).

Progress Microelectronic Research Institute developing relay and signaling equipment for space vehicles will become the supplier of shipboard electrical equipment for this series. The problem of project RSD 59 is typical of the Russian machine-building generally. Despite the fact that the project was developed after 2014 under the sanctions conditions it employs many European systems and components, which delayed the construction of the series in 2022-2023. Only after the West had imposed blocking sanctions does technological sovereignty become a priority.

Astrakhan shipbuilding agglomeration

Investments into modernization of three enterprises of the Southern Center of Shipbuilding and Ship Repair (SCSR) Astrakhan Shipbuilding Production Association (ASPO), Krasnye Barrikady Shipyard and shipbuilding plant Lotos will amount to 3 billion dollars, while the workload of the enterprises since 2024 is to be 100%. The biggest part of the funds will be concentrated at the Lotos plant, which will make it possible to increase ship assembly volumes twice.

It will be recalled that the same-name special economic zone (SEC) Lotos in the Narimanovsky District of the Astrakhan region was pooled into the common cluster with the port SEC created near the port of Olya in the Limansky District. In 2024 the City of Engineers will be built nearby. This residential area project is evaluated at 40-50 billion rubles. To fulfill a large volume of orders the plant needs qualified personnel and by 2025 about 2,000 specialists are expected to work on the shipbuilding sites. Besides, port extension will also facilitate the growing strength of the staff of various companies and services. Therefore, Astrakhan is rising to a new level of development as the biggest shipbuilding and port cluster of the northern Caspian.

Owing to a number of contracts up to 2027 the Astrakhan shipyards are fully provided with orders on building special purpose vessels (dredgers, tugboats etc.). Planned investments into Russian shipbuilding take into account the need to renew about 80% of the dry-cargo ships, oil and river barges with the service period exceeding 39 years. Shipbuilders must compensate for the deficit of transport in carrying oil and containers through the system Caspian Sea-Volga, as well as have reserves, if possible, to take orders from the regional neighbors (cooperation projects). At present, 10 ships of various class and purpose are now under construction at the Astrakhan shipyards, as well as modules of the ice-resistance stationary platform for the gas field Kamennomysskoye-Sea.

Volga navigation

One of the leading factors in the Caspian shipping is the commercial transport traffic on the internal waterways of Russia, in the first place, the Volga-Don navigation. At the new stage, business showed interest to cargo transportation by river through the corridor «North-South».

In the post-Soviet period barely half of this resources capacity was used. Many river ports were in a state of decline. In the recent years the Russian Government has been paying attention not only to the ITC «North-South» but also to the port facilities of the Volga, Don, to the condition of sluices and canals.

During the Caspian Economic Forum in 2022 the construction of a multimodal river port in the Samara region was announced (completion of this project is expected before 2027). The amount of necessary investments at that time was stated at about 40 billion rubles. At the Saint-Petersburg Economic Forum in June 2023 the Governor of the Samara region Dmitri Azarov signed an agreement on building a port logistics hub in the territory of the region. At the same time it was voiced that the Togliatti port may join the project (container site for the hub may be built in the port of Syzran or in Togliatti). The Ulyanovsk region began survey in order to organize and build the infrastructure of the commodity hub «mid-Volga region-Caspian Sea». The hub is designed to be built in the territory of the Ulyanovsk region together with Tatarstan and the Penza region.

Baku shipbuilding

The most important thing in Azerbaijans shipbuilding industry in 2023 was President Ilham Alyievs decision to extend the capacity of the Baku Shipyard (BS) in order to increase the production of ships to 10-20 units per year instead of 6-8 ships (as a comparison: Russias oldest Shipyard Krasnoe Sormovo manufactures 10-11 ships per year). BS is one of the youngest such enterprises in the Caspian region. The shipyard was founded in September 2013 and has rather big development potential. Capacity of this enterprise makes it possible to process simultaneously 25,000 tons of metal which provides the construction of four tankers throughout the year. Up till now BS implemented projects related to the construction of 12 various purpose vessels (including the multi-purpose railway/auto ferry CNF18C «Azerbaijan» commissioned in 2019. The ferry was designed by the Marine Engineering Bureau in Saint-Petersburg.

The Baku Shipyard builds ships not only for the Caspian, but also for use in other seas (like the Volgo-Don Maks). In the nearest months the tanker «Zangilan» (8,000 t) is to be commissioned. She will operate in the international waters, which indicates priority of business interests over the political climate demanding that ships be made available on the internal Caspian routes (lease rates for oil tankers worldwide have increased three times since the spring of 2022).

Market situation is complicated by the fact that in 2023 the tanker fleet increased by a mere 1.5%, while in 2024, judging by the orders at the shipyards, new oil tankers may never be built. All this shows that the global market of oil transportation by tankers will face a long period of rising prices for several years to come. For this reason, SOCAR places emphasis on transportation of Azerbaijani oil from the ports Ceyhan (Turkey) and Supsa (Georgia) by its own sea and ocean-going fleet.

At the same time, transportation in the Caspian is growing too. In particular, in 2022 transshipment of cargoes through the sea ports of Azerbaijan was 11 mln 750.6 thousand tons (growth by 32.4%). In the half year of 2023 it increased by another 13%.

The prospects of BS development are attributed to the technological partnership with the leading shipbuilders of Europe. In October 2023 Baku Shipyard and the Dutch company Damen Shipyards Gorinchem B.V. signed a contract for the construction of dredger CSD 650. It will be a first attempt of joint production with the worlds leader in the industry. President Ilham Alyiyev began cooperation talks with the Dutchmen in Davos at the meeting with the Head of Damen.

If this experience proves successful and expands, Baku Shipyard, in the environment of western sanctions imposed on the RF, may become the key shipbuilder in the Caspian region receiving a part of orders from the Russian ship-owners, buying for them a part of foreign equipment and components.

In early October 2023 a scheduled inter-governmental meeting between Russia and Azerbaijan was held on the level of Vice-Premiers. During this meeting the subject of shipbuilding was specifically under discussion, among other things. This subject, including the prospects of cooperation in the transport logistics sphere, was also on the economic agenda of the recent meeting of the Azerbaijani and Russian Presidents in Bishkek.

Kazakh and Turkmenian shipbuilders

Kazakhstans shipbuilding is represented by two enterprises: Ural Plant Zenit in the city of Uralsk and Research Institute Gidropribor (JSC). Starting from 1993 when Kazakhstan launched complete shipbuilding both the enterprises built 47 various ships and vessels for the republics Navy and Coast Guard. But because of shallow depths on the Chagan and in the lower reaches of the river Ural both the enterprises have a limitation on deadweight of 500 t.

A driver for the development of Kazakh shipbuilding may be industrial cooperation with Russia if preferential credits, grants, cascade funding are used on the level of the Eurasian Economic Union. The Eurasian Commission is preparing a mechanism of preferential credits for cooperation projects in the amount of 1 bn dollars for a period of 5 years. However, the shipbuilding industry, judging by the open sources, was not included into the number of such projects. Starting from this year the Caspian fleet of Kazmortransflot has five ships. Initially those were tankers «Astana», «Aktau», and «Almaty» with deadweight 12,400 t each. In 2023 an official ceremony was held in Romania on the purchase of two oil tankers Taraz and Liwa of the same type as Caspian max (both tankers were built at the shipyard of Damen Shipyard Galati).

It is worth mentioning that the new tankers allow Astana to fully meet its obligations on annual transportation of 750 thousand tons of oil through the Caspian Sea, on further transportation of 1.5 mln tons of Kazakhstans oil to the world markets via the main pipeline Baku-Tbilisi-Ceyhan under the agreement with SOCAR.

Briefly about the Turkmenian shipbuilders. Capacity of the Balkan shipbuilding and repair plant is designed to build on average five medium range vessels per year, annual volume of processed steel is 10,000 t. It is interesting that in March 2023 a meeting was held between the directors of the Turkmenian and Azerbaijani shipbuilding enterprises. An agreement was reached that Baku Shipyard will send concrete proposals to the Turkmenian side on the areas of shipbuilding cooperation.

In conclusion, let us outline general missions of Caspian shipbuilding. It is obvious that coordinated efforts are needed on the inter-governmental level to ensure the growth and speed of transportation through the Caspian Sea by the nationally built/assembled ships. Fleet increase will have a positive effect on the freight rates and tariffs. The only solution here is to extend the list of companies involved in equipment supplies and development of assembly production lines in the Caspian shipbuilding/industrial agglomerations. Through external purchases of used ships it is possible to gain time not to stop the cargo flow. But by the time their effective operation period expires, it is necessary to prepare the production of ships at competitive prices with modern, utterly import-independent equipment that would not degrade the economy of regional transportation.