Iran seeks cooperation with the Dagestani port of Makhachkala

City of Makhachkala, the capital of Dagestan (Credits: Bogdanov-62, CC BY-SA 4.0, via Wikimedia Commons)

Iran will play a primary role in the import-export activities in the Dagestani port of Makhachkala. The recent meeting between Dagestan and Iran’s representatives showed mutual interest in expanding trade cooperation and transit agreement.

A business meeting with a delegation from the Islamic Republic of Iran was held at the Makhachkala Commercial Sea Port in Daghestan. The port was represented by Acting General Director Alibulat Bigunilayev, who addressed in his speech the vast opportunities of his enterprise and its vital strategic role for the entire region. The Iranian delegation, headed by the general director of Daryadelan LLC, Hadad Yahya Mehdi, stressed that Makhachkala could profoundly contribute to developing relations between Russia and Iran.

The main Russian port for maritime trade in the Caspian Sea is Astrakhan, but several factors, including bureaucracy, have prevented trade with Iran from moving forward after the first lifting of sanctions. Therefore, when there was the auction to acquire the shares in the port of Makhachkala, Iran was predictably the highest bidder among the various competitors (there were also Vietnam, China, Turkey and Azerbaijan). Today, Iranian companies have controlling stakes in both Russian ports on the Caspian.

The privilege of the port of Makhachkala compared to other Russian ports is the milder climate. The port’s waters do not freeze in winter and are deep enough to allow the navigation of large ships. In this regard, Russia and Iran discussed ship projects and cargo flights. In recent years, the port has experienced a decrease in its turnover due to concerns over corruption at the Dagnefteproduct terminal.

Nevertheless, according to the scenario presented in the Strategy for the Development of the Russian Seaports in the Caspian Basin and Related Access Railways and Automobile Roads until 2030, the recovery of oil supplies via the seaport will allow increasing the hydrocarbon cargo traffic to 10 million tons per year by 2025.

Furthermore, since the Makhachkala port is the base of the Caspian Flotilla, the Ministry of Defense of Russia has already announced its claims to expand military infrastructure in the port. Secondly, as mentioned before, in January 2017, Russia introduced the construction of a harbour for cruise ships, yachts, and passenger boats to the Makhachkala port development concept. In fact, during the St. Petersburg International Economic Forum held on June 1st–3rd, 2017, the First Deputy Minister of the Ministry of North Caucasus Affairs of Russia, Odes Baysultanov, reported that the traffic flows via the Makhachkala seaport could be refocused on internal passenger traffic. At the fifth Caspian summit in Kazakhstan, Vladimir Putin announced the construction of a new Caspian deep-water seaport in Kaspiysk, located 18 kilometres southeast of Makhachkala until 2025, able to receive ships with a workload of 15,000-25,000 tons.

Geopolitical scenario

Iran will play a significant role in the Makhachkala port, as underlined by the continuous meetings and agreements between Moscow and Tehran and Tehran with Daghestani representatives. Trade should increase the port’s turnover since it is part of the International North-South Transport Corridor (INSTC), which provides a route from Indian goods to Russian and European markets. Moreover, Russia has recently shown interest in replacing European goods with the Iranian ones as a result of the sanctions imposed on Moscow due to the Ukrainian crisis.

In 2015, the diplomatic crisis between Russia and Turkey due to the downing of the Russian Sukhoi SU-24 plane by the Turkish military forces prompted the Kremlin to issue economic sanctions against Turkey. This event created the opportunity for Iran to replace the Turkish financial and business presence in the North Caucasus. Although Russian-Iranian relations in the Caucasus region are developing mainly within the framework of the “Caspian format”, several historical boundaries are exploited to promote the Islamic Republic’s influence through soft power. During the Persian conquests, one of the centres of Persian culture was the South Dagestani city of Derbent, whose history dates back more than five thousand years. Today, the Albanian city of Derbent still plays a unique role in strengthening cultural ties between Dagestan and Iran. The word “Darband” in Persian means “knot of gates” or “narrow passage”.

Another aspect that characterises the shared cultures of Persia and the ancient city of Derbent is the Nowruz holiday. This holiday has been known since Zoroastrian times. Persian-speaking peoples and peoples who were part of the area of Persian culture solemnly celebrated it in the pre-Islamic era and continued in the new Islamic establishment. The strategic use of the traditions of some ethnic minorities in the Russian Federation as a tool to enhance relations with Tehran can be proved by the word of Russian representatives, such as the Counsellor of the Russian Embassy in Tehran, Mikhail Fedorov, who cited this holiday celebrated in various parts of Russia (the Caucasus, the Republic of Tatarstan and the Republic of Bashkortostan) as a bridge between the cultures of the two countries.

Currently, cooperation between the two republics is carried out based on signed Russian-Iranian intergovernmental agreements and the Memorandum on Trade, Economic, Scientific and Technical Cooperation, signed on December 13th, 1997, in Makhachkala. Iranian companies show interest in developing the oil and gas resources of Dagestan in the joint production and processing of strontium concentrates, quartz and moulding sands based on Dagestani deposits. Several partnerships were signed between Iranian and Dagestani universities in multiple expertise areas.

The Iranians have always considered the Caspian Sea an exclusive area shared first with the Tsarist Empire, then with the Soviets and currently with the Russian Federation. In the aftermath of the independence of the former Soviet republics, a problem arose regarding the division of sovereignty over the waters. If the lack of advanced technologies for deep-sea drilling and the lack of necessary financial resources have represented one of the significant obstacles for Iran in the mining sector, from the point of view of transport corridors, the Russian ports of Astrakhan and Makhachkala provided a route to Russian markets that avoided Azerbaijan, with which Tehran has discontinuous relations.

Notably, South Korea (68.2 %) and China (8.28%) are the primary import source of Daghestan. The Islamic Republic of Iran was South Korea’s third-largest Middle Eastern trade partner before the United States unilaterally withdrew from a 2015 nuclear deal between Tehran and world powers and reimposed crippling sanctions.

Risk assessment

Iran-Russian relations in the Caspian Sea and the rising role of Makhachkala port might threaten the near Azerbaijani port of Baku. Indeed, the Azerbaijani Government has often promoted Baku port as a logistic hub in the Caspian Seato to connect Europe and Asia. In this context, regarding also the current confrontation between Europe and Russia due to the Ukraine conflict, Iran might play an essential role in supporting the Kremlin’s strategy to diversify its trade route by exploiting the strategic position of Makhachkala in Dagestan. The rising role of Makhachkala port does not undermine only Baku but also the European strategy to use Azerbaijan as an interconnector with the Central Asian market and gives a prominent role to Dagestan and the entire North Caucasus, where the Kremlin started 2010 a socioeconomic development strategy aimed at transforming the region into a logistic hub (Caucaso del Nord: turismo, progetti di sviluppo e possibilità di investment).

Author: Silvia Boltuc