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. Last Updated: 07/27/2016

Caspian Cargo Hub Trumps Suez Canal

Russia opened its first container terminal on the Caspian Sea on Wednesday, a cargo hub that senior government officials are hailing as a logistical milestone that will strengthen Russia's hand in the energy-rich region and boost trade with India, Iran and Kazakhstan.

The terminal is part of an ambitious agreement Russia signed with India and Iran three years ago to develop a so-called north-south transport corridor, which was joined last month by Belarus and Kazakhstan. The Transportation Ministry has said Tajikistan, Armenia, Syria and Oman are also close to joining the project.

The terminal, which has an initial capacity of 500,000 metric tons per year, is located near Astrakhan in the seaport town of Olya, where Deputy Prime Minister Vladimir Yakovlev -- flanked by Transportation Minister Sergei Frank and new Russian Railways Co. president Gennady Fadeyev -- was on hand for the official opening.

"[This hub] is a breakthrough in developing the nation's transportation infrastructure," news agencies quoted Yakovlev as saying.

With the opening of Olya, countries in the Persian Gulf and Indian Ocean regions can now ship goods to Europe much more quickly and cheaply. Shipping goods to Europe via Olya takes between 15 and 23 days and is 40 percent cheaper than shipping via the Suez Canal, the traditional route, which takes between 35 and 40 days.

However, without a rail link to the national railway network, the port's capacity is limited to receiving goods by truck only. Once it is integrated with the national rail system, the terminal's capacity is set to skyrocket.

Fadeyev said the first 11 kilometers of a new track to connect with the Astrakhan-Grozny line, which will eventually be more than 50 kilometers long, would be ready by the end of the year and be fully operational by September.

In 2005, Olya is expected to handle 4 million tons of cargo, and the volume is expected to double to 8 million tons in 2010.

Once the strategic link is completed, Russia, India and Iran will be able to double the volume of goods they ship to Europe, according to the Transportation Ministry.

The rail link is expected to cost some $100 million and will be financed by the new Russian Railways Co., or RZD, and the European Bank for Reconstruction and Development.

RZD, which has just inherited the commercial functions and infrastructure of the Railways Ministry, will invest a total of 130 billion rubles ($4.2 billion) next year on infrastructure projects.

"The lion's share of these funds will go to the development of transport corridors with exits to seaports," Interfax quoted Fadeyev as saying. "This is about 45 percent of the investment program."

Russia plans to invest a total of $15 billion developing international transport corridors through 2010.