Vladivostok chosen as Russia’s first 'free port' to help bolster economy

Vladivostok has been chosen to become Russia’s first ‘free port’ in move that could boost trade and bolster the economy in the far east of the country. In his state of the nation address, Russian president Vladimir Putin announced the Pacific port would benefit from the new status by July next year.

The decision would see less strict customs regulations, the introduction of tax incentives for port operators, and a lower cost for ships coming into the port. It will make the city an attractive option for overseas trade and help stimulate the economy, which has suffered as a result of Western sanctions following the Ukraine crisis.

Addressing the Federal Council, Mr Putin said it was now 'necessary' to pay attention to the far eastern parts of Russia because of its recent economic growth.

The region is also strategically placed to aid the President’s pursuit of new stronger ties with Asian nations, particularly China.

He said: 'Russia has a high potential as a major power in the Asia-Pacific region. I propose to give to Vladivostok the status of free port with an attractive easy customs regime. Let me remind you that this is available in respect of Sevastopol and other ports of Crimea'.

With a population of 600,000 Vladivostok is located at the head of Golden Horn Bay, not that far from the borders with China and North Korea. Currently home to the Russian Pacific fleet, it was actually a free port in the late 19^th century when its status allowed duty-free goods to be imported from abroad. This turned it into one of the largest ports in the world along with the likes of Hamburg and London, but the status was removed in 1909.

The idea to make Vladivostok a free port again came from to Mindalvostokrazvitiya - the Ministry of Development of the Far East - and following the President’s announcement officials will draw up a plan to facilitate the new customs regime.

But Nadezhda Malysheva, the director of development agency Portnews, said that port facilities in Vladivostok are limited by the city itself, as well as the vast military base. Instead, she believes it would be of more benefit to extend the new free zone to all ports in Primorsky Krai, including the ports Vostochny, near Nakhodka, and Zarubino. 

New figures released by the Russian Association of Commercial Seaports show that, for the first 10 months of 2014, Far Eastern ports handled 135.5 million tonnes of cargo - about a quarter of the total turnover of Russian ports.

Most productive was Vostochny, which handled 48.5 million tonnes of cargo compared to Vladivostok, which was in fifth place with 12.9 million tonnes.

Nevertheless, Mr Putin’s announcement will be welcomed, and it signals a move that Siberia and the Russian Far East is pivotal to forging closer ties with neighbouring Asian countries. His remarks came as Russia continues to struggle against the economic sanctions imposed by the United States and Europe over the crisis in Ukraine, falling oil prices and depreciation of the Rouble.

Meanwhile, the President also said he is keen on pushing ahead with the development of the Northern Shipping Route, giving more efficient access to Europe across the Arctic. Prime Minister Dmitry Medvedev has been tasked with drafting and approving a plan for the route by June 1, 2015, with the free port status due to be completed by July 15.