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Private Railway Transporters to Appear in Russia in 2013
Private railway transporters will appear in Russia in 2013, when all problems with wagon parks control are solved. 
“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
By means of private transporters, the government plans to solve the problem of locomotives deterioration in the RF – it exceeds now 70%, and sometimes there is a lack of locomotives at  the most busy sections. According to market players, about $60-70 billion is needed to renew the wagon fleet in the next decade. For that, it was planned to liberalise this segment of the market sector allowing independent operators to work on local railway sections.
Meanwhile, the President of RZD Vladimir Yakunin said at the end of 2011 that he is against private transporters on railway lines in Russia. “We told the government that we are against any property on locomotives that run on the mainlines. We think that locomotives and infrastructure cannot be separated, and it is what RZD must be engaged in,” said the senior manager of RZD justifying his position by the necessity to provide safe and efficient work on railways.

Russia and Ukraine to Maintain Shipping Safety in Azov Sea
Russian Transport Minister Igor Levitin and his Ukrainian counterpart, Minister of Infrastructure Borys Kolesnikov, signed an agreement between the Government of the Russian Federation and the Government of Ukraine on measures to ensure safety of navigation in the Sea of Azov and the Kerch Strait. 
The two parties highlighted the importance of the Sea of Azov and the Kerch Strait for economic development of Russia and Ukraine, the need for harmonizing the actions and measures that promote safety of navigation in areas of heavy traffic in the Sea of Azov and the Kerch Strait.

Vadim Morozov Noted The Trend of Increases in Export Transportation via RF Ports
Summing up the results of RZD’s interaction with Russian sea ports in 2011 and at the beginning of 2012, Vadim Morozov, the First Vice President of RZD, noted the trend of a significant increase in the exports transportation via Russian ports. 
In the words of Mr Morozov, in 2011 loading volume of export cargoes grew by 6%, and in the first two months of 2012 the increase was 16%. Loading of export cargoes exceeded the pre-crisis level (2007) by 30% in the North-West basin, by 11% in the Southern basin, and by 82% in the Far Eastern basin.
The First Vice President of RZD emphasized that favourable conditions for Russian port development had been created. Therefore, in the opinion of Mr Morozov, the basic task is now to increase the efficiency of work of all participants in the transportation process. 
He noted that this year unloading at terminals has increased by 19% year-on-year, but it is provided by only 70% of ports’ capacity.
Thus, in the words of Mr Morozov, capacities allowing unloading 156,000 railcars are not being used. In 2012, 31,200 railcars loaded with export cargoes idle on railway tracks near ports waiting for unloading.

Ukrainian Transport Enterprises Reduced Cargo Transportation by 1.4%
In January-February 2012, Ukrainian transport enterprises cut the volume of cargo transportation by 1.4% in comparison with the same period of the previous year to 122.6 million tons, reports Ukrainian Statistics Service. 
In the first two months of the year, the cargo turnover reduced by 5.6% to 63.7 billion ton-kilometres.
Cargo transportation by railway fell by 1.2% in January-February 2012. Of that, cargo dispatch shrank by 2.6%.
Dispatches of chemical and chemical fertilizers increased by 9.3%, construction materials – by 6.1%, grain and flour – by 130%, coke – by 2.5%. At the same time, dispatches of ferrous metals fell by 2.2%, ferrous metal scrap – by 42.1%, timber – by 27.1%, coal – by 7.9%, oil and petrochemicals – by 7.7%, cement – by 10.5%, ferrous and manganese ore – by 4.9%.
Sea and river fleet of Ukraine reduced cargo transportation by 33.3% to 0.6 million tons. International transportation of cargo by water transport fell by 37.4%
The volume of cargo handled in commercial and fishing ports and at industrial berths (sea and river) reduced by 0.8% to 23.8 million tons. The throughput of domestic cargoes grew by 2.8%, that of export cargo increased by 21.3%. There was a decline in the throughput of imports (-7%) and transit (-28.6%).
Road transport enterprises (including transportation by individual entrepreneurs) transported 24.2 million tons of freight in January-February 2012, a 7.9% increase year-on-year. In this period, the cargo turnover of road carriers amounted to 5.3 billion ton-kilometres, 4.2% more than in the same period of 2011.
In the first two months of 2012, air transport carried 19,900 tons of freight, 60% more than in January-February 2011.

Latvian Ports: a 30% Increase in Throughput in January-February
In January-February 2012, the throughput of Latvian ports grew by 29.4% in comparison with the same period of 2011. It amounted to 12.79 million tons. 
In that period of time, the ports handled 6.11 million tons of bulk cargo (+46.1% year-on-year). Of that, 3.92 million tons of coal (+72.1%), 491,200 tons of chemicals (-32.5%), and 289,700 tons of wood chips (+40.8%) were handled.
Latvian ports handled 4.68 million tons of liquid bulk (+21%), including 4.53 million tons of petrochemicals (+21%) and 12,900 tons of crude oil (-14.6%). 2 million tons of general cargoes was transshipped (+9.3%). Of that, there were 692,800 tons of timber (-8.4%), 603,100 tons of containerized cargo (+43.6%), and 483,700 tons of ro-ro cargo (+21.1%).
The leader among the Latvian ports was the port of Riga, which handled 6.19 million tons of cargo (+28.8%). The port of Ventspils takes second position (5.36 million tons, +31.2%), and the Liepaja port – the third position (1.02 million tons, +35.4%). In 2011, the throughput of Latvian ports amounted to 68.82 million tons (+12.5% in comparison with 2010).

No Application, No Rolling Stock
RZD has banned the dispatch of empty wagons to a station, if there is no adjusted application for cargo transportation, on the entire Russian railway network with the exception of the North-Caucasus Railway. 
Since February 1, the transporter started to carry out a respective order of the RF Transport Ministry on the territory of six railways – affiliates of RZD, where the company took control of the reception of empty railcars for transportation.
As the authors of the document suggested, the demanded adjusted application guarantees that the wagon is dispatched to a specific consignor and will participate in transportation instead of idling waiting for loading on station tracks in regions with a large transportation volume. Vladimir Yakunin, President of RZD, assured that these measures would improve the efficiency of transportation and the quality of services.
The rules targeting empty railcars were necessary to remove the accumulation of wagons on the railway tracks near large consignors – coal, metal, oil and mining companies.

Dollar Experiment
Since April 1, 2012, all calculations of prices for international transportation at the CIS Railways with the exception of Russian Railways will be done in US dollars, not in Swiss francs. 
The new rule will be in force till June 30, 2012 on the territory of the CIS railways. Representatives of the Administration of Tariff Policy of the CIS Railways said that this is an experiment. “Dollar and euro fluctuation significantly influences the financial result of RZD. Swiss franc is a more stable currency,” they said.
Not to make calculations complicated,  the coefficient of 0.93 was set for RZD to turn its rates in Swiss francs into those in US dollars. 

Regular Traffic Starts at Novaya Gavan
New Ro-Ro terminal Novaya Gavan at the port of Ust-Luga began accepting regular vessels traffic. These days terminal accepted vessels with Nissan, Infiniti and Mazda vehicles. The first stage area on the Terminal Novaya Gavan is planned to process at least 80,000 vehicles during 2012. This project sets new standards of services provided for OEMs and sets significant optimization of logistic solutions for the entire market.
The vessel Nordic Ace (flag of Bahamas, agent Inflot Worldwide Ferry Services) loaded with Mazda vehicles called at the berth number 1 of Terminal Novaya Gavan on 12 March 2012. The vessel arrived from the port of Zeebrugge (Belgium). 1,200 vehicles were unloaded in 8 hours and 40 minutes. 

Freight Transportation Volume of RZD Increased by 4.5% in January-February 2012
In January-February 2012, cargo transportation volume of RZD grew by 4.5% year-on-year to 222.9 million tons. 
Domestic transportation increased by 2.5% to 131.9 million tons, and international transportation grew by 7.6% to 91 million tons. Of that, 39.9 million tons was carried via sea ports (+14%), and 51.1 million tons – via border crossings (+3.1%), according to materials of RZD’s main computer centre.
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Private Railway Transporters to Appear in Russia in 2013
Private railway transporters will appear in Russia in 2013, when all problems with wagon parks control are solved. 
“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
By means of private transporters, the government plans to solve the problem of locomotives deterioration in the RF – it exceeds now 70%, and sometimes there is a lack of locomotives at  the most busy sections. According to market players, about $60-70 billion is needed to renew the wagon fleet in the next decade. For that, it was planned to liberalise this segment of the market sector allowing independent operators to work on local railway sections.
Meanwhile, the President of RZD Vladimir Yakunin said at the end of 2011 that he is against private transporters on railway lines in Russia. “We told the government that we are against any property on locomotives that run on the mainlines. We think that locomotives and infrastructure cannot be separated, and it is what RZD must be engaged in,” said the senior manager of RZD justifying his position by the necessity to provide safe and efficient work on railways.

Russia and Ukraine to Maintain Shipping Safety in Azov Sea
Russian Transport Minister Igor Levitin and his Ukrainian counterpart, Minister of Infrastructure Borys Kolesnikov, signed an agreement between the Government of the Russian Federation and the Government of Ukraine on measures to ensure safety of navigation in the Sea of Azov and the Kerch Strait. 
The two parties highlighted the importance of the Sea of Azov and the Kerch Strait for economic development of Russia and Ukraine, the need for harmonizing the actions and measures that promote safety of navigation in areas of heavy traffic in the Sea of Azov and the Kerch Strait.

Vadim Morozov Noted The Trend of Increases in Export Transportation via RF Ports
Summing up the results of RZD’s interaction with Russian sea ports in 2011 and at the beginning of 2012, Vadim Morozov, the First Vice President of RZD, noted the trend of a significant increase in the exports transportation via Russian ports. 
In the words of Mr Morozov, in 2011 loading volume of export cargoes grew by 6%, and in the first two months of 2012 the increase was 16%. Loading of export cargoes exceeded the pre-crisis level (2007) by 30% in the North-West basin, by 11% in the Southern basin, and by 82% in the Far Eastern basin.
The First Vice President of RZD emphasized that favourable conditions for Russian port development had been created. Therefore, in the opinion of Mr Morozov, the basic task is now to increase the efficiency of work of all participants in the transportation process. 
He noted that this year unloading at terminals has increased by 19% year-on-year, but it is provided by only 70% of ports’ capacity.
Thus, in the words of Mr Morozov, capacities allowing unloading 156,000 railcars are not being used. In 2012, 31,200 railcars loaded with export cargoes idle on railway tracks near ports waiting for unloading.

Ukrainian Transport Enterprises Reduced Cargo Transportation by 1.4%
In January-February 2012, Ukrainian transport enterprises cut the volume of cargo transportation by 1.4% in comparison with the same period of the previous year to 122.6 million tons, reports Ukrainian Statistics Service. 
In the first two months of the year, the cargo turnover reduced by 5.6% to 63.7 billion ton-kilometres.
Cargo transportation by railway fell by 1.2% in January-February 2012. Of that, cargo dispatch shrank by 2.6%.
Dispatches of chemical and chemical fertilizers increased by 9.3%, construction materials – by 6.1%, grain and flour – by 130%, coke – by 2.5%. At the same time, dispatches of ferrous metals fell by 2.2%, ferrous metal scrap – by 42.1%, timber – by 27.1%, coal – by 7.9%, oil and petrochemicals – by 7.7%, cement – by 10.5%, ferrous and manganese ore – by 4.9%.
Sea and river fleet of Ukraine reduced cargo transportation by 33.3% to 0.6 million tons. International transportation of cargo by water transport fell by 37.4%
The volume of cargo handled in commercial and fishing ports and at industrial berths (sea and river) reduced by 0.8% to 23.8 million tons. The throughput of domestic cargoes grew by 2.8%, that of export cargo increased by 21.3%. There was a decline in the throughput of imports (-7%) and transit (-28.6%).
Road transport enterprises (including transportation by individual entrepreneurs) transported 24.2 million tons of freight in January-February 2012, a 7.9% increase year-on-year. In this period, the cargo turnover of road carriers amounted to 5.3 billion ton-kilometres, 4.2% more than in the same period of 2011.
In the first two months of 2012, air transport carried 19,900 tons of freight, 60% more than in January-February 2011.

Latvian Ports: a 30% Increase in Throughput in January-February
In January-February 2012, the throughput of Latvian ports grew by 29.4% in comparison with the same period of 2011. It amounted to 12.79 million tons. 
In that period of time, the ports handled 6.11 million tons of bulk cargo (+46.1% year-on-year). Of that, 3.92 million tons of coal (+72.1%), 491,200 tons of chemicals (-32.5%), and 289,700 tons of wood chips (+40.8%) were handled.
Latvian ports handled 4.68 million tons of liquid bulk (+21%), including 4.53 million tons of petrochemicals (+21%) and 12,900 tons of crude oil (-14.6%). 2 million tons of general cargoes was transshipped (+9.3%). Of that, there were 692,800 tons of timber (-8.4%), 603,100 tons of containerized cargo (+43.6%), and 483,700 tons of ro-ro cargo (+21.1%).
The leader among the Latvian ports was the port of Riga, which handled 6.19 million tons of cargo (+28.8%). The port of Ventspils takes second position (5.36 million tons, +31.2%), and the Liepaja port – the third position (1.02 million tons, +35.4%). In 2011, the throughput of Latvian ports amounted to 68.82 million tons (+12.5% in comparison with 2010).

No Application, No Rolling Stock
RZD has banned the dispatch of empty wagons to a station, if there is no adjusted application for cargo transportation, on the entire Russian railway network with the exception of the North-Caucasus Railway. 
Since February 1, the transporter started to carry out a respective order of the RF Transport Ministry on the territory of six railways – affiliates of RZD, where the company took control of the reception of empty railcars for transportation.
As the authors of the document suggested, the demanded adjusted application guarantees that the wagon is dispatched to a specific consignor and will participate in transportation instead of idling waiting for loading on station tracks in regions with a large transportation volume. Vladimir Yakunin, President of RZD, assured that these measures would improve the efficiency of transportation and the quality of services.
The rules targeting empty railcars were necessary to remove the accumulation of wagons on the railway tracks near large consignors – coal, metal, oil and mining companies.

Dollar Experiment
Since April 1, 2012, all calculations of prices for international transportation at the CIS Railways with the exception of Russian Railways will be done in US dollars, not in Swiss francs. 
The new rule will be in force till June 30, 2012 on the territory of the CIS railways. Representatives of the Administration of Tariff Policy of the CIS Railways said that this is an experiment. “Dollar and euro fluctuation significantly influences the financial result of RZD. Swiss franc is a more stable currency,” they said.
Not to make calculations complicated,  the coefficient of 0.93 was set for RZD to turn its rates in Swiss francs into those in US dollars. 

Regular Traffic Starts at Novaya Gavan
New Ro-Ro terminal Novaya Gavan at the port of Ust-Luga began accepting regular vessels traffic. These days terminal accepted vessels with Nissan, Infiniti and Mazda vehicles. The first stage area on the Terminal Novaya Gavan is planned to process at least 80,000 vehicles during 2012. This project sets new standards of services provided for OEMs and sets significant optimization of logistic solutions for the entire market.
The vessel Nordic Ace (flag of Bahamas, agent Inflot Worldwide Ferry Services) loaded with Mazda vehicles called at the berth number 1 of Terminal Novaya Gavan on 12 March 2012. The vessel arrived from the port of Zeebrugge (Belgium). 1,200 vehicles were unloaded in 8 hours and 40 minutes. 

Freight Transportation Volume of RZD Increased by 4.5% in January-February 2012
In January-February 2012, cargo transportation volume of RZD grew by 4.5% year-on-year to 222.9 million tons. 
Domestic transportation increased by 2.5% to 131.9 million tons, and international transportation grew by 7.6% to 91 million tons. Of that, 39.9 million tons was carried via sea ports (+14%), and 51.1 million tons – via border crossings (+3.1%), according to materials of RZD’s main computer centre.
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“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
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“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
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Private Railway Transporters to Appear in Russia in 2013
Private railway transporters will appear in Russia in 2013, when all problems with wagon parks control are solved. 
“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
By means of private transporters, the government plans to solve the problem of locomotives deterioration in the RF – it exceeds now 70%, and sometimes there is a lack of locomotives at  the most busy sections. According to market players, about $60-70 billion is needed to renew the wagon fleet in the next decade. For that, it was planned to liberalise this segment of the market sector allowing independent operators to work on local railway sections.
Meanwhile, the President of RZD Vladimir Yakunin said at the end of 2011 that he is against private transporters on railway lines in Russia. “We told the government that we are against any property on locomotives that run on the mainlines. We think that locomotives and infrastructure cannot be separated, and it is what RZD must be engaged in,” said the senior manager of RZD justifying his position by the necessity to provide safe and efficient work on railways.

Russia and Ukraine to Maintain Shipping Safety in Azov Sea
Russian Transport Minister Igor Levitin and his Ukrainian counterpart, Minister of Infrastructure Borys Kolesnikov, signed an agreement between the Government of the Russian Federation and the Government of Ukraine on measures to ensure safety of navigation in the Sea of Azov and the Kerch Strait. 
The two parties highlighted the importance of the Sea of Azov and the Kerch Strait for economic development of Russia and Ukraine, the need for harmonizing the actions and measures that promote safety of navigation in areas of heavy traffic in the Sea of Azov and the Kerch Strait.

Vadim Morozov Noted The Trend of Increases in Export Transportation via RF Ports
Summing up the results of RZD’s interaction with Russian sea ports in 2011 and at the beginning of 2012, Vadim Morozov, the First Vice President of RZD, noted the trend of a significant increase in the exports transportation via Russian ports. 
In the words of Mr Morozov, in 2011 loading volume of export cargoes grew by 6%, and in the first two months of 2012 the increase was 16%. Loading of export cargoes exceeded the pre-crisis level (2007) by 30% in the North-West basin, by 11% in the Southern basin, and by 82% in the Far Eastern basin.
The First Vice President of RZD emphasized that favourable conditions for Russian port development had been created. Therefore, in the opinion of Mr Morozov, the basic task is now to increase the efficiency of work of all participants in the transportation process. 
He noted that this year unloading at terminals has increased by 19% year-on-year, but it is provided by only 70% of ports’ capacity.
Thus, in the words of Mr Morozov, capacities allowing unloading 156,000 railcars are not being used. In 2012, 31,200 railcars loaded with export cargoes idle on railway tracks near ports waiting for unloading.

Ukrainian Transport Enterprises Reduced Cargo Transportation by 1.4%
In January-February 2012, Ukrainian transport enterprises cut the volume of cargo transportation by 1.4% in comparison with the same period of the previous year to 122.6 million tons, reports Ukrainian Statistics Service. 
In the first two months of the year, the cargo turnover reduced by 5.6% to 63.7 billion ton-kilometres.
Cargo transportation by railway fell by 1.2% in January-February 2012. Of that, cargo dispatch shrank by 2.6%.
Dispatches of chemical and chemical fertilizers increased by 9.3%, construction materials – by 6.1%, grain and flour – by 130%, coke – by 2.5%. At the same time, dispatches of ferrous metals fell by 2.2%, ferrous metal scrap – by 42.1%, timber – by 27.1%, coal – by 7.9%, oil and petrochemicals – by 7.7%, cement – by 10.5%, ferrous and manganese ore – by 4.9%.
Sea and river fleet of Ukraine reduced cargo transportation by 33.3% to 0.6 million tons. International transportation of cargo by water transport fell by 37.4%
The volume of cargo handled in commercial and fishing ports and at industrial berths (sea and river) reduced by 0.8% to 23.8 million tons. The throughput of domestic cargoes grew by 2.8%, that of export cargo increased by 21.3%. There was a decline in the throughput of imports (-7%) and transit (-28.6%).
Road transport enterprises (including transportation by individual entrepreneurs) transported 24.2 million tons of freight in January-February 2012, a 7.9% increase year-on-year. In this period, the cargo turnover of road carriers amounted to 5.3 billion ton-kilometres, 4.2% more than in the same period of 2011.
In the first two months of 2012, air transport carried 19,900 tons of freight, 60% more than in January-February 2011.

Latvian Ports: a 30% Increase in Throughput in January-February
In January-February 2012, the throughput of Latvian ports grew by 29.4% in comparison with the same period of 2011. It amounted to 12.79 million tons. 
In that period of time, the ports handled 6.11 million tons of bulk cargo (+46.1% year-on-year). Of that, 3.92 million tons of coal (+72.1%), 491,200 tons of chemicals (-32.5%), and 289,700 tons of wood chips (+40.8%) were handled.
Latvian ports handled 4.68 million tons of liquid bulk (+21%), including 4.53 million tons of petrochemicals (+21%) and 12,900 tons of crude oil (-14.6%). 2 million tons of general cargoes was transshipped (+9.3%). Of that, there were 692,800 tons of timber (-8.4%), 603,100 tons of containerized cargo (+43.6%), and 483,700 tons of ro-ro cargo (+21.1%).
The leader among the Latvian ports was the port of Riga, which handled 6.19 million tons of cargo (+28.8%). The port of Ventspils takes second position (5.36 million tons, +31.2%), and the Liepaja port – the third position (1.02 million tons, +35.4%). In 2011, the throughput of Latvian ports amounted to 68.82 million tons (+12.5% in comparison with 2010).

No Application, No Rolling Stock
RZD has banned the dispatch of empty wagons to a station, if there is no adjusted application for cargo transportation, on the entire Russian railway network with the exception of the North-Caucasus Railway. 
Since February 1, the transporter started to carry out a respective order of the RF Transport Ministry on the territory of six railways – affiliates of RZD, where the company took control of the reception of empty railcars for transportation.
As the authors of the document suggested, the demanded adjusted application guarantees that the wagon is dispatched to a specific consignor and will participate in transportation instead of idling waiting for loading on station tracks in regions with a large transportation volume. Vladimir Yakunin, President of RZD, assured that these measures would improve the efficiency of transportation and the quality of services.
The rules targeting empty railcars were necessary to remove the accumulation of wagons on the railway tracks near large consignors – coal, metal, oil and mining companies.

Dollar Experiment
Since April 1, 2012, all calculations of prices for international transportation at the CIS Railways with the exception of Russian Railways will be done in US dollars, not in Swiss francs. 
The new rule will be in force till June 30, 2012 on the territory of the CIS railways. Representatives of the Administration of Tariff Policy of the CIS Railways said that this is an experiment. “Dollar and euro fluctuation significantly influences the financial result of RZD. Swiss franc is a more stable currency,” they said.
Not to make calculations complicated,  the coefficient of 0.93 was set for RZD to turn its rates in Swiss francs into those in US dollars. 

Regular Traffic Starts at Novaya Gavan
New Ro-Ro terminal Novaya Gavan at the port of Ust-Luga began accepting regular vessels traffic. These days terminal accepted vessels with Nissan, Infiniti and Mazda vehicles. The first stage area on the Terminal Novaya Gavan is planned to process at least 80,000 vehicles during 2012. This project sets new standards of services provided for OEMs and sets significant optimization of logistic solutions for the entire market.
The vessel Nordic Ace (flag of Bahamas, agent Inflot Worldwide Ferry Services) loaded with Mazda vehicles called at the berth number 1 of Terminal Novaya Gavan on 12 March 2012. The vessel arrived from the port of Zeebrugge (Belgium). 1,200 vehicles were unloaded in 8 hours and 40 minutes. 

Freight Transportation Volume of RZD Increased by 4.5% in January-February 2012
In January-February 2012, cargo transportation volume of RZD grew by 4.5% year-on-year to 222.9 million tons. 
Domestic transportation increased by 2.5% to 131.9 million tons, and international transportation grew by 7.6% to 91 million tons. Of that, 39.9 million tons was carried via sea ports (+14%), and 51.1 million tons – via border crossings (+3.1%), according to materials of RZD’s main computer centre.
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Private Railway Transporters to Appear in Russia in 2013
Private railway transporters will appear in Russia in 2013, when all problems with wagon parks control are solved. 
“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
By means of private transporters, the government plans to solve the problem of locomotives deterioration in the RF – it exceeds now 70%, and sometimes there is a lack of locomotives at  the most busy sections. According to market players, about $60-70 billion is needed to renew the wagon fleet in the next decade. For that, it was planned to liberalise this segment of the market sector allowing independent operators to work on local railway sections.
Meanwhile, the President of RZD Vladimir Yakunin said at the end of 2011 that he is against private transporters on railway lines in Russia. “We told the government that we are against any property on locomotives that run on the mainlines. We think that locomotives and infrastructure cannot be separated, and it is what RZD must be engaged in,” said the senior manager of RZD justifying his position by the necessity to provide safe and efficient work on railways.

Russia and Ukraine to Maintain Shipping Safety in Azov Sea
Russian Transport Minister Igor Levitin and his Ukrainian counterpart, Minister of Infrastructure Borys Kolesnikov, signed an agreement between the Government of the Russian Federation and the Government of Ukraine on measures to ensure safety of navigation in the Sea of Azov and the Kerch Strait. 
The two parties highlighted the importance of the Sea of Azov and the Kerch Strait for economic development of Russia and Ukraine, the need for harmonizing the actions and measures that promote safety of navigation in areas of heavy traffic in the Sea of Azov and the Kerch Strait.

Vadim Morozov Noted The Trend of Increases in Export Transportation via RF Ports
Summing up the results of RZD’s interaction with Russian sea ports in 2011 and at the beginning of 2012, Vadim Morozov, the First Vice President of RZD, noted the trend of a significant increase in the exports transportation via Russian ports. 
In the words of Mr Morozov, in 2011 loading volume of export cargoes grew by 6%, and in the first two months of 2012 the increase was 16%. Loading of export cargoes exceeded the pre-crisis level (2007) by 30% in the North-West basin, by 11% in the Southern basin, and by 82% in the Far Eastern basin.
The First Vice President of RZD emphasized that favourable conditions for Russian port development had been created. Therefore, in the opinion of Mr Morozov, the basic task is now to increase the efficiency of work of all participants in the transportation process. 
He noted that this year unloading at terminals has increased by 19% year-on-year, but it is provided by only 70% of ports’ capacity.
Thus, in the words of Mr Morozov, capacities allowing unloading 156,000 railcars are not being used. In 2012, 31,200 railcars loaded with export cargoes idle on railway tracks near ports waiting for unloading.

Ukrainian Transport Enterprises Reduced Cargo Transportation by 1.4%
In January-February 2012, Ukrainian transport enterprises cut the volume of cargo transportation by 1.4% in comparison with the same period of the previous year to 122.6 million tons, reports Ukrainian Statistics Service. 
In the first two months of the year, the cargo turnover reduced by 5.6% to 63.7 billion ton-kilometres.
Cargo transportation by railway fell by 1.2% in January-February 2012. Of that, cargo dispatch shrank by 2.6%.
Dispatches of chemical and chemical fertilizers increased by 9.3%, construction materials – by 6.1%, grain and flour – by 130%, coke – by 2.5%. At the same time, dispatches of ferrous metals fell by 2.2%, ferrous metal scrap – by 42.1%, timber – by 27.1%, coal – by 7.9%, oil and petrochemicals – by 7.7%, cement – by 10.5%, ferrous and manganese ore – by 4.9%.
Sea and river fleet of Ukraine reduced cargo transportation by 33.3% to 0.6 million tons. International transportation of cargo by water transport fell by 37.4%
The volume of cargo handled in commercial and fishing ports and at industrial berths (sea and river) reduced by 0.8% to 23.8 million tons. The throughput of domestic cargoes grew by 2.8%, that of export cargo increased by 21.3%. There was a decline in the throughput of imports (-7%) and transit (-28.6%).
Road transport enterprises (including transportation by individual entrepreneurs) transported 24.2 million tons of freight in January-February 2012, a 7.9% increase year-on-year. In this period, the cargo turnover of road carriers amounted to 5.3 billion ton-kilometres, 4.2% more than in the same period of 2011.
In the first two months of 2012, air transport carried 19,900 tons of freight, 60% more than in January-February 2011.

Latvian Ports: a 30% Increase in Throughput in January-February
In January-February 2012, the throughput of Latvian ports grew by 29.4% in comparison with the same period of 2011. It amounted to 12.79 million tons. 
In that period of time, the ports handled 6.11 million tons of bulk cargo (+46.1% year-on-year). Of that, 3.92 million tons of coal (+72.1%), 491,200 tons of chemicals (-32.5%), and 289,700 tons of wood chips (+40.8%) were handled.
Latvian ports handled 4.68 million tons of liquid bulk (+21%), including 4.53 million tons of petrochemicals (+21%) and 12,900 tons of crude oil (-14.6%). 2 million tons of general cargoes was transshipped (+9.3%). Of that, there were 692,800 tons of timber (-8.4%), 603,100 tons of containerized cargo (+43.6%), and 483,700 tons of ro-ro cargo (+21.1%).
The leader among the Latvian ports was the port of Riga, which handled 6.19 million tons of cargo (+28.8%). The port of Ventspils takes second position (5.36 million tons, +31.2%), and the Liepaja port – the third position (1.02 million tons, +35.4%). In 2011, the throughput of Latvian ports amounted to 68.82 million tons (+12.5% in comparison with 2010).

No Application, No Rolling Stock
RZD has banned the dispatch of empty wagons to a station, if there is no adjusted application for cargo transportation, on the entire Russian railway network with the exception of the North-Caucasus Railway. 
Since February 1, the transporter started to carry out a respective order of the RF Transport Ministry on the territory of six railways – affiliates of RZD, where the company took control of the reception of empty railcars for transportation.
As the authors of the document suggested, the demanded adjusted application guarantees that the wagon is dispatched to a specific consignor and will participate in transportation instead of idling waiting for loading on station tracks in regions with a large transportation volume. Vladimir Yakunin, President of RZD, assured that these measures would improve the efficiency of transportation and the quality of services.
The rules targeting empty railcars were necessary to remove the accumulation of wagons on the railway tracks near large consignors – coal, metal, oil and mining companies.

Dollar Experiment
Since April 1, 2012, all calculations of prices for international transportation at the CIS Railways with the exception of Russian Railways will be done in US dollars, not in Swiss francs. 
The new rule will be in force till June 30, 2012 on the territory of the CIS railways. Representatives of the Administration of Tariff Policy of the CIS Railways said that this is an experiment. “Dollar and euro fluctuation significantly influences the financial result of RZD. Swiss franc is a more stable currency,” they said.
Not to make calculations complicated,  the coefficient of 0.93 was set for RZD to turn its rates in Swiss francs into those in US dollars. 

Regular Traffic Starts at Novaya Gavan
New Ro-Ro terminal Novaya Gavan at the port of Ust-Luga began accepting regular vessels traffic. These days terminal accepted vessels with Nissan, Infiniti and Mazda vehicles. The first stage area on the Terminal Novaya Gavan is planned to process at least 80,000 vehicles during 2012. This project sets new standards of services provided for OEMs and sets significant optimization of logistic solutions for the entire market.
The vessel Nordic Ace (flag of Bahamas, agent Inflot Worldwide Ferry Services) loaded with Mazda vehicles called at the berth number 1 of Terminal Novaya Gavan on 12 March 2012. The vessel arrived from the port of Zeebrugge (Belgium). 1,200 vehicles were unloaded in 8 hours and 40 minutes. 

Freight Transportation Volume of RZD Increased by 4.5% in January-February 2012
In January-February 2012, cargo transportation volume of RZD grew by 4.5% year-on-year to 222.9 million tons. 
Domestic transportation increased by 2.5% to 131.9 million tons, and international transportation grew by 7.6% to 91 million tons. Of that, 39.9 million tons was carried via sea ports (+14%), and 51.1 million tons – via border crossings (+3.1%), according to materials of RZD’s main computer centre.
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“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
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“The technology of wagon parks control amid a multiplicity of operators is supposed to be worked out, and if it functions properly, private operators with their locomotives will come to the network,” said specialists of the RF Transport Ministry.
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    [DETAIL_TEXT] => – Mr Tashpulatov, does Railroad of Yakutia have enough locomotives to fulfill the tasks set, especially if we take into account last year’s events, when the “golden link” was laid at the Nizhny Bestyakh station? Thus, Railroad of Yakutia became connected with the Baikal-Amur and Trans-Siberian Mainlines – Russian railway lines joining the eastern and western parts of the country. In the near future the Railroad of Yakutia will face an increase in passenger and freight transportation.

– Today, the company has 16 multiple units of upgraded locomotives of 2TE10 model, 14 multiple units of TEM-2 model, including four upgraded diesel locomotives. In the long term, in 2014-2017, we are going to renew the fleet of mainline locomotives. 
Now, a priority is to upgrade the company’s shunting locomotives, the condition of which is not very good. This work is to be completed before the end of 2014. The company has already upgraded three locomotives of TEM-2 model, and completed the capital repair of two diesel locomotives. The amount of work will be practically the same this year.

– As far as we know, the Railroad of Yakutia has ordered the development of a new mainline locomotive for work in the North. Could you talk about it?

– Naturally, new lines put into operation extend the length of railway sections and the distance of transportation. On the whole, we are ready to service these sections, but if the transportation volume grows, it will be necessary to expand the park of diesel locomotives.
Starting from 2014, in the framework of the programme of mainline locomotives renewal, TE-8 locomotives are to be supplied to the Railroad of Yakutia. These locomotives are developed by Sinara – Transport Machines in cooperation with General Electric. One of our priorities has always been and will be usage of reliable machinery, the designers of which took into account the climatic peculiarities of the Sakha Republic (Yakutia). Some characteristics of this locomotive are similar to those of its equivalents, and others are even better.
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We will choose the equipment for the locomotive after it is tested on the Railroad of Yakutia in summer and in winter. Thus, we will have the basis and will be able to formulate the technical specifications of a new diesel locomotive designed specially for Yakutia.
According to a preliminary agreement, 12 locomotives of the new series TE-8 are to be delivered to the Railroad of Yakutia before the end of 2017. They must become the flagship of the locomotive park of the Railroad of Yakutia.  
Interviewed by Nadezhda Vtorushina     
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– Today, the company has 16 multiple units of upgraded locomotives of 2TE10 model, 14 multiple units of TEM-2 model, including four upgraded diesel locomotives. In the long term, in 2014-2017, we are going to renew the fleet of mainline locomotives. 
Now, a priority is to upgrade the company’s shunting locomotives, the condition of which is not very good. This work is to be completed before the end of 2014. The company has already upgraded three locomotives of TEM-2 model, and completed the capital repair of two diesel locomotives. The amount of work will be practically the same this year.

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– Naturally, new lines put into operation extend the length of railway sections and the distance of transportation. On the whole, we are ready to service these sections, but if the transportation volume grows, it will be necessary to expand the park of diesel locomotives.
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We will choose the equipment for the locomotive after it is tested on the Railroad of Yakutia in summer and in winter. Thus, we will have the basis and will be able to formulate the technical specifications of a new diesel locomotive designed specially for Yakutia.
According to a preliminary agreement, 12 locomotives of the new series TE-8 are to be delivered to the Railroad of Yakutia before the end of 2017. They must become the flagship of the locomotive park of the Railroad of Yakutia.  
Interviewed by Nadezhda Vtorushina     
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    [DETAIL_TEXT] => – Mr Tashpulatov, does Railroad of Yakutia have enough locomotives to fulfill the tasks set, especially if we take into account last year’s events, when the “golden link” was laid at the Nizhny Bestyakh station? Thus, Railroad of Yakutia became connected with the Baikal-Amur and Trans-Siberian Mainlines – Russian railway lines joining the eastern and western parts of the country. In the near future the Railroad of Yakutia will face an increase in passenger and freight transportation.

– Today, the company has 16 multiple units of upgraded locomotives of 2TE10 model, 14 multiple units of TEM-2 model, including four upgraded diesel locomotives. In the long term, in 2014-2017, we are going to renew the fleet of mainline locomotives. 
Now, a priority is to upgrade the company’s shunting locomotives, the condition of which is not very good. This work is to be completed before the end of 2014. The company has already upgraded three locomotives of TEM-2 model, and completed the capital repair of two diesel locomotives. The amount of work will be practically the same this year.

– As far as we know, the Railroad of Yakutia has ordered the development of a new mainline locomotive for work in the North. Could you talk about it?

– Naturally, new lines put into operation extend the length of railway sections and the distance of transportation. On the whole, we are ready to service these sections, but if the transportation volume grows, it will be necessary to expand the park of diesel locomotives.
Starting from 2014, in the framework of the programme of mainline locomotives renewal, TE-8 locomotives are to be supplied to the Railroad of Yakutia. These locomotives are developed by Sinara – Transport Machines in cooperation with General Electric. One of our priorities has always been and will be usage of reliable machinery, the designers of which took into account the climatic peculiarities of the Sakha Republic (Yakutia). Some characteristics of this locomotive are similar to those of its equivalents, and others are even better.
The main advantage of this diesel locomotive is the traction effort, declared by the engineering plant. It will be possible to install different diesel engines, including those with 12 or 16 cylinders, consequently, its capacity will change. Additional equipment may be installed in the diesel locomotives in accordance with the customer’s wish. The main characteristic of this machine is its reliability. 
We will choose the equipment for the locomotive after it is tested on the Railroad of Yakutia in summer and in winter. Thus, we will have the basis and will be able to formulate the technical specifications of a new diesel locomotive designed specially for Yakutia.
According to a preliminary agreement, 12 locomotives of the new series TE-8 are to be delivered to the Railroad of Yakutia before the end of 2017. They must become the flagship of the locomotive park of the Railroad of Yakutia.  
Interviewed by Nadezhda Vtorushina     
    [~DETAIL_TEXT] => – Mr Tashpulatov, does Railroad of Yakutia have enough locomotives to fulfill the tasks set, especially if we take into account last year’s events, when the “golden link” was laid at the Nizhny Bestyakh station? Thus, Railroad of Yakutia became connected with the Baikal-Amur and Trans-Siberian Mainlines – Russian railway lines joining the eastern and western parts of the country. In the near future the Railroad of Yakutia will face an increase in passenger and freight transportation.

– Today, the company has 16 multiple units of upgraded locomotives of 2TE10 model, 14 multiple units of TEM-2 model, including four upgraded diesel locomotives. In the long term, in 2014-2017, we are going to renew the fleet of mainline locomotives. 
Now, a priority is to upgrade the company’s shunting locomotives, the condition of which is not very good. This work is to be completed before the end of 2014. The company has already upgraded three locomotives of TEM-2 model, and completed the capital repair of two diesel locomotives. The amount of work will be practically the same this year.

– As far as we know, the Railroad of Yakutia has ordered the development of a new mainline locomotive for work in the North. Could you talk about it?

– Naturally, new lines put into operation extend the length of railway sections and the distance of transportation. On the whole, we are ready to service these sections, but if the transportation volume grows, it will be necessary to expand the park of diesel locomotives.
Starting from 2014, in the framework of the programme of mainline locomotives renewal, TE-8 locomotives are to be supplied to the Railroad of Yakutia. These locomotives are developed by Sinara – Transport Machines in cooperation with General Electric. One of our priorities has always been and will be usage of reliable machinery, the designers of which took into account the climatic peculiarities of the Sakha Republic (Yakutia). Some characteristics of this locomotive are similar to those of its equivalents, and others are even better.
The main advantage of this diesel locomotive is the traction effort, declared by the engineering plant. It will be possible to install different diesel engines, including those with 12 or 16 cylinders, consequently, its capacity will change. Additional equipment may be installed in the diesel locomotives in accordance with the customer’s wish. The main characteristic of this machine is its reliability. 
We will choose the equipment for the locomotive after it is tested on the Railroad of Yakutia in summer and in winter. Thus, we will have the basis and will be able to formulate the technical specifications of a new diesel locomotive designed specially for Yakutia.
According to a preliminary agreement, 12 locomotives of the new series TE-8 are to be delivered to the Railroad of Yakutia before the end of 2017. They must become the flagship of the locomotive park of the Railroad of Yakutia.  
Interviewed by Nadezhda Vtorushina     
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Road Absurd
Construction of roads in Russia is full of paradoxes. In Saratov, it is planned to make six toll roads to avoid traffic jams. From what we can conclude  investors are directly interested in the existence of eternal traffic jams in the city. Even more ridiculous is the story of the road construction in Skolkovo, where before putting the road into operation  the auditors  found the deterioration of asphalt along the entire route, water leaks in the tunnel, the deformation of the bridge over the Setun river and the failure of the coating on a pedestrian crossing. 
So, the question of whether the introduction of  life cycle contracts will help attract private investors for the construction of highways, and whether such a sort of construction will become widespread  throughout the country, is rhetorical. The cost of  construction of quality highway is not comparable with the possible investment risks that are simply impossible to calculate for several decades ahead. 
According to Denis Patrin, Head of the Department of Concession Tenders and Legal Support for the Russian Car Roads State Company  (Russian Highways, or Avtodor), analysis of the road network that was sent to the management of Autodor shows that the concession is an interesting business  only in a limited number of regions where there are large metropolitan areas with intense traffic. Together with this the development of areas with a low level of infrastructure is required, because there is a great imbalance of transport accessibility between the regions in the country. For example, Valeriy Molosov, Deputy Director of Public Policy in the Field of Road Construction and Road Urban Transport of Ministry of Transport, cited the treatment of the residents of Vorkuta into the country’s president reception. The resident said: “I live in Vorkuta, I have a car, but in order to go on the road network of the Russian Federation, I have to put the car on a railway platform,  pay a certain sum for its carriage, for example, to Uhta, and only after that I am able to drive the car along a road”.
According to the statements of relevant officials, the roads in remote and under-populated areas will not appear soon. At the moment the priority is the highways that will connect the biggest cities. To build highways in Western Syberia is not economically appropriate, as the traffic flow there is very low. However, in regions where there is a demand for such highways, they do not reach the conditions of A1 category, where the estimated speed should be 150 kph.

New – Well Rebuilt Old
The first and so far only toll part of the M4 Don route (on the bypass of the Hlevnoe village of Lipetsk region), opened in December, 2010. Its length is 55 km, it has two lanes in each direction and the maximum permitted speed on this segment is 110 kph. The fare for cars is one ruble per kilometer, and for trucks two-four rubles per kilometer. It is planned to create 15 toll road sections along a  total length of about 700 kilometers, on the Don road till 2015  whereas the length of the entire road is 1,517 kilometers. According Mr Patrin, on the example of an already existing site it is planned to create an operator agreement for the management and charging. However, users of paid services indicate that there are no services, in fact.
Previously, the main purpose of the organization of toll roads, according to Aleksandr Burkov, State Duma Deputy, was the improvement of quality and safety, and most importantly, increasing the length of the road network by building new roads. ”We were convinced that due to the lack of budget funds for road construction we should involve private investment in this sector  in the framework of public-private partnership and only after that to use these routes on a fee basis,” he said.
The state company has been given unprecedented powers and rights in the disposal of state property and budget funds. As a result, says Mr Burkov, we got the first official highway toll section at the junction of the Lipetsk and Voronezh regions on the Don M-4 route. But there is no new road, in fact. “It is the old road, only with a repaired road surface, new lighting and installed rumble strips,” Mr Burkov clarifies. Officials say that only during the first day of the toll terminal work it has collected over 1 million rubles. Of course! Poor motorists simply have no choice. However, there is an alternative free road, which is narrower in several spots, and passes through towns and villages. But truck drivers say that if they drive country roads, they will be stuck there until the spring.”
In other words, public expense is expanding and improving  roads built during the Soviet era , which will then be gradually monopolized. In fact, the main idea - to attract private money to build new roads – turned out to be very veiled.

No PPP – No Investment
However, experts say that all the most important documents for the road sector have been approved: Federal law on the roads and road activities in the Russian Federation, standards of financial costs for the repair and maintenance of highways, Federal law on Concession Agreements, Transport Strategy of Russia up to 2030, Development of Transport System of Russia (2010 - 2015 years) Federal Target Program. However, Sergey Kelbakh, Chairman of Autodor, admitted that from the point of view of building of toll roads Russia is starting at the very beginning. According to Ilya Skripnikov, adviser of the Salans law firm, there is a great risk that “the very beginning” will last very long. “There is no single state policy in attitude to public-private partnership in our country, - the expert says. – Investors function in different ways. The law on concession relations is the only one that regulates the PPP at the federal level. In the short time it has been changed eight times, and now it is again being revised. “ As you know, 46 regions have adopted their own legislation on the PPP at the moment. But, according to experts, it is 90% empty papers that do not give any idea of the risks or any protection to investors, and there are no  provisions on the obligations and responsibilities of the parties.
According to Mr Skripnikov, all three blocks of the PPP are failing at the moment: infrastructure bonds and project financing have failed and the Regional Investment Fund does not exist in the legislation of the Russian Federation as a category. One reason for the weak investor interest in participating in projects of this kind is the special feature of the Russian legislation, in which ownership of the object of the concession agreement  always belongs to the state. In particular, according to the provisions of existing concession contracts, infrastructure facilities are being built and operated by a private investor during a certain period (30 years) and then transferred to the state. The construction of toll high speed section of Moscow - St. Petersburg (section 15-58) highway is built according to this scheme. The concessionaire is the North-West Concession Company. Another project is the construction of the bypass near the city of Odintsovo that is in the Moscow region (Minsk highway). It is 18.5 kilometers long and it is carried out by Main Road Consortium Company. After the construction these roads will become toll roads. 
Significantly, the largest foreign investors that are partly represented on the market in the form of joint ventures and subsidiaries, don’t demonstrate any activity in the joining of concession projects. For example, recently the subsidiary of the Vinci French construction conglomerate changed its mind about participating in the contest for managing the  Don M4 road section. Representatives of the company referred to the fact that they had no time to prepare the tender documentation.
“The return on investment should be guaranteed to the private investor. This is not a charity. The main question of the PPP system is risk sharing. There are a lot of them, and a lot of disputes about who will carry the risks will arise. But there is potential for funding. An example is the implementation of the concession project in Udmurtia, where the construction of the bridge involved the federal budget, the regional budget and the funds of private companies”, said Mr Skripnikov.
Perhaps a better experience is the PPP-based multi-functional areas of service for motor carriers and drivers. Avtodor plans to meet the basic amount of work on the roadside service development program of Russia by 2015. As Evgeniy Komardin, Head of the Road Service Department of Exploitation and Traffic Safety Section of the company, said that by this time a network of similar multi zones should be formed by 90%. Moreover, these facilities will be located  no more than 100 kilometers apart. “The construction will be carried out on the principles of attracting private capital, equal access for investors and with the obligatory participation of small business,” emphasize the representatives of Avtodor.
The last study of roadside service facilities, conducted by the company, indicates that business will have place to develop there, as there is  not enough infrastructure. Thus, about 40% of road service facilities on the Belarus M-1 road are not equipped with parking spaces. Only 15% of facilities have parking places for trucks, 37% have toilets (another 34% are equipped with pit toilets, there are no toilets at all in the rest of the facilities). The same can be said about Don M-4 road. 60% of facilities have no parking places, 81% have no parking places for trucks, there are no toilets in a third of facilities. Together with this it turned out that 10% of facilities located within the boundaries of roads and roadsides are not the objects of road service. They are  markets, warehouses, depots and offices.
But even here there are doubts about whether a business is interested enough to build hotels and mini hotels on every 100 kilometers of road, where a concentration of roadside service facilities will be not optimal and the quality of the roads will not meet cost-effective traffic. Here again is a paradox.
By Oksana Perepelitsa
    [~DETAIL_TEXT] => 
Road Absurd
Construction of roads in Russia is full of paradoxes. In Saratov, it is planned to make six toll roads to avoid traffic jams. From what we can conclude  investors are directly interested in the existence of eternal traffic jams in the city. Even more ridiculous is the story of the road construction in Skolkovo, where before putting the road into operation  the auditors  found the deterioration of asphalt along the entire route, water leaks in the tunnel, the deformation of the bridge over the Setun river and the failure of the coating on a pedestrian crossing. 
So, the question of whether the introduction of  life cycle contracts will help attract private investors for the construction of highways, and whether such a sort of construction will become widespread  throughout the country, is rhetorical. The cost of  construction of quality highway is not comparable with the possible investment risks that are simply impossible to calculate for several decades ahead. 
According to Denis Patrin, Head of the Department of Concession Tenders and Legal Support for the Russian Car Roads State Company  (Russian Highways, or Avtodor), analysis of the road network that was sent to the management of Autodor shows that the concession is an interesting business  only in a limited number of regions where there are large metropolitan areas with intense traffic. Together with this the development of areas with a low level of infrastructure is required, because there is a great imbalance of transport accessibility between the regions in the country. For example, Valeriy Molosov, Deputy Director of Public Policy in the Field of Road Construction and Road Urban Transport of Ministry of Transport, cited the treatment of the residents of Vorkuta into the country’s president reception. The resident said: “I live in Vorkuta, I have a car, but in order to go on the road network of the Russian Federation, I have to put the car on a railway platform,  pay a certain sum for its carriage, for example, to Uhta, and only after that I am able to drive the car along a road”.
According to the statements of relevant officials, the roads in remote and under-populated areas will not appear soon. At the moment the priority is the highways that will connect the biggest cities. To build highways in Western Syberia is not economically appropriate, as the traffic flow there is very low. However, in regions where there is a demand for such highways, they do not reach the conditions of A1 category, where the estimated speed should be 150 kph.

New – Well Rebuilt Old
The first and so far only toll part of the M4 Don route (on the bypass of the Hlevnoe village of Lipetsk region), opened in December, 2010. Its length is 55 km, it has two lanes in each direction and the maximum permitted speed on this segment is 110 kph. The fare for cars is one ruble per kilometer, and for trucks two-four rubles per kilometer. It is planned to create 15 toll road sections along a  total length of about 700 kilometers, on the Don road till 2015  whereas the length of the entire road is 1,517 kilometers. According Mr Patrin, on the example of an already existing site it is planned to create an operator agreement for the management and charging. However, users of paid services indicate that there are no services, in fact.
Previously, the main purpose of the organization of toll roads, according to Aleksandr Burkov, State Duma Deputy, was the improvement of quality and safety, and most importantly, increasing the length of the road network by building new roads. ”We were convinced that due to the lack of budget funds for road construction we should involve private investment in this sector  in the framework of public-private partnership and only after that to use these routes on a fee basis,” he said.
The state company has been given unprecedented powers and rights in the disposal of state property and budget funds. As a result, says Mr Burkov, we got the first official highway toll section at the junction of the Lipetsk and Voronezh regions on the Don M-4 route. But there is no new road, in fact. “It is the old road, only with a repaired road surface, new lighting and installed rumble strips,” Mr Burkov clarifies. Officials say that only during the first day of the toll terminal work it has collected over 1 million rubles. Of course! Poor motorists simply have no choice. However, there is an alternative free road, which is narrower in several spots, and passes through towns and villages. But truck drivers say that if they drive country roads, they will be stuck there until the spring.”
In other words, public expense is expanding and improving  roads built during the Soviet era , which will then be gradually monopolized. In fact, the main idea - to attract private money to build new roads – turned out to be very veiled.

No PPP – No Investment
However, experts say that all the most important documents for the road sector have been approved: Federal law on the roads and road activities in the Russian Federation, standards of financial costs for the repair and maintenance of highways, Federal law on Concession Agreements, Transport Strategy of Russia up to 2030, Development of Transport System of Russia (2010 - 2015 years) Federal Target Program. However, Sergey Kelbakh, Chairman of Autodor, admitted that from the point of view of building of toll roads Russia is starting at the very beginning. According to Ilya Skripnikov, adviser of the Salans law firm, there is a great risk that “the very beginning” will last very long. “There is no single state policy in attitude to public-private partnership in our country, - the expert says. – Investors function in different ways. The law on concession relations is the only one that regulates the PPP at the federal level. In the short time it has been changed eight times, and now it is again being revised. “ As you know, 46 regions have adopted their own legislation on the PPP at the moment. But, according to experts, it is 90% empty papers that do not give any idea of the risks or any protection to investors, and there are no  provisions on the obligations and responsibilities of the parties.
According to Mr Skripnikov, all three blocks of the PPP are failing at the moment: infrastructure bonds and project financing have failed and the Regional Investment Fund does not exist in the legislation of the Russian Federation as a category. One reason for the weak investor interest in participating in projects of this kind is the special feature of the Russian legislation, in which ownership of the object of the concession agreement  always belongs to the state. In particular, according to the provisions of existing concession contracts, infrastructure facilities are being built and operated by a private investor during a certain period (30 years) and then transferred to the state. The construction of toll high speed section of Moscow - St. Petersburg (section 15-58) highway is built according to this scheme. The concessionaire is the North-West Concession Company. Another project is the construction of the bypass near the city of Odintsovo that is in the Moscow region (Minsk highway). It is 18.5 kilometers long and it is carried out by Main Road Consortium Company. After the construction these roads will become toll roads. 
Significantly, the largest foreign investors that are partly represented on the market in the form of joint ventures and subsidiaries, don’t demonstrate any activity in the joining of concession projects. For example, recently the subsidiary of the Vinci French construction conglomerate changed its mind about participating in the contest for managing the  Don M4 road section. Representatives of the company referred to the fact that they had no time to prepare the tender documentation.
“The return on investment should be guaranteed to the private investor. This is not a charity. The main question of the PPP system is risk sharing. There are a lot of them, and a lot of disputes about who will carry the risks will arise. But there is potential for funding. An example is the implementation of the concession project in Udmurtia, where the construction of the bridge involved the federal budget, the regional budget and the funds of private companies”, said Mr Skripnikov.
Perhaps a better experience is the PPP-based multi-functional areas of service for motor carriers and drivers. Avtodor plans to meet the basic amount of work on the roadside service development program of Russia by 2015. As Evgeniy Komardin, Head of the Road Service Department of Exploitation and Traffic Safety Section of the company, said that by this time a network of similar multi zones should be formed by 90%. Moreover, these facilities will be located  no more than 100 kilometers apart. “The construction will be carried out on the principles of attracting private capital, equal access for investors and with the obligatory participation of small business,” emphasize the representatives of Avtodor.
The last study of roadside service facilities, conducted by the company, indicates that business will have place to develop there, as there is  not enough infrastructure. Thus, about 40% of road service facilities on the Belarus M-1 road are not equipped with parking spaces. Only 15% of facilities have parking places for trucks, 37% have toilets (another 34% are equipped with pit toilets, there are no toilets at all in the rest of the facilities). The same can be said about Don M-4 road. 60% of facilities have no parking places, 81% have no parking places for trucks, there are no toilets in a third of facilities. Together with this it turned out that 10% of facilities located within the boundaries of roads and roadsides are not the objects of road service. They are  markets, warehouses, depots and offices.
But even here there are doubts about whether a business is interested enough to build hotels and mini hotels on every 100 kilometers of road, where a concentration of roadside service facilities will be not optimal and the quality of the roads will not meet cost-effective traffic. Here again is a paradox.
By Oksana Perepelitsa
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            [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/2/7.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />Previously, the basic legal and regulatory provisions in the field of road construction were made in order to attract extra-budgetary resources to the creation of toll roads and roadside services. However, the proposed models of public-private partnerships have not attracted potential investors. <br />There are few projects, and in addition some of them are being implemented using previously created infrastructure.
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    [DETAIL_TEXT] => 
Road Absurd
Construction of roads in Russia is full of paradoxes. In Saratov, it is planned to make six toll roads to avoid traffic jams. From what we can conclude  investors are directly interested in the existence of eternal traffic jams in the city. Even more ridiculous is the story of the road construction in Skolkovo, where before putting the road into operation  the auditors  found the deterioration of asphalt along the entire route, water leaks in the tunnel, the deformation of the bridge over the Setun river and the failure of the coating on a pedestrian crossing. 
So, the question of whether the introduction of  life cycle contracts will help attract private investors for the construction of highways, and whether such a sort of construction will become widespread  throughout the country, is rhetorical. The cost of  construction of quality highway is not comparable with the possible investment risks that are simply impossible to calculate for several decades ahead. 
According to Denis Patrin, Head of the Department of Concession Tenders and Legal Support for the Russian Car Roads State Company  (Russian Highways, or Avtodor), analysis of the road network that was sent to the management of Autodor shows that the concession is an interesting business  only in a limited number of regions where there are large metropolitan areas with intense traffic. Together with this the development of areas with a low level of infrastructure is required, because there is a great imbalance of transport accessibility between the regions in the country. For example, Valeriy Molosov, Deputy Director of Public Policy in the Field of Road Construction and Road Urban Transport of Ministry of Transport, cited the treatment of the residents of Vorkuta into the country’s president reception. The resident said: “I live in Vorkuta, I have a car, but in order to go on the road network of the Russian Federation, I have to put the car on a railway platform,  pay a certain sum for its carriage, for example, to Uhta, and only after that I am able to drive the car along a road”.
According to the statements of relevant officials, the roads in remote and under-populated areas will not appear soon. At the moment the priority is the highways that will connect the biggest cities. To build highways in Western Syberia is not economically appropriate, as the traffic flow there is very low. However, in regions where there is a demand for such highways, they do not reach the conditions of A1 category, where the estimated speed should be 150 kph.

New – Well Rebuilt Old
The first and so far only toll part of the M4 Don route (on the bypass of the Hlevnoe village of Lipetsk region), opened in December, 2010. Its length is 55 km, it has two lanes in each direction and the maximum permitted speed on this segment is 110 kph. The fare for cars is one ruble per kilometer, and for trucks two-four rubles per kilometer. It is planned to create 15 toll road sections along a  total length of about 700 kilometers, on the Don road till 2015  whereas the length of the entire road is 1,517 kilometers. According Mr Patrin, on the example of an already existing site it is planned to create an operator agreement for the management and charging. However, users of paid services indicate that there are no services, in fact.
Previously, the main purpose of the organization of toll roads, according to Aleksandr Burkov, State Duma Deputy, was the improvement of quality and safety, and most importantly, increasing the length of the road network by building new roads. ”We were convinced that due to the lack of budget funds for road construction we should involve private investment in this sector  in the framework of public-private partnership and only after that to use these routes on a fee basis,” he said.
The state company has been given unprecedented powers and rights in the disposal of state property and budget funds. As a result, says Mr Burkov, we got the first official highway toll section at the junction of the Lipetsk and Voronezh regions on the Don M-4 route. But there is no new road, in fact. “It is the old road, only with a repaired road surface, new lighting and installed rumble strips,” Mr Burkov clarifies. Officials say that only during the first day of the toll terminal work it has collected over 1 million rubles. Of course! Poor motorists simply have no choice. However, there is an alternative free road, which is narrower in several spots, and passes through towns and villages. But truck drivers say that if they drive country roads, they will be stuck there until the spring.”
In other words, public expense is expanding and improving  roads built during the Soviet era , which will then be gradually monopolized. In fact, the main idea - to attract private money to build new roads – turned out to be very veiled.

No PPP – No Investment
However, experts say that all the most important documents for the road sector have been approved: Federal law on the roads and road activities in the Russian Federation, standards of financial costs for the repair and maintenance of highways, Federal law on Concession Agreements, Transport Strategy of Russia up to 2030, Development of Transport System of Russia (2010 - 2015 years) Federal Target Program. However, Sergey Kelbakh, Chairman of Autodor, admitted that from the point of view of building of toll roads Russia is starting at the very beginning. According to Ilya Skripnikov, adviser of the Salans law firm, there is a great risk that “the very beginning” will last very long. “There is no single state policy in attitude to public-private partnership in our country, - the expert says. – Investors function in different ways. The law on concession relations is the only one that regulates the PPP at the federal level. In the short time it has been changed eight times, and now it is again being revised. “ As you know, 46 regions have adopted their own legislation on the PPP at the moment. But, according to experts, it is 90% empty papers that do not give any idea of the risks or any protection to investors, and there are no  provisions on the obligations and responsibilities of the parties.
According to Mr Skripnikov, all three blocks of the PPP are failing at the moment: infrastructure bonds and project financing have failed and the Regional Investment Fund does not exist in the legislation of the Russian Federation as a category. One reason for the weak investor interest in participating in projects of this kind is the special feature of the Russian legislation, in which ownership of the object of the concession agreement  always belongs to the state. In particular, according to the provisions of existing concession contracts, infrastructure facilities are being built and operated by a private investor during a certain period (30 years) and then transferred to the state. The construction of toll high speed section of Moscow - St. Petersburg (section 15-58) highway is built according to this scheme. The concessionaire is the North-West Concession Company. Another project is the construction of the bypass near the city of Odintsovo that is in the Moscow region (Minsk highway). It is 18.5 kilometers long and it is carried out by Main Road Consortium Company. After the construction these roads will become toll roads. 
Significantly, the largest foreign investors that are partly represented on the market in the form of joint ventures and subsidiaries, don’t demonstrate any activity in the joining of concession projects. For example, recently the subsidiary of the Vinci French construction conglomerate changed its mind about participating in the contest for managing the  Don M4 road section. Representatives of the company referred to the fact that they had no time to prepare the tender documentation.
“The return on investment should be guaranteed to the private investor. This is not a charity. The main question of the PPP system is risk sharing. There are a lot of them, and a lot of disputes about who will carry the risks will arise. But there is potential for funding. An example is the implementation of the concession project in Udmurtia, where the construction of the bridge involved the federal budget, the regional budget and the funds of private companies”, said Mr Skripnikov.
Perhaps a better experience is the PPP-based multi-functional areas of service for motor carriers and drivers. Avtodor plans to meet the basic amount of work on the roadside service development program of Russia by 2015. As Evgeniy Komardin, Head of the Road Service Department of Exploitation and Traffic Safety Section of the company, said that by this time a network of similar multi zones should be formed by 90%. Moreover, these facilities will be located  no more than 100 kilometers apart. “The construction will be carried out on the principles of attracting private capital, equal access for investors and with the obligatory participation of small business,” emphasize the representatives of Avtodor.
The last study of roadside service facilities, conducted by the company, indicates that business will have place to develop there, as there is  not enough infrastructure. Thus, about 40% of road service facilities on the Belarus M-1 road are not equipped with parking spaces. Only 15% of facilities have parking places for trucks, 37% have toilets (another 34% are equipped with pit toilets, there are no toilets at all in the rest of the facilities). The same can be said about Don M-4 road. 60% of facilities have no parking places, 81% have no parking places for trucks, there are no toilets in a third of facilities. Together with this it turned out that 10% of facilities located within the boundaries of roads and roadsides are not the objects of road service. They are  markets, warehouses, depots and offices.
But even here there are doubts about whether a business is interested enough to build hotels and mini hotels on every 100 kilometers of road, where a concentration of roadside service facilities will be not optimal and the quality of the roads will not meet cost-effective traffic. Here again is a paradox.
By Oksana Perepelitsa
    [~DETAIL_TEXT] => 
Road Absurd
Construction of roads in Russia is full of paradoxes. In Saratov, it is planned to make six toll roads to avoid traffic jams. From what we can conclude  investors are directly interested in the existence of eternal traffic jams in the city. Even more ridiculous is the story of the road construction in Skolkovo, where before putting the road into operation  the auditors  found the deterioration of asphalt along the entire route, water leaks in the tunnel, the deformation of the bridge over the Setun river and the failure of the coating on a pedestrian crossing. 
So, the question of whether the introduction of  life cycle contracts will help attract private investors for the construction of highways, and whether such a sort of construction will become widespread  throughout the country, is rhetorical. The cost of  construction of quality highway is not comparable with the possible investment risks that are simply impossible to calculate for several decades ahead. 
According to Denis Patrin, Head of the Department of Concession Tenders and Legal Support for the Russian Car Roads State Company  (Russian Highways, or Avtodor), analysis of the road network that was sent to the management of Autodor shows that the concession is an interesting business  only in a limited number of regions where there are large metropolitan areas with intense traffic. Together with this the development of areas with a low level of infrastructure is required, because there is a great imbalance of transport accessibility between the regions in the country. For example, Valeriy Molosov, Deputy Director of Public Policy in the Field of Road Construction and Road Urban Transport of Ministry of Transport, cited the treatment of the residents of Vorkuta into the country’s president reception. The resident said: “I live in Vorkuta, I have a car, but in order to go on the road network of the Russian Federation, I have to put the car on a railway platform,  pay a certain sum for its carriage, for example, to Uhta, and only after that I am able to drive the car along a road”.
According to the statements of relevant officials, the roads in remote and under-populated areas will not appear soon. At the moment the priority is the highways that will connect the biggest cities. To build highways in Western Syberia is not economically appropriate, as the traffic flow there is very low. However, in regions where there is a demand for such highways, they do not reach the conditions of A1 category, where the estimated speed should be 150 kph.

New – Well Rebuilt Old
The first and so far only toll part of the M4 Don route (on the bypass of the Hlevnoe village of Lipetsk region), opened in December, 2010. Its length is 55 km, it has two lanes in each direction and the maximum permitted speed on this segment is 110 kph. The fare for cars is one ruble per kilometer, and for trucks two-four rubles per kilometer. It is planned to create 15 toll road sections along a  total length of about 700 kilometers, on the Don road till 2015  whereas the length of the entire road is 1,517 kilometers. According Mr Patrin, on the example of an already existing site it is planned to create an operator agreement for the management and charging. However, users of paid services indicate that there are no services, in fact.
Previously, the main purpose of the organization of toll roads, according to Aleksandr Burkov, State Duma Deputy, was the improvement of quality and safety, and most importantly, increasing the length of the road network by building new roads. ”We were convinced that due to the lack of budget funds for road construction we should involve private investment in this sector  in the framework of public-private partnership and only after that to use these routes on a fee basis,” he said.
The state company has been given unprecedented powers and rights in the disposal of state property and budget funds. As a result, says Mr Burkov, we got the first official highway toll section at the junction of the Lipetsk and Voronezh regions on the Don M-4 route. But there is no new road, in fact. “It is the old road, only with a repaired road surface, new lighting and installed rumble strips,” Mr Burkov clarifies. Officials say that only during the first day of the toll terminal work it has collected over 1 million rubles. Of course! Poor motorists simply have no choice. However, there is an alternative free road, which is narrower in several spots, and passes through towns and villages. But truck drivers say that if they drive country roads, they will be stuck there until the spring.”
In other words, public expense is expanding and improving  roads built during the Soviet era , which will then be gradually monopolized. In fact, the main idea - to attract private money to build new roads – turned out to be very veiled.

No PPP – No Investment
However, experts say that all the most important documents for the road sector have been approved: Federal law on the roads and road activities in the Russian Federation, standards of financial costs for the repair and maintenance of highways, Federal law on Concession Agreements, Transport Strategy of Russia up to 2030, Development of Transport System of Russia (2010 - 2015 years) Federal Target Program. However, Sergey Kelbakh, Chairman of Autodor, admitted that from the point of view of building of toll roads Russia is starting at the very beginning. According to Ilya Skripnikov, adviser of the Salans law firm, there is a great risk that “the very beginning” will last very long. “There is no single state policy in attitude to public-private partnership in our country, - the expert says. – Investors function in different ways. The law on concession relations is the only one that regulates the PPP at the federal level. In the short time it has been changed eight times, and now it is again being revised. “ As you know, 46 regions have adopted their own legislation on the PPP at the moment. But, according to experts, it is 90% empty papers that do not give any idea of the risks or any protection to investors, and there are no  provisions on the obligations and responsibilities of the parties.
According to Mr Skripnikov, all three blocks of the PPP are failing at the moment: infrastructure bonds and project financing have failed and the Regional Investment Fund does not exist in the legislation of the Russian Federation as a category. One reason for the weak investor interest in participating in projects of this kind is the special feature of the Russian legislation, in which ownership of the object of the concession agreement  always belongs to the state. In particular, according to the provisions of existing concession contracts, infrastructure facilities are being built and operated by a private investor during a certain period (30 years) and then transferred to the state. The construction of toll high speed section of Moscow - St. Petersburg (section 15-58) highway is built according to this scheme. The concessionaire is the North-West Concession Company. Another project is the construction of the bypass near the city of Odintsovo that is in the Moscow region (Minsk highway). It is 18.5 kilometers long and it is carried out by Main Road Consortium Company. After the construction these roads will become toll roads. 
Significantly, the largest foreign investors that are partly represented on the market in the form of joint ventures and subsidiaries, don’t demonstrate any activity in the joining of concession projects. For example, recently the subsidiary of the Vinci French construction conglomerate changed its mind about participating in the contest for managing the  Don M4 road section. Representatives of the company referred to the fact that they had no time to prepare the tender documentation.
“The return on investment should be guaranteed to the private investor. This is not a charity. The main question of the PPP system is risk sharing. There are a lot of them, and a lot of disputes about who will carry the risks will arise. But there is potential for funding. An example is the implementation of the concession project in Udmurtia, where the construction of the bridge involved the federal budget, the regional budget and the funds of private companies”, said Mr Skripnikov.
Perhaps a better experience is the PPP-based multi-functional areas of service for motor carriers and drivers. Avtodor plans to meet the basic amount of work on the roadside service development program of Russia by 2015. As Evgeniy Komardin, Head of the Road Service Department of Exploitation and Traffic Safety Section of the company, said that by this time a network of similar multi zones should be formed by 90%. Moreover, these facilities will be located  no more than 100 kilometers apart. “The construction will be carried out on the principles of attracting private capital, equal access for investors and with the obligatory participation of small business,” emphasize the representatives of Avtodor.
The last study of roadside service facilities, conducted by the company, indicates that business will have place to develop there, as there is  not enough infrastructure. Thus, about 40% of road service facilities on the Belarus M-1 road are not equipped with parking spaces. Only 15% of facilities have parking places for trucks, 37% have toilets (another 34% are equipped with pit toilets, there are no toilets at all in the rest of the facilities). The same can be said about Don M-4 road. 60% of facilities have no parking places, 81% have no parking places for trucks, there are no toilets in a third of facilities. Together with this it turned out that 10% of facilities located within the boundaries of roads and roadsides are not the objects of road service. They are  markets, warehouses, depots and offices.
But even here there are doubts about whether a business is interested enough to build hotels and mini hotels on every 100 kilometers of road, where a concentration of roadside service facilities will be not optimal and the quality of the roads will not meet cost-effective traffic. Here again is a paradox.
By Oksana Perepelitsa
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Territorial Development Falls Behind the Economic One
The present-day layout of the railway network meets the modern demands of its consumers less and less. The past two decades saw dramatic change not only in almost all forms of economic activity, but also on the industrial map of the country. New industrial and raw material clusters appeared, the world market situation changed significantly. The potential of some old producing centres reduced; cooperation ties between industrial enterprises inside Russia and between Russian and foreign companies changed; the number of export goods increased, primary products and materials supplies from foreign states grew.
At the same time, the railway infrastructure did not change geographically. Just its carrying capacity increased in some directions. Specialists note that such conservation of the mainline network layout acts as a brake on the Russian economy. Recently, railway transport has significantly limited the further growth in cargo owners’ transportation volume depending on the transportation directions. Infrastructure capacity is almost exhausted in the direction of the Far East. The capacity of intensively developing ports of Vanino and Sovetskaya Gavan will exceed the capacity of railway access to these harbours two- or even three-fold in several years. 
In the peak periods of cargo transportation or unfavourable weather conditions, there are traffic jams on the railway approaches to the Far Eastern ports. A similar situation will take place if a part of cargo is re-directed to the southern ports of Russia or to Murmansk, because the capacity of these harbours and railway access to them is limited.   
According to the Transport Ministry, railway infrastructure deterioration amounted to 49% at the beginning of 2011. RUR 2.6 trillion has been spent on its maintenance since 2003. “Nowadays, the source of investments is the railway tariff regulated by the state. That is why there has appeared a significant shortage of funds in the investment programme,” recognizes Igor Levitin, Russian Transport Minister. According to the Ministry, the length of unrepaired railway sections was approximately 20,500 kilometres at the end of 2011 (16.5% of the total length of the network). If the financing of planned track maintenance and repair works in 2012-2015 remains at the level of 2011, the length of sections, where repair is needed, will increase to 22,000 kilometres in early 2013, and to 26,000 kilometres at the beginning of 2016.  
The share of overhead wiring that has exhausted its life time constantly increases. The life time of more than 50% of exploited overhead wiring at electrified lines with high traffic intensity is exceeded by more than 40 years. The share of track switches with an expired life time is over 20%. Despite a larger capital intensity of infrastructure complex and locomotive fleet in comparison with cargo railcars, their share in investments in railways is less than 65%. There are enough locomotives now to provide the existing and forecasted transportation volume. However, it is necessary to replace out-of-date locomotives and those with an exhausted life time by up-to-date efficient machines. There are over 20,000 locomotives of various types in the inventory park of Russian Railways. Their average age is 20-25 years. In 2004-2010, the share of mainline diesel locomotives with an exhausted life time grew by 87%, that of shunting locomotives increased by 50%. As a result, about 13% of electric locomotives, 20% of mainline and 30% of shunting diesel locomotives exhausted their resources. To restore the fleet, it is necessary to buy up to 800 units per annum (only 300 units have been bought annually in recent years).

Sectoral Priorities
The total volume of the company’s 2012-2014 investment budget is forecasted to reach RUR 1.1 trillion. Of that, RUR 428.4 billion is to be invested in 2012 (own projects – RUR 353.5 billion); RUR 341.9 billion – in 2013 (own projects – 100%), and RUR 367.6 billion in 2014 (own projects – 100%). The 2012 investment budget has increased by RUR 16.8 billion because some funds were transferred from 2011.
The decision on the state support for RZD (RUR 40 billion regarding indexation of railway tariffs by 6% since January 1, 2012) will allow to start to carry out a number of innovative projects. The company plans to increase the speed of passenger transportation between Moscow and Adler before 2014, and between Rostov and Krasnodar before 2015; to carry out a joint project of Siemens AG and Sinara to supply and localize high-speed electric trains manufacture; to speed up development of infrastructure in the South and Far East of Russia; to organize intermodal transportation between the Kazan railway station and the Kazan international airport. Due to extension of the track facilities repair programme to 10,400 kilometres, the company will reduce the number of unrepaired kilometers of tracks for the first time in recent years. Also, almost 400 locomotives and 460 units of electric multiple stock will be purchased.
The 2012-2014 financial plan of RZD is formed considering the current instability and high volatility in the world financial and commodities markets. The planned increase in the loading volume is 3% per annum. The revenue from basic activity is to grow by 3% on average, but the rate of increase  in company expenses is to be optimized and reduced. 
Most part of the programme is to be financed from RZD’s own funds and by means of state support in the form of target share capital payments. About RUR 100 billion is to be received via external loans.  
The basic priorities in 2012 are realization of state programmes in terms of railway infrastructure preparation for the winter Olympics in 2014, World Student Games in 2013, and the APEC summit in Vladivostok in 2012. Approximately RUR 75 billion is to be spent on reaching the target. The most important aspects of work are transport safety (approximately RUR 66.5 billion) and carrying out the projects targeted at removal of infrastructure limitations (about RUR 210 billion). Infrastructure projects aimed at tackling bottle-necks envisage increases in the carrying capacity on lines to Russian major ports and making transport more available to people.
In 2012, realization of the following large investment projects will continue:
• reconstruction of the Mga – Gatchina – Veimarn – Ivangorod railway section and railway accesses to the ports on the southern coast of the Finnish Gulf;   
• reconstruction of the Komsomolsk-on-Amur – Sovetskaya Gavan railway section and construction of new Kuznetsovsky tunnel;
• reconstruction of the M. Gorky – Kotelnikovo – Tikhoretskaya – Krymskaya section with a bypass around the Krasnodar node;
• development of Moscow transport hub;
• construction of additional main track on the Moscow – Kryukovo section. 
In the words of Yury Saakyan, CEO of Institute of Natural Monopolies’ Problems, the volume of investments in the railway sector is now 28.5%-37.5% smaller than that in other natural monopoly sectors of the country’s economy. According to the Federal Statistics Service, in 2010 investments of RZD were 78% less than those of mining industries, 77% less than investments of processing industries, and 67% less than those of power, heat, and water production and supply. Thus, the share of RZD in the total volume of all investments in basic assets made in the RF economy in 2010 was 3.22%. We will give only one example: in 2011 investments in the RF transport system amounted to RUR 2.3 trillion. Of that, RUR 950 billion was invested in the pipelines, and RUR 700 billion – in electricity supply network facilities. Judging by the recent criticism from the state authorities, the efficiency of these investments is at least not obvious.
The lack of investment in railway infrastructure carrying capacity restrains investment in the mining and processing sectors. It would be quite logical to expect that respective companies would take part in upgrading railway infrastructure. However, there are few market participants interested in increasing the volume of infrastructure project financing. Among them are production and services suppliers, especially representatives of railway engineering. Their interest in the increase of RZD’s investment programme is obvious – this will create a large and long-term order from their basic customer. In the words of Mr Saakyan, suppliers of the second level (components for manufacturing final products for railways) are interested to a lesser degree, because of diversification of their order portfolio, where the railways’ share does not prevail. 
The next group of beneficiaries of the increase in RZD’s investment programme are consignors. Production processes in some industries, particularly in coal industry, envisage non-alternative and mass use of railway transport. According to some evaluations, infrastructure limitations caused by insufficient funding for the projects of RZD will lead to respective insufficient funding for coal sector (by $15 million less, which can be compared with RZD’s need for investments in railway infrastructure development).
Nevertheless, the state is interested in the increase in RZD’s investment projects funding most of all, because it receives a multiplier effect in industrial and social sectors. Most products purchased in the framework of RZD’s investment programme are made by Russian enterprises. According to the Ministry of Economic Development, 36.5% of RZD’s 2011 programme returns to the budget in the form of taxes. Also, we should take into account additional tax receipts from consignors who will be able to expand their producing capacities. Its growth by 10 million tons only in the coal sector will provide additional tax receipts of at least RUR 3.5-3.7 billion per annum.

Programme of Programmes Coordination
In the opinion of experts, the existing programmes of railway sector development (such as the Strategy of Railway Transport Development in Russia to 2030 and the federal programme Transport System Development in 2010-2015) are not justified by sufficient financing sources. They do not define the conditions of private investment returns, there is a lack of principles for forming a transparent long-term tariff policy for investors – cargo owners. Moreover, they were adopted regardless of decisions on transport services supply during the 2018 FIFA World Cup. According to preliminary estimations of IERT, RUR 834.5 billion (approximately RUR 782 billion if the rolling stock is not taken into account ) is needed to reconstruct and build railway facilities for fast and high-speed transportation on the RF railway network during the 2018 FIFA World Cup. Works to register territorial and legal relations, to hold engineering and technical researches, to form preliminary permission and design and estimate documentation for infrastructure facilities will cost another RUR 70 billion according to estimates of Alexey Tikhonov, Head of Capital Construction Department of RZD. Thus, the customer and project institutes must fulfill works for the average sum of RUR 28 billion per annum. Consequently, the total costs of construction works will amount to about RUR 715 billion. Their annual fulfillment by contractual building companies must cost about RUR 160 billion on average.  
According to initial calculations, made in the framework of the Concept of Modernisation of the Existing Railway Infrastructure to Organise Transport Services for Passengers during the 2018 FIFA World Cup, total investment in the launch of passenger transportation on the special high-speed mainlines are estimated at RUR 2.6 trillion, and total need for funds to carry out the Concept may exceed RUR 3.4 trillion. The mentioned investments are considered additional in relation to projects to be carried out, including those envisaged by approved sectoral programmes of preparation to hold the Olympic Games in Sochi in 2014, World Student Games in Kazan in 2013, General Scheme of Moscow Railway Node Development, and Programme of Railway Stations Development.
Even authors of the new draft state programme “Transport System Development to 2019” recognize that the document does not envisage funds to organize passenger transport services during the 2018 FIFA World Cup. In the words of Elena Myasoedova, CEO of autonomous non-commercial organization Centre of Transport Complex Control Strategy and Improvement, the need for the new state programme emerged in the framework of forming the federal budget on the basis of programme-target principle and integration of the statements of the Concept of Long-Term Social and Economic Development of the RF to 2020, the RF Transport Strategy to 2030, and a number of federal target programmes. 
The budget of the state programme amounts to RUR 13.2 trillion. The document may be adopted in the first few months of the year. In the opinion of Yury Scherbanin, Chief of Transport and Logistic Systems Laboratory at the Institute of Economic Forecasting RAS, in the framework of the state programme, the funds will be redistributed in favour of the railway transport. “RZD estimates expenditure on preparation to the 2018 FIFA World Cup at approximately RUR 3 trillion. After the design works are completed, they will have to transfer funds from other transport modes to railways, because there is no other way to get such a sum,” he believes. 
In March 2011, RZD placed twenty-year Eurobonds for the total sum of GBP 350 million. In the middle of June 2011, the company placed an additional tranche of sterling-denominated Eurobonds for another GBP 300 million. Thus, the total volume of its Eurobonds issue amounted to GBP 650 million or a little bit more than $1 billion. The Eurobonds offering of Reg S notes was placed on the Irish Stock Exchange. According to Vadim Mikhailov, Senior Vice President of RZD, the issue of twenty-year bonds is a very serious step in the company’s debt policy. “This is a unique bonds issue for the Russian Federation. We showed that Western investors entrust their money to RZD for such a long period of time,” he noted. Earlier, Mr Mikhailov said that RZD was ready to invest its own and attracted means in infrastructure projects, the terms of which are up to 20 years. Although, it is impossible to loan non-stop, and private investors are not ready to participate in long-term plans. Thus, in the opinion of experts and transportation process participants, it is the state that must finance long-term projects. ®
By Oksana Perepelitsa
    [~DETAIL_TEXT] => 
Territorial Development Falls Behind the Economic One
The present-day layout of the railway network meets the modern demands of its consumers less and less. The past two decades saw dramatic change not only in almost all forms of economic activity, but also on the industrial map of the country. New industrial and raw material clusters appeared, the world market situation changed significantly. The potential of some old producing centres reduced; cooperation ties between industrial enterprises inside Russia and between Russian and foreign companies changed; the number of export goods increased, primary products and materials supplies from foreign states grew.
At the same time, the railway infrastructure did not change geographically. Just its carrying capacity increased in some directions. Specialists note that such conservation of the mainline network layout acts as a brake on the Russian economy. Recently, railway transport has significantly limited the further growth in cargo owners’ transportation volume depending on the transportation directions. Infrastructure capacity is almost exhausted in the direction of the Far East. The capacity of intensively developing ports of Vanino and Sovetskaya Gavan will exceed the capacity of railway access to these harbours two- or even three-fold in several years. 
In the peak periods of cargo transportation or unfavourable weather conditions, there are traffic jams on the railway approaches to the Far Eastern ports. A similar situation will take place if a part of cargo is re-directed to the southern ports of Russia or to Murmansk, because the capacity of these harbours and railway access to them is limited.   
According to the Transport Ministry, railway infrastructure deterioration amounted to 49% at the beginning of 2011. RUR 2.6 trillion has been spent on its maintenance since 2003. “Nowadays, the source of investments is the railway tariff regulated by the state. That is why there has appeared a significant shortage of funds in the investment programme,” recognizes Igor Levitin, Russian Transport Minister. According to the Ministry, the length of unrepaired railway sections was approximately 20,500 kilometres at the end of 2011 (16.5% of the total length of the network). If the financing of planned track maintenance and repair works in 2012-2015 remains at the level of 2011, the length of sections, where repair is needed, will increase to 22,000 kilometres in early 2013, and to 26,000 kilometres at the beginning of 2016.  
The share of overhead wiring that has exhausted its life time constantly increases. The life time of more than 50% of exploited overhead wiring at electrified lines with high traffic intensity is exceeded by more than 40 years. The share of track switches with an expired life time is over 20%. Despite a larger capital intensity of infrastructure complex and locomotive fleet in comparison with cargo railcars, their share in investments in railways is less than 65%. There are enough locomotives now to provide the existing and forecasted transportation volume. However, it is necessary to replace out-of-date locomotives and those with an exhausted life time by up-to-date efficient machines. There are over 20,000 locomotives of various types in the inventory park of Russian Railways. Their average age is 20-25 years. In 2004-2010, the share of mainline diesel locomotives with an exhausted life time grew by 87%, that of shunting locomotives increased by 50%. As a result, about 13% of electric locomotives, 20% of mainline and 30% of shunting diesel locomotives exhausted their resources. To restore the fleet, it is necessary to buy up to 800 units per annum (only 300 units have been bought annually in recent years).

Sectoral Priorities
The total volume of the company’s 2012-2014 investment budget is forecasted to reach RUR 1.1 trillion. Of that, RUR 428.4 billion is to be invested in 2012 (own projects – RUR 353.5 billion); RUR 341.9 billion – in 2013 (own projects – 100%), and RUR 367.6 billion in 2014 (own projects – 100%). The 2012 investment budget has increased by RUR 16.8 billion because some funds were transferred from 2011.
The decision on the state support for RZD (RUR 40 billion regarding indexation of railway tariffs by 6% since January 1, 2012) will allow to start to carry out a number of innovative projects. The company plans to increase the speed of passenger transportation between Moscow and Adler before 2014, and between Rostov and Krasnodar before 2015; to carry out a joint project of Siemens AG and Sinara to supply and localize high-speed electric trains manufacture; to speed up development of infrastructure in the South and Far East of Russia; to organize intermodal transportation between the Kazan railway station and the Kazan international airport. Due to extension of the track facilities repair programme to 10,400 kilometres, the company will reduce the number of unrepaired kilometers of tracks for the first time in recent years. Also, almost 400 locomotives and 460 units of electric multiple stock will be purchased.
The 2012-2014 financial plan of RZD is formed considering the current instability and high volatility in the world financial and commodities markets. The planned increase in the loading volume is 3% per annum. The revenue from basic activity is to grow by 3% on average, but the rate of increase  in company expenses is to be optimized and reduced. 
Most part of the programme is to be financed from RZD’s own funds and by means of state support in the form of target share capital payments. About RUR 100 billion is to be received via external loans.  
The basic priorities in 2012 are realization of state programmes in terms of railway infrastructure preparation for the winter Olympics in 2014, World Student Games in 2013, and the APEC summit in Vladivostok in 2012. Approximately RUR 75 billion is to be spent on reaching the target. The most important aspects of work are transport safety (approximately RUR 66.5 billion) and carrying out the projects targeted at removal of infrastructure limitations (about RUR 210 billion). Infrastructure projects aimed at tackling bottle-necks envisage increases in the carrying capacity on lines to Russian major ports and making transport more available to people.
In 2012, realization of the following large investment projects will continue:
• reconstruction of the Mga – Gatchina – Veimarn – Ivangorod railway section and railway accesses to the ports on the southern coast of the Finnish Gulf;   
• reconstruction of the Komsomolsk-on-Amur – Sovetskaya Gavan railway section and construction of new Kuznetsovsky tunnel;
• reconstruction of the M. Gorky – Kotelnikovo – Tikhoretskaya – Krymskaya section with a bypass around the Krasnodar node;
• development of Moscow transport hub;
• construction of additional main track on the Moscow – Kryukovo section. 
In the words of Yury Saakyan, CEO of Institute of Natural Monopolies’ Problems, the volume of investments in the railway sector is now 28.5%-37.5% smaller than that in other natural monopoly sectors of the country’s economy. According to the Federal Statistics Service, in 2010 investments of RZD were 78% less than those of mining industries, 77% less than investments of processing industries, and 67% less than those of power, heat, and water production and supply. Thus, the share of RZD in the total volume of all investments in basic assets made in the RF economy in 2010 was 3.22%. We will give only one example: in 2011 investments in the RF transport system amounted to RUR 2.3 trillion. Of that, RUR 950 billion was invested in the pipelines, and RUR 700 billion – in electricity supply network facilities. Judging by the recent criticism from the state authorities, the efficiency of these investments is at least not obvious.
The lack of investment in railway infrastructure carrying capacity restrains investment in the mining and processing sectors. It would be quite logical to expect that respective companies would take part in upgrading railway infrastructure. However, there are few market participants interested in increasing the volume of infrastructure project financing. Among them are production and services suppliers, especially representatives of railway engineering. Their interest in the increase of RZD’s investment programme is obvious – this will create a large and long-term order from their basic customer. In the words of Mr Saakyan, suppliers of the second level (components for manufacturing final products for railways) are interested to a lesser degree, because of diversification of their order portfolio, where the railways’ share does not prevail. 
The next group of beneficiaries of the increase in RZD’s investment programme are consignors. Production processes in some industries, particularly in coal industry, envisage non-alternative and mass use of railway transport. According to some evaluations, infrastructure limitations caused by insufficient funding for the projects of RZD will lead to respective insufficient funding for coal sector (by $15 million less, which can be compared with RZD’s need for investments in railway infrastructure development).
Nevertheless, the state is interested in the increase in RZD’s investment projects funding most of all, because it receives a multiplier effect in industrial and social sectors. Most products purchased in the framework of RZD’s investment programme are made by Russian enterprises. According to the Ministry of Economic Development, 36.5% of RZD’s 2011 programme returns to the budget in the form of taxes. Also, we should take into account additional tax receipts from consignors who will be able to expand their producing capacities. Its growth by 10 million tons only in the coal sector will provide additional tax receipts of at least RUR 3.5-3.7 billion per annum.

Programme of Programmes Coordination
In the opinion of experts, the existing programmes of railway sector development (such as the Strategy of Railway Transport Development in Russia to 2030 and the federal programme Transport System Development in 2010-2015) are not justified by sufficient financing sources. They do not define the conditions of private investment returns, there is a lack of principles for forming a transparent long-term tariff policy for investors – cargo owners. Moreover, they were adopted regardless of decisions on transport services supply during the 2018 FIFA World Cup. According to preliminary estimations of IERT, RUR 834.5 billion (approximately RUR 782 billion if the rolling stock is not taken into account ) is needed to reconstruct and build railway facilities for fast and high-speed transportation on the RF railway network during the 2018 FIFA World Cup. Works to register territorial and legal relations, to hold engineering and technical researches, to form preliminary permission and design and estimate documentation for infrastructure facilities will cost another RUR 70 billion according to estimates of Alexey Tikhonov, Head of Capital Construction Department of RZD. Thus, the customer and project institutes must fulfill works for the average sum of RUR 28 billion per annum. Consequently, the total costs of construction works will amount to about RUR 715 billion. Their annual fulfillment by contractual building companies must cost about RUR 160 billion on average.  
According to initial calculations, made in the framework of the Concept of Modernisation of the Existing Railway Infrastructure to Organise Transport Services for Passengers during the 2018 FIFA World Cup, total investment in the launch of passenger transportation on the special high-speed mainlines are estimated at RUR 2.6 trillion, and total need for funds to carry out the Concept may exceed RUR 3.4 trillion. The mentioned investments are considered additional in relation to projects to be carried out, including those envisaged by approved sectoral programmes of preparation to hold the Olympic Games in Sochi in 2014, World Student Games in Kazan in 2013, General Scheme of Moscow Railway Node Development, and Programme of Railway Stations Development.
Even authors of the new draft state programme “Transport System Development to 2019” recognize that the document does not envisage funds to organize passenger transport services during the 2018 FIFA World Cup. In the words of Elena Myasoedova, CEO of autonomous non-commercial organization Centre of Transport Complex Control Strategy and Improvement, the need for the new state programme emerged in the framework of forming the federal budget on the basis of programme-target principle and integration of the statements of the Concept of Long-Term Social and Economic Development of the RF to 2020, the RF Transport Strategy to 2030, and a number of federal target programmes. 
The budget of the state programme amounts to RUR 13.2 trillion. The document may be adopted in the first few months of the year. In the opinion of Yury Scherbanin, Chief of Transport and Logistic Systems Laboratory at the Institute of Economic Forecasting RAS, in the framework of the state programme, the funds will be redistributed in favour of the railway transport. “RZD estimates expenditure on preparation to the 2018 FIFA World Cup at approximately RUR 3 trillion. After the design works are completed, they will have to transfer funds from other transport modes to railways, because there is no other way to get such a sum,” he believes. 
In March 2011, RZD placed twenty-year Eurobonds for the total sum of GBP 350 million. In the middle of June 2011, the company placed an additional tranche of sterling-denominated Eurobonds for another GBP 300 million. Thus, the total volume of its Eurobonds issue amounted to GBP 650 million or a little bit more than $1 billion. The Eurobonds offering of Reg S notes was placed on the Irish Stock Exchange. According to Vadim Mikhailov, Senior Vice President of RZD, the issue of twenty-year bonds is a very serious step in the company’s debt policy. “This is a unique bonds issue for the Russian Federation. We showed that Western investors entrust their money to RZD for such a long period of time,” he noted. Earlier, Mr Mikhailov said that RZD was ready to invest its own and attracted means in infrastructure projects, the terms of which are up to 20 years. Although, it is impossible to loan non-stop, and private investors are not ready to participate in long-term plans. Thus, in the opinion of experts and transportation process participants, it is the state that must finance long-term projects. ®
By Oksana Perepelitsa
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            [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/2/6.jpg" border="1" alt=" " hspace="5" width="300" height="213" align="left" />The Board of Directors of RZD approved the company’s investment programme and financial plan for 2012-2014. The total volume of the investment budget in this period is estimated at RUR 1.1 trillion. Unlike in previous years, RZD has almost no inner reserves now to finance the investment programme at the expense of selling its stakes in daughter companies. In line with the enlargement of RZD’s loan portfolio and direct state support, long-term state approaches to tariff formation should be developed for further infrastructure development.
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    [DETAIL_TEXT] => 
Territorial Development Falls Behind the Economic One
The present-day layout of the railway network meets the modern demands of its consumers less and less. The past two decades saw dramatic change not only in almost all forms of economic activity, but also on the industrial map of the country. New industrial and raw material clusters appeared, the world market situation changed significantly. The potential of some old producing centres reduced; cooperation ties between industrial enterprises inside Russia and between Russian and foreign companies changed; the number of export goods increased, primary products and materials supplies from foreign states grew.
At the same time, the railway infrastructure did not change geographically. Just its carrying capacity increased in some directions. Specialists note that such conservation of the mainline network layout acts as a brake on the Russian economy. Recently, railway transport has significantly limited the further growth in cargo owners’ transportation volume depending on the transportation directions. Infrastructure capacity is almost exhausted in the direction of the Far East. The capacity of intensively developing ports of Vanino and Sovetskaya Gavan will exceed the capacity of railway access to these harbours two- or even three-fold in several years. 
In the peak periods of cargo transportation or unfavourable weather conditions, there are traffic jams on the railway approaches to the Far Eastern ports. A similar situation will take place if a part of cargo is re-directed to the southern ports of Russia or to Murmansk, because the capacity of these harbours and railway access to them is limited.   
According to the Transport Ministry, railway infrastructure deterioration amounted to 49% at the beginning of 2011. RUR 2.6 trillion has been spent on its maintenance since 2003. “Nowadays, the source of investments is the railway tariff regulated by the state. That is why there has appeared a significant shortage of funds in the investment programme,” recognizes Igor Levitin, Russian Transport Minister. According to the Ministry, the length of unrepaired railway sections was approximately 20,500 kilometres at the end of 2011 (16.5% of the total length of the network). If the financing of planned track maintenance and repair works in 2012-2015 remains at the level of 2011, the length of sections, where repair is needed, will increase to 22,000 kilometres in early 2013, and to 26,000 kilometres at the beginning of 2016.  
The share of overhead wiring that has exhausted its life time constantly increases. The life time of more than 50% of exploited overhead wiring at electrified lines with high traffic intensity is exceeded by more than 40 years. The share of track switches with an expired life time is over 20%. Despite a larger capital intensity of infrastructure complex and locomotive fleet in comparison with cargo railcars, their share in investments in railways is less than 65%. There are enough locomotives now to provide the existing and forecasted transportation volume. However, it is necessary to replace out-of-date locomotives and those with an exhausted life time by up-to-date efficient machines. There are over 20,000 locomotives of various types in the inventory park of Russian Railways. Their average age is 20-25 years. In 2004-2010, the share of mainline diesel locomotives with an exhausted life time grew by 87%, that of shunting locomotives increased by 50%. As a result, about 13% of electric locomotives, 20% of mainline and 30% of shunting diesel locomotives exhausted their resources. To restore the fleet, it is necessary to buy up to 800 units per annum (only 300 units have been bought annually in recent years).

Sectoral Priorities
The total volume of the company’s 2012-2014 investment budget is forecasted to reach RUR 1.1 trillion. Of that, RUR 428.4 billion is to be invested in 2012 (own projects – RUR 353.5 billion); RUR 341.9 billion – in 2013 (own projects – 100%), and RUR 367.6 billion in 2014 (own projects – 100%). The 2012 investment budget has increased by RUR 16.8 billion because some funds were transferred from 2011.
The decision on the state support for RZD (RUR 40 billion regarding indexation of railway tariffs by 6% since January 1, 2012) will allow to start to carry out a number of innovative projects. The company plans to increase the speed of passenger transportation between Moscow and Adler before 2014, and between Rostov and Krasnodar before 2015; to carry out a joint project of Siemens AG and Sinara to supply and localize high-speed electric trains manufacture; to speed up development of infrastructure in the South and Far East of Russia; to organize intermodal transportation between the Kazan railway station and the Kazan international airport. Due to extension of the track facilities repair programme to 10,400 kilometres, the company will reduce the number of unrepaired kilometers of tracks for the first time in recent years. Also, almost 400 locomotives and 460 units of electric multiple stock will be purchased.
The 2012-2014 financial plan of RZD is formed considering the current instability and high volatility in the world financial and commodities markets. The planned increase in the loading volume is 3% per annum. The revenue from basic activity is to grow by 3% on average, but the rate of increase  in company expenses is to be optimized and reduced. 
Most part of the programme is to be financed from RZD’s own funds and by means of state support in the form of target share capital payments. About RUR 100 billion is to be received via external loans.  
The basic priorities in 2012 are realization of state programmes in terms of railway infrastructure preparation for the winter Olympics in 2014, World Student Games in 2013, and the APEC summit in Vladivostok in 2012. Approximately RUR 75 billion is to be spent on reaching the target. The most important aspects of work are transport safety (approximately RUR 66.5 billion) and carrying out the projects targeted at removal of infrastructure limitations (about RUR 210 billion). Infrastructure projects aimed at tackling bottle-necks envisage increases in the carrying capacity on lines to Russian major ports and making transport more available to people.
In 2012, realization of the following large investment projects will continue:
• reconstruction of the Mga – Gatchina – Veimarn – Ivangorod railway section and railway accesses to the ports on the southern coast of the Finnish Gulf;   
• reconstruction of the Komsomolsk-on-Amur – Sovetskaya Gavan railway section and construction of new Kuznetsovsky tunnel;
• reconstruction of the M. Gorky – Kotelnikovo – Tikhoretskaya – Krymskaya section with a bypass around the Krasnodar node;
• development of Moscow transport hub;
• construction of additional main track on the Moscow – Kryukovo section. 
In the words of Yury Saakyan, CEO of Institute of Natural Monopolies’ Problems, the volume of investments in the railway sector is now 28.5%-37.5% smaller than that in other natural monopoly sectors of the country’s economy. According to the Federal Statistics Service, in 2010 investments of RZD were 78% less than those of mining industries, 77% less than investments of processing industries, and 67% less than those of power, heat, and water production and supply. Thus, the share of RZD in the total volume of all investments in basic assets made in the RF economy in 2010 was 3.22%. We will give only one example: in 2011 investments in the RF transport system amounted to RUR 2.3 trillion. Of that, RUR 950 billion was invested in the pipelines, and RUR 700 billion – in electricity supply network facilities. Judging by the recent criticism from the state authorities, the efficiency of these investments is at least not obvious.
The lack of investment in railway infrastructure carrying capacity restrains investment in the mining and processing sectors. It would be quite logical to expect that respective companies would take part in upgrading railway infrastructure. However, there are few market participants interested in increasing the volume of infrastructure project financing. Among them are production and services suppliers, especially representatives of railway engineering. Their interest in the increase of RZD’s investment programme is obvious – this will create a large and long-term order from their basic customer. In the words of Mr Saakyan, suppliers of the second level (components for manufacturing final products for railways) are interested to a lesser degree, because of diversification of their order portfolio, where the railways’ share does not prevail. 
The next group of beneficiaries of the increase in RZD’s investment programme are consignors. Production processes in some industries, particularly in coal industry, envisage non-alternative and mass use of railway transport. According to some evaluations, infrastructure limitations caused by insufficient funding for the projects of RZD will lead to respective insufficient funding for coal sector (by $15 million less, which can be compared with RZD’s need for investments in railway infrastructure development).
Nevertheless, the state is interested in the increase in RZD’s investment projects funding most of all, because it receives a multiplier effect in industrial and social sectors. Most products purchased in the framework of RZD’s investment programme are made by Russian enterprises. According to the Ministry of Economic Development, 36.5% of RZD’s 2011 programme returns to the budget in the form of taxes. Also, we should take into account additional tax receipts from consignors who will be able to expand their producing capacities. Its growth by 10 million tons only in the coal sector will provide additional tax receipts of at least RUR 3.5-3.7 billion per annum.

Programme of Programmes Coordination
In the opinion of experts, the existing programmes of railway sector development (such as the Strategy of Railway Transport Development in Russia to 2030 and the federal programme Transport System Development in 2010-2015) are not justified by sufficient financing sources. They do not define the conditions of private investment returns, there is a lack of principles for forming a transparent long-term tariff policy for investors – cargo owners. Moreover, they were adopted regardless of decisions on transport services supply during the 2018 FIFA World Cup. According to preliminary estimations of IERT, RUR 834.5 billion (approximately RUR 782 billion if the rolling stock is not taken into account ) is needed to reconstruct and build railway facilities for fast and high-speed transportation on the RF railway network during the 2018 FIFA World Cup. Works to register territorial and legal relations, to hold engineering and technical researches, to form preliminary permission and design and estimate documentation for infrastructure facilities will cost another RUR 70 billion according to estimates of Alexey Tikhonov, Head of Capital Construction Department of RZD. Thus, the customer and project institutes must fulfill works for the average sum of RUR 28 billion per annum. Consequently, the total costs of construction works will amount to about RUR 715 billion. Their annual fulfillment by contractual building companies must cost about RUR 160 billion on average.  
According to initial calculations, made in the framework of the Concept of Modernisation of the Existing Railway Infrastructure to Organise Transport Services for Passengers during the 2018 FIFA World Cup, total investment in the launch of passenger transportation on the special high-speed mainlines are estimated at RUR 2.6 trillion, and total need for funds to carry out the Concept may exceed RUR 3.4 trillion. The mentioned investments are considered additional in relation to projects to be carried out, including those envisaged by approved sectoral programmes of preparation to hold the Olympic Games in Sochi in 2014, World Student Games in Kazan in 2013, General Scheme of Moscow Railway Node Development, and Programme of Railway Stations Development.
Even authors of the new draft state programme “Transport System Development to 2019” recognize that the document does not envisage funds to organize passenger transport services during the 2018 FIFA World Cup. In the words of Elena Myasoedova, CEO of autonomous non-commercial organization Centre of Transport Complex Control Strategy and Improvement, the need for the new state programme emerged in the framework of forming the federal budget on the basis of programme-target principle and integration of the statements of the Concept of Long-Term Social and Economic Development of the RF to 2020, the RF Transport Strategy to 2030, and a number of federal target programmes. 
The budget of the state programme amounts to RUR 13.2 trillion. The document may be adopted in the first few months of the year. In the opinion of Yury Scherbanin, Chief of Transport and Logistic Systems Laboratory at the Institute of Economic Forecasting RAS, in the framework of the state programme, the funds will be redistributed in favour of the railway transport. “RZD estimates expenditure on preparation to the 2018 FIFA World Cup at approximately RUR 3 trillion. After the design works are completed, they will have to transfer funds from other transport modes to railways, because there is no other way to get such a sum,” he believes. 
In March 2011, RZD placed twenty-year Eurobonds for the total sum of GBP 350 million. In the middle of June 2011, the company placed an additional tranche of sterling-denominated Eurobonds for another GBP 300 million. Thus, the total volume of its Eurobonds issue amounted to GBP 650 million or a little bit more than $1 billion. The Eurobonds offering of Reg S notes was placed on the Irish Stock Exchange. According to Vadim Mikhailov, Senior Vice President of RZD, the issue of twenty-year bonds is a very serious step in the company’s debt policy. “This is a unique bonds issue for the Russian Federation. We showed that Western investors entrust their money to RZD for such a long period of time,” he noted. Earlier, Mr Mikhailov said that RZD was ready to invest its own and attracted means in infrastructure projects, the terms of which are up to 20 years. Although, it is impossible to loan non-stop, and private investors are not ready to participate in long-term plans. Thus, in the opinion of experts and transportation process participants, it is the state that must finance long-term projects. ®
By Oksana Perepelitsa
    [~DETAIL_TEXT] => 
Territorial Development Falls Behind the Economic One
The present-day layout of the railway network meets the modern demands of its consumers less and less. The past two decades saw dramatic change not only in almost all forms of economic activity, but also on the industrial map of the country. New industrial and raw material clusters appeared, the world market situation changed significantly. The potential of some old producing centres reduced; cooperation ties between industrial enterprises inside Russia and between Russian and foreign companies changed; the number of export goods increased, primary products and materials supplies from foreign states grew.
At the same time, the railway infrastructure did not change geographically. Just its carrying capacity increased in some directions. Specialists note that such conservation of the mainline network layout acts as a brake on the Russian economy. Recently, railway transport has significantly limited the further growth in cargo owners’ transportation volume depending on the transportation directions. Infrastructure capacity is almost exhausted in the direction of the Far East. The capacity of intensively developing ports of Vanino and Sovetskaya Gavan will exceed the capacity of railway access to these harbours two- or even three-fold in several years. 
In the peak periods of cargo transportation or unfavourable weather conditions, there are traffic jams on the railway approaches to the Far Eastern ports. A similar situation will take place if a part of cargo is re-directed to the southern ports of Russia or to Murmansk, because the capacity of these harbours and railway access to them is limited.   
According to the Transport Ministry, railway infrastructure deterioration amounted to 49% at the beginning of 2011. RUR 2.6 trillion has been spent on its maintenance since 2003. “Nowadays, the source of investments is the railway tariff regulated by the state. That is why there has appeared a significant shortage of funds in the investment programme,” recognizes Igor Levitin, Russian Transport Minister. According to the Ministry, the length of unrepaired railway sections was approximately 20,500 kilometres at the end of 2011 (16.5% of the total length of the network). If the financing of planned track maintenance and repair works in 2012-2015 remains at the level of 2011, the length of sections, where repair is needed, will increase to 22,000 kilometres in early 2013, and to 26,000 kilometres at the beginning of 2016.  
The share of overhead wiring that has exhausted its life time constantly increases. The life time of more than 50% of exploited overhead wiring at electrified lines with high traffic intensity is exceeded by more than 40 years. The share of track switches with an expired life time is over 20%. Despite a larger capital intensity of infrastructure complex and locomotive fleet in comparison with cargo railcars, their share in investments in railways is less than 65%. There are enough locomotives now to provide the existing and forecasted transportation volume. However, it is necessary to replace out-of-date locomotives and those with an exhausted life time by up-to-date efficient machines. There are over 20,000 locomotives of various types in the inventory park of Russian Railways. Their average age is 20-25 years. In 2004-2010, the share of mainline diesel locomotives with an exhausted life time grew by 87%, that of shunting locomotives increased by 50%. As a result, about 13% of electric locomotives, 20% of mainline and 30% of shunting diesel locomotives exhausted their resources. To restore the fleet, it is necessary to buy up to 800 units per annum (only 300 units have been bought annually in recent years).

Sectoral Priorities
The total volume of the company’s 2012-2014 investment budget is forecasted to reach RUR 1.1 trillion. Of that, RUR 428.4 billion is to be invested in 2012 (own projects – RUR 353.5 billion); RUR 341.9 billion – in 2013 (own projects – 100%), and RUR 367.6 billion in 2014 (own projects – 100%). The 2012 investment budget has increased by RUR 16.8 billion because some funds were transferred from 2011.
The decision on the state support for RZD (RUR 40 billion regarding indexation of railway tariffs by 6% since January 1, 2012) will allow to start to carry out a number of innovative projects. The company plans to increase the speed of passenger transportation between Moscow and Adler before 2014, and between Rostov and Krasnodar before 2015; to carry out a joint project of Siemens AG and Sinara to supply and localize high-speed electric trains manufacture; to speed up development of infrastructure in the South and Far East of Russia; to organize intermodal transportation between the Kazan railway station and the Kazan international airport. Due to extension of the track facilities repair programme to 10,400 kilometres, the company will reduce the number of unrepaired kilometers of tracks for the first time in recent years. Also, almost 400 locomotives and 460 units of electric multiple stock will be purchased.
The 2012-2014 financial plan of RZD is formed considering the current instability and high volatility in the world financial and commodities markets. The planned increase in the loading volume is 3% per annum. The revenue from basic activity is to grow by 3% on average, but the rate of increase  in company expenses is to be optimized and reduced. 
Most part of the programme is to be financed from RZD’s own funds and by means of state support in the form of target share capital payments. About RUR 100 billion is to be received via external loans.  
The basic priorities in 2012 are realization of state programmes in terms of railway infrastructure preparation for the winter Olympics in 2014, World Student Games in 2013, and the APEC summit in Vladivostok in 2012. Approximately RUR 75 billion is to be spent on reaching the target. The most important aspects of work are transport safety (approximately RUR 66.5 billion) and carrying out the projects targeted at removal of infrastructure limitations (about RUR 210 billion). Infrastructure projects aimed at tackling bottle-necks envisage increases in the carrying capacity on lines to Russian major ports and making transport more available to people.
In 2012, realization of the following large investment projects will continue:
• reconstruction of the Mga – Gatchina – Veimarn – Ivangorod railway section and railway accesses to the ports on the southern coast of the Finnish Gulf;   
• reconstruction of the Komsomolsk-on-Amur – Sovetskaya Gavan railway section and construction of new Kuznetsovsky tunnel;
• reconstruction of the M. Gorky – Kotelnikovo – Tikhoretskaya – Krymskaya section with a bypass around the Krasnodar node;
• development of Moscow transport hub;
• construction of additional main track on the Moscow – Kryukovo section. 
In the words of Yury Saakyan, CEO of Institute of Natural Monopolies’ Problems, the volume of investments in the railway sector is now 28.5%-37.5% smaller than that in other natural monopoly sectors of the country’s economy. According to the Federal Statistics Service, in 2010 investments of RZD were 78% less than those of mining industries, 77% less than investments of processing industries, and 67% less than those of power, heat, and water production and supply. Thus, the share of RZD in the total volume of all investments in basic assets made in the RF economy in 2010 was 3.22%. We will give only one example: in 2011 investments in the RF transport system amounted to RUR 2.3 trillion. Of that, RUR 950 billion was invested in the pipelines, and RUR 700 billion – in electricity supply network facilities. Judging by the recent criticism from the state authorities, the efficiency of these investments is at least not obvious.
The lack of investment in railway infrastructure carrying capacity restrains investment in the mining and processing sectors. It would be quite logical to expect that respective companies would take part in upgrading railway infrastructure. However, there are few market participants interested in increasing the volume of infrastructure project financing. Among them are production and services suppliers, especially representatives of railway engineering. Their interest in the increase of RZD’s investment programme is obvious – this will create a large and long-term order from their basic customer. In the words of Mr Saakyan, suppliers of the second level (components for manufacturing final products for railways) are interested to a lesser degree, because of diversification of their order portfolio, where the railways’ share does not prevail. 
The next group of beneficiaries of the increase in RZD’s investment programme are consignors. Production processes in some industries, particularly in coal industry, envisage non-alternative and mass use of railway transport. According to some evaluations, infrastructure limitations caused by insufficient funding for the projects of RZD will lead to respective insufficient funding for coal sector (by $15 million less, which can be compared with RZD’s need for investments in railway infrastructure development).
Nevertheless, the state is interested in the increase in RZD’s investment projects funding most of all, because it receives a multiplier effect in industrial and social sectors. Most products purchased in the framework of RZD’s investment programme are made by Russian enterprises. According to the Ministry of Economic Development, 36.5% of RZD’s 2011 programme returns to the budget in the form of taxes. Also, we should take into account additional tax receipts from consignors who will be able to expand their producing capacities. Its growth by 10 million tons only in the coal sector will provide additional tax receipts of at least RUR 3.5-3.7 billion per annum.

Programme of Programmes Coordination
In the opinion of experts, the existing programmes of railway sector development (such as the Strategy of Railway Transport Development in Russia to 2030 and the federal programme Transport System Development in 2010-2015) are not justified by sufficient financing sources. They do not define the conditions of private investment returns, there is a lack of principles for forming a transparent long-term tariff policy for investors – cargo owners. Moreover, they were adopted regardless of decisions on transport services supply during the 2018 FIFA World Cup. According to preliminary estimations of IERT, RUR 834.5 billion (approximately RUR 782 billion if the rolling stock is not taken into account ) is needed to reconstruct and build railway facilities for fast and high-speed transportation on the RF railway network during the 2018 FIFA World Cup. Works to register territorial and legal relations, to hold engineering and technical researches, to form preliminary permission and design and estimate documentation for infrastructure facilities will cost another RUR 70 billion according to estimates of Alexey Tikhonov, Head of Capital Construction Department of RZD. Thus, the customer and project institutes must fulfill works for the average sum of RUR 28 billion per annum. Consequently, the total costs of construction works will amount to about RUR 715 billion. Their annual fulfillment by contractual building companies must cost about RUR 160 billion on average.  
According to initial calculations, made in the framework of the Concept of Modernisation of the Existing Railway Infrastructure to Organise Transport Services for Passengers during the 2018 FIFA World Cup, total investment in the launch of passenger transportation on the special high-speed mainlines are estimated at RUR 2.6 trillion, and total need for funds to carry out the Concept may exceed RUR 3.4 trillion. The mentioned investments are considered additional in relation to projects to be carried out, including those envisaged by approved sectoral programmes of preparation to hold the Olympic Games in Sochi in 2014, World Student Games in Kazan in 2013, General Scheme of Moscow Railway Node Development, and Programme of Railway Stations Development.
Even authors of the new draft state programme “Transport System Development to 2019” recognize that the document does not envisage funds to organize passenger transport services during the 2018 FIFA World Cup. In the words of Elena Myasoedova, CEO of autonomous non-commercial organization Centre of Transport Complex Control Strategy and Improvement, the need for the new state programme emerged in the framework of forming the federal budget on the basis of programme-target principle and integration of the statements of the Concept of Long-Term Social and Economic Development of the RF to 2020, the RF Transport Strategy to 2030, and a number of federal target programmes. 
The budget of the state programme amounts to RUR 13.2 trillion. The document may be adopted in the first few months of the year. In the opinion of Yury Scherbanin, Chief of Transport and Logistic Systems Laboratory at the Institute of Economic Forecasting RAS, in the framework of the state programme, the funds will be redistributed in favour of the railway transport. “RZD estimates expenditure on preparation to the 2018 FIFA World Cup at approximately RUR 3 trillion. After the design works are completed, they will have to transfer funds from other transport modes to railways, because there is no other way to get such a sum,” he believes. 
In March 2011, RZD placed twenty-year Eurobonds for the total sum of GBP 350 million. In the middle of June 2011, the company placed an additional tranche of sterling-denominated Eurobonds for another GBP 300 million. Thus, the total volume of its Eurobonds issue amounted to GBP 650 million or a little bit more than $1 billion. The Eurobonds offering of Reg S notes was placed on the Irish Stock Exchange. According to Vadim Mikhailov, Senior Vice President of RZD, the issue of twenty-year bonds is a very serious step in the company’s debt policy. “This is a unique bonds issue for the Russian Federation. We showed that Western investors entrust their money to RZD for such a long period of time,” he noted. Earlier, Mr Mikhailov said that RZD was ready to invest its own and attracted means in infrastructure projects, the terms of which are up to 20 years. Although, it is impossible to loan non-stop, and private investors are not ready to participate in long-term plans. Thus, in the opinion of experts and transportation process participants, it is the state that must finance long-term projects. ®
By Oksana Perepelitsa
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/2/6.jpg" border="1" alt=" " hspace="5" width="300" height="213" align="left" />The Board of Directors of RZD approved the company’s investment programme and financial plan for 2012-2014. The total volume of the investment budget in this period is estimated at RUR 1.1 trillion. Unlike in previous years, RZD has almost no inner reserves now to finance the investment programme at the expense of selling its stakes in daughter companies. In line with the enlargement of RZD’s loan portfolio and direct state support, long-term state approaches to tariff formation should be developed for further infrastructure development.
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            [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/2/6.jpg" border="1" alt=" " hspace="5" width="300" height="213" align="left" />The Board of Directors of RZD approved the company’s investment programme and financial plan for 2012-2014. The total volume of the investment budget in this period is estimated at RUR 1.1 trillion. Unlike in previous years, RZD has almost no inner reserves now to finance the investment programme at the expense of selling its stakes in daughter companies. In line with the enlargement of RZD’s loan portfolio and direct state support, long-term state approaches to tariff formation should be developed for further infrastructure development.
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Coming onto Market Rails
The assets of RZD holding company are sold in the framework of the final stage of the railway structural reform, which is carried out to divide natural monopolistic and competitive businesses, develop competition in the market segments of the railway sector, and increase the economic efficiency of RZD’s operations.
In 2011, RZD received about RUR 150 billion from selling stakes in its subsidiaries. The proceeds were allocated to finance the company’s investment programme.
This year, it is planned to sell 75% minus 2 shares in Vagonremmash, Zheldorremmash, Novosibirsk Railroad Switch Plant, Moscow Locomotive Repair Works, and the First Non-Ore Company; 50% minus 2 shares in RZDstroy and BetElTrans; and a 25% shareholding from RZD’s 50% stake in the Central Suburban Passenger Company. The respective decrees of the RF Government have been signed already.

Repair Assets Are Like Gold Dust
According to the term of the competition, the shareholdings in Vagonremmash and Zheldorremmash (3.055 billion and 11.372 billion ordinary shares respectively) must be sold at a price not lower than the market one, defined on the basis of a report of an independent valuer. 
Zheldorremmash, a subsidiary of RZD, was established on the basis of the Directorate for traction rolling stock in the framework of the structural railway reform in 2009. Nowadays, the company is an integrated repair complex operating on the RZD network. It has 11 affiliates – 10 locomotive repair plants and an engineering centre in Yaroslavl. Zheldorremmash is the leader in the market of spares production and traction rolling stock repair in Russia and other states on the area of the former USSR.
In particular, the company provides average and capital repair of nodes, complete units, and locomotives, maintenance between one capital repair and the next, and their upgrading with life extension. The enterprise also participates in the development of innovative technologies for repair and modernization, and for creation of next generation rolling stock. The company puts successfully into operation energy-saving programmes and technologies, an up-to-date system of quality, and lean production methods. The developed network of company’s affiliates enables to fulfill the needs of RZD’s enterprises. 
Vagonremmash started business activity in the middle of 2008. It was launched on the basis of three wagon repair plants – those in Voronezh, Novorossiysk, and Tambov. The enterprise provides such services as capital and overhaul reconditioning repair and upgrading of passenger rolling stock, repair of specialized railcars, depot and capital repair of cargo wagons and repair of wheel-sets. Also, Vagonremmash produces brake equipment, spares, assembles two-axle bogies for cargo wagons and provides new forming of wheel-sets. The geographical position of its sites allows it to supply products and services to central and southern regions of Russia with the least transport expenses.
“Selling the control interests in these companies starts the process of structural changes in the locomotives and passenger railcars repair sector. These steps are the practical embodiment of plans to make the RZD’s repair complex more efficient and to transfer to market relations between repair enterprises and customers, including definition of the financial responsibility for the quality and timeliness of repair,” notes Konstantin Kostrikin, Head of Transport Engineering Research Department at the Institute of Natural Monopolies’ Problems. New owners are supposed to invest in modernization of repair enterprises, putting into operation new technologies of locomotive and passenger railcar repair.
In the opinion of experts, these assets are interesting to investors. “Despite relatively small revenue, Zheldorremmash is one of the basic players in the sector of maintenance services for traction rolling stock. Since the company operates in Russia as well as in the CIS (it owns assets in Ukraine, Latvia, and Uzbekistan), its customers will get access to almost all the 1520 space,” mentions Dmitry Adamidov, co-head of the analytical department at the independent analytical agency Investcafe. “As for Vagonremmash, this company is a large player in the wagon repair market in the southern regions of Russia.”
Zheldorremmash services mainly RZD, while Vagonremmash is oriented at independent operators and works in a competitive market. “The sale of these shareholdings will impact on the sector only if some large operator purchases them and changes the order portfolio (for example, in case it reorients the plants to service its own rolling stock). In other cases, the sale will not cause significant problems,” considers Mr Adamidov. 
According to his estimates, the value of the shareholdings will exceed the cost of the company’s net assets by 80-100%. Taking into account the results of 2010, 100% stake in Zheldorremmash will be estimated at not less than RUR 30-31 billion. Thus, 75% minus 2 shares will cost approximately RUR 23 billion. The figures for Vagonremmash are RUR 8.6-8.7 billion and RUR 6.5 billion respectively.
“Another question is whether potential buyers are ready to pay this sum,” says the analyst. In his opinion, in both cases, the investors may be large railway operators, because they have enough funds to pay the sum suitable for RZD. Zheldorremmash may be more interesting if we take into account the expected liberalization of the locomotive park. “This idea is quite disputable, but if RZD has to make this step, the repair company will be an attractive asset. Without locomotive traction liberalization, the shareholding in Zheldorremmash may be purchased only if the price is attractive (at the level of the cost of net assets), because a company will hardly manage to earn a lot fulfilling just RZD’s orders. By the way, its net profit margin was less than 2% in 2010,” considers Mr Adamidov.
The profitability of Vagonremmash is not very high either (net profit margin was 1.2% in 2010), but the shareholding in this company may be rather interesting to manage risks and compete with other market players. “An operator purchasing such an asset receives his own repair base and can to some degree pressure competitors, if their rolling stock is repaired at his plants,” notes the expert. The purchase of these assets by the usual investors for profit is hardly possible. 
In his turn, Mr Kostrikin emphasizes that the cost of shareholdings in these two subsidiaries depends on the results of estimates by independent valuers. If this approach is used, the market cost of assets owned by the enterprises and their market prospects are taken into account.
“Taking into account that RZD will remain the basic customer of Zheldorremmash for a long time, and the Federal Passenger Company – the customer of Vagonremmash, we can state that the sales market for the services provided by these plants is quite stable, and this must be taken into consideration when setting the starting price for the shareholdings,” says Mr Kostrikin. In his opinion, these assets are especially interesting to locomotive and passenger wagon manufacturers. Financial analysts think that the chosen time for the sale is rather risky. In fact, it is difficult to find a strategic investor in conditions of financial instability, Mr Kostrikin believes. “Taking into account the economic situation, it is not a very good period for investments, because the offer of long-term liquidity in the market is small. On the other hand, the situation in the railway sector is quite favourable: transportation of cargo and passengers increases, consequently, there is a need for rolling stock repair. If investors manage to solve the problem of liquidity attraction, new owners of these assets may earn significant proceeds and their business capitalization may grow.”
“The situation is now rather vague. The external situation is worse than a year ago, but it is not as bad as it could be in the case of a Greek default or a sudden significant decline in prices for oil,” adds Mr Amidov. “On the one hand, it is better not to stall for time, on the other hand, due to the specifics of the potential investors, the time of the sale is not crucial.”

Looking Forward
RZDstroy, BetElTrans, and the First Non-ore Company are engaged in transport construction and production of construction materials. 
RZDstroy is one of the leading companies in the Russian transport construction market. According to the volume of construction services sales, it is among the top five companies in the Russian Federation. It is a construction-industrial enterprise of a federal scale fulfilling contractor works across the entire territory of Russia – from Kaliningrad to Yuzhno-Sakhalinsk. 
BetElTrans is the largest producer of reinforced concrete products and materials for permanent way in Russia and the CIS. The 50% shareholding RZD will own after the sale will not be sold any time soon, because BetElTrans is considered a strategically important asset for the sector. 
The First Non-ore Company incorporates 18 plants. The prospects for the company’s further development depend on the investor that wins the competition. RZD’s stake in the company will be 25% plus 2 shares, therefore, the holding company will be able to agree with the future owner on the volume of crushed stone purchases and the prices for it.
Mr Adamidov believes that taking into account the cost of assets, the price for the shareholding in RZDstroy will amount to RUR 8.5 billion, in BetElTrans – RUR 350 million, and in the First Non-ore Company – RUR 5.5 billion. In the expert’s opinion, the stakes are likely to be bought by minority shareholders or top managers of the companies, if they have enough funds. “The exclusion may be RZDstroy. It may be purchased by large holding companies engaged in construction,” thinks the expert.
Shareholdings in the Novosibirsk Railroad Switch Plant and the Moscow Locomotive Repair Plant are also to be sold at a price not lower than the market one, defined on the basis of a report by an independent valuer, and not lower than the notional value of the shares. 
The Novosibirsk Railroad Switch Plant was launched as a joint stock company in 2008. It was established on the basis of the plant in the framework of forming RZD’s subsidiaries for permanent way repair. Nowadays, the plant specializes in railroad switch production for railway mainline tracks of RZD (fulfills 60% of the company’s needs), railway accesses to industrial enterprises, metallurgical and ore mining and processing enterprises, coal open-pit mines, pits, and for tramlines and the underground. The products of the plant are used on practically all railways in Russia, and purchased by a lot of CIS states. 
The Moscow Locomotive Repair Plant was launched in 2007. The company is engaged in capital repair of electric rolling stock, including upgrading and service life extension. It is now one of the largest plants in the engineering sector of Russia according to its technical equipment.
TransContainer is likely to be the most interesting asset to investors. The company was established in March 2006. It manages 60,000 large-capacity containers, about 25,000 flat railcars, has a network of railway terminals at 46 railway stations in Russia – from St Petersburg to Vladivostok, and manages a terminal in Slovakia. RZD owns 50% plus one share in TransContainer, FESCO – 18.5%, approximately 9% - to the European Bank of Reconstruction and Development, and 5.2% – to the non-governmental retirement fund Blagosostoyanie. 
Today, it is not clear yet what shareholding in TransContainer (25% or 50%) RZD will sell. Vladimir Yakunin, President of RZD, speaks about the need to sell only a 25% stake after 2013. In the opinion of the Ministry of Transport, the auction must be held in 2012, and it is necessary to sell the entire 50% shareholding owned by RZD.   
In their turn, senior managers of TransContainer expect that the final decision on the company’s privatization will be taken after the new RF government is formed, which will happen after the inauguration of the new RF President in May. The Transport Ministry notes that if there is a decline in the market, and the cost of the company reduces, it will be necessary to decide whether the company’s sale is reasonable. TransContainer held the IPO, and the company has a relevant cost.
Privatization of RZD’s assets will not end in 2012. In 2013, it is planned to sell at least 50% minus 2 shares in the authorized capital of Wagon Repair Company-1 OJSC (WRC-1) and not less than 75% minus 2 shares in WRC-2 OJSC and WRC-3 OJSC.
RZD established these three companies on the basis of the property of the Central Directorate for Cargo Railcars Repair of RZD in 2011 as 100% subsidiaries. The transporter transferred 118 wagon repair sub-divisions, which used to be in the structure of the Central Directorate for Cargo Railcars Repair to them (the total capacity is 358,134 repair operations per annum). At the beginning of 2011, the share of WRC in the wagon repair services market was approximately 70%, after the sale the share will drop to 25%. Thus, RZD believes that the sale will make for the formation of a competitive market in wagon repairs. Also, auctions to sell Refservice and Transwoodservice are supposed to be held in 2013. 
By Elena Ushkova
    [~DETAIL_TEXT] => 
Coming onto Market Rails
The assets of RZD holding company are sold in the framework of the final stage of the railway structural reform, which is carried out to divide natural monopolistic and competitive businesses, develop competition in the market segments of the railway sector, and increase the economic efficiency of RZD’s operations.
In 2011, RZD received about RUR 150 billion from selling stakes in its subsidiaries. The proceeds were allocated to finance the company’s investment programme.
This year, it is planned to sell 75% minus 2 shares in Vagonremmash, Zheldorremmash, Novosibirsk Railroad Switch Plant, Moscow Locomotive Repair Works, and the First Non-Ore Company; 50% minus 2 shares in RZDstroy and BetElTrans; and a 25% shareholding from RZD’s 50% stake in the Central Suburban Passenger Company. The respective decrees of the RF Government have been signed already.

Repair Assets Are Like Gold Dust
According to the term of the competition, the shareholdings in Vagonremmash and Zheldorremmash (3.055 billion and 11.372 billion ordinary shares respectively) must be sold at a price not lower than the market one, defined on the basis of a report of an independent valuer. 
Zheldorremmash, a subsidiary of RZD, was established on the basis of the Directorate for traction rolling stock in the framework of the structural railway reform in 2009. Nowadays, the company is an integrated repair complex operating on the RZD network. It has 11 affiliates – 10 locomotive repair plants and an engineering centre in Yaroslavl. Zheldorremmash is the leader in the market of spares production and traction rolling stock repair in Russia and other states on the area of the former USSR.
In particular, the company provides average and capital repair of nodes, complete units, and locomotives, maintenance between one capital repair and the next, and their upgrading with life extension. The enterprise also participates in the development of innovative technologies for repair and modernization, and for creation of next generation rolling stock. The company puts successfully into operation energy-saving programmes and technologies, an up-to-date system of quality, and lean production methods. The developed network of company’s affiliates enables to fulfill the needs of RZD’s enterprises. 
Vagonremmash started business activity in the middle of 2008. It was launched on the basis of three wagon repair plants – those in Voronezh, Novorossiysk, and Tambov. The enterprise provides such services as capital and overhaul reconditioning repair and upgrading of passenger rolling stock, repair of specialized railcars, depot and capital repair of cargo wagons and repair of wheel-sets. Also, Vagonremmash produces brake equipment, spares, assembles two-axle bogies for cargo wagons and provides new forming of wheel-sets. The geographical position of its sites allows it to supply products and services to central and southern regions of Russia with the least transport expenses.
“Selling the control interests in these companies starts the process of structural changes in the locomotives and passenger railcars repair sector. These steps are the practical embodiment of plans to make the RZD’s repair complex more efficient and to transfer to market relations between repair enterprises and customers, including definition of the financial responsibility for the quality and timeliness of repair,” notes Konstantin Kostrikin, Head of Transport Engineering Research Department at the Institute of Natural Monopolies’ Problems. New owners are supposed to invest in modernization of repair enterprises, putting into operation new technologies of locomotive and passenger railcar repair.
In the opinion of experts, these assets are interesting to investors. “Despite relatively small revenue, Zheldorremmash is one of the basic players in the sector of maintenance services for traction rolling stock. Since the company operates in Russia as well as in the CIS (it owns assets in Ukraine, Latvia, and Uzbekistan), its customers will get access to almost all the 1520 space,” mentions Dmitry Adamidov, co-head of the analytical department at the independent analytical agency Investcafe. “As for Vagonremmash, this company is a large player in the wagon repair market in the southern regions of Russia.”
Zheldorremmash services mainly RZD, while Vagonremmash is oriented at independent operators and works in a competitive market. “The sale of these shareholdings will impact on the sector only if some large operator purchases them and changes the order portfolio (for example, in case it reorients the plants to service its own rolling stock). In other cases, the sale will not cause significant problems,” considers Mr Adamidov. 
According to his estimates, the value of the shareholdings will exceed the cost of the company’s net assets by 80-100%. Taking into account the results of 2010, 100% stake in Zheldorremmash will be estimated at not less than RUR 30-31 billion. Thus, 75% minus 2 shares will cost approximately RUR 23 billion. The figures for Vagonremmash are RUR 8.6-8.7 billion and RUR 6.5 billion respectively.
“Another question is whether potential buyers are ready to pay this sum,” says the analyst. In his opinion, in both cases, the investors may be large railway operators, because they have enough funds to pay the sum suitable for RZD. Zheldorremmash may be more interesting if we take into account the expected liberalization of the locomotive park. “This idea is quite disputable, but if RZD has to make this step, the repair company will be an attractive asset. Without locomotive traction liberalization, the shareholding in Zheldorremmash may be purchased only if the price is attractive (at the level of the cost of net assets), because a company will hardly manage to earn a lot fulfilling just RZD’s orders. By the way, its net profit margin was less than 2% in 2010,” considers Mr Adamidov.
The profitability of Vagonremmash is not very high either (net profit margin was 1.2% in 2010), but the shareholding in this company may be rather interesting to manage risks and compete with other market players. “An operator purchasing such an asset receives his own repair base and can to some degree pressure competitors, if their rolling stock is repaired at his plants,” notes the expert. The purchase of these assets by the usual investors for profit is hardly possible. 
In his turn, Mr Kostrikin emphasizes that the cost of shareholdings in these two subsidiaries depends on the results of estimates by independent valuers. If this approach is used, the market cost of assets owned by the enterprises and their market prospects are taken into account.
“Taking into account that RZD will remain the basic customer of Zheldorremmash for a long time, and the Federal Passenger Company – the customer of Vagonremmash, we can state that the sales market for the services provided by these plants is quite stable, and this must be taken into consideration when setting the starting price for the shareholdings,” says Mr Kostrikin. In his opinion, these assets are especially interesting to locomotive and passenger wagon manufacturers. Financial analysts think that the chosen time for the sale is rather risky. In fact, it is difficult to find a strategic investor in conditions of financial instability, Mr Kostrikin believes. “Taking into account the economic situation, it is not a very good period for investments, because the offer of long-term liquidity in the market is small. On the other hand, the situation in the railway sector is quite favourable: transportation of cargo and passengers increases, consequently, there is a need for rolling stock repair. If investors manage to solve the problem of liquidity attraction, new owners of these assets may earn significant proceeds and their business capitalization may grow.”
“The situation is now rather vague. The external situation is worse than a year ago, but it is not as bad as it could be in the case of a Greek default or a sudden significant decline in prices for oil,” adds Mr Amidov. “On the one hand, it is better not to stall for time, on the other hand, due to the specifics of the potential investors, the time of the sale is not crucial.”

Looking Forward
RZDstroy, BetElTrans, and the First Non-ore Company are engaged in transport construction and production of construction materials. 
RZDstroy is one of the leading companies in the Russian transport construction market. According to the volume of construction services sales, it is among the top five companies in the Russian Federation. It is a construction-industrial enterprise of a federal scale fulfilling contractor works across the entire territory of Russia – from Kaliningrad to Yuzhno-Sakhalinsk. 
BetElTrans is the largest producer of reinforced concrete products and materials for permanent way in Russia and the CIS. The 50% shareholding RZD will own after the sale will not be sold any time soon, because BetElTrans is considered a strategically important asset for the sector. 
The First Non-ore Company incorporates 18 plants. The prospects for the company’s further development depend on the investor that wins the competition. RZD’s stake in the company will be 25% plus 2 shares, therefore, the holding company will be able to agree with the future owner on the volume of crushed stone purchases and the prices for it.
Mr Adamidov believes that taking into account the cost of assets, the price for the shareholding in RZDstroy will amount to RUR 8.5 billion, in BetElTrans – RUR 350 million, and in the First Non-ore Company – RUR 5.5 billion. In the expert’s opinion, the stakes are likely to be bought by minority shareholders or top managers of the companies, if they have enough funds. “The exclusion may be RZDstroy. It may be purchased by large holding companies engaged in construction,” thinks the expert.
Shareholdings in the Novosibirsk Railroad Switch Plant and the Moscow Locomotive Repair Plant are also to be sold at a price not lower than the market one, defined on the basis of a report by an independent valuer, and not lower than the notional value of the shares. 
The Novosibirsk Railroad Switch Plant was launched as a joint stock company in 2008. It was established on the basis of the plant in the framework of forming RZD’s subsidiaries for permanent way repair. Nowadays, the plant specializes in railroad switch production for railway mainline tracks of RZD (fulfills 60% of the company’s needs), railway accesses to industrial enterprises, metallurgical and ore mining and processing enterprises, coal open-pit mines, pits, and for tramlines and the underground. The products of the plant are used on practically all railways in Russia, and purchased by a lot of CIS states. 
The Moscow Locomotive Repair Plant was launched in 2007. The company is engaged in capital repair of electric rolling stock, including upgrading and service life extension. It is now one of the largest plants in the engineering sector of Russia according to its technical equipment.
TransContainer is likely to be the most interesting asset to investors. The company was established in March 2006. It manages 60,000 large-capacity containers, about 25,000 flat railcars, has a network of railway terminals at 46 railway stations in Russia – from St Petersburg to Vladivostok, and manages a terminal in Slovakia. RZD owns 50% plus one share in TransContainer, FESCO – 18.5%, approximately 9% - to the European Bank of Reconstruction and Development, and 5.2% – to the non-governmental retirement fund Blagosostoyanie. 
Today, it is not clear yet what shareholding in TransContainer (25% or 50%) RZD will sell. Vladimir Yakunin, President of RZD, speaks about the need to sell only a 25% stake after 2013. In the opinion of the Ministry of Transport, the auction must be held in 2012, and it is necessary to sell the entire 50% shareholding owned by RZD.   
In their turn, senior managers of TransContainer expect that the final decision on the company’s privatization will be taken after the new RF government is formed, which will happen after the inauguration of the new RF President in May. The Transport Ministry notes that if there is a decline in the market, and the cost of the company reduces, it will be necessary to decide whether the company’s sale is reasonable. TransContainer held the IPO, and the company has a relevant cost.
Privatization of RZD’s assets will not end in 2012. In 2013, it is planned to sell at least 50% minus 2 shares in the authorized capital of Wagon Repair Company-1 OJSC (WRC-1) and not less than 75% minus 2 shares in WRC-2 OJSC and WRC-3 OJSC.
RZD established these three companies on the basis of the property of the Central Directorate for Cargo Railcars Repair of RZD in 2011 as 100% subsidiaries. The transporter transferred 118 wagon repair sub-divisions, which used to be in the structure of the Central Directorate for Cargo Railcars Repair to them (the total capacity is 358,134 repair operations per annum). At the beginning of 2011, the share of WRC in the wagon repair services market was approximately 70%, after the sale the share will drop to 25%. Thus, RZD believes that the sale will make for the formation of a competitive market in wagon repairs. Also, auctions to sell Refservice and Transwoodservice are supposed to be held in 2013. 
By Elena Ushkova
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Coming onto Market Rails
The assets of RZD holding company are sold in the framework of the final stage of the railway structural reform, which is carried out to divide natural monopolistic and competitive businesses, develop competition in the market segments of the railway sector, and increase the economic efficiency of RZD’s operations.
In 2011, RZD received about RUR 150 billion from selling stakes in its subsidiaries. The proceeds were allocated to finance the company’s investment programme.
This year, it is planned to sell 75% minus 2 shares in Vagonremmash, Zheldorremmash, Novosibirsk Railroad Switch Plant, Moscow Locomotive Repair Works, and the First Non-Ore Company; 50% minus 2 shares in RZDstroy and BetElTrans; and a 25% shareholding from RZD’s 50% stake in the Central Suburban Passenger Company. The respective decrees of the RF Government have been signed already.

Repair Assets Are Like Gold Dust
According to the term of the competition, the shareholdings in Vagonremmash and Zheldorremmash (3.055 billion and 11.372 billion ordinary shares respectively) must be sold at a price not lower than the market one, defined on the basis of a report of an independent valuer. 
Zheldorremmash, a subsidiary of RZD, was established on the basis of the Directorate for traction rolling stock in the framework of the structural railway reform in 2009. Nowadays, the company is an integrated repair complex operating on the RZD network. It has 11 affiliates – 10 locomotive repair plants and an engineering centre in Yaroslavl. Zheldorremmash is the leader in the market of spares production and traction rolling stock repair in Russia and other states on the area of the former USSR.
In particular, the company provides average and capital repair of nodes, complete units, and locomotives, maintenance between one capital repair and the next, and their upgrading with life extension. The enterprise also participates in the development of innovative technologies for repair and modernization, and for creation of next generation rolling stock. The company puts successfully into operation energy-saving programmes and technologies, an up-to-date system of quality, and lean production methods. The developed network of company’s affiliates enables to fulfill the needs of RZD’s enterprises. 
Vagonremmash started business activity in the middle of 2008. It was launched on the basis of three wagon repair plants – those in Voronezh, Novorossiysk, and Tambov. The enterprise provides such services as capital and overhaul reconditioning repair and upgrading of passenger rolling stock, repair of specialized railcars, depot and capital repair of cargo wagons and repair of wheel-sets. Also, Vagonremmash produces brake equipment, spares, assembles two-axle bogies for cargo wagons and provides new forming of wheel-sets. The geographical position of its sites allows it to supply products and services to central and southern regions of Russia with the least transport expenses.
“Selling the control interests in these companies starts the process of structural changes in the locomotives and passenger railcars repair sector. These steps are the practical embodiment of plans to make the RZD’s repair complex more efficient and to transfer to market relations between repair enterprises and customers, including definition of the financial responsibility for the quality and timeliness of repair,” notes Konstantin Kostrikin, Head of Transport Engineering Research Department at the Institute of Natural Monopolies’ Problems. New owners are supposed to invest in modernization of repair enterprises, putting into operation new technologies of locomotive and passenger railcar repair.
In the opinion of experts, these assets are interesting to investors. “Despite relatively small revenue, Zheldorremmash is one of the basic players in the sector of maintenance services for traction rolling stock. Since the company operates in Russia as well as in the CIS (it owns assets in Ukraine, Latvia, and Uzbekistan), its customers will get access to almost all the 1520 space,” mentions Dmitry Adamidov, co-head of the analytical department at the independent analytical agency Investcafe. “As for Vagonremmash, this company is a large player in the wagon repair market in the southern regions of Russia.”
Zheldorremmash services mainly RZD, while Vagonremmash is oriented at independent operators and works in a competitive market. “The sale of these shareholdings will impact on the sector only if some large operator purchases them and changes the order portfolio (for example, in case it reorients the plants to service its own rolling stock). In other cases, the sale will not cause significant problems,” considers Mr Adamidov. 
According to his estimates, the value of the shareholdings will exceed the cost of the company’s net assets by 80-100%. Taking into account the results of 2010, 100% stake in Zheldorremmash will be estimated at not less than RUR 30-31 billion. Thus, 75% minus 2 shares will cost approximately RUR 23 billion. The figures for Vagonremmash are RUR 8.6-8.7 billion and RUR 6.5 billion respectively.
“Another question is whether potential buyers are ready to pay this sum,” says the analyst. In his opinion, in both cases, the investors may be large railway operators, because they have enough funds to pay the sum suitable for RZD. Zheldorremmash may be more interesting if we take into account the expected liberalization of the locomotive park. “This idea is quite disputable, but if RZD has to make this step, the repair company will be an attractive asset. Without locomotive traction liberalization, the shareholding in Zheldorremmash may be purchased only if the price is attractive (at the level of the cost of net assets), because a company will hardly manage to earn a lot fulfilling just RZD’s orders. By the way, its net profit margin was less than 2% in 2010,” considers Mr Adamidov.
The profitability of Vagonremmash is not very high either (net profit margin was 1.2% in 2010), but the shareholding in this company may be rather interesting to manage risks and compete with other market players. “An operator purchasing such an asset receives his own repair base and can to some degree pressure competitors, if their rolling stock is repaired at his plants,” notes the expert. The purchase of these assets by the usual investors for profit is hardly possible. 
In his turn, Mr Kostrikin emphasizes that the cost of shareholdings in these two subsidiaries depends on the results of estimates by independent valuers. If this approach is used, the market cost of assets owned by the enterprises and their market prospects are taken into account.
“Taking into account that RZD will remain the basic customer of Zheldorremmash for a long time, and the Federal Passenger Company – the customer of Vagonremmash, we can state that the sales market for the services provided by these plants is quite stable, and this must be taken into consideration when setting the starting price for the shareholdings,” says Mr Kostrikin. In his opinion, these assets are especially interesting to locomotive and passenger wagon manufacturers. Financial analysts think that the chosen time for the sale is rather risky. In fact, it is difficult to find a strategic investor in conditions of financial instability, Mr Kostrikin believes. “Taking into account the economic situation, it is not a very good period for investments, because the offer of long-term liquidity in the market is small. On the other hand, the situation in the railway sector is quite favourable: transportation of cargo and passengers increases, consequently, there is a need for rolling stock repair. If investors manage to solve the problem of liquidity attraction, new owners of these assets may earn significant proceeds and their business capitalization may grow.”
“The situation is now rather vague. The external situation is worse than a year ago, but it is not as bad as it could be in the case of a Greek default or a sudden significant decline in prices for oil,” adds Mr Amidov. “On the one hand, it is better not to stall for time, on the other hand, due to the specifics of the potential investors, the time of the sale is not crucial.”

Looking Forward
RZDstroy, BetElTrans, and the First Non-ore Company are engaged in transport construction and production of construction materials. 
RZDstroy is one of the leading companies in the Russian transport construction market. According to the volume of construction services sales, it is among the top five companies in the Russian Federation. It is a construction-industrial enterprise of a federal scale fulfilling contractor works across the entire territory of Russia – from Kaliningrad to Yuzhno-Sakhalinsk. 
BetElTrans is the largest producer of reinforced concrete products and materials for permanent way in Russia and the CIS. The 50% shareholding RZD will own after the sale will not be sold any time soon, because BetElTrans is considered a strategically important asset for the sector. 
The First Non-ore Company incorporates 18 plants. The prospects for the company’s further development depend on the investor that wins the competition. RZD’s stake in the company will be 25% plus 2 shares, therefore, the holding company will be able to agree with the future owner on the volume of crushed stone purchases and the prices for it.
Mr Adamidov believes that taking into account the cost of assets, the price for the shareholding in RZDstroy will amount to RUR 8.5 billion, in BetElTrans – RUR 350 million, and in the First Non-ore Company – RUR 5.5 billion. In the expert’s opinion, the stakes are likely to be bought by minority shareholders or top managers of the companies, if they have enough funds. “The exclusion may be RZDstroy. It may be purchased by large holding companies engaged in construction,” thinks the expert.
Shareholdings in the Novosibirsk Railroad Switch Plant and the Moscow Locomotive Repair Plant are also to be sold at a price not lower than the market one, defined on the basis of a report by an independent valuer, and not lower than the notional value of the shares. 
The Novosibirsk Railroad Switch Plant was launched as a joint stock company in 2008. It was established on the basis of the plant in the framework of forming RZD’s subsidiaries for permanent way repair. Nowadays, the plant specializes in railroad switch production for railway mainline tracks of RZD (fulfills 60% of the company’s needs), railway accesses to industrial enterprises, metallurgical and ore mining and processing enterprises, coal open-pit mines, pits, and for tramlines and the underground. The products of the plant are used on practically all railways in Russia, and purchased by a lot of CIS states. 
The Moscow Locomotive Repair Plant was launched in 2007. The company is engaged in capital repair of electric rolling stock, including upgrading and service life extension. It is now one of the largest plants in the engineering sector of Russia according to its technical equipment.
TransContainer is likely to be the most interesting asset to investors. The company was established in March 2006. It manages 60,000 large-capacity containers, about 25,000 flat railcars, has a network of railway terminals at 46 railway stations in Russia – from St Petersburg to Vladivostok, and manages a terminal in Slovakia. RZD owns 50% plus one share in TransContainer, FESCO – 18.5%, approximately 9% - to the European Bank of Reconstruction and Development, and 5.2% – to the non-governmental retirement fund Blagosostoyanie. 
Today, it is not clear yet what shareholding in TransContainer (25% or 50%) RZD will sell. Vladimir Yakunin, President of RZD, speaks about the need to sell only a 25% stake after 2013. In the opinion of the Ministry of Transport, the auction must be held in 2012, and it is necessary to sell the entire 50% shareholding owned by RZD.   
In their turn, senior managers of TransContainer expect that the final decision on the company’s privatization will be taken after the new RF government is formed, which will happen after the inauguration of the new RF President in May. The Transport Ministry notes that if there is a decline in the market, and the cost of the company reduces, it will be necessary to decide whether the company’s sale is reasonable. TransContainer held the IPO, and the company has a relevant cost.
Privatization of RZD’s assets will not end in 2012. In 2013, it is planned to sell at least 50% minus 2 shares in the authorized capital of Wagon Repair Company-1 OJSC (WRC-1) and not less than 75% minus 2 shares in WRC-2 OJSC and WRC-3 OJSC.
RZD established these three companies on the basis of the property of the Central Directorate for Cargo Railcars Repair of RZD in 2011 as 100% subsidiaries. The transporter transferred 118 wagon repair sub-divisions, which used to be in the structure of the Central Directorate for Cargo Railcars Repair to them (the total capacity is 358,134 repair operations per annum). At the beginning of 2011, the share of WRC in the wagon repair services market was approximately 70%, after the sale the share will drop to 25%. Thus, RZD believes that the sale will make for the formation of a competitive market in wagon repairs. Also, auctions to sell Refservice and Transwoodservice are supposed to be held in 2013. 
By Elena Ushkova
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Coming onto Market Rails
The assets of RZD holding company are sold in the framework of the final stage of the railway structural reform, which is carried out to divide natural monopolistic and competitive businesses, develop competition in the market segments of the railway sector, and increase the economic efficiency of RZD’s operations.
In 2011, RZD received about RUR 150 billion from selling stakes in its subsidiaries. The proceeds were allocated to finance the company’s investment programme.
This year, it is planned to sell 75% minus 2 shares in Vagonremmash, Zheldorremmash, Novosibirsk Railroad Switch Plant, Moscow Locomotive Repair Works, and the First Non-Ore Company; 50% minus 2 shares in RZDstroy and BetElTrans; and a 25% shareholding from RZD’s 50% stake in the Central Suburban Passenger Company. The respective decrees of the RF Government have been signed already.

Repair Assets Are Like Gold Dust
According to the term of the competition, the shareholdings in Vagonremmash and Zheldorremmash (3.055 billion and 11.372 billion ordinary shares respectively) must be sold at a price not lower than the market one, defined on the basis of a report of an independent valuer. 
Zheldorremmash, a subsidiary of RZD, was established on the basis of the Directorate for traction rolling stock in the framework of the structural railway reform in 2009. Nowadays, the company is an integrated repair complex operating on the RZD network. It has 11 affiliates – 10 locomotive repair plants and an engineering centre in Yaroslavl. Zheldorremmash is the leader in the market of spares production and traction rolling stock repair in Russia and other states on the area of the former USSR.
In particular, the company provides average and capital repair of nodes, complete units, and locomotives, maintenance between one capital repair and the next, and their upgrading with life extension. The enterprise also participates in the development of innovative technologies for repair and modernization, and for creation of next generation rolling stock. The company puts successfully into operation energy-saving programmes and technologies, an up-to-date system of quality, and lean production methods. The developed network of company’s affiliates enables to fulfill the needs of RZD’s enterprises. 
Vagonremmash started business activity in the middle of 2008. It was launched on the basis of three wagon repair plants – those in Voronezh, Novorossiysk, and Tambov. The enterprise provides such services as capital and overhaul reconditioning repair and upgrading of passenger rolling stock, repair of specialized railcars, depot and capital repair of cargo wagons and repair of wheel-sets. Also, Vagonremmash produces brake equipment, spares, assembles two-axle bogies for cargo wagons and provides new forming of wheel-sets. The geographical position of its sites allows it to supply products and services to central and southern regions of Russia with the least transport expenses.
“Selling the control interests in these companies starts the process of structural changes in the locomotives and passenger railcars repair sector. These steps are the practical embodiment of plans to make the RZD’s repair complex more efficient and to transfer to market relations between repair enterprises and customers, including definition of the financial responsibility for the quality and timeliness of repair,” notes Konstantin Kostrikin, Head of Transport Engineering Research Department at the Institute of Natural Monopolies’ Problems. New owners are supposed to invest in modernization of repair enterprises, putting into operation new technologies of locomotive and passenger railcar repair.
In the opinion of experts, these assets are interesting to investors. “Despite relatively small revenue, Zheldorremmash is one of the basic players in the sector of maintenance services for traction rolling stock. Since the company operates in Russia as well as in the CIS (it owns assets in Ukraine, Latvia, and Uzbekistan), its customers will get access to almost all the 1520 space,” mentions Dmitry Adamidov, co-head of the analytical department at the independent analytical agency Investcafe. “As for Vagonremmash, this company is a large player in the wagon repair market in the southern regions of Russia.”
Zheldorremmash services mainly RZD, while Vagonremmash is oriented at independent operators and works in a competitive market. “The sale of these shareholdings will impact on the sector only if some large operator purchases them and changes the order portfolio (for example, in case it reorients the plants to service its own rolling stock). In other cases, the sale will not cause significant problems,” considers Mr Adamidov. 
According to his estimates, the value of the shareholdings will exceed the cost of the company’s net assets by 80-100%. Taking into account the results of 2010, 100% stake in Zheldorremmash will be estimated at not less than RUR 30-31 billion. Thus, 75% minus 2 shares will cost approximately RUR 23 billion. The figures for Vagonremmash are RUR 8.6-8.7 billion and RUR 6.5 billion respectively.
“Another question is whether potential buyers are ready to pay this sum,” says the analyst. In his opinion, in both cases, the investors may be large railway operators, because they have enough funds to pay the sum suitable for RZD. Zheldorremmash may be more interesting if we take into account the expected liberalization of the locomotive park. “This idea is quite disputable, but if RZD has to make this step, the repair company will be an attractive asset. Without locomotive traction liberalization, the shareholding in Zheldorremmash may be purchased only if the price is attractive (at the level of the cost of net assets), because a company will hardly manage to earn a lot fulfilling just RZD’s orders. By the way, its net profit margin was less than 2% in 2010,” considers Mr Adamidov.
The profitability of Vagonremmash is not very high either (net profit margin was 1.2% in 2010), but the shareholding in this company may be rather interesting to manage risks and compete with other market players. “An operator purchasing such an asset receives his own repair base and can to some degree pressure competitors, if their rolling stock is repaired at his plants,” notes the expert. The purchase of these assets by the usual investors for profit is hardly possible. 
In his turn, Mr Kostrikin emphasizes that the cost of shareholdings in these two subsidiaries depends on the results of estimates by independent valuers. If this approach is used, the market cost of assets owned by the enterprises and their market prospects are taken into account.
“Taking into account that RZD will remain the basic customer of Zheldorremmash for a long time, and the Federal Passenger Company – the customer of Vagonremmash, we can state that the sales market for the services provided by these plants is quite stable, and this must be taken into consideration when setting the starting price for the shareholdings,” says Mr Kostrikin. In his opinion, these assets are especially interesting to locomotive and passenger wagon manufacturers. Financial analysts think that the chosen time for the sale is rather risky. In fact, it is difficult to find a strategic investor in conditions of financial instability, Mr Kostrikin believes. “Taking into account the economic situation, it is not a very good period for investments, because the offer of long-term liquidity in the market is small. On the other hand, the situation in the railway sector is quite favourable: transportation of cargo and passengers increases, consequently, there is a need for rolling stock repair. If investors manage to solve the problem of liquidity attraction, new owners of these assets may earn significant proceeds and their business capitalization may grow.”
“The situation is now rather vague. The external situation is worse than a year ago, but it is not as bad as it could be in the case of a Greek default or a sudden significant decline in prices for oil,” adds Mr Amidov. “On the one hand, it is better not to stall for time, on the other hand, due to the specifics of the potential investors, the time of the sale is not crucial.”

Looking Forward
RZDstroy, BetElTrans, and the First Non-ore Company are engaged in transport construction and production of construction materials. 
RZDstroy is one of the leading companies in the Russian transport construction market. According to the volume of construction services sales, it is among the top five companies in the Russian Federation. It is a construction-industrial enterprise of a federal scale fulfilling contractor works across the entire territory of Russia – from Kaliningrad to Yuzhno-Sakhalinsk. 
BetElTrans is the largest producer of reinforced concrete products and materials for permanent way in Russia and the CIS. The 50% shareholding RZD will own after the sale will not be sold any time soon, because BetElTrans is considered a strategically important asset for the sector. 
The First Non-ore Company incorporates 18 plants. The prospects for the company’s further development depend on the investor that wins the competition. RZD’s stake in the company will be 25% plus 2 shares, therefore, the holding company will be able to agree with the future owner on the volume of crushed stone purchases and the prices for it.
Mr Adamidov believes that taking into account the cost of assets, the price for the shareholding in RZDstroy will amount to RUR 8.5 billion, in BetElTrans – RUR 350 million, and in the First Non-ore Company – RUR 5.5 billion. In the expert’s opinion, the stakes are likely to be bought by minority shareholders or top managers of the companies, if they have enough funds. “The exclusion may be RZDstroy. It may be purchased by large holding companies engaged in construction,” thinks the expert.
Shareholdings in the Novosibirsk Railroad Switch Plant and the Moscow Locomotive Repair Plant are also to be sold at a price not lower than the market one, defined on the basis of a report by an independent valuer, and not lower than the notional value of the shares. 
The Novosibirsk Railroad Switch Plant was launched as a joint stock company in 2008. It was established on the basis of the plant in the framework of forming RZD’s subsidiaries for permanent way repair. Nowadays, the plant specializes in railroad switch production for railway mainline tracks of RZD (fulfills 60% of the company’s needs), railway accesses to industrial enterprises, metallurgical and ore mining and processing enterprises, coal open-pit mines, pits, and for tramlines and the underground. The products of the plant are used on practically all railways in Russia, and purchased by a lot of CIS states. 
The Moscow Locomotive Repair Plant was launched in 2007. The company is engaged in capital repair of electric rolling stock, including upgrading and service life extension. It is now one of the largest plants in the engineering sector of Russia according to its technical equipment.
TransContainer is likely to be the most interesting asset to investors. The company was established in March 2006. It manages 60,000 large-capacity containers, about 25,000 flat railcars, has a network of railway terminals at 46 railway stations in Russia – from St Petersburg to Vladivostok, and manages a terminal in Slovakia. RZD owns 50% plus one share in TransContainer, FESCO – 18.5%, approximately 9% - to the European Bank of Reconstruction and Development, and 5.2% – to the non-governmental retirement fund Blagosostoyanie. 
Today, it is not clear yet what shareholding in TransContainer (25% or 50%) RZD will sell. Vladimir Yakunin, President of RZD, speaks about the need to sell only a 25% stake after 2013. In the opinion of the Ministry of Transport, the auction must be held in 2012, and it is necessary to sell the entire 50% shareholding owned by RZD.   
In their turn, senior managers of TransContainer expect that the final decision on the company’s privatization will be taken after the new RF government is formed, which will happen after the inauguration of the new RF President in May. The Transport Ministry notes that if there is a decline in the market, and the cost of the company reduces, it will be necessary to decide whether the company’s sale is reasonable. TransContainer held the IPO, and the company has a relevant cost.
Privatization of RZD’s assets will not end in 2012. In 2013, it is planned to sell at least 50% minus 2 shares in the authorized capital of Wagon Repair Company-1 OJSC (WRC-1) and not less than 75% minus 2 shares in WRC-2 OJSC and WRC-3 OJSC.
RZD established these three companies on the basis of the property of the Central Directorate for Cargo Railcars Repair of RZD in 2011 as 100% subsidiaries. The transporter transferred 118 wagon repair sub-divisions, which used to be in the structure of the Central Directorate for Cargo Railcars Repair to them (the total capacity is 358,134 repair operations per annum). At the beginning of 2011, the share of WRC in the wagon repair services market was approximately 70%, after the sale the share will drop to 25%. Thus, RZD believes that the sale will make for the formation of a competitive market in wagon repairs. Also, auctions to sell Refservice and Transwoodservice are supposed to be held in 2013. 
By Elena Ushkova
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Railway Line from Yakutia to Magadan to Be Built in 2016-2030
The administration of the Magadan Region approved the draft scientific and technological basis for the construction of a railway line from the border of Yakutia to Magadan. The project envisages that the construction works will start in 2016 and be completed in 2030. 
“Approximately RUR 5 million was spent  developing the project. It envisages two directions of the railway line –westwards and eastwards. The former will run from the border with Yakutia to Kadykchan, Susuman, Neksikan, Yagodnoe settlement, Orotukan settlement, and then via Gerba and Atka southwards to Magadan,” a representative of the press-service of the regional administration.
The eastward direction envisages construction of a railway line from Gerba to Omsukchan, and farther to the northeast to Chukotka and to the southeast to Kamchatka.
The draft scientific and technological basis was developed by specialists at Financial and Organisational Consulting LLC.
“The development of the project started in 2009. At that time it was not approved, because the executor – Financial and Organisational Consulting LLC – had not taken into account loading of the Magadan Commercial Sea Port in the transport scheme of the territory after the launch of the railway line,” said the representative of the press-service of the regional administration.

FESCO Can Wait Two Years
FESCO transport group of companies can sell its 21.1% shareholding in TransContainer, if the state does not decide on the sale of RZD’s shareholding in the largest Russian container operator, said Kirill Rubinsky, Head of the Board of Directors of FESCO. 
“We are not financial investors, thus we have no reason for keeping the stake,” Mr Rubinsky told journalists.
He added that FESCO is ready to wait not more than two years, and it is not going to enlarge its stake in TransContainer through buying shares in the market. RZD owns 50% plus 1 share of TransContainer.

Russian International Ship Register Has Registered 51 Vessels
From January 1, 2012 to March 15, 2012, the number of vessels registered in the Russian International Ship Register totaled 51 units, a Russian official said. 
Deputy Minister of Transport Victor Olersky told the Board of the Federal Agency of Maritime and River Transport (Rosmorrechflot) the number includes 11 vessels registered in St Petersburg and Taganrog, 1 of them was built in 2012, while the build date of 10 vessels is 1990 and later. 27 ships changed their flags (Malta, Sierra Leone, St. Kitts and Nevis), the oldest vessel’s build date is 1997, the youngest – was built in 2012 (a former Malta flag ship).
The society also re-registered 24 Russian flag ships, the oldest of them was built in 1990, the youngest – last year.

RZD Increases Investments into Development of Ports and Railway Accesses to Them
RZD invests RUR 520 billion to develop ports and railway access to them, the “Vedomosti” newspaper wrote referring to the company’s 2013-2015 investment programme. 
According to the document, the volume of investments is to grow in 2012 by RUR 18.7 billion to RUR 447.1 billion; in 2013 – by RUR 36 billion to RUR 337 billion, and in 2014 investments will amount to RUR 367 billion, and in 2015 – RUR 383.6 billion. The total sum of the investment programme will exceed RUR 1.1 trillion over four years. The investment programme will be financed from RZD’s own means plus loans. To carry it out, the company offers to increase transportation tariffs by 11% in 2013, and by 5% in 2014-2015. Another possible financial source is so-called “infrastructure bonds.”

RZD Invests in Mainline Railway Transport Development in Kuzbass
In 2012-2015, Russian Railways JSC to invest RUR 100 billion in mainline railway transport development in Kuzbass. 
Administration of the Kemerovskaya Oblast has discussed the draft programme of mainline and industrial railway transport development and its technology of work improvement in Kuzbass in 2012-2015.
RZD and 36 coal companies and industrial enterprises of Kuzbass will take part in realization of the programme.
In this period, it is supposed to construct river crossings via the Tom’ at the Tomusinskaya – Karlyk and the Bardino – Erunakovo sections, a tunnel near the Kuregesh station, secondary tracks on the Proektnaya – Yurga 2 and the Predkombinat – Anzherskaya sections. It is planned to buy new powerful mainline electric locomotives “Granit”; to extend tracks on the freight railway stations of Meret’, Mezhdurechensk, Pravotomsk, and Zarinskaya; to renew and re-equip overhead line equipment at the Taiga – Anzherskaya, the Spichenkovo – Novokuznetsk-Sortirovochny, the Oyash – Chebula, and the Moscovka – Syropyatskoe railway sections; to reconstruct Belovo railway substation.

Strategy of Railways Development to 2030 Should Be Updated
The Strategy of Railways Development in Russia to 2030 is still topical, but it should be updated in accordance with the current situation. 
Speaking at the plenary session of the 2nd international forum “Transport Science. Innovative Solutions for Business”, Vadim Morozov, First Vice President of RZD, said, “The strategy realisation must result in creation of conditions for a three-fold increase in the country’s economy in comparison with the figures of 2007”. “The current volatility of the world economic system, caused by the global crisis, dictates that it is necessary to search for new approaches based on the priority development of the real sector of the economy,” said Mr Morozov. “The key condition for it is outpaced development of railway transport. It must be upgraded dramatically, and complex innovative solutions must be implemented.”

Wagon Casting Shortage Is Over
There was a shortage of wagon casting until 2012 because of the maximum production of new cargo railcars. 
Also, casting plants did not reach their design capacity at that time, said Vladimir Prokofyev, President of Association of Transporters and Railway Rolling Stock Operators, at the meeting of the Association and non-commercial partnership Union of Railway Machinery Manufacturers. The meeting was devoted to improvement of the quality and reliability of large-size wagon casting. “Taking into account that upgraded plants have reached the design capacity, and additional capacities are to be put into operation at the Bezhetsky Steel Casting Plant in the second half of the year, and VKM-Steel will start to manufacture this product, the deficit in casting disappears,” added Mr Prokofyev.

Regions Refuse to Subside Suburban Transportation – RZD
A lot of Russian regions do not give suburban passenger companies subsidies to provide passenger transportation by railway, the press-service of RZD said. 
Despite a number of important decisions on railway suburban passenger transportation made by the RF Government in 2011, the problem of smaller revenue received by suburban passenger companies has not been solved yet.
Thus, the need for subsidies in 2012 is approximately RUR 16 billion (about $544 million) in the RF. Russian regions envisage in their budgets that the sum for financing suburban passenger companies is approximately RUR 6.6 billion (or 40% of the company’s demand). 
According to experts, to whose estimations RZD refers, the specific need for financing of 10 passenger-kilometres from the regional budget is by 50% less for railways than that for other transport modes. Also, according to their evaluations, at least 30% of subsidies return to the budget in the form of taxes.
However, a number of regions plan to compensate for less than 20% of the revenue not received by the suburban passenger companies.
“The lack of 100% compensation for the revenues not received by suburban passenger companies raises doubts that the companies may not reach the break-even point before 2013, as it was planned in the railway transport structural reform programme. Moreover, it destabilizes the financial position of suburban passenger companies, and consequently, it may cause changes in the suburban railway communication in some regions and instability of suburban railway transportation in the entire country,” RZD’s press-service concluded.

RF Transport Ministry Estimates Infrastructure Bond Market Capacity at RUR 500 Billion per Year
The potential infrastructure bond market capacity is estimated at about RUR 500 billion a year, according to Russia’s Minister of Transport Igor Levitin.
“We have work to do to develop the infrastructure bond market, i.e. by means of placing the savings part of pensions in bond issues sold for construction of transport infrastructure objects. The potential infrastructure bond market capacity is estimated at RUR 500 billion annually taking into account implementation of the high speed rail programme” said Mr Levitin. He added that demand for private investments till 2010 is estimated at RUR 300 billion for road infrastructure, RUR 350 billion for sea ports and about RUR 200 billion for airport infrastructure. Deputy Minister for Economic Development Andrey Klepach said in February that the government would make final arrangements for infrastructure bond issuance.
  
RZD Suggests Adjusting Tariffs on Cargo Transportation by the Annual Inflation Index
RZD suggests increasing tariffs on cargo transportation by 10% in 2013, and adjusting them by the annual inflation index starting from 2014, Vladimir Yakunin, RZD President, told journalists.
According to RZD’s project, its investment programme will grow by RUR 18.7 billion in 2012 to RUR 447.1 billion; by RUR 36 billion in 2013 to RUR 377 billion; and it will remain the same in 2014 and 2015 – RUR 367 billion and RUR 383.6 billion respectively. Therefore, the total volume of investments is more than RUR 1.1 trillion. The extended investment programme must be financed from RZD’s own means, including loaned ones. In March, RZD suggested including the investment component of 4% into the tariff. Thus, the transporter wanted to index the tariff by 11% in 2013, and by 5% in 2014-2015.
    [~DETAIL_TEXT] => 
Railway Line from Yakutia to Magadan to Be Built in 2016-2030
The administration of the Magadan Region approved the draft scientific and technological basis for the construction of a railway line from the border of Yakutia to Magadan. The project envisages that the construction works will start in 2016 and be completed in 2030. 
“Approximately RUR 5 million was spent  developing the project. It envisages two directions of the railway line –westwards and eastwards. The former will run from the border with Yakutia to Kadykchan, Susuman, Neksikan, Yagodnoe settlement, Orotukan settlement, and then via Gerba and Atka southwards to Magadan,” a representative of the press-service of the regional administration.
The eastward direction envisages construction of a railway line from Gerba to Omsukchan, and farther to the northeast to Chukotka and to the southeast to Kamchatka.
The draft scientific and technological basis was developed by specialists at Financial and Organisational Consulting LLC.
“The development of the project started in 2009. At that time it was not approved, because the executor – Financial and Organisational Consulting LLC – had not taken into account loading of the Magadan Commercial Sea Port in the transport scheme of the territory after the launch of the railway line,” said the representative of the press-service of the regional administration.

FESCO Can Wait Two Years
FESCO transport group of companies can sell its 21.1% shareholding in TransContainer, if the state does not decide on the sale of RZD’s shareholding in the largest Russian container operator, said Kirill Rubinsky, Head of the Board of Directors of FESCO. 
“We are not financial investors, thus we have no reason for keeping the stake,” Mr Rubinsky told journalists.
He added that FESCO is ready to wait not more than two years, and it is not going to enlarge its stake in TransContainer through buying shares in the market. RZD owns 50% plus 1 share of TransContainer.

Russian International Ship Register Has Registered 51 Vessels
From January 1, 2012 to March 15, 2012, the number of vessels registered in the Russian International Ship Register totaled 51 units, a Russian official said. 
Deputy Minister of Transport Victor Olersky told the Board of the Federal Agency of Maritime and River Transport (Rosmorrechflot) the number includes 11 vessels registered in St Petersburg and Taganrog, 1 of them was built in 2012, while the build date of 10 vessels is 1990 and later. 27 ships changed their flags (Malta, Sierra Leone, St. Kitts and Nevis), the oldest vessel’s build date is 1997, the youngest – was built in 2012 (a former Malta flag ship).
The society also re-registered 24 Russian flag ships, the oldest of them was built in 1990, the youngest – last year.

RZD Increases Investments into Development of Ports and Railway Accesses to Them
RZD invests RUR 520 billion to develop ports and railway access to them, the “Vedomosti” newspaper wrote referring to the company’s 2013-2015 investment programme. 
According to the document, the volume of investments is to grow in 2012 by RUR 18.7 billion to RUR 447.1 billion; in 2013 – by RUR 36 billion to RUR 337 billion, and in 2014 investments will amount to RUR 367 billion, and in 2015 – RUR 383.6 billion. The total sum of the investment programme will exceed RUR 1.1 trillion over four years. The investment programme will be financed from RZD’s own means plus loans. To carry it out, the company offers to increase transportation tariffs by 11% in 2013, and by 5% in 2014-2015. Another possible financial source is so-called “infrastructure bonds.”

RZD Invests in Mainline Railway Transport Development in Kuzbass
In 2012-2015, Russian Railways JSC to invest RUR 100 billion in mainline railway transport development in Kuzbass. 
Administration of the Kemerovskaya Oblast has discussed the draft programme of mainline and industrial railway transport development and its technology of work improvement in Kuzbass in 2012-2015.
RZD and 36 coal companies and industrial enterprises of Kuzbass will take part in realization of the programme.
In this period, it is supposed to construct river crossings via the Tom’ at the Tomusinskaya – Karlyk and the Bardino – Erunakovo sections, a tunnel near the Kuregesh station, secondary tracks on the Proektnaya – Yurga 2 and the Predkombinat – Anzherskaya sections. It is planned to buy new powerful mainline electric locomotives “Granit”; to extend tracks on the freight railway stations of Meret’, Mezhdurechensk, Pravotomsk, and Zarinskaya; to renew and re-equip overhead line equipment at the Taiga – Anzherskaya, the Spichenkovo – Novokuznetsk-Sortirovochny, the Oyash – Chebula, and the Moscovka – Syropyatskoe railway sections; to reconstruct Belovo railway substation.

Strategy of Railways Development to 2030 Should Be Updated
The Strategy of Railways Development in Russia to 2030 is still topical, but it should be updated in accordance with the current situation. 
Speaking at the plenary session of the 2nd international forum “Transport Science. Innovative Solutions for Business”, Vadim Morozov, First Vice President of RZD, said, “The strategy realisation must result in creation of conditions for a three-fold increase in the country’s economy in comparison with the figures of 2007”. “The current volatility of the world economic system, caused by the global crisis, dictates that it is necessary to search for new approaches based on the priority development of the real sector of the economy,” said Mr Morozov. “The key condition for it is outpaced development of railway transport. It must be upgraded dramatically, and complex innovative solutions must be implemented.”

Wagon Casting Shortage Is Over
There was a shortage of wagon casting until 2012 because of the maximum production of new cargo railcars. 
Also, casting plants did not reach their design capacity at that time, said Vladimir Prokofyev, President of Association of Transporters and Railway Rolling Stock Operators, at the meeting of the Association and non-commercial partnership Union of Railway Machinery Manufacturers. The meeting was devoted to improvement of the quality and reliability of large-size wagon casting. “Taking into account that upgraded plants have reached the design capacity, and additional capacities are to be put into operation at the Bezhetsky Steel Casting Plant in the second half of the year, and VKM-Steel will start to manufacture this product, the deficit in casting disappears,” added Mr Prokofyev.

Regions Refuse to Subside Suburban Transportation – RZD
A lot of Russian regions do not give suburban passenger companies subsidies to provide passenger transportation by railway, the press-service of RZD said. 
Despite a number of important decisions on railway suburban passenger transportation made by the RF Government in 2011, the problem of smaller revenue received by suburban passenger companies has not been solved yet.
Thus, the need for subsidies in 2012 is approximately RUR 16 billion (about $544 million) in the RF. Russian regions envisage in their budgets that the sum for financing suburban passenger companies is approximately RUR 6.6 billion (or 40% of the company’s demand). 
According to experts, to whose estimations RZD refers, the specific need for financing of 10 passenger-kilometres from the regional budget is by 50% less for railways than that for other transport modes. Also, according to their evaluations, at least 30% of subsidies return to the budget in the form of taxes.
However, a number of regions plan to compensate for less than 20% of the revenue not received by the suburban passenger companies.
“The lack of 100% compensation for the revenues not received by suburban passenger companies raises doubts that the companies may not reach the break-even point before 2013, as it was planned in the railway transport structural reform programme. Moreover, it destabilizes the financial position of suburban passenger companies, and consequently, it may cause changes in the suburban railway communication in some regions and instability of suburban railway transportation in the entire country,” RZD’s press-service concluded.

RF Transport Ministry Estimates Infrastructure Bond Market Capacity at RUR 500 Billion per Year
The potential infrastructure bond market capacity is estimated at about RUR 500 billion a year, according to Russia’s Minister of Transport Igor Levitin.
“We have work to do to develop the infrastructure bond market, i.e. by means of placing the savings part of pensions in bond issues sold for construction of transport infrastructure objects. The potential infrastructure bond market capacity is estimated at RUR 500 billion annually taking into account implementation of the high speed rail programme” said Mr Levitin. He added that demand for private investments till 2010 is estimated at RUR 300 billion for road infrastructure, RUR 350 billion for sea ports and about RUR 200 billion for airport infrastructure. Deputy Minister for Economic Development Andrey Klepach said in February that the government would make final arrangements for infrastructure bond issuance.
  
RZD Suggests Adjusting Tariffs on Cargo Transportation by the Annual Inflation Index
RZD suggests increasing tariffs on cargo transportation by 10% in 2013, and adjusting them by the annual inflation index starting from 2014, Vladimir Yakunin, RZD President, told journalists.
According to RZD’s project, its investment programme will grow by RUR 18.7 billion in 2012 to RUR 447.1 billion; by RUR 36 billion in 2013 to RUR 377 billion; and it will remain the same in 2014 and 2015 – RUR 367 billion and RUR 383.6 billion respectively. Therefore, the total volume of investments is more than RUR 1.1 trillion. The extended investment programme must be financed from RZD’s own means, including loaned ones. In March, RZD suggested including the investment component of 4% into the tariff. Thus, the transporter wanted to index the tariff by 11% in 2013, and by 5% in 2014-2015.
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Railway Line from Yakutia to Magadan to Be Built in 2016-2030
The administration of the Magadan Region approved the draft scientific and technological basis for the construction of a railway line from the border of Yakutia to Magadan. The project envisages that the construction works will start in 2016 and be completed in 2030. 
“Approximately RUR 5 million was spent  developing the project. It envisages two directions of the railway line –westwards and eastwards. The former will run from the border with Yakutia to Kadykchan, Susuman, Neksikan, Yagodnoe settlement, Orotukan settlement, and then via Gerba and Atka southwards to Magadan,” a representative of the press-service of the regional administration.
The eastward direction envisages construction of a railway line from Gerba to Omsukchan, and farther to the northeast to Chukotka and to the southeast to Kamchatka.
The draft scientific and technological basis was developed by specialists at Financial and Organisational Consulting LLC.
“The development of the project started in 2009. At that time it was not approved, because the executor – Financial and Organisational Consulting LLC – had not taken into account loading of the Magadan Commercial Sea Port in the transport scheme of the territory after the launch of the railway line,” said the representative of the press-service of the regional administration.

FESCO Can Wait Two Years
FESCO transport group of companies can sell its 21.1% shareholding in TransContainer, if the state does not decide on the sale of RZD’s shareholding in the largest Russian container operator, said Kirill Rubinsky, Head of the Board of Directors of FESCO. 
“We are not financial investors, thus we have no reason for keeping the stake,” Mr Rubinsky told journalists.
He added that FESCO is ready to wait not more than two years, and it is not going to enlarge its stake in TransContainer through buying shares in the market. RZD owns 50% plus 1 share of TransContainer.

Russian International Ship Register Has Registered 51 Vessels
From January 1, 2012 to March 15, 2012, the number of vessels registered in the Russian International Ship Register totaled 51 units, a Russian official said. 
Deputy Minister of Transport Victor Olersky told the Board of the Federal Agency of Maritime and River Transport (Rosmorrechflot) the number includes 11 vessels registered in St Petersburg and Taganrog, 1 of them was built in 2012, while the build date of 10 vessels is 1990 and later. 27 ships changed their flags (Malta, Sierra Leone, St. Kitts and Nevis), the oldest vessel’s build date is 1997, the youngest – was built in 2012 (a former Malta flag ship).
The society also re-registered 24 Russian flag ships, the oldest of them was built in 1990, the youngest – last year.

RZD Increases Investments into Development of Ports and Railway Accesses to Them
RZD invests RUR 520 billion to develop ports and railway access to them, the “Vedomosti” newspaper wrote referring to the company’s 2013-2015 investment programme. 
According to the document, the volume of investments is to grow in 2012 by RUR 18.7 billion to RUR 447.1 billion; in 2013 – by RUR 36 billion to RUR 337 billion, and in 2014 investments will amount to RUR 367 billion, and in 2015 – RUR 383.6 billion. The total sum of the investment programme will exceed RUR 1.1 trillion over four years. The investment programme will be financed from RZD’s own means plus loans. To carry it out, the company offers to increase transportation tariffs by 11% in 2013, and by 5% in 2014-2015. Another possible financial source is so-called “infrastructure bonds.”

RZD Invests in Mainline Railway Transport Development in Kuzbass
In 2012-2015, Russian Railways JSC to invest RUR 100 billion in mainline railway transport development in Kuzbass. 
Administration of the Kemerovskaya Oblast has discussed the draft programme of mainline and industrial railway transport development and its technology of work improvement in Kuzbass in 2012-2015.
RZD and 36 coal companies and industrial enterprises of Kuzbass will take part in realization of the programme.
In this period, it is supposed to construct river crossings via the Tom’ at the Tomusinskaya – Karlyk and the Bardino – Erunakovo sections, a tunnel near the Kuregesh station, secondary tracks on the Proektnaya – Yurga 2 and the Predkombinat – Anzherskaya sections. It is planned to buy new powerful mainline electric locomotives “Granit”; to extend tracks on the freight railway stations of Meret’, Mezhdurechensk, Pravotomsk, and Zarinskaya; to renew and re-equip overhead line equipment at the Taiga – Anzherskaya, the Spichenkovo – Novokuznetsk-Sortirovochny, the Oyash – Chebula, and the Moscovka – Syropyatskoe railway sections; to reconstruct Belovo railway substation.

Strategy of Railways Development to 2030 Should Be Updated
The Strategy of Railways Development in Russia to 2030 is still topical, but it should be updated in accordance with the current situation. 
Speaking at the plenary session of the 2nd international forum “Transport Science. Innovative Solutions for Business”, Vadim Morozov, First Vice President of RZD, said, “The strategy realisation must result in creation of conditions for a three-fold increase in the country’s economy in comparison with the figures of 2007”. “The current volatility of the world economic system, caused by the global crisis, dictates that it is necessary to search for new approaches based on the priority development of the real sector of the economy,” said Mr Morozov. “The key condition for it is outpaced development of railway transport. It must be upgraded dramatically, and complex innovative solutions must be implemented.”

Wagon Casting Shortage Is Over
There was a shortage of wagon casting until 2012 because of the maximum production of new cargo railcars. 
Also, casting plants did not reach their design capacity at that time, said Vladimir Prokofyev, President of Association of Transporters and Railway Rolling Stock Operators, at the meeting of the Association and non-commercial partnership Union of Railway Machinery Manufacturers. The meeting was devoted to improvement of the quality and reliability of large-size wagon casting. “Taking into account that upgraded plants have reached the design capacity, and additional capacities are to be put into operation at the Bezhetsky Steel Casting Plant in the second half of the year, and VKM-Steel will start to manufacture this product, the deficit in casting disappears,” added Mr Prokofyev.

Regions Refuse to Subside Suburban Transportation – RZD
A lot of Russian regions do not give suburban passenger companies subsidies to provide passenger transportation by railway, the press-service of RZD said. 
Despite a number of important decisions on railway suburban passenger transportation made by the RF Government in 2011, the problem of smaller revenue received by suburban passenger companies has not been solved yet.
Thus, the need for subsidies in 2012 is approximately RUR 16 billion (about $544 million) in the RF. Russian regions envisage in their budgets that the sum for financing suburban passenger companies is approximately RUR 6.6 billion (or 40% of the company’s demand). 
According to experts, to whose estimations RZD refers, the specific need for financing of 10 passenger-kilometres from the regional budget is by 50% less for railways than that for other transport modes. Also, according to their evaluations, at least 30% of subsidies return to the budget in the form of taxes.
However, a number of regions plan to compensate for less than 20% of the revenue not received by the suburban passenger companies.
“The lack of 100% compensation for the revenues not received by suburban passenger companies raises doubts that the companies may not reach the break-even point before 2013, as it was planned in the railway transport structural reform programme. Moreover, it destabilizes the financial position of suburban passenger companies, and consequently, it may cause changes in the suburban railway communication in some regions and instability of suburban railway transportation in the entire country,” RZD’s press-service concluded.

RF Transport Ministry Estimates Infrastructure Bond Market Capacity at RUR 500 Billion per Year
The potential infrastructure bond market capacity is estimated at about RUR 500 billion a year, according to Russia’s Minister of Transport Igor Levitin.
“We have work to do to develop the infrastructure bond market, i.e. by means of placing the savings part of pensions in bond issues sold for construction of transport infrastructure objects. The potential infrastructure bond market capacity is estimated at RUR 500 billion annually taking into account implementation of the high speed rail programme” said Mr Levitin. He added that demand for private investments till 2010 is estimated at RUR 300 billion for road infrastructure, RUR 350 billion for sea ports and about RUR 200 billion for airport infrastructure. Deputy Minister for Economic Development Andrey Klepach said in February that the government would make final arrangements for infrastructure bond issuance.
  
RZD Suggests Adjusting Tariffs on Cargo Transportation by the Annual Inflation Index
RZD suggests increasing tariffs on cargo transportation by 10% in 2013, and adjusting them by the annual inflation index starting from 2014, Vladimir Yakunin, RZD President, told journalists.
According to RZD’s project, its investment programme will grow by RUR 18.7 billion in 2012 to RUR 447.1 billion; by RUR 36 billion in 2013 to RUR 377 billion; and it will remain the same in 2014 and 2015 – RUR 367 billion and RUR 383.6 billion respectively. Therefore, the total volume of investments is more than RUR 1.1 trillion. The extended investment programme must be financed from RZD’s own means, including loaned ones. In March, RZD suggested including the investment component of 4% into the tariff. Thus, the transporter wanted to index the tariff by 11% in 2013, and by 5% in 2014-2015.
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Railway Line from Yakutia to Magadan to Be Built in 2016-2030
The administration of the Magadan Region approved the draft scientific and technological basis for the construction of a railway line from the border of Yakutia to Magadan. The project envisages that the construction works will start in 2016 and be completed in 2030. 
“Approximately RUR 5 million was spent  developing the project. It envisages two directions of the railway line –westwards and eastwards. The former will run from the border with Yakutia to Kadykchan, Susuman, Neksikan, Yagodnoe settlement, Orotukan settlement, and then via Gerba and Atka southwards to Magadan,” a representative of the press-service of the regional administration.
The eastward direction envisages construction of a railway line from Gerba to Omsukchan, and farther to the northeast to Chukotka and to the southeast to Kamchatka.
The draft scientific and technological basis was developed by specialists at Financial and Organisational Consulting LLC.
“The development of the project started in 2009. At that time it was not approved, because the executor – Financial and Organisational Consulting LLC – had not taken into account loading of the Magadan Commercial Sea Port in the transport scheme of the territory after the launch of the railway line,” said the representative of the press-service of the regional administration.

FESCO Can Wait Two Years
FESCO transport group of companies can sell its 21.1% shareholding in TransContainer, if the state does not decide on the sale of RZD’s shareholding in the largest Russian container operator, said Kirill Rubinsky, Head of the Board of Directors of FESCO. 
“We are not financial investors, thus we have no reason for keeping the stake,” Mr Rubinsky told journalists.
He added that FESCO is ready to wait not more than two years, and it is not going to enlarge its stake in TransContainer through buying shares in the market. RZD owns 50% plus 1 share of TransContainer.

Russian International Ship Register Has Registered 51 Vessels
From January 1, 2012 to March 15, 2012, the number of vessels registered in the Russian International Ship Register totaled 51 units, a Russian official said. 
Deputy Minister of Transport Victor Olersky told the Board of the Federal Agency of Maritime and River Transport (Rosmorrechflot) the number includes 11 vessels registered in St Petersburg and Taganrog, 1 of them was built in 2012, while the build date of 10 vessels is 1990 and later. 27 ships changed their flags (Malta, Sierra Leone, St. Kitts and Nevis), the oldest vessel’s build date is 1997, the youngest – was built in 2012 (a former Malta flag ship).
The society also re-registered 24 Russian flag ships, the oldest of them was built in 1990, the youngest – last year.

RZD Increases Investments into Development of Ports and Railway Accesses to Them
RZD invests RUR 520 billion to develop ports and railway access to them, the “Vedomosti” newspaper wrote referring to the company’s 2013-2015 investment programme. 
According to the document, the volume of investments is to grow in 2012 by RUR 18.7 billion to RUR 447.1 billion; in 2013 – by RUR 36 billion to RUR 337 billion, and in 2014 investments will amount to RUR 367 billion, and in 2015 – RUR 383.6 billion. The total sum of the investment programme will exceed RUR 1.1 trillion over four years. The investment programme will be financed from RZD’s own means plus loans. To carry it out, the company offers to increase transportation tariffs by 11% in 2013, and by 5% in 2014-2015. Another possible financial source is so-called “infrastructure bonds.”

RZD Invests in Mainline Railway Transport Development in Kuzbass
In 2012-2015, Russian Railways JSC to invest RUR 100 billion in mainline railway transport development in Kuzbass. 
Administration of the Kemerovskaya Oblast has discussed the draft programme of mainline and industrial railway transport development and its technology of work improvement in Kuzbass in 2012-2015.
RZD and 36 coal companies and industrial enterprises of Kuzbass will take part in realization of the programme.
In this period, it is supposed to construct river crossings via the Tom’ at the Tomusinskaya – Karlyk and the Bardino – Erunakovo sections, a tunnel near the Kuregesh station, secondary tracks on the Proektnaya – Yurga 2 and the Predkombinat – Anzherskaya sections. It is planned to buy new powerful mainline electric locomotives “Granit”; to extend tracks on the freight railway stations of Meret’, Mezhdurechensk, Pravotomsk, and Zarinskaya; to renew and re-equip overhead line equipment at the Taiga – Anzherskaya, the Spichenkovo – Novokuznetsk-Sortirovochny, the Oyash – Chebula, and the Moscovka – Syropyatskoe railway sections; to reconstruct Belovo railway substation.

Strategy of Railways Development to 2030 Should Be Updated
The Strategy of Railways Development in Russia to 2030 is still topical, but it should be updated in accordance with the current situation. 
Speaking at the plenary session of the 2nd international forum “Transport Science. Innovative Solutions for Business”, Vadim Morozov, First Vice President of RZD, said, “The strategy realisation must result in creation of conditions for a three-fold increase in the country’s economy in comparison with the figures of 2007”. “The current volatility of the world economic system, caused by the global crisis, dictates that it is necessary to search for new approaches based on the priority development of the real sector of the economy,” said Mr Morozov. “The key condition for it is outpaced development of railway transport. It must be upgraded dramatically, and complex innovative solutions must be implemented.”

Wagon Casting Shortage Is Over
There was a shortage of wagon casting until 2012 because of the maximum production of new cargo railcars. 
Also, casting plants did not reach their design capacity at that time, said Vladimir Prokofyev, President of Association of Transporters and Railway Rolling Stock Operators, at the meeting of the Association and non-commercial partnership Union of Railway Machinery Manufacturers. The meeting was devoted to improvement of the quality and reliability of large-size wagon casting. “Taking into account that upgraded plants have reached the design capacity, and additional capacities are to be put into operation at the Bezhetsky Steel Casting Plant in the second half of the year, and VKM-Steel will start to manufacture this product, the deficit in casting disappears,” added Mr Prokofyev.

Regions Refuse to Subside Suburban Transportation – RZD
A lot of Russian regions do not give suburban passenger companies subsidies to provide passenger transportation by railway, the press-service of RZD said. 
Despite a number of important decisions on railway suburban passenger transportation made by the RF Government in 2011, the problem of smaller revenue received by suburban passenger companies has not been solved yet.
Thus, the need for subsidies in 2012 is approximately RUR 16 billion (about $544 million) in the RF. Russian regions envisage in their budgets that the sum for financing suburban passenger companies is approximately RUR 6.6 billion (or 40% of the company’s demand). 
According to experts, to whose estimations RZD refers, the specific need for financing of 10 passenger-kilometres from the regional budget is by 50% less for railways than that for other transport modes. Also, according to their evaluations, at least 30% of subsidies return to the budget in the form of taxes.
However, a number of regions plan to compensate for less than 20% of the revenue not received by the suburban passenger companies.
“The lack of 100% compensation for the revenues not received by suburban passenger companies raises doubts that the companies may not reach the break-even point before 2013, as it was planned in the railway transport structural reform programme. Moreover, it destabilizes the financial position of suburban passenger companies, and consequently, it may cause changes in the suburban railway communication in some regions and instability of suburban railway transportation in the entire country,” RZD’s press-service concluded.

RF Transport Ministry Estimates Infrastructure Bond Market Capacity at RUR 500 Billion per Year
The potential infrastructure bond market capacity is estimated at about RUR 500 billion a year, according to Russia’s Minister of Transport Igor Levitin.
“We have work to do to develop the infrastructure bond market, i.e. by means of placing the savings part of pensions in bond issues sold for construction of transport infrastructure objects. The potential infrastructure bond market capacity is estimated at RUR 500 billion annually taking into account implementation of the high speed rail programme” said Mr Levitin. He added that demand for private investments till 2010 is estimated at RUR 300 billion for road infrastructure, RUR 350 billion for sea ports and about RUR 200 billion for airport infrastructure. Deputy Minister for Economic Development Andrey Klepach said in February that the government would make final arrangements for infrastructure bond issuance.
  
RZD Suggests Adjusting Tariffs on Cargo Transportation by the Annual Inflation Index
RZD suggests increasing tariffs on cargo transportation by 10% in 2013, and adjusting them by the annual inflation index starting from 2014, Vladimir Yakunin, RZD President, told journalists.
According to RZD’s project, its investment programme will grow by RUR 18.7 billion in 2012 to RUR 447.1 billion; by RUR 36 billion in 2013 to RUR 377 billion; and it will remain the same in 2014 and 2015 – RUR 367 billion and RUR 383.6 billion respectively. Therefore, the total volume of investments is more than RUR 1.1 trillion. The extended investment programme must be financed from RZD’s own means, including loaned ones. In March, RZD suggested including the investment component of 4% into the tariff. Thus, the transporter wanted to index the tariff by 11% in 2013, and by 5% in 2014-2015.
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Sector Waits for Support
A lot of Russian experts are now sceptical. According to some evaluations, the total losses of Russia’s economy after joining the WTO will amount to RUR 1.5 trillion per annum. Oleg Savchenko, a deputy of the State Duma, said recently that the committee for industry would recommend postponement of ratification of documents on Russia joining the WTO to the State Duma and the Government. “We need to protect national industry for enterprises to be able to form in the new conditions their strategies for the next five, ten, and 15 years, as companies do in developed countries,” he noted. A number of programmes for separate sectors have been developed lately in Russia: the Strategy of Agricultural Engineering Development to 2020, the Strategy of Heavy Engineering Development to 2020, the Concept of Bearing Sub-sector Development to 2020, etc. The adopted documents depend to a great extent upon state support measures and protection from competition with foreign companies during the transition period, so that the sectors could upgrade and restructure their capacities.
Concrete measures to increase the competitiveness of Russian enterprises’ production have been suggested lately, actions are offered to minimize the negative impact of Russia joining the WTO. Alexander Moskalenko, Chairman of the Association of Bearings Manufacturers, considers that the necessary aspects of state support for Russian engineering must be:
• assistance in the launch of joint ventures with international concerns on the basis of existing manufacturing;
• provision of preferences for Russian producers in supplies for defence and other strategically important sectors;
• carrying out a harsh and consistent price anti-dumping policy with regard to import products;
• removal of barriers to sector consolidation.
Out of all engineering companies, bearing producers are in the most unfavourable position. Firstly, the share of Russian bearing plants in the world production volume is very small (about 1.6%). Secondly, the share of import products in the Russian market is very large – up to 38%. To compare: it is 23% in the USA, 22% in China, 18% in the European Union, and 8% in Japan. Thirdly, the efficiency of Russian enterprises is low: for example, labour efficiency falls behind world figures by 400-600%.
Another sector that will be disturbed is agricultural engineering. According to some estimation, its losses may reach RUR 50 billion.
Locomotive engineering, however, may find the situation favourable. Microcircuits are not made in Russia, they are purchased abroad, consequently, when the duties on components cut, the prices for them may fall either. 
On the whole, the anxiety of Russian machine builders is quite understandable. A number of obligations, Russia will have, are likely to have negative consequences. In particular, it concerns the factual ban on localization of manufacturing.
In turn, representatives of the working group for Russia joining the WTO assure that if the effect is rather painful for the country, the state has its own inner methods to support the national economy and the mechanisms of negotiations, including revision of international obligations. A member of Russian delegation of this working group from the Ministry of Economic Development Victor Batanin explains that there are protecting measures for Russian manufacturers – higher duties that may be implemented after an investigation of cases with unfair competition on the part of a foreign partner.

Standards Will Protect
From the standpoint of limiting the access for import to the Russian market in the WTO conditions, the major role will be played by the system of technical regulation, standards, and certificates. The professional community is now fulfilling a difficult task of harmonization and adaptation of international standards to up-to-date conditions of Russian engineering. 
Andrey Lotsmanov, Chairman of the Council for Technical Regulation and Standardization at the Ministry of Industry and Trade, assures that standards and technical regulations for the work in the WTO conditions will be successfully developed. It should be taken into account, however, that the system of technical regulation in Russia is at a transitional stage.
 “The federal law “On Technical Regulation” developed specially for the programme of preparing Russia joining the WTO a decade ago, slowed down the process of national standards development. Nowadays, machine builders speak about the necessity of the federal law “On Standardisation,” he noted.
“In 2006, about a hundred standards were adopted in Russia per annum, and today – more than a thousand,” says Vladimir Matyushin, Vice President of non-commercial partnership Union of Industries of Railway Equipment. “Russian Union of Industrialists and Entrepreneurs and other public organizations take part in this work. It is clauses updated in the standards that may provide reliable protection for the sector. If there are none of them, we are opened to the market. For example, the standards in the consumer goods sector are very weak. Meanwhile, the task is not to impose the standards, but create equal opportunities for competition,” emphasizes Mr Matyushin. “There must be an opportunity for any foreign company to visit the website of the Federal Agency for Technical Regulation and Metrology (Rosstandard) and see all regulatory documents acting in the country.”

The Emphasis Is on Quality
“We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under the new conditions – either to invest in your own developments and technical re-equipment or launch joint ventures with world leaders,” believes Anton Zubikhin, Vice President of non-commercial partnership Union of Industries of Railway Equipment (OPZT), Deputy CEO of the Ural Locomotives LLC. 
The enterprises can be notionally divided into two categories. The first is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented towards the domestic market. The WTO is a definite threat for them.
Therefore, experts agree that stimuli to produce more qualitative production must be created in Russia, and Russian companies must do a lot to be able to resist the rush of imports. The success will depend on the competitiveness of Russian products, and this is directly affected by the equipment in use. There are significant problems in this sphere – the deterioration of equipment at some plants reaches 80%.
The situation in the world market is not favourable for Russian producers. For example, to transport a usual pipe to Russia, a foreign company should get just two documents – the certificate of the plant-producer and the conclusion of the Russian Chamber of Commerce and Industry that this pipe is not for a dual purpose. To supply similar production to the EU, Russian pipe-producing enterprises must have not just a declaration, but six European certificates of quality as well.
Therefore, the RF market of railway machinery is not properly protected, and the special protective duties in the WTO conditions will be not enough. The state subsidises Russian companies in terms of interest rates on technological re-equipment of manufacturers and provides support on R&D, which will not be permissible in the framework of the WTO.
Amid the opening of the Russian market and mass emergence of cheap, although sometimes less reliable, products of separate foreign producers together with a simultaneous decline in prices for qualitative import equivalents, national products will be in a severe competitive environment for practically the first time. Taking into account that no protective duties on import railway machinery have been implemented, and the conditions of the WTO will not allow to change the situation, a number of measures must be developed to support national enterprises, the OPZT members are sure. In particular, they offer the following steps:
• to continue actively the work targeted at improving the national system of standardization in terms of railway transport, preventing products that do not meet the standards from coming to the market;
• to stimulate development of joint projects with leading foreign producers and localization of manufacturing of advanced machinery;
• to carry out joint work together with the Union of Machine Builders of Russia and the OPZT to reveal and promote most prospective national projects to organize state support for them;
• to establish the Centre of information and monitoring the activity of enterprises under the WTO conditions, which could provide consultations and support for enterprises to promote national products to foreign markets, and react fast to the situations causing worse conditions for Russian manufacturers.
The major conclusion is that joining the WTO will demand Russian engineering companies speed up all the processes of modernization and technical renewal. There are things, however, that are favourable for national enterprises. An example is the decline in duties on imports of equipment and components and better availability of foreign capital. Meanwhile, there are problems to be solved to protect the interests of Russian manufacturers. And the role of the state and balanced industrial policy cannot be overestimated in the process.
By Elena Ushkova

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Sector Waits for Support
A lot of Russian experts are now sceptical. According to some evaluations, the total losses of Russia’s economy after joining the WTO will amount to RUR 1.5 trillion per annum. Oleg Savchenko, a deputy of the State Duma, said recently that the committee for industry would recommend postponement of ratification of documents on Russia joining the WTO to the State Duma and the Government. “We need to protect national industry for enterprises to be able to form in the new conditions their strategies for the next five, ten, and 15 years, as companies do in developed countries,” he noted. A number of programmes for separate sectors have been developed lately in Russia: the Strategy of Agricultural Engineering Development to 2020, the Strategy of Heavy Engineering Development to 2020, the Concept of Bearing Sub-sector Development to 2020, etc. The adopted documents depend to a great extent upon state support measures and protection from competition with foreign companies during the transition period, so that the sectors could upgrade and restructure their capacities.
Concrete measures to increase the competitiveness of Russian enterprises’ production have been suggested lately, actions are offered to minimize the negative impact of Russia joining the WTO. Alexander Moskalenko, Chairman of the Association of Bearings Manufacturers, considers that the necessary aspects of state support for Russian engineering must be:
• assistance in the launch of joint ventures with international concerns on the basis of existing manufacturing;
• provision of preferences for Russian producers in supplies for defence and other strategically important sectors;
• carrying out a harsh and consistent price anti-dumping policy with regard to import products;
• removal of barriers to sector consolidation.
Out of all engineering companies, bearing producers are in the most unfavourable position. Firstly, the share of Russian bearing plants in the world production volume is very small (about 1.6%). Secondly, the share of import products in the Russian market is very large – up to 38%. To compare: it is 23% in the USA, 22% in China, 18% in the European Union, and 8% in Japan. Thirdly, the efficiency of Russian enterprises is low: for example, labour efficiency falls behind world figures by 400-600%.
Another sector that will be disturbed is agricultural engineering. According to some estimation, its losses may reach RUR 50 billion.
Locomotive engineering, however, may find the situation favourable. Microcircuits are not made in Russia, they are purchased abroad, consequently, when the duties on components cut, the prices for them may fall either. 
On the whole, the anxiety of Russian machine builders is quite understandable. A number of obligations, Russia will have, are likely to have negative consequences. In particular, it concerns the factual ban on localization of manufacturing.
In turn, representatives of the working group for Russia joining the WTO assure that if the effect is rather painful for the country, the state has its own inner methods to support the national economy and the mechanisms of negotiations, including revision of international obligations. A member of Russian delegation of this working group from the Ministry of Economic Development Victor Batanin explains that there are protecting measures for Russian manufacturers – higher duties that may be implemented after an investigation of cases with unfair competition on the part of a foreign partner.

Standards Will Protect
From the standpoint of limiting the access for import to the Russian market in the WTO conditions, the major role will be played by the system of technical regulation, standards, and certificates. The professional community is now fulfilling a difficult task of harmonization and adaptation of international standards to up-to-date conditions of Russian engineering. 
Andrey Lotsmanov, Chairman of the Council for Technical Regulation and Standardization at the Ministry of Industry and Trade, assures that standards and technical regulations for the work in the WTO conditions will be successfully developed. It should be taken into account, however, that the system of technical regulation in Russia is at a transitional stage.
 “The federal law “On Technical Regulation” developed specially for the programme of preparing Russia joining the WTO a decade ago, slowed down the process of national standards development. Nowadays, machine builders speak about the necessity of the federal law “On Standardisation,” he noted.
“In 2006, about a hundred standards were adopted in Russia per annum, and today – more than a thousand,” says Vladimir Matyushin, Vice President of non-commercial partnership Union of Industries of Railway Equipment. “Russian Union of Industrialists and Entrepreneurs and other public organizations take part in this work. It is clauses updated in the standards that may provide reliable protection for the sector. If there are none of them, we are opened to the market. For example, the standards in the consumer goods sector are very weak. Meanwhile, the task is not to impose the standards, but create equal opportunities for competition,” emphasizes Mr Matyushin. “There must be an opportunity for any foreign company to visit the website of the Federal Agency for Technical Regulation and Metrology (Rosstandard) and see all regulatory documents acting in the country.”

The Emphasis Is on Quality
“We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under the new conditions – either to invest in your own developments and technical re-equipment or launch joint ventures with world leaders,” believes Anton Zubikhin, Vice President of non-commercial partnership Union of Industries of Railway Equipment (OPZT), Deputy CEO of the Ural Locomotives LLC. 
The enterprises can be notionally divided into two categories. The first is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented towards the domestic market. The WTO is a definite threat for them.
Therefore, experts agree that stimuli to produce more qualitative production must be created in Russia, and Russian companies must do a lot to be able to resist the rush of imports. The success will depend on the competitiveness of Russian products, and this is directly affected by the equipment in use. There are significant problems in this sphere – the deterioration of equipment at some plants reaches 80%.
The situation in the world market is not favourable for Russian producers. For example, to transport a usual pipe to Russia, a foreign company should get just two documents – the certificate of the plant-producer and the conclusion of the Russian Chamber of Commerce and Industry that this pipe is not for a dual purpose. To supply similar production to the EU, Russian pipe-producing enterprises must have not just a declaration, but six European certificates of quality as well.
Therefore, the RF market of railway machinery is not properly protected, and the special protective duties in the WTO conditions will be not enough. The state subsidises Russian companies in terms of interest rates on technological re-equipment of manufacturers and provides support on R&D, which will not be permissible in the framework of the WTO.
Amid the opening of the Russian market and mass emergence of cheap, although sometimes less reliable, products of separate foreign producers together with a simultaneous decline in prices for qualitative import equivalents, national products will be in a severe competitive environment for practically the first time. Taking into account that no protective duties on import railway machinery have been implemented, and the conditions of the WTO will not allow to change the situation, a number of measures must be developed to support national enterprises, the OPZT members are sure. In particular, they offer the following steps:
• to continue actively the work targeted at improving the national system of standardization in terms of railway transport, preventing products that do not meet the standards from coming to the market;
• to stimulate development of joint projects with leading foreign producers and localization of manufacturing of advanced machinery;
• to carry out joint work together with the Union of Machine Builders of Russia and the OPZT to reveal and promote most prospective national projects to organize state support for them;
• to establish the Centre of information and monitoring the activity of enterprises under the WTO conditions, which could provide consultations and support for enterprises to promote national products to foreign markets, and react fast to the situations causing worse conditions for Russian manufacturers.
The major conclusion is that joining the WTO will demand Russian engineering companies speed up all the processes of modernization and technical renewal. There are things, however, that are favourable for national enterprises. An example is the decline in duties on imports of equipment and components and better availability of foreign capital. Meanwhile, there are problems to be solved to protect the interests of Russian manufacturers. And the role of the state and balanced industrial policy cannot be overestimated in the process.
By Elena Ushkova

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Sector Waits for Support
A lot of Russian experts are now sceptical. According to some evaluations, the total losses of Russia’s economy after joining the WTO will amount to RUR 1.5 trillion per annum. Oleg Savchenko, a deputy of the State Duma, said recently that the committee for industry would recommend postponement of ratification of documents on Russia joining the WTO to the State Duma and the Government. “We need to protect national industry for enterprises to be able to form in the new conditions their strategies for the next five, ten, and 15 years, as companies do in developed countries,” he noted. A number of programmes for separate sectors have been developed lately in Russia: the Strategy of Agricultural Engineering Development to 2020, the Strategy of Heavy Engineering Development to 2020, the Concept of Bearing Sub-sector Development to 2020, etc. The adopted documents depend to a great extent upon state support measures and protection from competition with foreign companies during the transition period, so that the sectors could upgrade and restructure their capacities.
Concrete measures to increase the competitiveness of Russian enterprises’ production have been suggested lately, actions are offered to minimize the negative impact of Russia joining the WTO. Alexander Moskalenko, Chairman of the Association of Bearings Manufacturers, considers that the necessary aspects of state support for Russian engineering must be:
• assistance in the launch of joint ventures with international concerns on the basis of existing manufacturing;
• provision of preferences for Russian producers in supplies for defence and other strategically important sectors;
• carrying out a harsh and consistent price anti-dumping policy with regard to import products;
• removal of barriers to sector consolidation.
Out of all engineering companies, bearing producers are in the most unfavourable position. Firstly, the share of Russian bearing plants in the world production volume is very small (about 1.6%). Secondly, the share of import products in the Russian market is very large – up to 38%. To compare: it is 23% in the USA, 22% in China, 18% in the European Union, and 8% in Japan. Thirdly, the efficiency of Russian enterprises is low: for example, labour efficiency falls behind world figures by 400-600%.
Another sector that will be disturbed is agricultural engineering. According to some estimation, its losses may reach RUR 50 billion.
Locomotive engineering, however, may find the situation favourable. Microcircuits are not made in Russia, they are purchased abroad, consequently, when the duties on components cut, the prices for them may fall either. 
On the whole, the anxiety of Russian machine builders is quite understandable. A number of obligations, Russia will have, are likely to have negative consequences. In particular, it concerns the factual ban on localization of manufacturing.
In turn, representatives of the working group for Russia joining the WTO assure that if the effect is rather painful for the country, the state has its own inner methods to support the national economy and the mechanisms of negotiations, including revision of international obligations. A member of Russian delegation of this working group from the Ministry of Economic Development Victor Batanin explains that there are protecting measures for Russian manufacturers – higher duties that may be implemented after an investigation of cases with unfair competition on the part of a foreign partner.

Standards Will Protect
From the standpoint of limiting the access for import to the Russian market in the WTO conditions, the major role will be played by the system of technical regulation, standards, and certificates. The professional community is now fulfilling a difficult task of harmonization and adaptation of international standards to up-to-date conditions of Russian engineering. 
Andrey Lotsmanov, Chairman of the Council for Technical Regulation and Standardization at the Ministry of Industry and Trade, assures that standards and technical regulations for the work in the WTO conditions will be successfully developed. It should be taken into account, however, that the system of technical regulation in Russia is at a transitional stage.
 “The federal law “On Technical Regulation” developed specially for the programme of preparing Russia joining the WTO a decade ago, slowed down the process of national standards development. Nowadays, machine builders speak about the necessity of the federal law “On Standardisation,” he noted.
“In 2006, about a hundred standards were adopted in Russia per annum, and today – more than a thousand,” says Vladimir Matyushin, Vice President of non-commercial partnership Union of Industries of Railway Equipment. “Russian Union of Industrialists and Entrepreneurs and other public organizations take part in this work. It is clauses updated in the standards that may provide reliable protection for the sector. If there are none of them, we are opened to the market. For example, the standards in the consumer goods sector are very weak. Meanwhile, the task is not to impose the standards, but create equal opportunities for competition,” emphasizes Mr Matyushin. “There must be an opportunity for any foreign company to visit the website of the Federal Agency for Technical Regulation and Metrology (Rosstandard) and see all regulatory documents acting in the country.”

The Emphasis Is on Quality
“We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under the new conditions – either to invest in your own developments and technical re-equipment or launch joint ventures with world leaders,” believes Anton Zubikhin, Vice President of non-commercial partnership Union of Industries of Railway Equipment (OPZT), Deputy CEO of the Ural Locomotives LLC. 
The enterprises can be notionally divided into two categories. The first is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented towards the domestic market. The WTO is a definite threat for them.
Therefore, experts agree that stimuli to produce more qualitative production must be created in Russia, and Russian companies must do a lot to be able to resist the rush of imports. The success will depend on the competitiveness of Russian products, and this is directly affected by the equipment in use. There are significant problems in this sphere – the deterioration of equipment at some plants reaches 80%.
The situation in the world market is not favourable for Russian producers. For example, to transport a usual pipe to Russia, a foreign company should get just two documents – the certificate of the plant-producer and the conclusion of the Russian Chamber of Commerce and Industry that this pipe is not for a dual purpose. To supply similar production to the EU, Russian pipe-producing enterprises must have not just a declaration, but six European certificates of quality as well.
Therefore, the RF market of railway machinery is not properly protected, and the special protective duties in the WTO conditions will be not enough. The state subsidises Russian companies in terms of interest rates on technological re-equipment of manufacturers and provides support on R&D, which will not be permissible in the framework of the WTO.
Amid the opening of the Russian market and mass emergence of cheap, although sometimes less reliable, products of separate foreign producers together with a simultaneous decline in prices for qualitative import equivalents, national products will be in a severe competitive environment for practically the first time. Taking into account that no protective duties on import railway machinery have been implemented, and the conditions of the WTO will not allow to change the situation, a number of measures must be developed to support national enterprises, the OPZT members are sure. In particular, they offer the following steps:
• to continue actively the work targeted at improving the national system of standardization in terms of railway transport, preventing products that do not meet the standards from coming to the market;
• to stimulate development of joint projects with leading foreign producers and localization of manufacturing of advanced machinery;
• to carry out joint work together with the Union of Machine Builders of Russia and the OPZT to reveal and promote most prospective national projects to organize state support for them;
• to establish the Centre of information and monitoring the activity of enterprises under the WTO conditions, which could provide consultations and support for enterprises to promote national products to foreign markets, and react fast to the situations causing worse conditions for Russian manufacturers.
The major conclusion is that joining the WTO will demand Russian engineering companies speed up all the processes of modernization and technical renewal. There are things, however, that are favourable for national enterprises. An example is the decline in duties on imports of equipment and components and better availability of foreign capital. Meanwhile, there are problems to be solved to protect the interests of Russian manufacturers. And the role of the state and balanced industrial policy cannot be overestimated in the process.
By Elena Ushkova

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Sector Waits for Support
A lot of Russian experts are now sceptical. According to some evaluations, the total losses of Russia’s economy after joining the WTO will amount to RUR 1.5 trillion per annum. Oleg Savchenko, a deputy of the State Duma, said recently that the committee for industry would recommend postponement of ratification of documents on Russia joining the WTO to the State Duma and the Government. “We need to protect national industry for enterprises to be able to form in the new conditions their strategies for the next five, ten, and 15 years, as companies do in developed countries,” he noted. A number of programmes for separate sectors have been developed lately in Russia: the Strategy of Agricultural Engineering Development to 2020, the Strategy of Heavy Engineering Development to 2020, the Concept of Bearing Sub-sector Development to 2020, etc. The adopted documents depend to a great extent upon state support measures and protection from competition with foreign companies during the transition period, so that the sectors could upgrade and restructure their capacities.
Concrete measures to increase the competitiveness of Russian enterprises’ production have been suggested lately, actions are offered to minimize the negative impact of Russia joining the WTO. Alexander Moskalenko, Chairman of the Association of Bearings Manufacturers, considers that the necessary aspects of state support for Russian engineering must be:
• assistance in the launch of joint ventures with international concerns on the basis of existing manufacturing;
• provision of preferences for Russian producers in supplies for defence and other strategically important sectors;
• carrying out a harsh and consistent price anti-dumping policy with regard to import products;
• removal of barriers to sector consolidation.
Out of all engineering companies, bearing producers are in the most unfavourable position. Firstly, the share of Russian bearing plants in the world production volume is very small (about 1.6%). Secondly, the share of import products in the Russian market is very large – up to 38%. To compare: it is 23% in the USA, 22% in China, 18% in the European Union, and 8% in Japan. Thirdly, the efficiency of Russian enterprises is low: for example, labour efficiency falls behind world figures by 400-600%.
Another sector that will be disturbed is agricultural engineering. According to some estimation, its losses may reach RUR 50 billion.
Locomotive engineering, however, may find the situation favourable. Microcircuits are not made in Russia, they are purchased abroad, consequently, when the duties on components cut, the prices for them may fall either. 
On the whole, the anxiety of Russian machine builders is quite understandable. A number of obligations, Russia will have, are likely to have negative consequences. In particular, it concerns the factual ban on localization of manufacturing.
In turn, representatives of the working group for Russia joining the WTO assure that if the effect is rather painful for the country, the state has its own inner methods to support the national economy and the mechanisms of negotiations, including revision of international obligations. A member of Russian delegation of this working group from the Ministry of Economic Development Victor Batanin explains that there are protecting measures for Russian manufacturers – higher duties that may be implemented after an investigation of cases with unfair competition on the part of a foreign partner.

Standards Will Protect
From the standpoint of limiting the access for import to the Russian market in the WTO conditions, the major role will be played by the system of technical regulation, standards, and certificates. The professional community is now fulfilling a difficult task of harmonization and adaptation of international standards to up-to-date conditions of Russian engineering. 
Andrey Lotsmanov, Chairman of the Council for Technical Regulation and Standardization at the Ministry of Industry and Trade, assures that standards and technical regulations for the work in the WTO conditions will be successfully developed. It should be taken into account, however, that the system of technical regulation in Russia is at a transitional stage.
 “The federal law “On Technical Regulation” developed specially for the programme of preparing Russia joining the WTO a decade ago, slowed down the process of national standards development. Nowadays, machine builders speak about the necessity of the federal law “On Standardisation,” he noted.
“In 2006, about a hundred standards were adopted in Russia per annum, and today – more than a thousand,” says Vladimir Matyushin, Vice President of non-commercial partnership Union of Industries of Railway Equipment. “Russian Union of Industrialists and Entrepreneurs and other public organizations take part in this work. It is clauses updated in the standards that may provide reliable protection for the sector. If there are none of them, we are opened to the market. For example, the standards in the consumer goods sector are very weak. Meanwhile, the task is not to impose the standards, but create equal opportunities for competition,” emphasizes Mr Matyushin. “There must be an opportunity for any foreign company to visit the website of the Federal Agency for Technical Regulation and Metrology (Rosstandard) and see all regulatory documents acting in the country.”

The Emphasis Is on Quality
“We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under the new conditions – either to invest in your own developments and technical re-equipment or launch joint ventures with world leaders,” believes Anton Zubikhin, Vice President of non-commercial partnership Union of Industries of Railway Equipment (OPZT), Deputy CEO of the Ural Locomotives LLC. 
The enterprises can be notionally divided into two categories. The first is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented towards the domestic market. The WTO is a definite threat for them.
Therefore, experts agree that stimuli to produce more qualitative production must be created in Russia, and Russian companies must do a lot to be able to resist the rush of imports. The success will depend on the competitiveness of Russian products, and this is directly affected by the equipment in use. There are significant problems in this sphere – the deterioration of equipment at some plants reaches 80%.
The situation in the world market is not favourable for Russian producers. For example, to transport a usual pipe to Russia, a foreign company should get just two documents – the certificate of the plant-producer and the conclusion of the Russian Chamber of Commerce and Industry that this pipe is not for a dual purpose. To supply similar production to the EU, Russian pipe-producing enterprises must have not just a declaration, but six European certificates of quality as well.
Therefore, the RF market of railway machinery is not properly protected, and the special protective duties in the WTO conditions will be not enough. The state subsidises Russian companies in terms of interest rates on technological re-equipment of manufacturers and provides support on R&D, which will not be permissible in the framework of the WTO.
Amid the opening of the Russian market and mass emergence of cheap, although sometimes less reliable, products of separate foreign producers together with a simultaneous decline in prices for qualitative import equivalents, national products will be in a severe competitive environment for practically the first time. Taking into account that no protective duties on import railway machinery have been implemented, and the conditions of the WTO will not allow to change the situation, a number of measures must be developed to support national enterprises, the OPZT members are sure. In particular, they offer the following steps:
• to continue actively the work targeted at improving the national system of standardization in terms of railway transport, preventing products that do not meet the standards from coming to the market;
• to stimulate development of joint projects with leading foreign producers and localization of manufacturing of advanced machinery;
• to carry out joint work together with the Union of Machine Builders of Russia and the OPZT to reveal and promote most prospective national projects to organize state support for them;
• to establish the Centre of information and monitoring the activity of enterprises under the WTO conditions, which could provide consultations and support for enterprises to promote national products to foreign markets, and react fast to the situations causing worse conditions for Russian manufacturers.
The major conclusion is that joining the WTO will demand Russian engineering companies speed up all the processes of modernization and technical renewal. There are things, however, that are favourable for national enterprises. An example is the decline in duties on imports of equipment and components and better availability of foreign capital. Meanwhile, there are problems to be solved to protect the interests of Russian manufacturers. And the role of the state and balanced industrial policy cannot be overestimated in the process.
By Elena Ushkova

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The Sinara group of companies carries out both approaches. The Ural Locomotives is developing by adopting the best foreign technologies of Siemens. Electric locomotive “Granit” 2ES10 has been manufactured already. Production of “Lastochka” electric train is to become the next step. This is a scenario of development by means of a JV.
Sinara – Transport Machines invests in its own projects. The company launched an Innovative Development Centre, which supervises development of new types of diesel locomotives, rolling stock, and micro-processing systems – either at their own expense, or through the means of development institutions.
One should understand that a JV provides an opportunity to come to the market with an innovative product fast. In addition, personnel training and the transfer to a modern level are necessary. In those sectors where competition is not tough and the market is not so particular about the time factor, companies can stake out their own developments, and develop their own scientific base. Unfortunately, there are few examples of successful perspective development strategies in Russia. 

– Why is the share of innovative products small in Russian plants, in your opinion?

– Strange it is, but any innovation is a sort of conflict with technical specialists, for whom it is easier to use a standard solution instead of developing a new one. And the demand for innovative production is rather small because of its high price. At least, we have finally started to take into account the cost of the life cycle of a product. We must admit that there is an enormous lack of professionals in this country. Creation of something new has lost its savour. An example is diesel engineering. The state programme of the sector support was adopted. Its total sum is RUR 16 billion. However, when the lots were distributed, it turned out that there were no worthy bidders on some of them. Foreign companies offer engineering actively, and we should not avoid it. We should use their experience and train our own personnel while carrying out joint projects.

– What is the role of the state under the new conditions?

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I’d like to speak about one more urgent problem. When the state finances any development, it takes patents and intellectual property rights, but it is an inefficient owner of them, and there is no mechanism to give these rights to the developer. We are now developing the concept which could become the basis for legal acts to transfer the rights on a technology to its developer. We think it is logical. In the USA, for example, there is a law on the transfer of technologies, and all these aspects are defined in it. 
Interviewed by Elena Ushkova
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– Last December we held a special conference to learn the opinion of the OPZT members on the issue. The enterprises can be notionally divided into two categories. The first one is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented at the domestic market. The WTO is a definite threat for them.
We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under new conditions – either to invest in your own developments and technical re-equipment or to launch joint ventures with world leaders. For example, braking system producers have chosen the first way, and bearing manufacturers the second.  
The Sinara group of companies carries out both approaches. The Ural Locomotives is developing by adopting the best foreign technologies of Siemens. Electric locomotive “Granit” 2ES10 has been manufactured already. Production of “Lastochka” electric train is to become the next step. This is a scenario of development by means of a JV.
Sinara – Transport Machines invests in its own projects. The company launched an Innovative Development Centre, which supervises development of new types of diesel locomotives, rolling stock, and micro-processing systems – either at their own expense, or through the means of development institutions.
One should understand that a JV provides an opportunity to come to the market with an innovative product fast. In addition, personnel training and the transfer to a modern level are necessary. In those sectors where competition is not tough and the market is not so particular about the time factor, companies can stake out their own developments, and develop their own scientific base. Unfortunately, there are few examples of successful perspective development strategies in Russia. 

– Why is the share of innovative products small in Russian plants, in your opinion?

– Strange it is, but any innovation is a sort of conflict with technical specialists, for whom it is easier to use a standard solution instead of developing a new one. And the demand for innovative production is rather small because of its high price. At least, we have finally started to take into account the cost of the life cycle of a product. We must admit that there is an enormous lack of professionals in this country. Creation of something new has lost its savour. An example is diesel engineering. The state programme of the sector support was adopted. Its total sum is RUR 16 billion. However, when the lots were distributed, it turned out that there were no worthy bidders on some of them. Foreign companies offer engineering actively, and we should not avoid it. We should use their experience and train our own personnel while carrying out joint projects.

– What is the role of the state under the new conditions?

– It is very important. In the framework of the OPZT Committee for Innovations, we encourage our colleagues to apply to state development institutions, but there is an opinion that they are inaccessible. Only three out of 120 enterprises–members of the OPZT participate in the Skolkovo programme. We have revealed the following problem: a lot of companies do not have their own projects with which they could apply to Skolkovo, for example; if they have some, there is no proper organization inside the company to form a competent offer. The task of the state is to invest in projects that will be popular in the market. 
I’d like to speak about one more urgent problem. When the state finances any development, it takes patents and intellectual property rights, but it is an inefficient owner of them, and there is no mechanism to give these rights to the developer. We are now developing the concept which could become the basis for legal acts to transfer the rights on a technology to its developer. We think it is logical. In the USA, for example, there is a law on the transfer of technologies, and all these aspects are defined in it. 
Interviewed by Elena Ushkova
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    [DETAIL_TEXT] => – Mr Zubikhin, which enterprises are most worried about Russia’s future joining the WTO, and what should they do to keep their position in the market?

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We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under new conditions – either to invest in your own developments and technical re-equipment or to launch joint ventures with world leaders. For example, braking system producers have chosen the first way, and bearing manufacturers the second.  
The Sinara group of companies carries out both approaches. The Ural Locomotives is developing by adopting the best foreign technologies of Siemens. Electric locomotive “Granit” 2ES10 has been manufactured already. Production of “Lastochka” electric train is to become the next step. This is a scenario of development by means of a JV.
Sinara – Transport Machines invests in its own projects. The company launched an Innovative Development Centre, which supervises development of new types of diesel locomotives, rolling stock, and micro-processing systems – either at their own expense, or through the means of development institutions.
One should understand that a JV provides an opportunity to come to the market with an innovative product fast. In addition, personnel training and the transfer to a modern level are necessary. In those sectors where competition is not tough and the market is not so particular about the time factor, companies can stake out their own developments, and develop their own scientific base. Unfortunately, there are few examples of successful perspective development strategies in Russia. 

– Why is the share of innovative products small in Russian plants, in your opinion?

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– What is the role of the state under the new conditions?

– It is very important. In the framework of the OPZT Committee for Innovations, we encourage our colleagues to apply to state development institutions, but there is an opinion that they are inaccessible. Only three out of 120 enterprises–members of the OPZT participate in the Skolkovo programme. We have revealed the following problem: a lot of companies do not have their own projects with which they could apply to Skolkovo, for example; if they have some, there is no proper organization inside the company to form a competent offer. The task of the state is to invest in projects that will be popular in the market. 
I’d like to speak about one more urgent problem. When the state finances any development, it takes patents and intellectual property rights, but it is an inefficient owner of them, and there is no mechanism to give these rights to the developer. We are now developing the concept which could become the basis for legal acts to transfer the rights on a technology to its developer. We think it is logical. In the USA, for example, there is a law on the transfer of technologies, and all these aspects are defined in it. 
Interviewed by Elena Ushkova
    [~DETAIL_TEXT] => – Mr Zubikhin, which enterprises are most worried about Russia’s future joining the WTO, and what should they do to keep their position in the market?

– Last December we held a special conference to learn the opinion of the OPZT members on the issue. The enterprises can be notionally divided into two categories. The first one is export-oriented enterprises engaged in engineering. Such companies will not have serious problems in future. The second category is those companies that have not carried out technical upgrades lately, and are oriented at the domestic market. The WTO is a definite threat for them.
We started to say long ago that globalization is inevitable and companies should get ready for it thoroughly beforehand. There are two basic ways to survive under new conditions – either to invest in your own developments and technical re-equipment or to launch joint ventures with world leaders. For example, braking system producers have chosen the first way, and bearing manufacturers the second.  
The Sinara group of companies carries out both approaches. The Ural Locomotives is developing by adopting the best foreign technologies of Siemens. Electric locomotive “Granit” 2ES10 has been manufactured already. Production of “Lastochka” electric train is to become the next step. This is a scenario of development by means of a JV.
Sinara – Transport Machines invests in its own projects. The company launched an Innovative Development Centre, which supervises development of new types of diesel locomotives, rolling stock, and micro-processing systems – either at their own expense, or through the means of development institutions.
One should understand that a JV provides an opportunity to come to the market with an innovative product fast. In addition, personnel training and the transfer to a modern level are necessary. In those sectors where competition is not tough and the market is not so particular about the time factor, companies can stake out their own developments, and develop their own scientific base. Unfortunately, there are few examples of successful perspective development strategies in Russia. 

– Why is the share of innovative products small in Russian plants, in your opinion?

– Strange it is, but any innovation is a sort of conflict with technical specialists, for whom it is easier to use a standard solution instead of developing a new one. And the demand for innovative production is rather small because of its high price. At least, we have finally started to take into account the cost of the life cycle of a product. We must admit that there is an enormous lack of professionals in this country. Creation of something new has lost its savour. An example is diesel engineering. The state programme of the sector support was adopted. Its total sum is RUR 16 billion. However, when the lots were distributed, it turned out that there were no worthy bidders on some of them. Foreign companies offer engineering actively, and we should not avoid it. We should use their experience and train our own personnel while carrying out joint projects.

– What is the role of the state under the new conditions?

– It is very important. In the framework of the OPZT Committee for Innovations, we encourage our colleagues to apply to state development institutions, but there is an opinion that they are inaccessible. Only three out of 120 enterprises–members of the OPZT participate in the Skolkovo programme. We have revealed the following problem: a lot of companies do not have their own projects with which they could apply to Skolkovo, for example; if they have some, there is no proper organization inside the company to form a competent offer. The task of the state is to invest in projects that will be popular in the market. 
I’d like to speak about one more urgent problem. When the state finances any development, it takes patents and intellectual property rights, but it is an inefficient owner of them, and there is no mechanism to give these rights to the developer. We are now developing the concept which could become the basis for legal acts to transfer the rights on a technology to its developer. We think it is logical. In the USA, for example, there is a law on the transfer of technologies, and all these aspects are defined in it. 
Interviewed by Elena Ushkova
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In or Out?
The forecasts are indisputable – it does not matter whether imports will force out local producers in their fight for consumers’ budgets, or vice versa Russian companies will make use of the decrease in barriers to enter foreign markets, – the transportation of goods will be necessary. Trade fights will extend the number of transporters’ clients, and taking into account the distance from a plant to a shop, it is likely to be the golden age for the transport sector.
Specialists of the Economic Situation and Strategic Development Department of RZD make less optimistic prognoses. The report “Evaluation of Impact from Russia’s Joining the WTO on the Economy of RZD’s Operations” states that approximately 65% of cargo turnover is formed by energy freight, and joining the WTO will not influence these cargo flows significantly, their dynamics will depend on other factors. One should take into account, however, that privileged tariffs are applied to coal exported by railway, and thus, suppliers save up to RUR 2,500-3,000 per one wagon in a cut-off. In fact, this measure helped Russian coal companies in hard times, and it is still a significant factor to support their competitiveness in the external markets. 
The policy of the WTO targeted at tariff leveling may destroy this idyll, and if new players from South America, Africa, East Asia, and even the USA come to the market, this may cause a decline in export supplies, the volume of which was 39.5% of the total volume of coal extracted last year. Nevertheless, experts think that no dramatic changes will happen in the near future. “Foreign consumers are attracted by stable supplies first of all, and stable quality of Russian companies’ products,” Vladimir Koshevny, head of one of the largest sectoral analytical agencies, is sure. “It is hardly possible that someone will try to get better prices and risk concluding a contract with unchecked suppliers.” Thus, the situation may be developed under a Chinese scenario, when the requirements to level conditions are ceremonial. As a result, a buyer can lose more than the seller. Meanwhile, changes in the structure of transportation on the RZD’s network will be more dynamic for a number of cargoes. 

Metalworking Companies to Benefit
Due to Russia’s joining the WTO, Russian metal-working companies will have the same conditions to trade in export markets as their foreign competitors have in most countries, Vadim Astapovich from the VTB Capital notes. Although, national metalworkers are not too optimistic, because the changes will hardly influence the sale of semi-finished products – the basis of export products of Russian metalworkers. A square billet and, sometimes, even flat steel are raw materials for further processing. The increase in supplies is a double-edged sword. The use of cheap Russian low added-value products allows foreign producers to force the Russian out of high added-value products markets. 
Joining the WTO may be a stimulus to develop steel milling capacities in Russia, although this is a rather long-term process. The Novolipetsky metallurgical combinat will be the main beneficiary of the trade liberalization as well as pipe companies, on which price anti-dumping duties are set in a number of states. 
Joining the WTO will strengthen the competition in the inner market, which has become important for Russian metalworkers lately. In this country they sell mainly high added-value products. The new trade mode will prohibit the Russian government from protecting the market from foreign producers, and Russian metalworkers are now trying to get governmental support for some products, for example, pre-painted galvanized iron.
There will be no dramatic changes in the non-ferrous metal and mining and processing industries, thinks Marat Gabitov from Unicredit. Non-ferrous metals, coal, and ores are traded in export markets, assuming that they are practically not imported. Joining the WTO, however, will remove the limits on purchasing of equipment and machinery for these sectors, which will help them to benefit.

Automobile Industry: Going into a Slide
One of the most discussed consequences of Russia joining the WTO is changes in the automobile market. Rumours about the inevitable collapse of the national car-making industry are premature and exaggerated. Russian negotiators succeeded in getting the most favourable conditions possible. In particular, the duties on new cars in the middle of the next year must be 25% instead of former 30%. The further decline will be rather smooth – from 25% to 15% in seven years. Of that, the largest decrease will take place in the last three years of the period. In the words of Vladimir Spesivtsev, Commercial Director of Autoalliance, it is more likely to be a psychological factor than a real economic one. 
“The automobile market returns to its position after the crisis of 2009, but there will hardly be any abrupt increase in growth rates caused by the future decline in import duties,” he is sure. “First of all, it is because of relatively low elasticity of demand. No doubt, the entire climate will change, but the changes will be smooth in the real sales sector. The decline in cost of low-end models will not be so significant to be able to cause any serious changes in the sales structure. A customer will more likely use the saved money to buy additional options or purchase a car with more expensive equipment.” The difference in the sector of luxury vehicles will be more vivid, but the demand dynamics is defined not only by the price for a car, but by expenses on its maintenance. Consequently, experts are cautious about the potential of duties decline as a driver of the demand for foreign cars.
“Naturally, foreign car-makers are interested in extension of their presence in the Russian market. They should take into account, however, that it is not just attractive, it is unpredictable to some degree. It seems that no player plans scaled intervention,” believes Valery Tischenko, an analyst at Auto-Profit company. In his opinion, Russian authorities have a lot of instruments to correct the market. The experience of recent years proves that in order to keep the national car-making industry, the Russian government can take even unpopular measures paying no attention to a negative reaction inside the country and abroad.
 “There are rumours already now that perhaps a dealer will have to pay a duty on car utilization when he imports a foreign car,” notes Mr Tischenko. It is not an official duty, and its size does not fall within the jurisdiction of intergovernmental agreements, meanwhile, the consequences may be very serious for imports. Moreover, there are different mechanisms of privileged crediting, technical maintenance, and other preferences to make cars assembled in Russia more popular.”  
A more significant factor, in the experts’ opinion, may be a decline in duties on second-hand foreign cars to 20%, but the planned term of this measure’s implementation (2020) allows to talk about some changes in the long-term prospect. And the country’s authorities have a lot of instruments to avoid the dominance of foreign companies.
A more dramatic situation may emerge in the freight vehicles market. For example, duties on new 20-ton dump trucks will fall after joining from the current 25% to 15%, and in three years – to 5% only. Meanwhile, duties on second-hand vehicles of the same type, the age of which is 3-5 years, will reduce from 30% to 15%, and in three years – to 10%. The additional rate on engine cubic metres will be abolished. A number of experts consider that it may lead to a mass import of cheap, although less reliable Chinese lorries. Meanwhile, prices for good import equivalents are becoming stable in a more acceptable price range, which will make the competition even harsher. 
One should understand that the demand in this sector is much lower than in the car market, and mechanisms for its change are more complicated. In particular, most large enterprises are connected with suppliers and auto dealers by long-term agreements, which will not be broken spontaneously. Also, truck replacement is usually a step-by-step process, and buyers gravitate to the same manufacturers, because the service departments are equipped to maintain these models.
It is obvious that not a real ratio of powers, but some psychological climate will change in the national automobile market soon. There are no objective prerequisites for abrupt significant changes. Time will show who – the Russians or foreigners – will make better use of the seven-year postponement. 

The Future Is in Deep Processing  
Timber transportation may be another potential battle field. The decree dated December 29, 2010, kept duties on logs exported in 2011 the same as in 2010 – 25% of the customs value, but not less than €15 for a cubic metre. Until recently, the duties on Russian timber exported to Finland were the main obstacle to Russia joining the WTO. 
Russian timber supplies to Finland decreased to one third because of the growth in RF duties – from 14.8 million cubic metres in 2005 to 5.3 million cubic metres in 2009. The statistics of the Federal Customs Service demonstrate a decline in exports of “non-processed wood” from 51 million cubic metres in 2006 and 49 million cubic metres in 2007 to 36.7 million cubic metres in 2008, 21.6 million cubic metres in 2009, and 21 million cubic metres in 2010. When becoming a member of the WTO, Russia will decrease the rate within the limits of the quota on white wood exports (6.2 million cubic metres, 5.9 million cubic metres of which is destined for the European Union) to 13% (practically half the current level). 
However, the government will have an opportunity to implement prohibitive duties if the volume is above the quota. A similar quota on redwood will be 16 million cubic metres (of that, 3.6 million cubic metres destined for the EU) with the 15% rate within the limits of the quota (a decline by 40%). There will be no quotas on non-processed birch and aspen wood, but export duties will be 7% and 5% respectively. Therefore, the export duty on aspen wood will fall by half, and that on birch wood will grow from 0% to 7%.
Thus, the increase in export volume of hardwood (white wood and redwood) is limited at the up-to-date level of timber exports – 22 million cubic metres. If timber export volumes recover to the level of 2006, the larger part of it will be quota-free softwood. 

Fine-tuning Is Needed
Cutting import and export duties and simplification of paperwork mechanisms may cause just a short-term increase or decline in transportation, besides, this potential is limited by market capacity. Obviously, joining the WTO is just the beginning of a long chess match, the name of which is interstate trade relations. The state as well as private companies have a lot of opportunities for balancing the market. RZD will benefit in any case. According to the company’s forecast, in 2015 export and import transportation volumes will increase by 20% in comparison with 2010 and amount to 580-590 million tons. 
By Dmitry Khantsevich
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In or Out?
The forecasts are indisputable – it does not matter whether imports will force out local producers in their fight for consumers’ budgets, or vice versa Russian companies will make use of the decrease in barriers to enter foreign markets, – the transportation of goods will be necessary. Trade fights will extend the number of transporters’ clients, and taking into account the distance from a plant to a shop, it is likely to be the golden age for the transport sector.
Specialists of the Economic Situation and Strategic Development Department of RZD make less optimistic prognoses. The report “Evaluation of Impact from Russia’s Joining the WTO on the Economy of RZD’s Operations” states that approximately 65% of cargo turnover is formed by energy freight, and joining the WTO will not influence these cargo flows significantly, their dynamics will depend on other factors. One should take into account, however, that privileged tariffs are applied to coal exported by railway, and thus, suppliers save up to RUR 2,500-3,000 per one wagon in a cut-off. In fact, this measure helped Russian coal companies in hard times, and it is still a significant factor to support their competitiveness in the external markets. 
The policy of the WTO targeted at tariff leveling may destroy this idyll, and if new players from South America, Africa, East Asia, and even the USA come to the market, this may cause a decline in export supplies, the volume of which was 39.5% of the total volume of coal extracted last year. Nevertheless, experts think that no dramatic changes will happen in the near future. “Foreign consumers are attracted by stable supplies first of all, and stable quality of Russian companies’ products,” Vladimir Koshevny, head of one of the largest sectoral analytical agencies, is sure. “It is hardly possible that someone will try to get better prices and risk concluding a contract with unchecked suppliers.” Thus, the situation may be developed under a Chinese scenario, when the requirements to level conditions are ceremonial. As a result, a buyer can lose more than the seller. Meanwhile, changes in the structure of transportation on the RZD’s network will be more dynamic for a number of cargoes. 

Metalworking Companies to Benefit
Due to Russia’s joining the WTO, Russian metal-working companies will have the same conditions to trade in export markets as their foreign competitors have in most countries, Vadim Astapovich from the VTB Capital notes. Although, national metalworkers are not too optimistic, because the changes will hardly influence the sale of semi-finished products – the basis of export products of Russian metalworkers. A square billet and, sometimes, even flat steel are raw materials for further processing. The increase in supplies is a double-edged sword. The use of cheap Russian low added-value products allows foreign producers to force the Russian out of high added-value products markets. 
Joining the WTO may be a stimulus to develop steel milling capacities in Russia, although this is a rather long-term process. The Novolipetsky metallurgical combinat will be the main beneficiary of the trade liberalization as well as pipe companies, on which price anti-dumping duties are set in a number of states. 
Joining the WTO will strengthen the competition in the inner market, which has become important for Russian metalworkers lately. In this country they sell mainly high added-value products. The new trade mode will prohibit the Russian government from protecting the market from foreign producers, and Russian metalworkers are now trying to get governmental support for some products, for example, pre-painted galvanized iron.
There will be no dramatic changes in the non-ferrous metal and mining and processing industries, thinks Marat Gabitov from Unicredit. Non-ferrous metals, coal, and ores are traded in export markets, assuming that they are practically not imported. Joining the WTO, however, will remove the limits on purchasing of equipment and machinery for these sectors, which will help them to benefit.

Automobile Industry: Going into a Slide
One of the most discussed consequences of Russia joining the WTO is changes in the automobile market. Rumours about the inevitable collapse of the national car-making industry are premature and exaggerated. Russian negotiators succeeded in getting the most favourable conditions possible. In particular, the duties on new cars in the middle of the next year must be 25% instead of former 30%. The further decline will be rather smooth – from 25% to 15% in seven years. Of that, the largest decrease will take place in the last three years of the period. In the words of Vladimir Spesivtsev, Commercial Director of Autoalliance, it is more likely to be a psychological factor than a real economic one. 
“The automobile market returns to its position after the crisis of 2009, but there will hardly be any abrupt increase in growth rates caused by the future decline in import duties,” he is sure. “First of all, it is because of relatively low elasticity of demand. No doubt, the entire climate will change, but the changes will be smooth in the real sales sector. The decline in cost of low-end models will not be so significant to be able to cause any serious changes in the sales structure. A customer will more likely use the saved money to buy additional options or purchase a car with more expensive equipment.” The difference in the sector of luxury vehicles will be more vivid, but the demand dynamics is defined not only by the price for a car, but by expenses on its maintenance. Consequently, experts are cautious about the potential of duties decline as a driver of the demand for foreign cars.
“Naturally, foreign car-makers are interested in extension of their presence in the Russian market. They should take into account, however, that it is not just attractive, it is unpredictable to some degree. It seems that no player plans scaled intervention,” believes Valery Tischenko, an analyst at Auto-Profit company. In his opinion, Russian authorities have a lot of instruments to correct the market. The experience of recent years proves that in order to keep the national car-making industry, the Russian government can take even unpopular measures paying no attention to a negative reaction inside the country and abroad.
 “There are rumours already now that perhaps a dealer will have to pay a duty on car utilization when he imports a foreign car,” notes Mr Tischenko. It is not an official duty, and its size does not fall within the jurisdiction of intergovernmental agreements, meanwhile, the consequences may be very serious for imports. Moreover, there are different mechanisms of privileged crediting, technical maintenance, and other preferences to make cars assembled in Russia more popular.”  
A more significant factor, in the experts’ opinion, may be a decline in duties on second-hand foreign cars to 20%, but the planned term of this measure’s implementation (2020) allows to talk about some changes in the long-term prospect. And the country’s authorities have a lot of instruments to avoid the dominance of foreign companies.
A more dramatic situation may emerge in the freight vehicles market. For example, duties on new 20-ton dump trucks will fall after joining from the current 25% to 15%, and in three years – to 5% only. Meanwhile, duties on second-hand vehicles of the same type, the age of which is 3-5 years, will reduce from 30% to 15%, and in three years – to 10%. The additional rate on engine cubic metres will be abolished. A number of experts consider that it may lead to a mass import of cheap, although less reliable Chinese lorries. Meanwhile, prices for good import equivalents are becoming stable in a more acceptable price range, which will make the competition even harsher. 
One should understand that the demand in this sector is much lower than in the car market, and mechanisms for its change are more complicated. In particular, most large enterprises are connected with suppliers and auto dealers by long-term agreements, which will not be broken spontaneously. Also, truck replacement is usually a step-by-step process, and buyers gravitate to the same manufacturers, because the service departments are equipped to maintain these models.
It is obvious that not a real ratio of powers, but some psychological climate will change in the national automobile market soon. There are no objective prerequisites for abrupt significant changes. Time will show who – the Russians or foreigners – will make better use of the seven-year postponement. 

The Future Is in Deep Processing  
Timber transportation may be another potential battle field. The decree dated December 29, 2010, kept duties on logs exported in 2011 the same as in 2010 – 25% of the customs value, but not less than €15 for a cubic metre. Until recently, the duties on Russian timber exported to Finland were the main obstacle to Russia joining the WTO. 
Russian timber supplies to Finland decreased to one third because of the growth in RF duties – from 14.8 million cubic metres in 2005 to 5.3 million cubic metres in 2009. The statistics of the Federal Customs Service demonstrate a decline in exports of “non-processed wood” from 51 million cubic metres in 2006 and 49 million cubic metres in 2007 to 36.7 million cubic metres in 2008, 21.6 million cubic metres in 2009, and 21 million cubic metres in 2010. When becoming a member of the WTO, Russia will decrease the rate within the limits of the quota on white wood exports (6.2 million cubic metres, 5.9 million cubic metres of which is destined for the European Union) to 13% (practically half the current level). 
However, the government will have an opportunity to implement prohibitive duties if the volume is above the quota. A similar quota on redwood will be 16 million cubic metres (of that, 3.6 million cubic metres destined for the EU) with the 15% rate within the limits of the quota (a decline by 40%). There will be no quotas on non-processed birch and aspen wood, but export duties will be 7% and 5% respectively. Therefore, the export duty on aspen wood will fall by half, and that on birch wood will grow from 0% to 7%.
Thus, the increase in export volume of hardwood (white wood and redwood) is limited at the up-to-date level of timber exports – 22 million cubic metres. If timber export volumes recover to the level of 2006, the larger part of it will be quota-free softwood. 

Fine-tuning Is Needed
Cutting import and export duties and simplification of paperwork mechanisms may cause just a short-term increase or decline in transportation, besides, this potential is limited by market capacity. Obviously, joining the WTO is just the beginning of a long chess match, the name of which is interstate trade relations. The state as well as private companies have a lot of opportunities for balancing the market. RZD will benefit in any case. According to the company’s forecast, in 2015 export and import transportation volumes will increase by 20% in comparison with 2010 and amount to 580-590 million tons. 
By Dmitry Khantsevich
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In or Out?
The forecasts are indisputable – it does not matter whether imports will force out local producers in their fight for consumers’ budgets, or vice versa Russian companies will make use of the decrease in barriers to enter foreign markets, – the transportation of goods will be necessary. Trade fights will extend the number of transporters’ clients, and taking into account the distance from a plant to a shop, it is likely to be the golden age for the transport sector.
Specialists of the Economic Situation and Strategic Development Department of RZD make less optimistic prognoses. The report “Evaluation of Impact from Russia’s Joining the WTO on the Economy of RZD’s Operations” states that approximately 65% of cargo turnover is formed by energy freight, and joining the WTO will not influence these cargo flows significantly, their dynamics will depend on other factors. One should take into account, however, that privileged tariffs are applied to coal exported by railway, and thus, suppliers save up to RUR 2,500-3,000 per one wagon in a cut-off. In fact, this measure helped Russian coal companies in hard times, and it is still a significant factor to support their competitiveness in the external markets. 
The policy of the WTO targeted at tariff leveling may destroy this idyll, and if new players from South America, Africa, East Asia, and even the USA come to the market, this may cause a decline in export supplies, the volume of which was 39.5% of the total volume of coal extracted last year. Nevertheless, experts think that no dramatic changes will happen in the near future. “Foreign consumers are attracted by stable supplies first of all, and stable quality of Russian companies’ products,” Vladimir Koshevny, head of one of the largest sectoral analytical agencies, is sure. “It is hardly possible that someone will try to get better prices and risk concluding a contract with unchecked suppliers.” Thus, the situation may be developed under a Chinese scenario, when the requirements to level conditions are ceremonial. As a result, a buyer can lose more than the seller. Meanwhile, changes in the structure of transportation on the RZD’s network will be more dynamic for a number of cargoes. 

Metalworking Companies to Benefit
Due to Russia’s joining the WTO, Russian metal-working companies will have the same conditions to trade in export markets as their foreign competitors have in most countries, Vadim Astapovich from the VTB Capital notes. Although, national metalworkers are not too optimistic, because the changes will hardly influence the sale of semi-finished products – the basis of export products of Russian metalworkers. A square billet and, sometimes, even flat steel are raw materials for further processing. The increase in supplies is a double-edged sword. The use of cheap Russian low added-value products allows foreign producers to force the Russian out of high added-value products markets. 
Joining the WTO may be a stimulus to develop steel milling capacities in Russia, although this is a rather long-term process. The Novolipetsky metallurgical combinat will be the main beneficiary of the trade liberalization as well as pipe companies, on which price anti-dumping duties are set in a number of states. 
Joining the WTO will strengthen the competition in the inner market, which has become important for Russian metalworkers lately. In this country they sell mainly high added-value products. The new trade mode will prohibit the Russian government from protecting the market from foreign producers, and Russian metalworkers are now trying to get governmental support for some products, for example, pre-painted galvanized iron.
There will be no dramatic changes in the non-ferrous metal and mining and processing industries, thinks Marat Gabitov from Unicredit. Non-ferrous metals, coal, and ores are traded in export markets, assuming that they are practically not imported. Joining the WTO, however, will remove the limits on purchasing of equipment and machinery for these sectors, which will help them to benefit.

Automobile Industry: Going into a Slide
One of the most discussed consequences of Russia joining the WTO is changes in the automobile market. Rumours about the inevitable collapse of the national car-making industry are premature and exaggerated. Russian negotiators succeeded in getting the most favourable conditions possible. In particular, the duties on new cars in the middle of the next year must be 25% instead of former 30%. The further decline will be rather smooth – from 25% to 15% in seven years. Of that, the largest decrease will take place in the last three years of the period. In the words of Vladimir Spesivtsev, Commercial Director of Autoalliance, it is more likely to be a psychological factor than a real economic one. 
“The automobile market returns to its position after the crisis of 2009, but there will hardly be any abrupt increase in growth rates caused by the future decline in import duties,” he is sure. “First of all, it is because of relatively low elasticity of demand. No doubt, the entire climate will change, but the changes will be smooth in the real sales sector. The decline in cost of low-end models will not be so significant to be able to cause any serious changes in the sales structure. A customer will more likely use the saved money to buy additional options or purchase a car with more expensive equipment.” The difference in the sector of luxury vehicles will be more vivid, but the demand dynamics is defined not only by the price for a car, but by expenses on its maintenance. Consequently, experts are cautious about the potential of duties decline as a driver of the demand for foreign cars.
“Naturally, foreign car-makers are interested in extension of their presence in the Russian market. They should take into account, however, that it is not just attractive, it is unpredictable to some degree. It seems that no player plans scaled intervention,” believes Valery Tischenko, an analyst at Auto-Profit company. In his opinion, Russian authorities have a lot of instruments to correct the market. The experience of recent years proves that in order to keep the national car-making industry, the Russian government can take even unpopular measures paying no attention to a negative reaction inside the country and abroad.
 “There are rumours already now that perhaps a dealer will have to pay a duty on car utilization when he imports a foreign car,” notes Mr Tischenko. It is not an official duty, and its size does not fall within the jurisdiction of intergovernmental agreements, meanwhile, the consequences may be very serious for imports. Moreover, there are different mechanisms of privileged crediting, technical maintenance, and other preferences to make cars assembled in Russia more popular.”  
A more significant factor, in the experts’ opinion, may be a decline in duties on second-hand foreign cars to 20%, but the planned term of this measure’s implementation (2020) allows to talk about some changes in the long-term prospect. And the country’s authorities have a lot of instruments to avoid the dominance of foreign companies.
A more dramatic situation may emerge in the freight vehicles market. For example, duties on new 20-ton dump trucks will fall after joining from the current 25% to 15%, and in three years – to 5% only. Meanwhile, duties on second-hand vehicles of the same type, the age of which is 3-5 years, will reduce from 30% to 15%, and in three years – to 10%. The additional rate on engine cubic metres will be abolished. A number of experts consider that it may lead to a mass import of cheap, although less reliable Chinese lorries. Meanwhile, prices for good import equivalents are becoming stable in a more acceptable price range, which will make the competition even harsher. 
One should understand that the demand in this sector is much lower than in the car market, and mechanisms for its change are more complicated. In particular, most large enterprises are connected with suppliers and auto dealers by long-term agreements, which will not be broken spontaneously. Also, truck replacement is usually a step-by-step process, and buyers gravitate to the same manufacturers, because the service departments are equipped to maintain these models.
It is obvious that not a real ratio of powers, but some psychological climate will change in the national automobile market soon. There are no objective prerequisites for abrupt significant changes. Time will show who – the Russians or foreigners – will make better use of the seven-year postponement. 

The Future Is in Deep Processing  
Timber transportation may be another potential battle field. The decree dated December 29, 2010, kept duties on logs exported in 2011 the same as in 2010 – 25% of the customs value, but not less than €15 for a cubic metre. Until recently, the duties on Russian timber exported to Finland were the main obstacle to Russia joining the WTO. 
Russian timber supplies to Finland decreased to one third because of the growth in RF duties – from 14.8 million cubic metres in 2005 to 5.3 million cubic metres in 2009. The statistics of the Federal Customs Service demonstrate a decline in exports of “non-processed wood” from 51 million cubic metres in 2006 and 49 million cubic metres in 2007 to 36.7 million cubic metres in 2008, 21.6 million cubic metres in 2009, and 21 million cubic metres in 2010. When becoming a member of the WTO, Russia will decrease the rate within the limits of the quota on white wood exports (6.2 million cubic metres, 5.9 million cubic metres of which is destined for the European Union) to 13% (practically half the current level). 
However, the government will have an opportunity to implement prohibitive duties if the volume is above the quota. A similar quota on redwood will be 16 million cubic metres (of that, 3.6 million cubic metres destined for the EU) with the 15% rate within the limits of the quota (a decline by 40%). There will be no quotas on non-processed birch and aspen wood, but export duties will be 7% and 5% respectively. Therefore, the export duty on aspen wood will fall by half, and that on birch wood will grow from 0% to 7%.
Thus, the increase in export volume of hardwood (white wood and redwood) is limited at the up-to-date level of timber exports – 22 million cubic metres. If timber export volumes recover to the level of 2006, the larger part of it will be quota-free softwood. 

Fine-tuning Is Needed
Cutting import and export duties and simplification of paperwork mechanisms may cause just a short-term increase or decline in transportation, besides, this potential is limited by market capacity. Obviously, joining the WTO is just the beginning of a long chess match, the name of which is interstate trade relations. The state as well as private companies have a lot of opportunities for balancing the market. RZD will benefit in any case. According to the company’s forecast, in 2015 export and import transportation volumes will increase by 20% in comparison with 2010 and amount to 580-590 million tons. 
By Dmitry Khantsevich
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In or Out?
The forecasts are indisputable – it does not matter whether imports will force out local producers in their fight for consumers’ budgets, or vice versa Russian companies will make use of the decrease in barriers to enter foreign markets, – the transportation of goods will be necessary. Trade fights will extend the number of transporters’ clients, and taking into account the distance from a plant to a shop, it is likely to be the golden age for the transport sector.
Specialists of the Economic Situation and Strategic Development Department of RZD make less optimistic prognoses. The report “Evaluation of Impact from Russia’s Joining the WTO on the Economy of RZD’s Operations” states that approximately 65% of cargo turnover is formed by energy freight, and joining the WTO will not influence these cargo flows significantly, their dynamics will depend on other factors. One should take into account, however, that privileged tariffs are applied to coal exported by railway, and thus, suppliers save up to RUR 2,500-3,000 per one wagon in a cut-off. In fact, this measure helped Russian coal companies in hard times, and it is still a significant factor to support their competitiveness in the external markets. 
The policy of the WTO targeted at tariff leveling may destroy this idyll, and if new players from South America, Africa, East Asia, and even the USA come to the market, this may cause a decline in export supplies, the volume of which was 39.5% of the total volume of coal extracted last year. Nevertheless, experts think that no dramatic changes will happen in the near future. “Foreign consumers are attracted by stable supplies first of all, and stable quality of Russian companies’ products,” Vladimir Koshevny, head of one of the largest sectoral analytical agencies, is sure. “It is hardly possible that someone will try to get better prices and risk concluding a contract with unchecked suppliers.” Thus, the situation may be developed under a Chinese scenario, when the requirements to level conditions are ceremonial. As a result, a buyer can lose more than the seller. Meanwhile, changes in the structure of transportation on the RZD’s network will be more dynamic for a number of cargoes. 

Metalworking Companies to Benefit
Due to Russia’s joining the WTO, Russian metal-working companies will have the same conditions to trade in export markets as their foreign competitors have in most countries, Vadim Astapovich from the VTB Capital notes. Although, national metalworkers are not too optimistic, because the changes will hardly influence the sale of semi-finished products – the basis of export products of Russian metalworkers. A square billet and, sometimes, even flat steel are raw materials for further processing. The increase in supplies is a double-edged sword. The use of cheap Russian low added-value products allows foreign producers to force the Russian out of high added-value products markets. 
Joining the WTO may be a stimulus to develop steel milling capacities in Russia, although this is a rather long-term process. The Novolipetsky metallurgical combinat will be the main beneficiary of the trade liberalization as well as pipe companies, on which price anti-dumping duties are set in a number of states. 
Joining the WTO will strengthen the competition in the inner market, which has become important for Russian metalworkers lately. In this country they sell mainly high added-value products. The new trade mode will prohibit the Russian government from protecting the market from foreign producers, and Russian metalworkers are now trying to get governmental support for some products, for example, pre-painted galvanized iron.
There will be no dramatic changes in the non-ferrous metal and mining and processing industries, thinks Marat Gabitov from Unicredit. Non-ferrous metals, coal, and ores are traded in export markets, assuming that they are practically not imported. Joining the WTO, however, will remove the limits on purchasing of equipment and machinery for these sectors, which will help them to benefit.

Automobile Industry: Going into a Slide
One of the most discussed consequences of Russia joining the WTO is changes in the automobile market. Rumours about the inevitable collapse of the national car-making industry are premature and exaggerated. Russian negotiators succeeded in getting the most favourable conditions possible. In particular, the duties on new cars in the middle of the next year must be 25% instead of former 30%. The further decline will be rather smooth – from 25% to 15% in seven years. Of that, the largest decrease will take place in the last three years of the period. In the words of Vladimir Spesivtsev, Commercial Director of Autoalliance, it is more likely to be a psychological factor than a real economic one. 
“The automobile market returns to its position after the crisis of 2009, but there will hardly be any abrupt increase in growth rates caused by the future decline in import duties,” he is sure. “First of all, it is because of relatively low elasticity of demand. No doubt, the entire climate will change, but the changes will be smooth in the real sales sector. The decline in cost of low-end models will not be so significant to be able to cause any serious changes in the sales structure. A customer will more likely use the saved money to buy additional options or purchase a car with more expensive equipment.” The difference in the sector of luxury vehicles will be more vivid, but the demand dynamics is defined not only by the price for a car, but by expenses on its maintenance. Consequently, experts are cautious about the potential of duties decline as a driver of the demand for foreign cars.
“Naturally, foreign car-makers are interested in extension of their presence in the Russian market. They should take into account, however, that it is not just attractive, it is unpredictable to some degree. It seems that no player plans scaled intervention,” believes Valery Tischenko, an analyst at Auto-Profit company. In his opinion, Russian authorities have a lot of instruments to correct the market. The experience of recent years proves that in order to keep the national car-making industry, the Russian government can take even unpopular measures paying no attention to a negative reaction inside the country and abroad.
 “There are rumours already now that perhaps a dealer will have to pay a duty on car utilization when he imports a foreign car,” notes Mr Tischenko. It is not an official duty, and its size does not fall within the jurisdiction of intergovernmental agreements, meanwhile, the consequences may be very serious for imports. Moreover, there are different mechanisms of privileged crediting, technical maintenance, and other preferences to make cars assembled in Russia more popular.”  
A more significant factor, in the experts’ opinion, may be a decline in duties on second-hand foreign cars to 20%, but the planned term of this measure’s implementation (2020) allows to talk about some changes in the long-term prospect. And the country’s authorities have a lot of instruments to avoid the dominance of foreign companies.
A more dramatic situation may emerge in the freight vehicles market. For example, duties on new 20-ton dump trucks will fall after joining from the current 25% to 15%, and in three years – to 5% only. Meanwhile, duties on second-hand vehicles of the same type, the age of which is 3-5 years, will reduce from 30% to 15%, and in three years – to 10%. The additional rate on engine cubic metres will be abolished. A number of experts consider that it may lead to a mass import of cheap, although less reliable Chinese lorries. Meanwhile, prices for good import equivalents are becoming stable in a more acceptable price range, which will make the competition even harsher. 
One should understand that the demand in this sector is much lower than in the car market, and mechanisms for its change are more complicated. In particular, most large enterprises are connected with suppliers and auto dealers by long-term agreements, which will not be broken spontaneously. Also, truck replacement is usually a step-by-step process, and buyers gravitate to the same manufacturers, because the service departments are equipped to maintain these models.
It is obvious that not a real ratio of powers, but some psychological climate will change in the national automobile market soon. There are no objective prerequisites for abrupt significant changes. Time will show who – the Russians or foreigners – will make better use of the seven-year postponement. 

The Future Is in Deep Processing  
Timber transportation may be another potential battle field. The decree dated December 29, 2010, kept duties on logs exported in 2011 the same as in 2010 – 25% of the customs value, but not less than €15 for a cubic metre. Until recently, the duties on Russian timber exported to Finland were the main obstacle to Russia joining the WTO. 
Russian timber supplies to Finland decreased to one third because of the growth in RF duties – from 14.8 million cubic metres in 2005 to 5.3 million cubic metres in 2009. The statistics of the Federal Customs Service demonstrate a decline in exports of “non-processed wood” from 51 million cubic metres in 2006 and 49 million cubic metres in 2007 to 36.7 million cubic metres in 2008, 21.6 million cubic metres in 2009, and 21 million cubic metres in 2010. When becoming a member of the WTO, Russia will decrease the rate within the limits of the quota on white wood exports (6.2 million cubic metres, 5.9 million cubic metres of which is destined for the European Union) to 13% (practically half the current level). 
However, the government will have an opportunity to implement prohibitive duties if the volume is above the quota. A similar quota on redwood will be 16 million cubic metres (of that, 3.6 million cubic metres destined for the EU) with the 15% rate within the limits of the quota (a decline by 40%). There will be no quotas on non-processed birch and aspen wood, but export duties will be 7% and 5% respectively. Therefore, the export duty on aspen wood will fall by half, and that on birch wood will grow from 0% to 7%.
Thus, the increase in export volume of hardwood (white wood and redwood) is limited at the up-to-date level of timber exports – 22 million cubic metres. If timber export volumes recover to the level of 2006, the larger part of it will be quota-free softwood. 

Fine-tuning Is Needed
Cutting import and export duties and simplification of paperwork mechanisms may cause just a short-term increase or decline in transportation, besides, this potential is limited by market capacity. Obviously, joining the WTO is just the beginning of a long chess match, the name of which is interstate trade relations. The state as well as private companies have a lot of opportunities for balancing the market. RZD will benefit in any case. According to the company’s forecast, in 2015 export and import transportation volumes will increase by 20% in comparison with 2010 and amount to 580-590 million tons. 
By Dmitry Khantsevich
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To Define Mutual Interest
– Mr Morozov, one of the most important factors, on which the situation on the RZD’s network depends, is the beginning of the functioning of the proprietary and rented wagon parks. What is their size now? Have they fulfilled the tasks set?

– First of all, I would like to remind you that railcars from the Second Cargo Company’s fleet are selected to the owned and rented wagons park in accordance with Decree №1051 of the RF Government dated December 20, 2011. Nowadays, the park consists of approximately 105,000 gondola railcars. The rented wagons are managed on the impersonality principle, which helps to reduce the impact of such negative factors as long idling of empty private rolling stock waiting for more profitable transportation, mass oncoming traffic of empty railcars of the same type owned by different companies, an increase in the classification work, etc. Generally, judging by the current situation on the railway network, the decision made at the end of last year was correct. Naturally, there are some difficulties, and the further improvement of the rented park’s operation depends on overcoming them. For example, a decision on the issue of tariffs on transit and timber transportation via the RF territory has not been made yet. In cooperation with the Federal Tariff Service, RZD thrashes out the necessary amendments to the regulatory base. 

– Is it planned to extend the number of rented railcars? On what conditions? Can you name companies interested in the offer made by RZD?

– There is an address to the rolling stock owners on the website of RZD, in which the company asks them to consider the possibility of giving universal gondola railcars to the rented fleet. A number of rolling stock owners have shown their interest, and work is now under way to reveal the basic criteria influencing the private companies’ decision. It also helps us to define the parameters for further development of the scheme of attracting parks under RZD’s control.

– What is the reason for the rather cautious reaction of operators in response to the transporter’s offer? Will their opinion on the issue change soon?

– The governmental decree mentioned above and respective order № 444-t/4 of the Federal Tariff Service came into force only two months ago, so it is too early to speak about the results of the rented park creation. In fact, rolling stock owners are wary of the idea to transfer their railcars. After working out all technological aspects of work and putting necessary amendments to the regulatory and legal acts, we will be able to create a fleet of 200,000 – 250,000 universal gondola cars. A long-term contract with RZD and stable guaranteed profitability are two of the major factors influencing the final decision of a rolling stock owner. Mutual interest in the cooperation gives an opportunity to search together with transport market players for the most rational and mutually beneficial ways to fulfill the tasks set for the transporter and hope for a positive result.          

Rights Go Hand in Hand with Responsibilities
– Do you think that rolling stock owners should be administratively obliged to put railcars under the control of RZD?

– I think it would be viable to formalize in legislation the terms “operator” and “operator activity” and give operators a function of supplying wagons, containers for cargo railway transportation, and make this their public function. In my opinion, it is necessary to envisage that operators are obliged to form and maintain a reserve of wagons and containers to provide especially urgent military railway transportation (mobilization assignments).

– There was a heated discussion on a respective document developed by the Transport Ministry. What is RZD’s opinion on the document?

– I would like to emphasise that development of the bill of the RF Government “On the Basis of Legal Regulation of the Activity of Railway Rolling Stock Operators and Their Interaction with Transportation Process Participants during Transportation” was caused by the necessity to establish at the legislation level the basis for legal regulation of their activity.  
Simultaneously, in the opinion of RZD, this project does not define what is included in the field of operators’ responsibility and what differs them from other participants. Operators must provide wagons and containers for transportation, however, the document does not entrust them with this responsibility, but declares freedom of contract as one of the principles of operator activity. Thus, it excludes the responsibility of these companies to the state and the society for supplying consignors with wagons and containers they own. Therefore, there is a mismatch between the norms set by the document and the basic principles of operators’ business, their interaction with other participants of the transportation process. Also, other key issues were not mentioned in the draft. In particular, the legal regulation of rolling stock staying on the public tracks was not envisaged. Wagons, which do not participate in the transportation process, can stay on the public tracks only if their owner has a contract with the infrastructure owner. 
On the whole, if we consider the document from the standpoint of transportation process organization and provision of efficient interaction between the key links of the transportation system, unfortunately, we have to admit that the draft does not accord fully with the expectations of the market participants.

– There is an opinion that such issues cannot be completely solved at the level of a decree, and there will be specifications in other regulatory acts. Also, the draft decree envisages a possibility to conclude bilateral civil-law contracts between operators and other participants in the transportation process.

– If mentioned responsibilities are not fixed legally, there will be no basis for establishing bilateral relations. Even if we assume that rolling stock supply may be regulated in a contract, but the problems of inefficient idling of empty private wagons on public tracks, and consequently, an overstock on tracks, will not be solved.

– What are the most urgent issues to be solved to improve the work of railways in the cargo transportation sector?

– The improvement of the quality of cargo transportation depends on the clear regulatory rules of interaction of transportation process participants, enhancement of the legal and regulatory environment, timely consideration of practice. I mean that necessary amendments should be put into the federal laws “The Code of Railway Transport of the Russian Federation” and “On Railway Transport in the Russian Federation”. In particular, amendments should be made to these laws related to:
• setting responsibility of consignors and consignees, owners of non-public railway tracks, and other persons for presence of empty or loaded railcars on public railway tracks for the reasons depending upon them;
• collecting fees for using non-public railway tracks of RZD;
• concretization of operator’s legal status;
• implementation of the necessity of giving an application by empty rolling stock dispatcher, a similar to that for cargo transportation. 

Tariffs to Be Revised
– Can tariff policy become a more efficient instrument for the railway sector development?

– Earlier existing different approaches to the state tariff policy concerning natural monopolistic economic sectors determined the inequality of the conditions of their activity. In recent years, the standards and regulating methods in these sectors have been converging step by step.
The mechanism of state regulation of tariffs in the railway transport, in its natural monopolistic sector, was developed in 2009-2010. The Government approved Decree № 643 “On State Regulation and Control of Tariffs, Dues, and Fees for Operations (Services) of Natural Monopolies in the Railway Transportation Sector”. It became the basis for the Methods of Calculation of Economically Justified Expenses and Normative Profit, Taken into Consideration When Forming Economically Justified Index to the Existing Level of Tariffs, Dues, and Fees for Cargo Railway Transportation, approved by the Federal Tariff Service.
In practice, this mechanism defines a variant of financing the sector, which envisages expanded reproduction of RZD’s basic assets necessary for full and qualitative fulfillment of the national economy’s need for cargo transportation by railways. Taking into account the current economic situation, the methods combine tariff and budget financing instruments. Also, this document forms the mechanism of long-term tariff planning providing an expanded reproduction of railway basic assets comparable with the national economy’s needs.
Implementation of new approaches to state tariff regulation will be an efficient instrument for the sector’s development.

– Do you agree that tariffs on empty mileage must be equalised?

 Transportation market demonopolisation has created new conditions and reality of work. After the rolling stock fleet became 100% private, the efficiency of transport infrastructure reduced. Loading of empty railcars after cargo of the first tariff class (especially coal) has been discharged is not economically profitable for rolling stock owners, consequently, there appears an increase in the oncoming empty wagon traffic, and in the idling of wagons after taking cargoes of the third tariff class out of them. Such situation causes significant changes in the technological processes of train traffic organization.
The forced irrational usage of infrastructure and rolling stock negatively influences the financial and economic results of RZD’s activity, as well as the contentment of consumers of railway services. 
One of the current tasks in the tariff formation sector, fulfillment of which may make for greater efficiency in wagon park management, is unification of tariffs on empty mileage regardless of the class of earlier transported cargo and the owner of the railcars. Last November, the governmental commission for transport and communication noted that decisions on unification must be made in the first half of 2012.
Nowadays, taking into account the approaches approved by adjacent executive federal bodies, at the first stage it is supposed to apply a universal calculation of carriage charges for the empty mileage regardless of the cargo transported earlier to universal rolling stock only (gondola cars and flat wagons), that prevails in mass cargo transportation (coal, ore, timber, construction materials, ferrous metals). To limit the increase in tariffs on transportation of cargoes of the first tariff class, and to avoid significant excess in tariffs on empty mileage as compared with those on loaded trip, additional decreasing coefficients are to be applied to the tariff rates on empty mileage of wagons after discharging cargo of the second tariff class.

To Stimulate a Commodity Producer
– Do you think that it is high time to at least revise or even abolish privileged tariffs?

– It is worth noting that due to Russia joining the Common Economic Space, work is under way to adjust acting Tariff Regulation № 10-01 to the special terms of setting tariffs on some cargoes transportation in order to abolish now existing privileged tariffs in 2013. Starting from 2010, the RF Federal Tariff Service have already put into Tariff Regulation №10-01 privileged tariffs on transportation of freight in containers (to extend the wagon and container components in the tariff), coal, cargoes in universal and isothermal rolling stock, including large-capacity thermally insulated containers and refrigerated containers. Universal rules of setting privileged tariffs are now being developed. They will not be included into Tariff Regulation № 10-01, because they will be set by an entrusted body of states – members of the Common Economic Space in concurrence with the Commission of the Customs Union for transportation of some definite cargoes in separate directions in case there is no other way to support commodity producers. They should be based on the principle of impermissibility to create advantages for some definite commodity producers. 

– More and more often we hear suggestions that rolling stock owners should be stimulated to purchase innovative machinery by means of tariff preferences. Will these measures be efficient, in your opinion?

– The issue of creating tariff mechanisms to stimulate transporters, operators, and consignors to purchase next-generation railcars and containers is rather topical today. It was discussed at the meeting of the governmental commission for advanced technologies and innovations on January 30, 2012. In order to create conditions for tariffs to motivate owners to use innovative cargo railcars, work is under way to define the possibility of making changes in the system of tariffs on cargo transportation. All-Russian Railway Research Institute (VNIIZhT) is to research “Tariff Stimulation of Usage Cargo Rolling Stock with Better Exploitation Characteristics.” After considering the results of practical evaluation of the influence on infrastructure and defining the economic effect the railway will get, respective suggestions for tariff solutions may be approved. ®
Interviewed by Dmitry Khantsevich 

    [~DETAIL_TEXT] => 
To Define Mutual Interest
– Mr Morozov, one of the most important factors, on which the situation on the RZD’s network depends, is the beginning of the functioning of the proprietary and rented wagon parks. What is their size now? Have they fulfilled the tasks set?

– First of all, I would like to remind you that railcars from the Second Cargo Company’s fleet are selected to the owned and rented wagons park in accordance with Decree №1051 of the RF Government dated December 20, 2011. Nowadays, the park consists of approximately 105,000 gondola railcars. The rented wagons are managed on the impersonality principle, which helps to reduce the impact of such negative factors as long idling of empty private rolling stock waiting for more profitable transportation, mass oncoming traffic of empty railcars of the same type owned by different companies, an increase in the classification work, etc. Generally, judging by the current situation on the railway network, the decision made at the end of last year was correct. Naturally, there are some difficulties, and the further improvement of the rented park’s operation depends on overcoming them. For example, a decision on the issue of tariffs on transit and timber transportation via the RF territory has not been made yet. In cooperation with the Federal Tariff Service, RZD thrashes out the necessary amendments to the regulatory base. 

– Is it planned to extend the number of rented railcars? On what conditions? Can you name companies interested in the offer made by RZD?

– There is an address to the rolling stock owners on the website of RZD, in which the company asks them to consider the possibility of giving universal gondola railcars to the rented fleet. A number of rolling stock owners have shown their interest, and work is now under way to reveal the basic criteria influencing the private companies’ decision. It also helps us to define the parameters for further development of the scheme of attracting parks under RZD’s control.

– What is the reason for the rather cautious reaction of operators in response to the transporter’s offer? Will their opinion on the issue change soon?

– The governmental decree mentioned above and respective order № 444-t/4 of the Federal Tariff Service came into force only two months ago, so it is too early to speak about the results of the rented park creation. In fact, rolling stock owners are wary of the idea to transfer their railcars. After working out all technological aspects of work and putting necessary amendments to the regulatory and legal acts, we will be able to create a fleet of 200,000 – 250,000 universal gondola cars. A long-term contract with RZD and stable guaranteed profitability are two of the major factors influencing the final decision of a rolling stock owner. Mutual interest in the cooperation gives an opportunity to search together with transport market players for the most rational and mutually beneficial ways to fulfill the tasks set for the transporter and hope for a positive result.          

Rights Go Hand in Hand with Responsibilities
– Do you think that rolling stock owners should be administratively obliged to put railcars under the control of RZD?

– I think it would be viable to formalize in legislation the terms “operator” and “operator activity” and give operators a function of supplying wagons, containers for cargo railway transportation, and make this their public function. In my opinion, it is necessary to envisage that operators are obliged to form and maintain a reserve of wagons and containers to provide especially urgent military railway transportation (mobilization assignments).

– There was a heated discussion on a respective document developed by the Transport Ministry. What is RZD’s opinion on the document?

– I would like to emphasise that development of the bill of the RF Government “On the Basis of Legal Regulation of the Activity of Railway Rolling Stock Operators and Their Interaction with Transportation Process Participants during Transportation” was caused by the necessity to establish at the legislation level the basis for legal regulation of their activity.  
Simultaneously, in the opinion of RZD, this project does not define what is included in the field of operators’ responsibility and what differs them from other participants. Operators must provide wagons and containers for transportation, however, the document does not entrust them with this responsibility, but declares freedom of contract as one of the principles of operator activity. Thus, it excludes the responsibility of these companies to the state and the society for supplying consignors with wagons and containers they own. Therefore, there is a mismatch between the norms set by the document and the basic principles of operators’ business, their interaction with other participants of the transportation process. Also, other key issues were not mentioned in the draft. In particular, the legal regulation of rolling stock staying on the public tracks was not envisaged. Wagons, which do not participate in the transportation process, can stay on the public tracks only if their owner has a contract with the infrastructure owner. 
On the whole, if we consider the document from the standpoint of transportation process organization and provision of efficient interaction between the key links of the transportation system, unfortunately, we have to admit that the draft does not accord fully with the expectations of the market participants.

– There is an opinion that such issues cannot be completely solved at the level of a decree, and there will be specifications in other regulatory acts. Also, the draft decree envisages a possibility to conclude bilateral civil-law contracts between operators and other participants in the transportation process.

– If mentioned responsibilities are not fixed legally, there will be no basis for establishing bilateral relations. Even if we assume that rolling stock supply may be regulated in a contract, but the problems of inefficient idling of empty private wagons on public tracks, and consequently, an overstock on tracks, will not be solved.

– What are the most urgent issues to be solved to improve the work of railways in the cargo transportation sector?

– The improvement of the quality of cargo transportation depends on the clear regulatory rules of interaction of transportation process participants, enhancement of the legal and regulatory environment, timely consideration of practice. I mean that necessary amendments should be put into the federal laws “The Code of Railway Transport of the Russian Federation” and “On Railway Transport in the Russian Federation”. In particular, amendments should be made to these laws related to:
• setting responsibility of consignors and consignees, owners of non-public railway tracks, and other persons for presence of empty or loaded railcars on public railway tracks for the reasons depending upon them;
• collecting fees for using non-public railway tracks of RZD;
• concretization of operator’s legal status;
• implementation of the necessity of giving an application by empty rolling stock dispatcher, a similar to that for cargo transportation. 

Tariffs to Be Revised
– Can tariff policy become a more efficient instrument for the railway sector development?

– Earlier existing different approaches to the state tariff policy concerning natural monopolistic economic sectors determined the inequality of the conditions of their activity. In recent years, the standards and regulating methods in these sectors have been converging step by step.
The mechanism of state regulation of tariffs in the railway transport, in its natural monopolistic sector, was developed in 2009-2010. The Government approved Decree № 643 “On State Regulation and Control of Tariffs, Dues, and Fees for Operations (Services) of Natural Monopolies in the Railway Transportation Sector”. It became the basis for the Methods of Calculation of Economically Justified Expenses and Normative Profit, Taken into Consideration When Forming Economically Justified Index to the Existing Level of Tariffs, Dues, and Fees for Cargo Railway Transportation, approved by the Federal Tariff Service.
In practice, this mechanism defines a variant of financing the sector, which envisages expanded reproduction of RZD’s basic assets necessary for full and qualitative fulfillment of the national economy’s need for cargo transportation by railways. Taking into account the current economic situation, the methods combine tariff and budget financing instruments. Also, this document forms the mechanism of long-term tariff planning providing an expanded reproduction of railway basic assets comparable with the national economy’s needs.
Implementation of new approaches to state tariff regulation will be an efficient instrument for the sector’s development.

– Do you agree that tariffs on empty mileage must be equalised?

 Transportation market demonopolisation has created new conditions and reality of work. After the rolling stock fleet became 100% private, the efficiency of transport infrastructure reduced. Loading of empty railcars after cargo of the first tariff class (especially coal) has been discharged is not economically profitable for rolling stock owners, consequently, there appears an increase in the oncoming empty wagon traffic, and in the idling of wagons after taking cargoes of the third tariff class out of them. Such situation causes significant changes in the technological processes of train traffic organization.
The forced irrational usage of infrastructure and rolling stock negatively influences the financial and economic results of RZD’s activity, as well as the contentment of consumers of railway services. 
One of the current tasks in the tariff formation sector, fulfillment of which may make for greater efficiency in wagon park management, is unification of tariffs on empty mileage regardless of the class of earlier transported cargo and the owner of the railcars. Last November, the governmental commission for transport and communication noted that decisions on unification must be made in the first half of 2012.
Nowadays, taking into account the approaches approved by adjacent executive federal bodies, at the first stage it is supposed to apply a universal calculation of carriage charges for the empty mileage regardless of the cargo transported earlier to universal rolling stock only (gondola cars and flat wagons), that prevails in mass cargo transportation (coal, ore, timber, construction materials, ferrous metals). To limit the increase in tariffs on transportation of cargoes of the first tariff class, and to avoid significant excess in tariffs on empty mileage as compared with those on loaded trip, additional decreasing coefficients are to be applied to the tariff rates on empty mileage of wagons after discharging cargo of the second tariff class.

To Stimulate a Commodity Producer
– Do you think that it is high time to at least revise or even abolish privileged tariffs?

– It is worth noting that due to Russia joining the Common Economic Space, work is under way to adjust acting Tariff Regulation № 10-01 to the special terms of setting tariffs on some cargoes transportation in order to abolish now existing privileged tariffs in 2013. Starting from 2010, the RF Federal Tariff Service have already put into Tariff Regulation №10-01 privileged tariffs on transportation of freight in containers (to extend the wagon and container components in the tariff), coal, cargoes in universal and isothermal rolling stock, including large-capacity thermally insulated containers and refrigerated containers. Universal rules of setting privileged tariffs are now being developed. They will not be included into Tariff Regulation № 10-01, because they will be set by an entrusted body of states – members of the Common Economic Space in concurrence with the Commission of the Customs Union for transportation of some definite cargoes in separate directions in case there is no other way to support commodity producers. They should be based on the principle of impermissibility to create advantages for some definite commodity producers. 

– More and more often we hear suggestions that rolling stock owners should be stimulated to purchase innovative machinery by means of tariff preferences. Will these measures be efficient, in your opinion?

– The issue of creating tariff mechanisms to stimulate transporters, operators, and consignors to purchase next-generation railcars and containers is rather topical today. It was discussed at the meeting of the governmental commission for advanced technologies and innovations on January 30, 2012. In order to create conditions for tariffs to motivate owners to use innovative cargo railcars, work is under way to define the possibility of making changes in the system of tariffs on cargo transportation. All-Russian Railway Research Institute (VNIIZhT) is to research “Tariff Stimulation of Usage Cargo Rolling Stock with Better Exploitation Characteristics.” After considering the results of practical evaluation of the influence on infrastructure and defining the economic effect the railway will get, respective suggestions for tariff solutions may be approved. ®
Interviewed by Dmitry Khantsevich 

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    [~PREVIEW_TEXT] => The past few months were saturated with a lot of different events, decisions, and new projects, which are starting to be realised. It is possible to say 
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/2/2.jpg" border="1" alt=" " hspace="5" width="200" height="230" align="left" />The past few months were saturated with a lot of different events, decisions, and new projects, which are starting to be realised. It is possible to say <br />now that the railway transportation market in 2012 differs dramatically from the system we got used to. Vadim Morozov, First Vice President of RZD, <br />talks about the changes that have happened or will happen in the near future, and urgent tasks that should not be delayed.
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To Define Mutual Interest
– Mr Morozov, one of the most important factors, on which the situation on the RZD’s network depends, is the beginning of the functioning of the proprietary and rented wagon parks. What is their size now? Have they fulfilled the tasks set?

– First of all, I would like to remind you that railcars from the Second Cargo Company’s fleet are selected to the owned and rented wagons park in accordance with Decree №1051 of the RF Government dated December 20, 2011. Nowadays, the park consists of approximately 105,000 gondola railcars. The rented wagons are managed on the impersonality principle, which helps to reduce the impact of such negative factors as long idling of empty private rolling stock waiting for more profitable transportation, mass oncoming traffic of empty railcars of the same type owned by different companies, an increase in the classification work, etc. Generally, judging by the current situation on the railway network, the decision made at the end of last year was correct. Naturally, there are some difficulties, and the further improvement of the rented park’s operation depends on overcoming them. For example, a decision on the issue of tariffs on transit and timber transportation via the RF territory has not been made yet. In cooperation with the Federal Tariff Service, RZD thrashes out the necessary amendments to the regulatory base. 

– Is it planned to extend the number of rented railcars? On what conditions? Can you name companies interested in the offer made by RZD?

– There is an address to the rolling stock owners on the website of RZD, in which the company asks them to consider the possibility of giving universal gondola railcars to the rented fleet. A number of rolling stock owners have shown their interest, and work is now under way to reveal the basic criteria influencing the private companies’ decision. It also helps us to define the parameters for further development of the scheme of attracting parks under RZD’s control.

– What is the reason for the rather cautious reaction of operators in response to the transporter’s offer? Will their opinion on the issue change soon?

– The governmental decree mentioned above and respective order № 444-t/4 of the Federal Tariff Service came into force only two months ago, so it is too early to speak about the results of the rented park creation. In fact, rolling stock owners are wary of the idea to transfer their railcars. After working out all technological aspects of work and putting necessary amendments to the regulatory and legal acts, we will be able to create a fleet of 200,000 – 250,000 universal gondola cars. A long-term contract with RZD and stable guaranteed profitability are two of the major factors influencing the final decision of a rolling stock owner. Mutual interest in the cooperation gives an opportunity to search together with transport market players for the most rational and mutually beneficial ways to fulfill the tasks set for the transporter and hope for a positive result.          

Rights Go Hand in Hand with Responsibilities
– Do you think that rolling stock owners should be administratively obliged to put railcars under the control of RZD?

– I think it would be viable to formalize in legislation the terms “operator” and “operator activity” and give operators a function of supplying wagons, containers for cargo railway transportation, and make this their public function. In my opinion, it is necessary to envisage that operators are obliged to form and maintain a reserve of wagons and containers to provide especially urgent military railway transportation (mobilization assignments).

– There was a heated discussion on a respective document developed by the Transport Ministry. What is RZD’s opinion on the document?

– I would like to emphasise that development of the bill of the RF Government “On the Basis of Legal Regulation of the Activity of Railway Rolling Stock Operators and Their Interaction with Transportation Process Participants during Transportation” was caused by the necessity to establish at the legislation level the basis for legal regulation of their activity.  
Simultaneously, in the opinion of RZD, this project does not define what is included in the field of operators’ responsibility and what differs them from other participants. Operators must provide wagons and containers for transportation, however, the document does not entrust them with this responsibility, but declares freedom of contract as one of the principles of operator activity. Thus, it excludes the responsibility of these companies to the state and the society for supplying consignors with wagons and containers they own. Therefore, there is a mismatch between the norms set by the document and the basic principles of operators’ business, their interaction with other participants of the transportation process. Also, other key issues were not mentioned in the draft. In particular, the legal regulation of rolling stock staying on the public tracks was not envisaged. Wagons, which do not participate in the transportation process, can stay on the public tracks only if their owner has a contract with the infrastructure owner. 
On the whole, if we consider the document from the standpoint of transportation process organization and provision of efficient interaction between the key links of the transportation system, unfortunately, we have to admit that the draft does not accord fully with the expectations of the market participants.

– There is an opinion that such issues cannot be completely solved at the level of a decree, and there will be specifications in other regulatory acts. Also, the draft decree envisages a possibility to conclude bilateral civil-law contracts between operators and other participants in the transportation process.

– If mentioned responsibilities are not fixed legally, there will be no basis for establishing bilateral relations. Even if we assume that rolling stock supply may be regulated in a contract, but the problems of inefficient idling of empty private wagons on public tracks, and consequently, an overstock on tracks, will not be solved.

– What are the most urgent issues to be solved to improve the work of railways in the cargo transportation sector?

– The improvement of the quality of cargo transportation depends on the clear regulatory rules of interaction of transportation process participants, enhancement of the legal and regulatory environment, timely consideration of practice. I mean that necessary amendments should be put into the federal laws “The Code of Railway Transport of the Russian Federation” and “On Railway Transport in the Russian Federation”. In particular, amendments should be made to these laws related to:
• setting responsibility of consignors and consignees, owners of non-public railway tracks, and other persons for presence of empty or loaded railcars on public railway tracks for the reasons depending upon them;
• collecting fees for using non-public railway tracks of RZD;
• concretization of operator’s legal status;
• implementation of the necessity of giving an application by empty rolling stock dispatcher, a similar to that for cargo transportation. 

Tariffs to Be Revised
– Can tariff policy become a more efficient instrument for the railway sector development?

– Earlier existing different approaches to the state tariff policy concerning natural monopolistic economic sectors determined the inequality of the conditions of their activity. In recent years, the standards and regulating methods in these sectors have been converging step by step.
The mechanism of state regulation of tariffs in the railway transport, in its natural monopolistic sector, was developed in 2009-2010. The Government approved Decree № 643 “On State Regulation and Control of Tariffs, Dues, and Fees for Operations (Services) of Natural Monopolies in the Railway Transportation Sector”. It became the basis for the Methods of Calculation of Economically Justified Expenses and Normative Profit, Taken into Consideration When Forming Economically Justified Index to the Existing Level of Tariffs, Dues, and Fees for Cargo Railway Transportation, approved by the Federal Tariff Service.
In practice, this mechanism defines a variant of financing the sector, which envisages expanded reproduction of RZD’s basic assets necessary for full and qualitative fulfillment of the national economy’s need for cargo transportation by railways. Taking into account the current economic situation, the methods combine tariff and budget financing instruments. Also, this document forms the mechanism of long-term tariff planning providing an expanded reproduction of railway basic assets comparable with the national economy’s needs.
Implementation of new approaches to state tariff regulation will be an efficient instrument for the sector’s development.

– Do you agree that tariffs on empty mileage must be equalised?

 Transportation market demonopolisation has created new conditions and reality of work. After the rolling stock fleet became 100% private, the efficiency of transport infrastructure reduced. Loading of empty railcars after cargo of the first tariff class (especially coal) has been discharged is not economically profitable for rolling stock owners, consequently, there appears an increase in the oncoming empty wagon traffic, and in the idling of wagons after taking cargoes of the third tariff class out of them. Such situation causes significant changes in the technological processes of train traffic organization.
The forced irrational usage of infrastructure and rolling stock negatively influences the financial and economic results of RZD’s activity, as well as the contentment of consumers of railway services. 
One of the current tasks in the tariff formation sector, fulfillment of which may make for greater efficiency in wagon park management, is unification of tariffs on empty mileage regardless of the class of earlier transported cargo and the owner of the railcars. Last November, the governmental commission for transport and communication noted that decisions on unification must be made in the first half of 2012.
Nowadays, taking into account the approaches approved by adjacent executive federal bodies, at the first stage it is supposed to apply a universal calculation of carriage charges for the empty mileage regardless of the cargo transported earlier to universal rolling stock only (gondola cars and flat wagons), that prevails in mass cargo transportation (coal, ore, timber, construction materials, ferrous metals). To limit the increase in tariffs on transportation of cargoes of the first tariff class, and to avoid significant excess in tariffs on empty mileage as compared with those on loaded trip, additional decreasing coefficients are to be applied to the tariff rates on empty mileage of wagons after discharging cargo of the second tariff class.

To Stimulate a Commodity Producer
– Do you think that it is high time to at least revise or even abolish privileged tariffs?

– It is worth noting that due to Russia joining the Common Economic Space, work is under way to adjust acting Tariff Regulation № 10-01 to the special terms of setting tariffs on some cargoes transportation in order to abolish now existing privileged tariffs in 2013. Starting from 2010, the RF Federal Tariff Service have already put into Tariff Regulation №10-01 privileged tariffs on transportation of freight in containers (to extend the wagon and container components in the tariff), coal, cargoes in universal and isothermal rolling stock, including large-capacity thermally insulated containers and refrigerated containers. Universal rules of setting privileged tariffs are now being developed. They will not be included into Tariff Regulation № 10-01, because they will be set by an entrusted body of states – members of the Common Economic Space in concurrence with the Commission of the Customs Union for transportation of some definite cargoes in separate directions in case there is no other way to support commodity producers. They should be based on the principle of impermissibility to create advantages for some definite commodity producers. 

– More and more often we hear suggestions that rolling stock owners should be stimulated to purchase innovative machinery by means of tariff preferences. Will these measures be efficient, in your opinion?

– The issue of creating tariff mechanisms to stimulate transporters, operators, and consignors to purchase next-generation railcars and containers is rather topical today. It was discussed at the meeting of the governmental commission for advanced technologies and innovations on January 30, 2012. In order to create conditions for tariffs to motivate owners to use innovative cargo railcars, work is under way to define the possibility of making changes in the system of tariffs on cargo transportation. All-Russian Railway Research Institute (VNIIZhT) is to research “Tariff Stimulation of Usage Cargo Rolling Stock with Better Exploitation Characteristics.” After considering the results of practical evaluation of the influence on infrastructure and defining the economic effect the railway will get, respective suggestions for tariff solutions may be approved. ®
Interviewed by Dmitry Khantsevich 

    [~DETAIL_TEXT] => 
To Define Mutual Interest
– Mr Morozov, one of the most important factors, on which the situation on the RZD’s network depends, is the beginning of the functioning of the proprietary and rented wagon parks. What is their size now? Have they fulfilled the tasks set?

– First of all, I would like to remind you that railcars from the Second Cargo Company’s fleet are selected to the owned and rented wagons park in accordance with Decree №1051 of the RF Government dated December 20, 2011. Nowadays, the park consists of approximately 105,000 gondola railcars. The rented wagons are managed on the impersonality principle, which helps to reduce the impact of such negative factors as long idling of empty private rolling stock waiting for more profitable transportation, mass oncoming traffic of empty railcars of the same type owned by different companies, an increase in the classification work, etc. Generally, judging by the current situation on the railway network, the decision made at the end of last year was correct. Naturally, there are some difficulties, and the further improvement of the rented park’s operation depends on overcoming them. For example, a decision on the issue of tariffs on transit and timber transportation via the RF territory has not been made yet. In cooperation with the Federal Tariff Service, RZD thrashes out the necessary amendments to the regulatory base. 

– Is it planned to extend the number of rented railcars? On what conditions? Can you name companies interested in the offer made by RZD?

– There is an address to the rolling stock owners on the website of RZD, in which the company asks them to consider the possibility of giving universal gondola railcars to the rented fleet. A number of rolling stock owners have shown their interest, and work is now under way to reveal the basic criteria influencing the private companies’ decision. It also helps us to define the parameters for further development of the scheme of attracting parks under RZD’s control.

– What is the reason for the rather cautious reaction of operators in response to the transporter’s offer? Will their opinion on the issue change soon?

– The governmental decree mentioned above and respective order № 444-t/4 of the Federal Tariff Service came into force only two months ago, so it is too early to speak about the results of the rented park creation. In fact, rolling stock owners are wary of the idea to transfer their railcars. After working out all technological aspects of work and putting necessary amendments to the regulatory and legal acts, we will be able to create a fleet of 200,000 – 250,000 universal gondola cars. A long-term contract with RZD and stable guaranteed profitability are two of the major factors influencing the final decision of a rolling stock owner. Mutual interest in the cooperation gives an opportunity to search together with transport market players for the most rational and mutually beneficial ways to fulfill the tasks set for the transporter and hope for a positive result.          

Rights Go Hand in Hand with Responsibilities
– Do you think that rolling stock owners should be administratively obliged to put railcars under the control of RZD?

– I think it would be viable to formalize in legislation the terms “operator” and “operator activity” and give operators a function of supplying wagons, containers for cargo railway transportation, and make this their public function. In my opinion, it is necessary to envisage that operators are obliged to form and maintain a reserve of wagons and containers to provide especially urgent military railway transportation (mobilization assignments).

– There was a heated discussion on a respective document developed by the Transport Ministry. What is RZD’s opinion on the document?

– I would like to emphasise that development of the bill of the RF Government “On the Basis of Legal Regulation of the Activity of Railway Rolling Stock Operators and Their Interaction with Transportation Process Participants during Transportation” was caused by the necessity to establish at the legislation level the basis for legal regulation of their activity.  
Simultaneously, in the opinion of RZD, this project does not define what is included in the field of operators’ responsibility and what differs them from other participants. Operators must provide wagons and containers for transportation, however, the document does not entrust them with this responsibility, but declares freedom of contract as one of the principles of operator activity. Thus, it excludes the responsibility of these companies to the state and the society for supplying consignors with wagons and containers they own. Therefore, there is a mismatch between the norms set by the document and the basic principles of operators’ business, their interaction with other participants of the transportation process. Also, other key issues were not mentioned in the draft. In particular, the legal regulation of rolling stock staying on the public tracks was not envisaged. Wagons, which do not participate in the transportation process, can stay on the public tracks only if their owner has a contract with the infrastructure owner. 
On the whole, if we consider the document from the standpoint of transportation process organization and provision of efficient interaction between the key links of the transportation system, unfortunately, we have to admit that the draft does not accord fully with the expectations of the market participants.

– There is an opinion that such issues cannot be completely solved at the level of a decree, and there will be specifications in other regulatory acts. Also, the draft decree envisages a possibility to conclude bilateral civil-law contracts between operators and other participants in the transportation process.

– If mentioned responsibilities are not fixed legally, there will be no basis for establishing bilateral relations. Even if we assume that rolling stock supply may be regulated in a contract, but the problems of inefficient idling of empty private wagons on public tracks, and consequently, an overstock on tracks, will not be solved.

– What are the most urgent issues to be solved to improve the work of railways in the cargo transportation sector?

– The improvement of the quality of cargo transportation depends on the clear regulatory rules of interaction of transportation process participants, enhancement of the legal and regulatory environment, timely consideration of practice. I mean that necessary amendments should be put into the federal laws “The Code of Railway Transport of the Russian Federation” and “On Railway Transport in the Russian Federation”. In particular, amendments should be made to these laws related to:
• setting responsibility of consignors and consignees, owners of non-public railway tracks, and other persons for presence of empty or loaded railcars on public railway tracks for the reasons depending upon them;
• collecting fees for using non-public railway tracks of RZD;
• concretization of operator’s legal status;
• implementation of the necessity of giving an application by empty rolling stock dispatcher, a similar to that for cargo transportation. 

Tariffs to Be Revised
– Can tariff policy become a more efficient instrument for the railway sector development?

– Earlier existing different approaches to the state tariff policy concerning natural monopolistic economic sectors determined the inequality of the conditions of their activity. In recent years, the standards and regulating methods in these sectors have been converging step by step.
The mechanism of state regulation of tariffs in the railway transport, in its natural monopolistic sector, was developed in 2009-2010. The Government approved Decree № 643 “On State Regulation and Control of Tariffs, Dues, and Fees for Operations (Services) of Natural Monopolies in the Railway Transportation Sector”. It became the basis for the Methods of Calculation of Economically Justified Expenses and Normative Profit, Taken into Consideration When Forming Economically Justified Index to the Existing Level of Tariffs, Dues, and Fees for Cargo Railway Transportation, approved by the Federal Tariff Service.
In practice, this mechanism defines a variant of financing the sector, which envisages expanded reproduction of RZD’s basic assets necessary for full and qualitative fulfillment of the national economy’s need for cargo transportation by railways. Taking into account the current economic situation, the methods combine tariff and budget financing instruments. Also, this document forms the mechanism of long-term tariff planning providing an expanded reproduction of railway basic assets comparable with the national economy’s needs.
Implementation of new approaches to state tariff regulation will be an efficient instrument for the sector’s development.

– Do you agree that tariffs on empty mileage must be equalised?

 Transportation market demonopolisation has created new conditions and reality of work. After the rolling stock fleet became 100% private, the efficiency of transport infrastructure reduced. Loading of empty railcars after cargo of the first tariff class (especially coal) has been discharged is not economically profitable for rolling stock owners, consequently, there appears an increase in the oncoming empty wagon traffic, and in the idling of wagons after taking cargoes of the third tariff class out of them. Such situation causes significant changes in the technological processes of train traffic organization.
The forced irrational usage of infrastructure and rolling stock negatively influences the financial and economic results of RZD’s activity, as well as the contentment of consumers of railway services. 
One of the current tasks in the tariff formation sector, fulfillment of which may make for greater efficiency in wagon park management, is unification of tariffs on empty mileage regardless of the class of earlier transported cargo and the owner of the railcars. Last November, the governmental commission for transport and communication noted that decisions on unification must be made in the first half of 2012.
Nowadays, taking into account the approaches approved by adjacent executive federal bodies, at the first stage it is supposed to apply a universal calculation of carriage charges for the empty mileage regardless of the cargo transported earlier to universal rolling stock only (gondola cars and flat wagons), that prevails in mass cargo transportation (coal, ore, timber, construction materials, ferrous metals). To limit the increase in tariffs on transportation of cargoes of the first tariff class, and to avoid significant excess in tariffs on empty mileage as compared with those on loaded trip, additional decreasing coefficients are to be applied to the tariff rates on empty mileage of wagons after discharging cargo of the second tariff class.

To Stimulate a Commodity Producer
– Do you think that it is high time to at least revise or even abolish privileged tariffs?

– It is worth noting that due to Russia joining the Common Economic Space, work is under way to adjust acting Tariff Regulation № 10-01 to the special terms of setting tariffs on some cargoes transportation in order to abolish now existing privileged tariffs in 2013. Starting from 2010, the RF Federal Tariff Service have already put into Tariff Regulation №10-01 privileged tariffs on transportation of freight in containers (to extend the wagon and container components in the tariff), coal, cargoes in universal and isothermal rolling stock, including large-capacity thermally insulated containers and refrigerated containers. Universal rules of setting privileged tariffs are now being developed. They will not be included into Tariff Regulation № 10-01, because they will be set by an entrusted body of states – members of the Common Economic Space in concurrence with the Commission of the Customs Union for transportation of some definite cargoes in separate directions in case there is no other way to support commodity producers. They should be based on the principle of impermissibility to create advantages for some definite commodity producers. 

– More and more often we hear suggestions that rolling stock owners should be stimulated to purchase innovative machinery by means of tariff preferences. Will these measures be efficient, in your opinion?

– The issue of creating tariff mechanisms to stimulate transporters, operators, and consignors to purchase next-generation railcars and containers is rather topical today. It was discussed at the meeting of the governmental commission for advanced technologies and innovations on January 30, 2012. In order to create conditions for tariffs to motivate owners to use innovative cargo railcars, work is under way to define the possibility of making changes in the system of tariffs on cargo transportation. All-Russian Railway Research Institute (VNIIZhT) is to research “Tariff Stimulation of Usage Cargo Rolling Stock with Better Exploitation Characteristics.” After considering the results of practical evaluation of the influence on infrastructure and defining the economic effect the railway will get, respective suggestions for tariff solutions may be approved. ®
Interviewed by Dmitry Khantsevich 

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