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    [NAME] => Transport Exhibitions In Russia – The Shortest Way To A Client’s Heart
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Exact Certificates!
The statement that participating in transport and logistics exhibitions is one of the most efficient marketing instruments to promote European and American companies in Russia sounds obvious nowadays. It is enough to visit any large special event to understand it is a place where businessmen, eager to win the hearts of Russian cargo owners, find partners and come together.
In the past decade, the Russian transport sector grew by 15% annually, although there has been some stabilisation in the last three years. Most exhibiting companies have already decided on their priority events. Nevertheless, young ambitious exhibition and congress operators do appear, planning to win the market over through the quality of services and ingenious format of events.
When considering innovative exhibition technologies and ingenious formats that are now popular, we cannot help but mark the development of Internet exhibitions, which make for maximum cost reduction and allow participants to present their wares in detail. Such a format is becoming more and more popular in Russia, although the largest exhibition operators already offer their clients the opportunity to present their company in the cyberspace, to coordinate schedules business meetings at this or that event. There are also a lot of different marketing technologies available due to the development of web technologies.
There is another important thing to be taken into consideration by everyone who is going to visit this or that transport and logistics exhibition in Russia or exhibit there. One of the main aspects to be taken into account when choosing an exhibition or trade fair is whether certificates or data verifying an audit inspectionare available. Russia has at last started to work with exhibition statistics in a civilised way. 
What is given by audit? First of all, an opportunity to position exhibitions on the Russian and the CIS markets in a new way. It is the first time an organiser can tell all his clients and partners: here is true and independent description of our product; we are holding a fair and open game and are a real, client-oriented company. In the opinion of Andrey Zhukovsky, Director General of RussCom IT Systems, the auditing inspection certificate provides organisers with new marketing opportunities. Before, it was hardly possible to calculate the real price of a potential business contract. Nowadays, it is just a simple arithmetic problem. To do this, the cost of a potential stand at the exhibition is divided by the number of visitors – specialists, mentioned in the audit certificate.       
Obviously, such an opportunity is good for those organisers whose figures are more competitive and attractive to exhibitors. In other words, for the more powerful players in the exhibition market. In Moscow, competition among market players is especially strong, so the audit of exhibitions may be a real factor in competition.

Seeing Once Is Better Than Hearing Twice
The trends mentioned above are causing, if not a strife, at least a strengthening of natural selection. “Regarding the growth of the business events market, the tendency of natural selection becomes more and more obvious. On the market there remain either large events – interesting and useful to lots of participants – or very small, elite ones. The rest cease to exist because participants choose carefully and are ready to visit only those events at which a high-class programme is combined with worthy representation. That is why specialised companies remain in the sectoral events market, and business ones have either to find a powerful sectoral partner or to leave the market”, comments Maria Germanova, Deputy CEO for Development of OOO Business Dialogue (forum Strategic Partnership 1520,  International Salon of Rolling Stock and Rail Technologies EXPO 1520, etc).  
The words of Mrs Germanova are proved by the fact that there are a number of events already considered “must-attends” for specialists in the transport sector. People interviewed by The RZD-Partner International named in particular the largest transport exhibition, called TransRussia, international forum Strategic Partnership 1520, which unites railway officials and businessmen from countries where the railway gauge is 1,520 mm wide. The discovery of the year, and a pleasant surprise for the railway sector, was the International Salon of Rolling Stock and Rail Technologies EXPO 1520, which was combined with the full-size exposition of the latest developments in the rolling stock produced by the CIS enterprise sector. 
Another distinguished railway event is the annual international conference, OAO RZD on the Transport Services Market: Cooperation and Partnership, where authorities of the sector work out important strategic solutions with business representatives.
Anastasiya Dudina, Specialist for Advertising and PR of AsstrA group of companies, names a number of other events especially devoted to logistics. “Traditionally we take part in the leading sectoral events in Russia, for example, in the exhibition Warehouse. Transport Logistics, Moscow International Logistics Forum, and Russian logistics forum BusinessLog. Such events give us an opportunity to share our experience with colleagues, to look at the situation with our clients’ eyes. Open discussion of the issues that are urgent for our consumers allows us to improve the services provided by AsstrA group of companies”, she said.
“In 2008 exhibition TransRussia will be held on a new, larger area that will allow us to enlarge the exposition, attract more new companies and separate out some thematic sections. TransRussia conference will be also held simultaneously with the exhibition for the comfort of the delegates, many of whom are exhibitors”, says Tatyana Yastrebova, Director of the exhibition (company ITE LLC Moscow).
Maria Germanova from Business Dialogue says: “In 2008, taking into account the active development of the logistics business, we will continue the tradition of holding regional transport and logistics forums. After Saint Petersburg and Vladivostok, transport process participants will get together in Yekaterinburg and Novosibirsk. In Riga and Kiev, the regional business forums Strategic Partnership 1520 will be held. Round table discussions about tariff formation, interaction with customs bodies and legislation will be organised for specialists. Regular meetings will be held in Sochi and Moscow at the business forum Strategic Partnership 1520 and OAO RZD on the Transport Services Market: Cooperation and Partnership”.

Resume
“The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with the existing clients, to see what is new in the sector”, says Anastasiya Dudina from AsstrA. “We participate in Russian exhibitions and that’s where we feel there is demand for our services. We have developed a lot of useful contacts due to our presence at different events as exhibitors”, notes Marketing Director of the port of Kotka, Nanna Sirola-Myllyla.
At the above-mentioned International Salon of Rolling Stock and Rail Technologies, The RZD-Partner Editorship (issuing The RZD-Partner International China magazine) organised a round table discussion devoted to the prospects of Chinese wagon-building companies on the Russian market. Representatives of Zhuzhou Electric Locomotive Construction Corporation and Chinese Northern Industrial Locomotive and Wagon Building Corporation took part in the discussion, got acquainted with their potential customers and their competitors – the top managers of OAO RZD and FGUP PO Uralvagonzavod.
It is no wonder that long-sighted companies prefer to reserve places at the largest exhibitions and conferences in Russia a year in advance, because they know the shortest way to a partner they need.
By Olga Rantalainen
viewpoint
Maria Germanova,
Deputy Director General for Development OOO Business Dialogue:
– Today the exhibition and conference business is growing very fast in Russia, which is due to the overall growth of the country’s economy, the increase of the population’s welfare and investment volume. A lot of companies reorient from advertisement placement and publication in mass-media to participation in conferences and exhibitions, making such communication more efficient. Today the event market in Moscow is almost full, that’s why movement in the regions is active. Besides, not only businessmen but also local and federal authorities are interested in holding regional events. In 2006 one of our most successful projects was EXPO 1520 – there had been nothing like it in Russia before. Presenting full-size samples of locomotives and rolling stock allowed us to show the current state of the sector and gathered specialists from around the world. And the “Day of open railways” allowed everyone to sit in a locomotive cabin, to visit the most comfortable passenger wagons and even get onto a freight rail car.
The exhibitions sector is becoming especially interesting, because now Russian companies can offer a competitive product and require demo areas and we always react to clients’ needs. That is why in 2008 we are offering another interesting exhibition project, this time in the container transportation sector.

Anastasiya Dudina,
Specialist for Advertising and PR AsstrA group of companies:
– The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with existing clients and see what is new in the sector.
Moreover, exhibitions are an important image event. Every company of AsstrA group, when it takes part in any exhibition, makes for promotion of the pack of its services as well as the brand of AsstrA. Company’s presence and the scale of participation in an exhibition shows its role and position in the market objectively enough. 
Participation in any event must be reasoned by a company’s market strategy, the scale of its activities, target audience, demand for services and products and targets to be reached through participation in the event. It is also necessary to estimate the potential and opportunities of the exhibition, its visitors, the place where it is being held and the organisation level. 
Tatyana Yastrebova,
ITE LLC Moscow Director of Trans-Russia exhibition:
– The exhibition business in Russia, in particular in Moscow, is the direct reflection of a given economic sector – the higher the demand for these or those goods and services, the more players emerge on the market, and consequently the demand for advertising services grows.
I believe that transport exhibitions and conferences are necessary constituents for the sector’s development because, in this industry, an important factor is private contacts with clients, colleagues and partners.
The success of the TransRussia project is explained by the fact that it has a properly defined idea of itself. The themes of the exhibition participants and visitors’ activity are defined, which allows them to hold an efficient marketing policy, aimed at attraction of the former and the latter. 
     
    [~DETAIL_TEXT] => 
Exact Certificates!
The statement that participating in transport and logistics exhibitions is one of the most efficient marketing instruments to promote European and American companies in Russia sounds obvious nowadays. It is enough to visit any large special event to understand it is a place where businessmen, eager to win the hearts of Russian cargo owners, find partners and come together.
In the past decade, the Russian transport sector grew by 15% annually, although there has been some stabilisation in the last three years. Most exhibiting companies have already decided on their priority events. Nevertheless, young ambitious exhibition and congress operators do appear, planning to win the market over through the quality of services and ingenious format of events.
When considering innovative exhibition technologies and ingenious formats that are now popular, we cannot help but mark the development of Internet exhibitions, which make for maximum cost reduction and allow participants to present their wares in detail. Such a format is becoming more and more popular in Russia, although the largest exhibition operators already offer their clients the opportunity to present their company in the cyberspace, to coordinate schedules business meetings at this or that event. There are also a lot of different marketing technologies available due to the development of web technologies.
There is another important thing to be taken into consideration by everyone who is going to visit this or that transport and logistics exhibition in Russia or exhibit there. One of the main aspects to be taken into account when choosing an exhibition or trade fair is whether certificates or data verifying an audit inspectionare available. Russia has at last started to work with exhibition statistics in a civilised way. 
What is given by audit? First of all, an opportunity to position exhibitions on the Russian and the CIS markets in a new way. It is the first time an organiser can tell all his clients and partners: here is true and independent description of our product; we are holding a fair and open game and are a real, client-oriented company. In the opinion of Andrey Zhukovsky, Director General of RussCom IT Systems, the auditing inspection certificate provides organisers with new marketing opportunities. Before, it was hardly possible to calculate the real price of a potential business contract. Nowadays, it is just a simple arithmetic problem. To do this, the cost of a potential stand at the exhibition is divided by the number of visitors – specialists, mentioned in the audit certificate.       
Obviously, such an opportunity is good for those organisers whose figures are more competitive and attractive to exhibitors. In other words, for the more powerful players in the exhibition market. In Moscow, competition among market players is especially strong, so the audit of exhibitions may be a real factor in competition.

Seeing Once Is Better Than Hearing Twice
The trends mentioned above are causing, if not a strife, at least a strengthening of natural selection. “Regarding the growth of the business events market, the tendency of natural selection becomes more and more obvious. On the market there remain either large events – interesting and useful to lots of participants – or very small, elite ones. The rest cease to exist because participants choose carefully and are ready to visit only those events at which a high-class programme is combined with worthy representation. That is why specialised companies remain in the sectoral events market, and business ones have either to find a powerful sectoral partner or to leave the market”, comments Maria Germanova, Deputy CEO for Development of OOO Business Dialogue (forum Strategic Partnership 1520,  International Salon of Rolling Stock and Rail Technologies EXPO 1520, etc).  
The words of Mrs Germanova are proved by the fact that there are a number of events already considered “must-attends” for specialists in the transport sector. People interviewed by The RZD-Partner International named in particular the largest transport exhibition, called TransRussia, international forum Strategic Partnership 1520, which unites railway officials and businessmen from countries where the railway gauge is 1,520 mm wide. The discovery of the year, and a pleasant surprise for the railway sector, was the International Salon of Rolling Stock and Rail Technologies EXPO 1520, which was combined with the full-size exposition of the latest developments in the rolling stock produced by the CIS enterprise sector. 
Another distinguished railway event is the annual international conference, OAO RZD on the Transport Services Market: Cooperation and Partnership, where authorities of the sector work out important strategic solutions with business representatives.
Anastasiya Dudina, Specialist for Advertising and PR of AsstrA group of companies, names a number of other events especially devoted to logistics. “Traditionally we take part in the leading sectoral events in Russia, for example, in the exhibition Warehouse. Transport Logistics, Moscow International Logistics Forum, and Russian logistics forum BusinessLog. Such events give us an opportunity to share our experience with colleagues, to look at the situation with our clients’ eyes. Open discussion of the issues that are urgent for our consumers allows us to improve the services provided by AsstrA group of companies”, she said.
“In 2008 exhibition TransRussia will be held on a new, larger area that will allow us to enlarge the exposition, attract more new companies and separate out some thematic sections. TransRussia conference will be also held simultaneously with the exhibition for the comfort of the delegates, many of whom are exhibitors”, says Tatyana Yastrebova, Director of the exhibition (company ITE LLC Moscow).
Maria Germanova from Business Dialogue says: “In 2008, taking into account the active development of the logistics business, we will continue the tradition of holding regional transport and logistics forums. After Saint Petersburg and Vladivostok, transport process participants will get together in Yekaterinburg and Novosibirsk. In Riga and Kiev, the regional business forums Strategic Partnership 1520 will be held. Round table discussions about tariff formation, interaction with customs bodies and legislation will be organised for specialists. Regular meetings will be held in Sochi and Moscow at the business forum Strategic Partnership 1520 and OAO RZD on the Transport Services Market: Cooperation and Partnership”.

Resume
“The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with the existing clients, to see what is new in the sector”, says Anastasiya Dudina from AsstrA. “We participate in Russian exhibitions and that’s where we feel there is demand for our services. We have developed a lot of useful contacts due to our presence at different events as exhibitors”, notes Marketing Director of the port of Kotka, Nanna Sirola-Myllyla.
At the above-mentioned International Salon of Rolling Stock and Rail Technologies, The RZD-Partner Editorship (issuing The RZD-Partner International China magazine) organised a round table discussion devoted to the prospects of Chinese wagon-building companies on the Russian market. Representatives of Zhuzhou Electric Locomotive Construction Corporation and Chinese Northern Industrial Locomotive and Wagon Building Corporation took part in the discussion, got acquainted with their potential customers and their competitors – the top managers of OAO RZD and FGUP PO Uralvagonzavod.
It is no wonder that long-sighted companies prefer to reserve places at the largest exhibitions and conferences in Russia a year in advance, because they know the shortest way to a partner they need.
By Olga Rantalainen
viewpoint
Maria Germanova,
Deputy Director General for Development OOO Business Dialogue:
– Today the exhibition and conference business is growing very fast in Russia, which is due to the overall growth of the country’s economy, the increase of the population’s welfare and investment volume. A lot of companies reorient from advertisement placement and publication in mass-media to participation in conferences and exhibitions, making such communication more efficient. Today the event market in Moscow is almost full, that’s why movement in the regions is active. Besides, not only businessmen but also local and federal authorities are interested in holding regional events. In 2006 one of our most successful projects was EXPO 1520 – there had been nothing like it in Russia before. Presenting full-size samples of locomotives and rolling stock allowed us to show the current state of the sector and gathered specialists from around the world. And the “Day of open railways” allowed everyone to sit in a locomotive cabin, to visit the most comfortable passenger wagons and even get onto a freight rail car.
The exhibitions sector is becoming especially interesting, because now Russian companies can offer a competitive product and require demo areas and we always react to clients’ needs. That is why in 2008 we are offering another interesting exhibition project, this time in the container transportation sector.

Anastasiya Dudina,
Specialist for Advertising and PR AsstrA group of companies:
– The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with existing clients and see what is new in the sector.
Moreover, exhibitions are an important image event. Every company of AsstrA group, when it takes part in any exhibition, makes for promotion of the pack of its services as well as the brand of AsstrA. Company’s presence and the scale of participation in an exhibition shows its role and position in the market objectively enough. 
Participation in any event must be reasoned by a company’s market strategy, the scale of its activities, target audience, demand for services and products and targets to be reached through participation in the event. It is also necessary to estimate the potential and opportunities of the exhibition, its visitors, the place where it is being held and the organisation level. 
Tatyana Yastrebova,
ITE LLC Moscow Director of Trans-Russia exhibition:
– The exhibition business in Russia, in particular in Moscow, is the direct reflection of a given economic sector – the higher the demand for these or those goods and services, the more players emerge on the market, and consequently the demand for advertising services grows.
I believe that transport exhibitions and conferences are necessary constituents for the sector’s development because, in this industry, an important factor is private contacts with clients, colleagues and partners.
The success of the TransRussia project is explained by the fact that it has a properly defined idea of itself. The themes of the exhibition participants and visitors’ activity are defined, which allows them to hold an efficient marketing policy, aimed at attraction of the former and the latter. 
     
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this is how Lingang Sang, sales manager of Zhuzhou Electric Locomotive Construction Corporation, characterised the target of his visit to International Salon of Rolling Stock and Rail Technologies EXPO 1520, held in Russia in 2007. And Mr. Sang reached his target – his company's stand was one of the most often-visited stands at the exhibition. And it is not a surprise: participation in such events is one of the most efficient ways to promote a company in Russia.
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this is how Lingang Sang, sales manager of Zhuzhou Electric Locomotive Construction Corporation, characterised the target of his visit to International Salon of Rolling Stock and Rail Technologies EXPO 1520, held in Russia in 2007. And Mr. Sang reached his target – his company's stand was one of the most often-visited stands at the exhibition. And it is not a surprise: participation in such events is one of the most efficient ways to promote a company in Russia.
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this is how Lingang Sang, sales manager of Zhuzhou Electric Locomotive Construction Corporation, characterised the target of his visit to International Salon of Rolling Stock and Rail Technologies EXPO 1520, held in Russia in 2007. And Mr. Sang reached his target – his company's stand was one of the most often-visited stands at the exhibition. And it is not a surprise: participation in such events is one of the most efficient ways to promote a company in Russia.
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Exact Certificates!
The statement that participating in transport and logistics exhibitions is one of the most efficient marketing instruments to promote European and American companies in Russia sounds obvious nowadays. It is enough to visit any large special event to understand it is a place where businessmen, eager to win the hearts of Russian cargo owners, find partners and come together.
In the past decade, the Russian transport sector grew by 15% annually, although there has been some stabilisation in the last three years. Most exhibiting companies have already decided on their priority events. Nevertheless, young ambitious exhibition and congress operators do appear, planning to win the market over through the quality of services and ingenious format of events.
When considering innovative exhibition technologies and ingenious formats that are now popular, we cannot help but mark the development of Internet exhibitions, which make for maximum cost reduction and allow participants to present their wares in detail. Such a format is becoming more and more popular in Russia, although the largest exhibition operators already offer their clients the opportunity to present their company in the cyberspace, to coordinate schedules business meetings at this or that event. There are also a lot of different marketing technologies available due to the development of web technologies.
There is another important thing to be taken into consideration by everyone who is going to visit this or that transport and logistics exhibition in Russia or exhibit there. One of the main aspects to be taken into account when choosing an exhibition or trade fair is whether certificates or data verifying an audit inspectionare available. Russia has at last started to work with exhibition statistics in a civilised way. 
What is given by audit? First of all, an opportunity to position exhibitions on the Russian and the CIS markets in a new way. It is the first time an organiser can tell all his clients and partners: here is true and independent description of our product; we are holding a fair and open game and are a real, client-oriented company. In the opinion of Andrey Zhukovsky, Director General of RussCom IT Systems, the auditing inspection certificate provides organisers with new marketing opportunities. Before, it was hardly possible to calculate the real price of a potential business contract. Nowadays, it is just a simple arithmetic problem. To do this, the cost of a potential stand at the exhibition is divided by the number of visitors – specialists, mentioned in the audit certificate.       
Obviously, such an opportunity is good for those organisers whose figures are more competitive and attractive to exhibitors. In other words, for the more powerful players in the exhibition market. In Moscow, competition among market players is especially strong, so the audit of exhibitions may be a real factor in competition.

Seeing Once Is Better Than Hearing Twice
The trends mentioned above are causing, if not a strife, at least a strengthening of natural selection. “Regarding the growth of the business events market, the tendency of natural selection becomes more and more obvious. On the market there remain either large events – interesting and useful to lots of participants – or very small, elite ones. The rest cease to exist because participants choose carefully and are ready to visit only those events at which a high-class programme is combined with worthy representation. That is why specialised companies remain in the sectoral events market, and business ones have either to find a powerful sectoral partner or to leave the market”, comments Maria Germanova, Deputy CEO for Development of OOO Business Dialogue (forum Strategic Partnership 1520,  International Salon of Rolling Stock and Rail Technologies EXPO 1520, etc).  
The words of Mrs Germanova are proved by the fact that there are a number of events already considered “must-attends” for specialists in the transport sector. People interviewed by The RZD-Partner International named in particular the largest transport exhibition, called TransRussia, international forum Strategic Partnership 1520, which unites railway officials and businessmen from countries where the railway gauge is 1,520 mm wide. The discovery of the year, and a pleasant surprise for the railway sector, was the International Salon of Rolling Stock and Rail Technologies EXPO 1520, which was combined with the full-size exposition of the latest developments in the rolling stock produced by the CIS enterprise sector. 
Another distinguished railway event is the annual international conference, OAO RZD on the Transport Services Market: Cooperation and Partnership, where authorities of the sector work out important strategic solutions with business representatives.
Anastasiya Dudina, Specialist for Advertising and PR of AsstrA group of companies, names a number of other events especially devoted to logistics. “Traditionally we take part in the leading sectoral events in Russia, for example, in the exhibition Warehouse. Transport Logistics, Moscow International Logistics Forum, and Russian logistics forum BusinessLog. Such events give us an opportunity to share our experience with colleagues, to look at the situation with our clients’ eyes. Open discussion of the issues that are urgent for our consumers allows us to improve the services provided by AsstrA group of companies”, she said.
“In 2008 exhibition TransRussia will be held on a new, larger area that will allow us to enlarge the exposition, attract more new companies and separate out some thematic sections. TransRussia conference will be also held simultaneously with the exhibition for the comfort of the delegates, many of whom are exhibitors”, says Tatyana Yastrebova, Director of the exhibition (company ITE LLC Moscow).
Maria Germanova from Business Dialogue says: “In 2008, taking into account the active development of the logistics business, we will continue the tradition of holding regional transport and logistics forums. After Saint Petersburg and Vladivostok, transport process participants will get together in Yekaterinburg and Novosibirsk. In Riga and Kiev, the regional business forums Strategic Partnership 1520 will be held. Round table discussions about tariff formation, interaction with customs bodies and legislation will be organised for specialists. Regular meetings will be held in Sochi and Moscow at the business forum Strategic Partnership 1520 and OAO RZD on the Transport Services Market: Cooperation and Partnership”.

Resume
“The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with the existing clients, to see what is new in the sector”, says Anastasiya Dudina from AsstrA. “We participate in Russian exhibitions and that’s where we feel there is demand for our services. We have developed a lot of useful contacts due to our presence at different events as exhibitors”, notes Marketing Director of the port of Kotka, Nanna Sirola-Myllyla.
At the above-mentioned International Salon of Rolling Stock and Rail Technologies, The RZD-Partner Editorship (issuing The RZD-Partner International China magazine) organised a round table discussion devoted to the prospects of Chinese wagon-building companies on the Russian market. Representatives of Zhuzhou Electric Locomotive Construction Corporation and Chinese Northern Industrial Locomotive and Wagon Building Corporation took part in the discussion, got acquainted with their potential customers and their competitors – the top managers of OAO RZD and FGUP PO Uralvagonzavod.
It is no wonder that long-sighted companies prefer to reserve places at the largest exhibitions and conferences in Russia a year in advance, because they know the shortest way to a partner they need.
By Olga Rantalainen
viewpoint
Maria Germanova,
Deputy Director General for Development OOO Business Dialogue:
– Today the exhibition and conference business is growing very fast in Russia, which is due to the overall growth of the country’s economy, the increase of the population’s welfare and investment volume. A lot of companies reorient from advertisement placement and publication in mass-media to participation in conferences and exhibitions, making such communication more efficient. Today the event market in Moscow is almost full, that’s why movement in the regions is active. Besides, not only businessmen but also local and federal authorities are interested in holding regional events. In 2006 one of our most successful projects was EXPO 1520 – there had been nothing like it in Russia before. Presenting full-size samples of locomotives and rolling stock allowed us to show the current state of the sector and gathered specialists from around the world. And the “Day of open railways” allowed everyone to sit in a locomotive cabin, to visit the most comfortable passenger wagons and even get onto a freight rail car.
The exhibitions sector is becoming especially interesting, because now Russian companies can offer a competitive product and require demo areas and we always react to clients’ needs. That is why in 2008 we are offering another interesting exhibition project, this time in the container transportation sector.

Anastasiya Dudina,
Specialist for Advertising and PR AsstrA group of companies:
– The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with existing clients and see what is new in the sector.
Moreover, exhibitions are an important image event. Every company of AsstrA group, when it takes part in any exhibition, makes for promotion of the pack of its services as well as the brand of AsstrA. Company’s presence and the scale of participation in an exhibition shows its role and position in the market objectively enough. 
Participation in any event must be reasoned by a company’s market strategy, the scale of its activities, target audience, demand for services and products and targets to be reached through participation in the event. It is also necessary to estimate the potential and opportunities of the exhibition, its visitors, the place where it is being held and the organisation level. 
Tatyana Yastrebova,
ITE LLC Moscow Director of Trans-Russia exhibition:
– The exhibition business in Russia, in particular in Moscow, is the direct reflection of a given economic sector – the higher the demand for these or those goods and services, the more players emerge on the market, and consequently the demand for advertising services grows.
I believe that transport exhibitions and conferences are necessary constituents for the sector’s development because, in this industry, an important factor is private contacts with clients, colleagues and partners.
The success of the TransRussia project is explained by the fact that it has a properly defined idea of itself. The themes of the exhibition participants and visitors’ activity are defined, which allows them to hold an efficient marketing policy, aimed at attraction of the former and the latter. 
     
    [~DETAIL_TEXT] => 
Exact Certificates!
The statement that participating in transport and logistics exhibitions is one of the most efficient marketing instruments to promote European and American companies in Russia sounds obvious nowadays. It is enough to visit any large special event to understand it is a place where businessmen, eager to win the hearts of Russian cargo owners, find partners and come together.
In the past decade, the Russian transport sector grew by 15% annually, although there has been some stabilisation in the last three years. Most exhibiting companies have already decided on their priority events. Nevertheless, young ambitious exhibition and congress operators do appear, planning to win the market over through the quality of services and ingenious format of events.
When considering innovative exhibition technologies and ingenious formats that are now popular, we cannot help but mark the development of Internet exhibitions, which make for maximum cost reduction and allow participants to present their wares in detail. Such a format is becoming more and more popular in Russia, although the largest exhibition operators already offer their clients the opportunity to present their company in the cyberspace, to coordinate schedules business meetings at this or that event. There are also a lot of different marketing technologies available due to the development of web technologies.
There is another important thing to be taken into consideration by everyone who is going to visit this or that transport and logistics exhibition in Russia or exhibit there. One of the main aspects to be taken into account when choosing an exhibition or trade fair is whether certificates or data verifying an audit inspectionare available. Russia has at last started to work with exhibition statistics in a civilised way. 
What is given by audit? First of all, an opportunity to position exhibitions on the Russian and the CIS markets in a new way. It is the first time an organiser can tell all his clients and partners: here is true and independent description of our product; we are holding a fair and open game and are a real, client-oriented company. In the opinion of Andrey Zhukovsky, Director General of RussCom IT Systems, the auditing inspection certificate provides organisers with new marketing opportunities. Before, it was hardly possible to calculate the real price of a potential business contract. Nowadays, it is just a simple arithmetic problem. To do this, the cost of a potential stand at the exhibition is divided by the number of visitors – specialists, mentioned in the audit certificate.       
Obviously, such an opportunity is good for those organisers whose figures are more competitive and attractive to exhibitors. In other words, for the more powerful players in the exhibition market. In Moscow, competition among market players is especially strong, so the audit of exhibitions may be a real factor in competition.

Seeing Once Is Better Than Hearing Twice
The trends mentioned above are causing, if not a strife, at least a strengthening of natural selection. “Regarding the growth of the business events market, the tendency of natural selection becomes more and more obvious. On the market there remain either large events – interesting and useful to lots of participants – or very small, elite ones. The rest cease to exist because participants choose carefully and are ready to visit only those events at which a high-class programme is combined with worthy representation. That is why specialised companies remain in the sectoral events market, and business ones have either to find a powerful sectoral partner or to leave the market”, comments Maria Germanova, Deputy CEO for Development of OOO Business Dialogue (forum Strategic Partnership 1520,  International Salon of Rolling Stock and Rail Technologies EXPO 1520, etc).  
The words of Mrs Germanova are proved by the fact that there are a number of events already considered “must-attends” for specialists in the transport sector. People interviewed by The RZD-Partner International named in particular the largest transport exhibition, called TransRussia, international forum Strategic Partnership 1520, which unites railway officials and businessmen from countries where the railway gauge is 1,520 mm wide. The discovery of the year, and a pleasant surprise for the railway sector, was the International Salon of Rolling Stock and Rail Technologies EXPO 1520, which was combined with the full-size exposition of the latest developments in the rolling stock produced by the CIS enterprise sector. 
Another distinguished railway event is the annual international conference, OAO RZD on the Transport Services Market: Cooperation and Partnership, where authorities of the sector work out important strategic solutions with business representatives.
Anastasiya Dudina, Specialist for Advertising and PR of AsstrA group of companies, names a number of other events especially devoted to logistics. “Traditionally we take part in the leading sectoral events in Russia, for example, in the exhibition Warehouse. Transport Logistics, Moscow International Logistics Forum, and Russian logistics forum BusinessLog. Such events give us an opportunity to share our experience with colleagues, to look at the situation with our clients’ eyes. Open discussion of the issues that are urgent for our consumers allows us to improve the services provided by AsstrA group of companies”, she said.
“In 2008 exhibition TransRussia will be held on a new, larger area that will allow us to enlarge the exposition, attract more new companies and separate out some thematic sections. TransRussia conference will be also held simultaneously with the exhibition for the comfort of the delegates, many of whom are exhibitors”, says Tatyana Yastrebova, Director of the exhibition (company ITE LLC Moscow).
Maria Germanova from Business Dialogue says: “In 2008, taking into account the active development of the logistics business, we will continue the tradition of holding regional transport and logistics forums. After Saint Petersburg and Vladivostok, transport process participants will get together in Yekaterinburg and Novosibirsk. In Riga and Kiev, the regional business forums Strategic Partnership 1520 will be held. Round table discussions about tariff formation, interaction with customs bodies and legislation will be organised for specialists. Regular meetings will be held in Sochi and Moscow at the business forum Strategic Partnership 1520 and OAO RZD on the Transport Services Market: Cooperation and Partnership”.

Resume
“The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with the existing clients, to see what is new in the sector”, says Anastasiya Dudina from AsstrA. “We participate in Russian exhibitions and that’s where we feel there is demand for our services. We have developed a lot of useful contacts due to our presence at different events as exhibitors”, notes Marketing Director of the port of Kotka, Nanna Sirola-Myllyla.
At the above-mentioned International Salon of Rolling Stock and Rail Technologies, The RZD-Partner Editorship (issuing The RZD-Partner International China magazine) organised a round table discussion devoted to the prospects of Chinese wagon-building companies on the Russian market. Representatives of Zhuzhou Electric Locomotive Construction Corporation and Chinese Northern Industrial Locomotive and Wagon Building Corporation took part in the discussion, got acquainted with their potential customers and their competitors – the top managers of OAO RZD and FGUP PO Uralvagonzavod.
It is no wonder that long-sighted companies prefer to reserve places at the largest exhibitions and conferences in Russia a year in advance, because they know the shortest way to a partner they need.
By Olga Rantalainen
viewpoint
Maria Germanova,
Deputy Director General for Development OOO Business Dialogue:
– Today the exhibition and conference business is growing very fast in Russia, which is due to the overall growth of the country’s economy, the increase of the population’s welfare and investment volume. A lot of companies reorient from advertisement placement and publication in mass-media to participation in conferences and exhibitions, making such communication more efficient. Today the event market in Moscow is almost full, that’s why movement in the regions is active. Besides, not only businessmen but also local and federal authorities are interested in holding regional events. In 2006 one of our most successful projects was EXPO 1520 – there had been nothing like it in Russia before. Presenting full-size samples of locomotives and rolling stock allowed us to show the current state of the sector and gathered specialists from around the world. And the “Day of open railways” allowed everyone to sit in a locomotive cabin, to visit the most comfortable passenger wagons and even get onto a freight rail car.
The exhibitions sector is becoming especially interesting, because now Russian companies can offer a competitive product and require demo areas and we always react to clients’ needs. That is why in 2008 we are offering another interesting exhibition project, this time in the container transportation sector.

Anastasiya Dudina,
Specialist for Advertising and PR AsstrA group of companies:
– The main target of any logistics company, in particular AsstrA, when it participates in any event, is promotion of the company’s services to a defined target audience. It is an opportunity to present a company and its product, find new clients, hold negotiations, strengthen relations with existing clients and see what is new in the sector.
Moreover, exhibitions are an important image event. Every company of AsstrA group, when it takes part in any exhibition, makes for promotion of the pack of its services as well as the brand of AsstrA. Company’s presence and the scale of participation in an exhibition shows its role and position in the market objectively enough. 
Participation in any event must be reasoned by a company’s market strategy, the scale of its activities, target audience, demand for services and products and targets to be reached through participation in the event. It is also necessary to estimate the potential and opportunities of the exhibition, its visitors, the place where it is being held and the organisation level. 
Tatyana Yastrebova,
ITE LLC Moscow Director of Trans-Russia exhibition:
– The exhibition business in Russia, in particular in Moscow, is the direct reflection of a given economic sector – the higher the demand for these or those goods and services, the more players emerge on the market, and consequently the demand for advertising services grows.
I believe that transport exhibitions and conferences are necessary constituents for the sector’s development because, in this industry, an important factor is private contacts with clients, colleagues and partners.
The success of the TransRussia project is explained by the fact that it has a properly defined idea of itself. The themes of the exhibition participants and visitors’ activity are defined, which allows them to hold an efficient marketing policy, aimed at attraction of the former and the latter. 
     
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this is how Lingang Sang, sales manager of Zhuzhou Electric Locomotive Construction Corporation, characterised the target of his visit to International Salon of Rolling Stock and Rail Technologies EXPO 1520, held in Russia in 2007. And Mr. Sang reached his target – his company's stand was one of the most often-visited stands at the exhibition. And it is not a surprise: participation in such events is one of the most efficient ways to promote a company in Russia.
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this is how Lingang Sang, sales manager of Zhuzhou Electric Locomotive Construction Corporation, characterised the target of his visit to International Salon of Rolling Stock and Rail Technologies EXPO 1520, held in Russia in 2007. And Mr. Sang reached his target – his company's stand was one of the most often-visited stands at the exhibition. And it is not a surprise: participation in such events is one of the most efficient ways to promote a company in Russia.
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Global Shortage
According to the estimations of RosBusinessConsulting analysts, the turnover of the companies operating on the transport and logistics services market in Russia increased by more than 50% in the last two years and amounted to USD 30 billion; meanwhile experts believe that their potential is about USD 120 billion.
Consequently, the demand for logistic services and storage facilities continues to grow. The large retail networks’ expansion to regions that started about two years ago also makes for an increase in demand. It is no secret that, to start work in a new region, a network retailer opens new sales outlets and has to look for warehousing capacities. To keep their goods, the companies need neither former agricultural production storehouses nor Soviet refrigerator areas, but automatically controlled warehouses with special temperature conditions, modern loading and unloading facilities and qualified staff. In other words, they require A class warehouses.
The second reason for the increase of the demand for A class logistic warehouses was the total economic growth of manufacturing. It led to the establishment of the companies producing consumer goods, which have to look for places to store strategic reserves of their products in the regions. “Nowadays, it is very difficult to find a warehouse of the European level in the region we need. It is one of the most crucial issues, and there is a significant imbalance between business requirements for A class warehouses and the supply”, says David Hassler, Director of the Production Supplying Service in the CIS for JTI company. “I believe the reason is that most building companies considered construction of offices and commercial buildings or housing more profitable than warehouses. As a result, the price demanded by the owners of the existing A class warehouses for their services is two times higher than that of European companies. That is why we prefer storing the major part of tobacco raw materials in the storage facilities in Antwerp, not in Russia”, he says.
One more factor stimulating development of transport and warehousing logistics was foreign companies that came to the Russian market. In particular, as Russian logisticians emphasise, their advantages are technologies, experience and unlimited financial resources.
Demand and Reality
Due to the economic boom, in 2007 the imbalance between the demand for A class logistics warehouses in the country and those on offer increased greatly. The real area of industrial real estate is 5.22 million square metres, while the required space is 50 million square metres! Meanwhile, the average percentage of fulfilled demand in Russia’s largest cities hardly exceeds 15-18%, and in many towns the figure is less than 5%-7%. 
In Russia the main centres where cargo flows are serviced, are Moscow, Saint Petersburg, Nizhny Novgorod, Yekaterinburg and Novosibirsk, and about 10 smaller cities. Moscow is the largest consumer market in Russia, so it lacks warehouses more than other cities. Comparing the absolute volume of warehousing areas per head in the Russian capital and in East European states’ capitals, it is obvious that Russia falls behind foreign countries in this aspect. For example, in the suburbs of Warsaw (3 million people), there are warehouses with an area of 7 million square metres; in Moscow suburb there are storage facilities with an area of 3-3.5 million square metres, meanwhile, there are four- or five times more people in Moscow than in Warsaw. Sector experts believe that the existing imbalance will continue for at least three to five years.
All these factors created the need to develop a large network of warehouse projects in Russia. For example, Eurasia Logistics plans to create the largest network of logistic centres in the country. They will have a single brand – Greengate. The logistic centres will be situated in 14 key regions in Russia, in the main economic centres of Ukraine, in the transport junction on the border between China and Kazakhstan, and the largest Turkish cities. The planned total area of all the logistics centres will amount to 9.3 million square metres. The total investment in the project is USD 7.4 billion. 
Such companies as The Raven Group and MLP are also developing their own network of logistics centres. In particular, The Raven Group is going to build 15 warehouses in Russian largest cities, and MLP plans to put its 9 projects into operation before 2010. Besides, transport companies also go in for construction of network logistics complexes. As a rule, their storage facilities meet all the requirements of a specified company – the client. For example, logistics services provider DHL is building several service warehouses for its client – Sun Microsystems. The warehouses, united by one IT network, are situated in different regions of Russia. “We are ready to launch such projects for other clients, but now the main consumers of such warehouses are companies specialising in IT, because the equipment supplied by them provides e-systems, and the time of the required goods delivery from the warehouse must be as short as possible. For example, regional clients of Sun Microsystems get the necessary equipment from our warehouse two hours after they make an application”, explains Edward Baldakov, National Channel Manager DHL Russia.
Trading Companies Turn Into Logistics Ones
As a result of the significant shortage of warehouses, network retailers as well as production companies prefer to build their own logistics and distribution centres in the regions they come to.
 “Almost all companies face the problem of underdeveloped logistics operators as well as a lack of distribution centres. Besides, there is a shortage of warehouses, especially the ones meeting the international standards of A and B class storage facilities”, says Dmitry Chumakov, Director General of Vector Market Research agency. In his words, instead of renting the existing storage facilities, a lot of companies have to build warehouses and distribution centres in the regions. “The secondary warehouse market in the country is very poor and exhausted by the constantly growing demands of fast developing businesses. Several months before opening a distribution centre, we start to look for a suitable building, examine and analyse several variants, out of which we choose only one, meeting our requirements better”, tells Igor Tryasunov, Director of Logistics Department, X5 Retail Group.
Food producers, whose requirements in storage facilities are extremely high, note that to solve logistics problems, they have to unite their warehousing capacities with their colleagues’. “We try to combine our transport schemes with those of producers from neighbouring regions. Besides, we distribute the quotas for our cargo deliveries on a special price between regional logistics structures”, emphasises CEO of Atria Russia Juha Ruohola. Some companies, requiring special temperature conditions to store their goods, prefer building their own logistics complexes. In particular, Sunway company decided to invest about USD 500 million in transport and warehousing logistics in 5 years’ time, and open three logistics terminals in Moscow, Yekaterinburg and Nizhny Novgorod before 2009. The area of each of the terminals will be 5,000-7,000 square metres. 
Most network retailers have chosen a similar plan of development. Russia’s largest retailer, X5 company, prefers to construct its own logistics centres in the regions where it is going to open its shops. Gennady Frolov, Director for Communication of X5 Retail Group, claims that the creation of the company’s own network of logistics centres is targeted at increasing operational efficiency by enlarging the share of direct supplies from the retailer’s own distributional centres to Pyatyorochka and Perekrestok shops from 25-50% to 70-90%. In the next five years, X5 will invest at least USD 1 billion, forecasts the Head of X5 Retail Group Lev Hasis. “As a result, the gross profitability will increase from 27.9% in 2006 to 29.1% in 2008”, he notes.
“The existing storage facilities in Russia, offered to companies to organise distribution centres, are not suitable for goods storing. Often they are former warehouses, and it is necessary to invest a lot of money in them before using them”, highlights Leonid Tyukavkin, Vice President for Strategy of Technosila company. So, the company made a decision to construct its own logistics complex in the Moscow region. In other regions the network has outsourced several warehousing terminals. In some towns the retailer has decided to use the new warehouses of Eurasia Logistics. “So, we are using a form of cooperation new to the market: we deal with one operator that services several regions at once. Thus, our expenses fall because a single technology is used”, says Mr Tyukavkin. Still, the company continues to examine different variants of development, including construction of its own logistics centres in the regions.
Resume
Construction of these logistics warehouses will continue until the market is able to offer outsourcing as an alternative, believe representatives of Knight Frank consulting company.
However, this will hardly happen in the near future. Even if all the logistics centres declared for construction by large, regional and even smaller network companies market in the market, are built, there will be about 35-40 million square metres of such warehouses in Russia and the CIS in 2010-2012, when the construction is completed. Taking the real situation into consideration, it is possible to suggest that only 1/3 of the declared projects will have been completed by 2012.
Then, the total area of modern warehouses of A and B class will be 10 million square metres, so it is a gloomy outlook.
By Maria  Shevchenko
viewpoint
Leonid Tyukavkin,
Vice President for Strategy, Technosila:
– A well-organised logistics structure is of key importance for a retail network on a federal scale. Our company pays special attention to development of the logistics constituent of its business. Today we have two central distribution terminals in Moscow and eight regional distribution centres.
Last year, Technosila made some steps to improve logistics, in particular, the move to work with one warehousing operator. This scheme allows cost reductions by using a single technology: cargo is dispatched and received by one operator, it is easier to find cargo that has not been loaded or is redundant. While opening new shops in Russia, we will put into operation new regional warehouses in our network.     
 
Alla Solovyova,
Executive Director, MLP:
– The fast rates of development in the Russian economy lately and the increase of the retail trade volume cannot but influence the activity of trading companies, retailers and logistics services providers. Their demand for warehouses is growing today and collides with the existing earlier superiority of demand over supply. Speaking of large logistics centres meeting international standards, the main problem faced by companies at the early stage of construction is the lack of areas with developed transport infrastructure. Not every territory allows the servicing of different transport modes at one terminal. The second problem, which slows down the process of A class warehouse construction, is the processing of documentation, getting necessary permissions and other administrative processes.
On average, it takes one year to put the first stage of a logistics terminal into operation. Much depends on the potential of the developer. In November 2007, we put into operation the first stage of the warehouses in the Leningrad and Moscow regions. We are also realising a project in Kiev. All our projects meet international standards and are of A class, which has allowed us to unite there all the famous transnational producers of consumer goods, leading distributors and the largest logistics operators. In 2008 we plan to put into operation several warehouses in the regions.
 
    [~DETAIL_TEXT] => 
Global Shortage
According to the estimations of RosBusinessConsulting analysts, the turnover of the companies operating on the transport and logistics services market in Russia increased by more than 50% in the last two years and amounted to USD 30 billion; meanwhile experts believe that their potential is about USD 120 billion.
Consequently, the demand for logistic services and storage facilities continues to grow. The large retail networks’ expansion to regions that started about two years ago also makes for an increase in demand. It is no secret that, to start work in a new region, a network retailer opens new sales outlets and has to look for warehousing capacities. To keep their goods, the companies need neither former agricultural production storehouses nor Soviet refrigerator areas, but automatically controlled warehouses with special temperature conditions, modern loading and unloading facilities and qualified staff. In other words, they require A class warehouses.
The second reason for the increase of the demand for A class logistic warehouses was the total economic growth of manufacturing. It led to the establishment of the companies producing consumer goods, which have to look for places to store strategic reserves of their products in the regions. “Nowadays, it is very difficult to find a warehouse of the European level in the region we need. It is one of the most crucial issues, and there is a significant imbalance between business requirements for A class warehouses and the supply”, says David Hassler, Director of the Production Supplying Service in the CIS for JTI company. “I believe the reason is that most building companies considered construction of offices and commercial buildings or housing more profitable than warehouses. As a result, the price demanded by the owners of the existing A class warehouses for their services is two times higher than that of European companies. That is why we prefer storing the major part of tobacco raw materials in the storage facilities in Antwerp, not in Russia”, he says.
One more factor stimulating development of transport and warehousing logistics was foreign companies that came to the Russian market. In particular, as Russian logisticians emphasise, their advantages are technologies, experience and unlimited financial resources.
Demand and Reality
Due to the economic boom, in 2007 the imbalance between the demand for A class logistics warehouses in the country and those on offer increased greatly. The real area of industrial real estate is 5.22 million square metres, while the required space is 50 million square metres! Meanwhile, the average percentage of fulfilled demand in Russia’s largest cities hardly exceeds 15-18%, and in many towns the figure is less than 5%-7%. 
In Russia the main centres where cargo flows are serviced, are Moscow, Saint Petersburg, Nizhny Novgorod, Yekaterinburg and Novosibirsk, and about 10 smaller cities. Moscow is the largest consumer market in Russia, so it lacks warehouses more than other cities. Comparing the absolute volume of warehousing areas per head in the Russian capital and in East European states’ capitals, it is obvious that Russia falls behind foreign countries in this aspect. For example, in the suburbs of Warsaw (3 million people), there are warehouses with an area of 7 million square metres; in Moscow suburb there are storage facilities with an area of 3-3.5 million square metres, meanwhile, there are four- or five times more people in Moscow than in Warsaw. Sector experts believe that the existing imbalance will continue for at least three to five years.
All these factors created the need to develop a large network of warehouse projects in Russia. For example, Eurasia Logistics plans to create the largest network of logistic centres in the country. They will have a single brand – Greengate. The logistic centres will be situated in 14 key regions in Russia, in the main economic centres of Ukraine, in the transport junction on the border between China and Kazakhstan, and the largest Turkish cities. The planned total area of all the logistics centres will amount to 9.3 million square metres. The total investment in the project is USD 7.4 billion. 
Such companies as The Raven Group and MLP are also developing their own network of logistics centres. In particular, The Raven Group is going to build 15 warehouses in Russian largest cities, and MLP plans to put its 9 projects into operation before 2010. Besides, transport companies also go in for construction of network logistics complexes. As a rule, their storage facilities meet all the requirements of a specified company – the client. For example, logistics services provider DHL is building several service warehouses for its client – Sun Microsystems. The warehouses, united by one IT network, are situated in different regions of Russia. “We are ready to launch such projects for other clients, but now the main consumers of such warehouses are companies specialising in IT, because the equipment supplied by them provides e-systems, and the time of the required goods delivery from the warehouse must be as short as possible. For example, regional clients of Sun Microsystems get the necessary equipment from our warehouse two hours after they make an application”, explains Edward Baldakov, National Channel Manager DHL Russia.
Trading Companies Turn Into Logistics Ones
As a result of the significant shortage of warehouses, network retailers as well as production companies prefer to build their own logistics and distribution centres in the regions they come to.
 “Almost all companies face the problem of underdeveloped logistics operators as well as a lack of distribution centres. Besides, there is a shortage of warehouses, especially the ones meeting the international standards of A and B class storage facilities”, says Dmitry Chumakov, Director General of Vector Market Research agency. In his words, instead of renting the existing storage facilities, a lot of companies have to build warehouses and distribution centres in the regions. “The secondary warehouse market in the country is very poor and exhausted by the constantly growing demands of fast developing businesses. Several months before opening a distribution centre, we start to look for a suitable building, examine and analyse several variants, out of which we choose only one, meeting our requirements better”, tells Igor Tryasunov, Director of Logistics Department, X5 Retail Group.
Food producers, whose requirements in storage facilities are extremely high, note that to solve logistics problems, they have to unite their warehousing capacities with their colleagues’. “We try to combine our transport schemes with those of producers from neighbouring regions. Besides, we distribute the quotas for our cargo deliveries on a special price between regional logistics structures”, emphasises CEO of Atria Russia Juha Ruohola. Some companies, requiring special temperature conditions to store their goods, prefer building their own logistics complexes. In particular, Sunway company decided to invest about USD 500 million in transport and warehousing logistics in 5 years’ time, and open three logistics terminals in Moscow, Yekaterinburg and Nizhny Novgorod before 2009. The area of each of the terminals will be 5,000-7,000 square metres. 
Most network retailers have chosen a similar plan of development. Russia’s largest retailer, X5 company, prefers to construct its own logistics centres in the regions where it is going to open its shops. Gennady Frolov, Director for Communication of X5 Retail Group, claims that the creation of the company’s own network of logistics centres is targeted at increasing operational efficiency by enlarging the share of direct supplies from the retailer’s own distributional centres to Pyatyorochka and Perekrestok shops from 25-50% to 70-90%. In the next five years, X5 will invest at least USD 1 billion, forecasts the Head of X5 Retail Group Lev Hasis. “As a result, the gross profitability will increase from 27.9% in 2006 to 29.1% in 2008”, he notes.
“The existing storage facilities in Russia, offered to companies to organise distribution centres, are not suitable for goods storing. Often they are former warehouses, and it is necessary to invest a lot of money in them before using them”, highlights Leonid Tyukavkin, Vice President for Strategy of Technosila company. So, the company made a decision to construct its own logistics complex in the Moscow region. In other regions the network has outsourced several warehousing terminals. In some towns the retailer has decided to use the new warehouses of Eurasia Logistics. “So, we are using a form of cooperation new to the market: we deal with one operator that services several regions at once. Thus, our expenses fall because a single technology is used”, says Mr Tyukavkin. Still, the company continues to examine different variants of development, including construction of its own logistics centres in the regions.
Resume
Construction of these logistics warehouses will continue until the market is able to offer outsourcing as an alternative, believe representatives of Knight Frank consulting company.
However, this will hardly happen in the near future. Even if all the logistics centres declared for construction by large, regional and even smaller network companies market in the market, are built, there will be about 35-40 million square metres of such warehouses in Russia and the CIS in 2010-2012, when the construction is completed. Taking the real situation into consideration, it is possible to suggest that only 1/3 of the declared projects will have been completed by 2012.
Then, the total area of modern warehouses of A and B class will be 10 million square metres, so it is a gloomy outlook.
By Maria  Shevchenko
viewpoint
Leonid Tyukavkin,
Vice President for Strategy, Technosila:
– A well-organised logistics structure is of key importance for a retail network on a federal scale. Our company pays special attention to development of the logistics constituent of its business. Today we have two central distribution terminals in Moscow and eight regional distribution centres.
Last year, Technosila made some steps to improve logistics, in particular, the move to work with one warehousing operator. This scheme allows cost reductions by using a single technology: cargo is dispatched and received by one operator, it is easier to find cargo that has not been loaded or is redundant. While opening new shops in Russia, we will put into operation new regional warehouses in our network.     
 
Alla Solovyova,
Executive Director, MLP:
– The fast rates of development in the Russian economy lately and the increase of the retail trade volume cannot but influence the activity of trading companies, retailers and logistics services providers. Their demand for warehouses is growing today and collides with the existing earlier superiority of demand over supply. Speaking of large logistics centres meeting international standards, the main problem faced by companies at the early stage of construction is the lack of areas with developed transport infrastructure. Not every territory allows the servicing of different transport modes at one terminal. The second problem, which slows down the process of A class warehouse construction, is the processing of documentation, getting necessary permissions and other administrative processes.
On average, it takes one year to put the first stage of a logistics terminal into operation. Much depends on the potential of the developer. In November 2007, we put into operation the first stage of the warehouses in the Leningrad and Moscow regions. We are also realising a project in Kiev. All our projects meet international standards and are of A class, which has allowed us to unite there all the famous transnational producers of consumer goods, leading distributors and the largest logistics operators. In 2008 we plan to put into operation several warehouses in the regions.
 
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            [SECTION_META_DESCRIPTION] => Development of retail networks and large enterprises in Russia caused a boom in demand for logistics complexes. At the end of 2007, the area of industrial estate property in the CIS (mainly in Russia) amounted to 5.2 million square metres, meanwhile the potential market capacity is 50 million square metres. Experts forecast that, even if all the announced projects for network warehousing terminals are carried out, the demand will only be partly fulfilled by 2010-2012. And now, although this business is not profitable for them, cargo owners prefer to create their own warehousing assets.
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Global Shortage
According to the estimations of RosBusinessConsulting analysts, the turnover of the companies operating on the transport and logistics services market in Russia increased by more than 50% in the last two years and amounted to USD 30 billion; meanwhile experts believe that their potential is about USD 120 billion.
Consequently, the demand for logistic services and storage facilities continues to grow. The large retail networks’ expansion to regions that started about two years ago also makes for an increase in demand. It is no secret that, to start work in a new region, a network retailer opens new sales outlets and has to look for warehousing capacities. To keep their goods, the companies need neither former agricultural production storehouses nor Soviet refrigerator areas, but automatically controlled warehouses with special temperature conditions, modern loading and unloading facilities and qualified staff. In other words, they require A class warehouses.
The second reason for the increase of the demand for A class logistic warehouses was the total economic growth of manufacturing. It led to the establishment of the companies producing consumer goods, which have to look for places to store strategic reserves of their products in the regions. “Nowadays, it is very difficult to find a warehouse of the European level in the region we need. It is one of the most crucial issues, and there is a significant imbalance between business requirements for A class warehouses and the supply”, says David Hassler, Director of the Production Supplying Service in the CIS for JTI company. “I believe the reason is that most building companies considered construction of offices and commercial buildings or housing more profitable than warehouses. As a result, the price demanded by the owners of the existing A class warehouses for their services is two times higher than that of European companies. That is why we prefer storing the major part of tobacco raw materials in the storage facilities in Antwerp, not in Russia”, he says.
One more factor stimulating development of transport and warehousing logistics was foreign companies that came to the Russian market. In particular, as Russian logisticians emphasise, their advantages are technologies, experience and unlimited financial resources.
Demand and Reality
Due to the economic boom, in 2007 the imbalance between the demand for A class logistics warehouses in the country and those on offer increased greatly. The real area of industrial real estate is 5.22 million square metres, while the required space is 50 million square metres! Meanwhile, the average percentage of fulfilled demand in Russia’s largest cities hardly exceeds 15-18%, and in many towns the figure is less than 5%-7%. 
In Russia the main centres where cargo flows are serviced, are Moscow, Saint Petersburg, Nizhny Novgorod, Yekaterinburg and Novosibirsk, and about 10 smaller cities. Moscow is the largest consumer market in Russia, so it lacks warehouses more than other cities. Comparing the absolute volume of warehousing areas per head in the Russian capital and in East European states’ capitals, it is obvious that Russia falls behind foreign countries in this aspect. For example, in the suburbs of Warsaw (3 million people), there are warehouses with an area of 7 million square metres; in Moscow suburb there are storage facilities with an area of 3-3.5 million square metres, meanwhile, there are four- or five times more people in Moscow than in Warsaw. Sector experts believe that the existing imbalance will continue for at least three to five years.
All these factors created the need to develop a large network of warehouse projects in Russia. For example, Eurasia Logistics plans to create the largest network of logistic centres in the country. They will have a single brand – Greengate. The logistic centres will be situated in 14 key regions in Russia, in the main economic centres of Ukraine, in the transport junction on the border between China and Kazakhstan, and the largest Turkish cities. The planned total area of all the logistics centres will amount to 9.3 million square metres. The total investment in the project is USD 7.4 billion. 
Such companies as The Raven Group and MLP are also developing their own network of logistics centres. In particular, The Raven Group is going to build 15 warehouses in Russian largest cities, and MLP plans to put its 9 projects into operation before 2010. Besides, transport companies also go in for construction of network logistics complexes. As a rule, their storage facilities meet all the requirements of a specified company – the client. For example, logistics services provider DHL is building several service warehouses for its client – Sun Microsystems. The warehouses, united by one IT network, are situated in different regions of Russia. “We are ready to launch such projects for other clients, but now the main consumers of such warehouses are companies specialising in IT, because the equipment supplied by them provides e-systems, and the time of the required goods delivery from the warehouse must be as short as possible. For example, regional clients of Sun Microsystems get the necessary equipment from our warehouse two hours after they make an application”, explains Edward Baldakov, National Channel Manager DHL Russia.
Trading Companies Turn Into Logistics Ones
As a result of the significant shortage of warehouses, network retailers as well as production companies prefer to build their own logistics and distribution centres in the regions they come to.
 “Almost all companies face the problem of underdeveloped logistics operators as well as a lack of distribution centres. Besides, there is a shortage of warehouses, especially the ones meeting the international standards of A and B class storage facilities”, says Dmitry Chumakov, Director General of Vector Market Research agency. In his words, instead of renting the existing storage facilities, a lot of companies have to build warehouses and distribution centres in the regions. “The secondary warehouse market in the country is very poor and exhausted by the constantly growing demands of fast developing businesses. Several months before opening a distribution centre, we start to look for a suitable building, examine and analyse several variants, out of which we choose only one, meeting our requirements better”, tells Igor Tryasunov, Director of Logistics Department, X5 Retail Group.
Food producers, whose requirements in storage facilities are extremely high, note that to solve logistics problems, they have to unite their warehousing capacities with their colleagues’. “We try to combine our transport schemes with those of producers from neighbouring regions. Besides, we distribute the quotas for our cargo deliveries on a special price between regional logistics structures”, emphasises CEO of Atria Russia Juha Ruohola. Some companies, requiring special temperature conditions to store their goods, prefer building their own logistics complexes. In particular, Sunway company decided to invest about USD 500 million in transport and warehousing logistics in 5 years’ time, and open three logistics terminals in Moscow, Yekaterinburg and Nizhny Novgorod before 2009. The area of each of the terminals will be 5,000-7,000 square metres. 
Most network retailers have chosen a similar plan of development. Russia’s largest retailer, X5 company, prefers to construct its own logistics centres in the regions where it is going to open its shops. Gennady Frolov, Director for Communication of X5 Retail Group, claims that the creation of the company’s own network of logistics centres is targeted at increasing operational efficiency by enlarging the share of direct supplies from the retailer’s own distributional centres to Pyatyorochka and Perekrestok shops from 25-50% to 70-90%. In the next five years, X5 will invest at least USD 1 billion, forecasts the Head of X5 Retail Group Lev Hasis. “As a result, the gross profitability will increase from 27.9% in 2006 to 29.1% in 2008”, he notes.
“The existing storage facilities in Russia, offered to companies to organise distribution centres, are not suitable for goods storing. Often they are former warehouses, and it is necessary to invest a lot of money in them before using them”, highlights Leonid Tyukavkin, Vice President for Strategy of Technosila company. So, the company made a decision to construct its own logistics complex in the Moscow region. In other regions the network has outsourced several warehousing terminals. In some towns the retailer has decided to use the new warehouses of Eurasia Logistics. “So, we are using a form of cooperation new to the market: we deal with one operator that services several regions at once. Thus, our expenses fall because a single technology is used”, says Mr Tyukavkin. Still, the company continues to examine different variants of development, including construction of its own logistics centres in the regions.
Resume
Construction of these logistics warehouses will continue until the market is able to offer outsourcing as an alternative, believe representatives of Knight Frank consulting company.
However, this will hardly happen in the near future. Even if all the logistics centres declared for construction by large, regional and even smaller network companies market in the market, are built, there will be about 35-40 million square metres of such warehouses in Russia and the CIS in 2010-2012, when the construction is completed. Taking the real situation into consideration, it is possible to suggest that only 1/3 of the declared projects will have been completed by 2012.
Then, the total area of modern warehouses of A and B class will be 10 million square metres, so it is a gloomy outlook.
By Maria  Shevchenko
viewpoint
Leonid Tyukavkin,
Vice President for Strategy, Technosila:
– A well-organised logistics structure is of key importance for a retail network on a federal scale. Our company pays special attention to development of the logistics constituent of its business. Today we have two central distribution terminals in Moscow and eight regional distribution centres.
Last year, Technosila made some steps to improve logistics, in particular, the move to work with one warehousing operator. This scheme allows cost reductions by using a single technology: cargo is dispatched and received by one operator, it is easier to find cargo that has not been loaded or is redundant. While opening new shops in Russia, we will put into operation new regional warehouses in our network.     
 
Alla Solovyova,
Executive Director, MLP:
– The fast rates of development in the Russian economy lately and the increase of the retail trade volume cannot but influence the activity of trading companies, retailers and logistics services providers. Their demand for warehouses is growing today and collides with the existing earlier superiority of demand over supply. Speaking of large logistics centres meeting international standards, the main problem faced by companies at the early stage of construction is the lack of areas with developed transport infrastructure. Not every territory allows the servicing of different transport modes at one terminal. The second problem, which slows down the process of A class warehouse construction, is the processing of documentation, getting necessary permissions and other administrative processes.
On average, it takes one year to put the first stage of a logistics terminal into operation. Much depends on the potential of the developer. In November 2007, we put into operation the first stage of the warehouses in the Leningrad and Moscow regions. We are also realising a project in Kiev. All our projects meet international standards and are of A class, which has allowed us to unite there all the famous transnational producers of consumer goods, leading distributors and the largest logistics operators. In 2008 we plan to put into operation several warehouses in the regions.
 
    [~DETAIL_TEXT] => 
Global Shortage
According to the estimations of RosBusinessConsulting analysts, the turnover of the companies operating on the transport and logistics services market in Russia increased by more than 50% in the last two years and amounted to USD 30 billion; meanwhile experts believe that their potential is about USD 120 billion.
Consequently, the demand for logistic services and storage facilities continues to grow. The large retail networks’ expansion to regions that started about two years ago also makes for an increase in demand. It is no secret that, to start work in a new region, a network retailer opens new sales outlets and has to look for warehousing capacities. To keep their goods, the companies need neither former agricultural production storehouses nor Soviet refrigerator areas, but automatically controlled warehouses with special temperature conditions, modern loading and unloading facilities and qualified staff. In other words, they require A class warehouses.
The second reason for the increase of the demand for A class logistic warehouses was the total economic growth of manufacturing. It led to the establishment of the companies producing consumer goods, which have to look for places to store strategic reserves of their products in the regions. “Nowadays, it is very difficult to find a warehouse of the European level in the region we need. It is one of the most crucial issues, and there is a significant imbalance between business requirements for A class warehouses and the supply”, says David Hassler, Director of the Production Supplying Service in the CIS for JTI company. “I believe the reason is that most building companies considered construction of offices and commercial buildings or housing more profitable than warehouses. As a result, the price demanded by the owners of the existing A class warehouses for their services is two times higher than that of European companies. That is why we prefer storing the major part of tobacco raw materials in the storage facilities in Antwerp, not in Russia”, he says.
One more factor stimulating development of transport and warehousing logistics was foreign companies that came to the Russian market. In particular, as Russian logisticians emphasise, their advantages are technologies, experience and unlimited financial resources.
Demand and Reality
Due to the economic boom, in 2007 the imbalance between the demand for A class logistics warehouses in the country and those on offer increased greatly. The real area of industrial real estate is 5.22 million square metres, while the required space is 50 million square metres! Meanwhile, the average percentage of fulfilled demand in Russia’s largest cities hardly exceeds 15-18%, and in many towns the figure is less than 5%-7%. 
In Russia the main centres where cargo flows are serviced, are Moscow, Saint Petersburg, Nizhny Novgorod, Yekaterinburg and Novosibirsk, and about 10 smaller cities. Moscow is the largest consumer market in Russia, so it lacks warehouses more than other cities. Comparing the absolute volume of warehousing areas per head in the Russian capital and in East European states’ capitals, it is obvious that Russia falls behind foreign countries in this aspect. For example, in the suburbs of Warsaw (3 million people), there are warehouses with an area of 7 million square metres; in Moscow suburb there are storage facilities with an area of 3-3.5 million square metres, meanwhile, there are four- or five times more people in Moscow than in Warsaw. Sector experts believe that the existing imbalance will continue for at least three to five years.
All these factors created the need to develop a large network of warehouse projects in Russia. For example, Eurasia Logistics plans to create the largest network of logistic centres in the country. They will have a single brand – Greengate. The logistic centres will be situated in 14 key regions in Russia, in the main economic centres of Ukraine, in the transport junction on the border between China and Kazakhstan, and the largest Turkish cities. The planned total area of all the logistics centres will amount to 9.3 million square metres. The total investment in the project is USD 7.4 billion. 
Such companies as The Raven Group and MLP are also developing their own network of logistics centres. In particular, The Raven Group is going to build 15 warehouses in Russian largest cities, and MLP plans to put its 9 projects into operation before 2010. Besides, transport companies also go in for construction of network logistics complexes. As a rule, their storage facilities meet all the requirements of a specified company – the client. For example, logistics services provider DHL is building several service warehouses for its client – Sun Microsystems. The warehouses, united by one IT network, are situated in different regions of Russia. “We are ready to launch such projects for other clients, but now the main consumers of such warehouses are companies specialising in IT, because the equipment supplied by them provides e-systems, and the time of the required goods delivery from the warehouse must be as short as possible. For example, regional clients of Sun Microsystems get the necessary equipment from our warehouse two hours after they make an application”, explains Edward Baldakov, National Channel Manager DHL Russia.
Trading Companies Turn Into Logistics Ones
As a result of the significant shortage of warehouses, network retailers as well as production companies prefer to build their own logistics and distribution centres in the regions they come to.
 “Almost all companies face the problem of underdeveloped logistics operators as well as a lack of distribution centres. Besides, there is a shortage of warehouses, especially the ones meeting the international standards of A and B class storage facilities”, says Dmitry Chumakov, Director General of Vector Market Research agency. In his words, instead of renting the existing storage facilities, a lot of companies have to build warehouses and distribution centres in the regions. “The secondary warehouse market in the country is very poor and exhausted by the constantly growing demands of fast developing businesses. Several months before opening a distribution centre, we start to look for a suitable building, examine and analyse several variants, out of which we choose only one, meeting our requirements better”, tells Igor Tryasunov, Director of Logistics Department, X5 Retail Group.
Food producers, whose requirements in storage facilities are extremely high, note that to solve logistics problems, they have to unite their warehousing capacities with their colleagues’. “We try to combine our transport schemes with those of producers from neighbouring regions. Besides, we distribute the quotas for our cargo deliveries on a special price between regional logistics structures”, emphasises CEO of Atria Russia Juha Ruohola. Some companies, requiring special temperature conditions to store their goods, prefer building their own logistics complexes. In particular, Sunway company decided to invest about USD 500 million in transport and warehousing logistics in 5 years’ time, and open three logistics terminals in Moscow, Yekaterinburg and Nizhny Novgorod before 2009. The area of each of the terminals will be 5,000-7,000 square metres. 
Most network retailers have chosen a similar plan of development. Russia’s largest retailer, X5 company, prefers to construct its own logistics centres in the regions where it is going to open its shops. Gennady Frolov, Director for Communication of X5 Retail Group, claims that the creation of the company’s own network of logistics centres is targeted at increasing operational efficiency by enlarging the share of direct supplies from the retailer’s own distributional centres to Pyatyorochka and Perekrestok shops from 25-50% to 70-90%. In the next five years, X5 will invest at least USD 1 billion, forecasts the Head of X5 Retail Group Lev Hasis. “As a result, the gross profitability will increase from 27.9% in 2006 to 29.1% in 2008”, he notes.
“The existing storage facilities in Russia, offered to companies to organise distribution centres, are not suitable for goods storing. Often they are former warehouses, and it is necessary to invest a lot of money in them before using them”, highlights Leonid Tyukavkin, Vice President for Strategy of Technosila company. So, the company made a decision to construct its own logistics complex in the Moscow region. In other regions the network has outsourced several warehousing terminals. In some towns the retailer has decided to use the new warehouses of Eurasia Logistics. “So, we are using a form of cooperation new to the market: we deal with one operator that services several regions at once. Thus, our expenses fall because a single technology is used”, says Mr Tyukavkin. Still, the company continues to examine different variants of development, including construction of its own logistics centres in the regions.
Resume
Construction of these logistics warehouses will continue until the market is able to offer outsourcing as an alternative, believe representatives of Knight Frank consulting company.
However, this will hardly happen in the near future. Even if all the logistics centres declared for construction by large, regional and even smaller network companies market in the market, are built, there will be about 35-40 million square metres of such warehouses in Russia and the CIS in 2010-2012, when the construction is completed. Taking the real situation into consideration, it is possible to suggest that only 1/3 of the declared projects will have been completed by 2012.
Then, the total area of modern warehouses of A and B class will be 10 million square metres, so it is a gloomy outlook.
By Maria  Shevchenko
viewpoint
Leonid Tyukavkin,
Vice President for Strategy, Technosila:
– A well-organised logistics structure is of key importance for a retail network on a federal scale. Our company pays special attention to development of the logistics constituent of its business. Today we have two central distribution terminals in Moscow and eight regional distribution centres.
Last year, Technosila made some steps to improve logistics, in particular, the move to work with one warehousing operator. This scheme allows cost reductions by using a single technology: cargo is dispatched and received by one operator, it is easier to find cargo that has not been loaded or is redundant. While opening new shops in Russia, we will put into operation new regional warehouses in our network.     
 
Alla Solovyova,
Executive Director, MLP:
– The fast rates of development in the Russian economy lately and the increase of the retail trade volume cannot but influence the activity of trading companies, retailers and logistics services providers. Their demand for warehouses is growing today and collides with the existing earlier superiority of demand over supply. Speaking of large logistics centres meeting international standards, the main problem faced by companies at the early stage of construction is the lack of areas with developed transport infrastructure. Not every territory allows the servicing of different transport modes at one terminal. The second problem, which slows down the process of A class warehouse construction, is the processing of documentation, getting necessary permissions and other administrative processes.
On average, it takes one year to put the first stage of a logistics terminal into operation. Much depends on the potential of the developer. In November 2007, we put into operation the first stage of the warehouses in the Leningrad and Moscow regions. We are also realising a project in Kiev. All our projects meet international standards and are of A class, which has allowed us to unite there all the famous transnational producers of consumer goods, leading distributors and the largest logistics operators. In 2008 we plan to put into operation several warehouses in the regions.
 
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– Mr Shimokhin, could you please comment on OJSC Railroad of Yakutia’s results in 2007? What were the dynamics of the transportation volume?
– According to the preliminary data, the volume of cargo transportation amounted to 2.2 million tons in 2007, up 23% year-on-year (in 2006 the company carried 1.78 million tons). Passenger transportation remained at the same level: annually, the railway transports about 100,000 passengers and in 2007 the figure grew by 4%.
– Why did the loading volume increase so much? Will the company manage to keep the achieved rates in 2008?
– Firstly, the dynamics were caused by the increase of coal transportation in the southern direction, along the traditional “coal routes” of the Republic. Secondly, there was a small rise in construction materials carried to where the Eastern Siberia – the Pacific Ocean pipeline was being built.
In 2008 we expect the transportation volume of construction materials and metalwork to grow because of the intensive construction of the Tommot-Kerdem railway. Also, in 2008, the preliminary works will start to develop the Elkonskoye field of uranium ores, so additional volumes of construction materials will be carried there. As far as we know, ZAO Polus (a daughter company of MMC Norilsk Nickel) is going to increase the output volume of mining company OAO Aldanzoloto by reconstructing gold recovery plants. So, this year the transportation volume will continue to increase and perhaps the growth will make 5-7% year-on-year.
– What projects were the most important for your company in 2007?
– Last year we paid special attention to the rolling stock park of OJSC Railroad of Yakutia. In particular, in the framework of the programme, which is to be carried out by 2011, whereby five sections of mainline diesel electric locomotives 2TE10M were modernised, and two of them are now being tested at the Poltavsky Diesel Electric Locomotive Repair Plant. Before 2011, 28 sections are to be modernised. 
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– What are the main directions for railway development in 2008?
– We have a lot of plans. We want to start construction of a new locomotive depot. We are going to carry out the programme of modernising shunting diesel electric locomotives TEM2, using technologies similar to the ones for mainline diesel electric locomotives. This target is a unique one. Modernising the mainline diesel electric locomotives, we use the technologies approbated in Kazakhstan and Mongolia. But shunting locomotives remains mainly “terra incognita”. As a result, we will have a practically new locomotive with improved technical and economic characteristics. So far, the basic technical solutions have been developed and the stages of their implementation have been defined. We hope that the first modernised facility will have been completed by the end of 2008. 
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– Why did the loading volume increase so much? Will the company manage to keep the achieved rates in 2008?
– Firstly, the dynamics were caused by the increase of coal transportation in the southern direction, along the traditional “coal routes” of the Republic. Secondly, there was a small rise in construction materials carried to where the Eastern Siberia – the Pacific Ocean pipeline was being built.
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– What projects were the most important for your company in 2007?
– Last year we paid special attention to the rolling stock park of OJSC Railroad of Yakutia. In particular, in the framework of the programme, which is to be carried out by 2011, whereby five sections of mainline diesel electric locomotives 2TE10M were modernised, and two of them are now being tested at the Poltavsky Diesel Electric Locomotive Repair Plant. Before 2011, 28 sections are to be modernised. 
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– We have a lot of plans. We want to start construction of a new locomotive depot. We are going to carry out the programme of modernising shunting diesel electric locomotives TEM2, using technologies similar to the ones for mainline diesel electric locomotives. This target is a unique one. Modernising the mainline diesel electric locomotives, we use the technologies approbated in Kazakhstan and Mongolia. But shunting locomotives remains mainly “terra incognita”. As a result, we will have a practically new locomotive with improved technical and economic characteristics. So far, the basic technical solutions have been developed and the stages of their implementation have been defined. We hope that the first modernised facility will have been completed by the end of 2008. 
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– Mr Shimokhin, could you please comment on OJSC Railroad of Yakutia’s results in 2007? What were the dynamics of the transportation volume?
– According to the preliminary data, the volume of cargo transportation amounted to 2.2 million tons in 2007, up 23% year-on-year (in 2006 the company carried 1.78 million tons). Passenger transportation remained at the same level: annually, the railway transports about 100,000 passengers and in 2007 the figure grew by 4%.
– Why did the loading volume increase so much? Will the company manage to keep the achieved rates in 2008?
– Firstly, the dynamics were caused by the increase of coal transportation in the southern direction, along the traditional “coal routes” of the Republic. Secondly, there was a small rise in construction materials carried to where the Eastern Siberia – the Pacific Ocean pipeline was being built.
In 2008 we expect the transportation volume of construction materials and metalwork to grow because of the intensive construction of the Tommot-Kerdem railway. Also, in 2008, the preliminary works will start to develop the Elkonskoye field of uranium ores, so additional volumes of construction materials will be carried there. As far as we know, ZAO Polus (a daughter company of MMC Norilsk Nickel) is going to increase the output volume of mining company OAO Aldanzoloto by reconstructing gold recovery plants. So, this year the transportation volume will continue to increase and perhaps the growth will make 5-7% year-on-year.
– What projects were the most important for your company in 2007?
– Last year we paid special attention to the rolling stock park of OJSC Railroad of Yakutia. In particular, in the framework of the programme, which is to be carried out by 2011, whereby five sections of mainline diesel electric locomotives 2TE10M were modernised, and two of them are now being tested at the Poltavsky Diesel Electric Locomotive Repair Plant. Before 2011, 28 sections are to be modernised. 
Besides, it is planned to modernise two more sections of 2TE10M. They are now in Belgorod. The programme for 2008 envisages the repair of four more sections. Another large project of OJSC Railroad of Yakutia is the launch of the technology to cooperate with OAO RZD using a single information resource. In December, a computer suite was put into operation at the Railways of Yakutia, and the automated system was implemented to manage railway stations. The system is now being tested independently, separately from the informational resources of OAO RZD. Also, the adaptation of the ETRAN system is being completed now. 
– What are the main directions for railway development in 2008?
– We have a lot of plans. We want to start construction of a new locomotive depot. We are going to carry out the programme of modernising shunting diesel electric locomotives TEM2, using technologies similar to the ones for mainline diesel electric locomotives. This target is a unique one. Modernising the mainline diesel electric locomotives, we use the technologies approbated in Kazakhstan and Mongolia. But shunting locomotives remains mainly “terra incognita”. As a result, we will have a practically new locomotive with improved technical and economic characteristics. So far, the basic technical solutions have been developed and the stages of their implementation have been defined. We hope that the first modernised facility will have been completed by the end of 2008. 
And perhaps the main infrastructure project is upgrading the technical level of the railway line. The cost of the projects will be at least RUR 7 billion.
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– Mr Shimokhin, could you please comment on OJSC Railroad of Yakutia’s results in 2007? What were the dynamics of the transportation volume?
– According to the preliminary data, the volume of cargo transportation amounted to 2.2 million tons in 2007, up 23% year-on-year (in 2006 the company carried 1.78 million tons). Passenger transportation remained at the same level: annually, the railway transports about 100,000 passengers and in 2007 the figure grew by 4%.
– Why did the loading volume increase so much? Will the company manage to keep the achieved rates in 2008?
– Firstly, the dynamics were caused by the increase of coal transportation in the southern direction, along the traditional “coal routes” of the Republic. Secondly, there was a small rise in construction materials carried to where the Eastern Siberia – the Pacific Ocean pipeline was being built.
In 2008 we expect the transportation volume of construction materials and metalwork to grow because of the intensive construction of the Tommot-Kerdem railway. Also, in 2008, the preliminary works will start to develop the Elkonskoye field of uranium ores, so additional volumes of construction materials will be carried there. As far as we know, ZAO Polus (a daughter company of MMC Norilsk Nickel) is going to increase the output volume of mining company OAO Aldanzoloto by reconstructing gold recovery plants. So, this year the transportation volume will continue to increase and perhaps the growth will make 5-7% year-on-year.
– What projects were the most important for your company in 2007?
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– What are the main directions for railway development in 2008?
– We have a lot of plans. We want to start construction of a new locomotive depot. We are going to carry out the programme of modernising shunting diesel electric locomotives TEM2, using technologies similar to the ones for mainline diesel electric locomotives. This target is a unique one. Modernising the mainline diesel electric locomotives, we use the technologies approbated in Kazakhstan and Mongolia. But shunting locomotives remains mainly “terra incognita”. As a result, we will have a practically new locomotive with improved technical and economic characteristics. So far, the basic technical solutions have been developed and the stages of their implementation have been defined. We hope that the first modernised facility will have been completed by the end of 2008. 
And perhaps the main infrastructure project is upgrading the technical level of the railway line. The cost of the projects will be at least RUR 7 billion.
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Be Independent to Survive
First, let’s see the definitions of the terms. According to normative documents, a railway transporter is a company, owning rolling stock, including locomotives, and obliged to carry the submitted cargo to the station mentioned in the client’s application on the current price list. OAO RZD is the only transporter in Russia. In its turn, an operator company manages its wagon park and purchases locomotive services from OAO RZD. The company has a right to choose clients, destinations, and can set tariffs, i.e. it can act as an independent structure, free from any public obligations.
Analysing the history of operating companies in Russia, it becomes clear that these subjects did not appear in the market as a result of any reforms – it was a spontaneous process, meeting actual demands of the railway transportation market. When the country was overcoming the scaled economic crisis (the mid of the 1990’s), a number of oil-processing and metallurgical enterprises started to enlarge production volume, consequently, there appeared the demand for this or that type of rolling stock. As a result, industrial companies, in particular, exporting their production, had to purchase wagons to provide continuous transportation of their goods.
At that time, to exploit their growing rolling stock parks, large industrial enterprises started to launch daughter companies, owning rolling stock and providing it to transport cargoes. But these companies were not transporters; hence, at first, operators serviced cargoes of their mother companies. 
There used to be another way for operator companies to emerge: a forwarder bought rolling stock and offered it for goods transportation. Even at that time it was clear that creation of operator companies had a positive impact on the railway transport. Without taking the prospect of competition transport services markets creation, obviously, the process was to help OAO RZD (the Ministry of Railways at that time) to enlarge the wagon park, especially the critical types of rolling stock.
Local Monopolists
While the market was developing as well as large operator companies, the amount of private rolling stock and of the cargo carried in it was rapidly increasing. From a commercial standpoint, operator companies leave behind OAO RZD, taking the revenues from providing rolling stock for the most profitable transportation. In the words of Director General of the Centre of Transport Services of OAO RZD Vyacheslav Petrenko, the first results of the reform, caused by the development of operator companies, showed that operators developed their activities in the highly profitable segments of the transport market in technologically isolated areas. So, “the existing operators are becoming local monopolists in the chosen segments of the transport market”.
Meanwhile, it is very important that formation of prices for operators’ services is quite flexible. Not only do operators work on the profitable directions, they can vary tariffs and discounts, attracting a cargo owner there, where they have a surplus of rolling stock, and increasing prices where a cargo owner is ready to pay a larger sum than is envisaged by the Tariff Regulation. Nowadays, so-called “wagon constituent” is included into the structure of the tariff, paid by the operators to OAO RZD. It is a certain tariff discount, because these companies use their own rolling stock for cargo transportation and not the transporter’s. 
Due to all these factors, by mid-2007, the freight wagons park in Russia amounted to 939,000 units, including 321,000 rail cars of private companies (according to the concept of the railway transport reform, by 2010 the share of private wagons is to make 50% of the total volume). The share of rolling stock owners exceeds one third of the freight transportation sector, the meaning and influence of the companies continues to grow in the market. As for domestic and international transportation, the share of operator companies is 26% and 38% respectively. The companies transport 64% of the total oil bulk volume carried by railway, 22% of ferrous metals, 46% of ore, and 47% of mineral fertilisers. According to the information of OAO RZD, the volume of cargo transportation volume in the company’s park has constantly been falling for the last three years. 
It is possible to say that the rolling stock operating business has developed significantly in Russia. Now operators offer not only a wagon to be loaded, but a pack of services that includes routing to the load station, help to plan delivery of private wagons and OAO RZD’s rail cars, dispatcher control for the wagons during transportation, cooperation with port forwarders, faster unloading, etc.
Alexander Eliseev, Chairman of the Board of Directors of OAO Novaya Perevozochnaya Kompaniya, notes, “Objectively, operator companies have some advantages. Firstly, the wagon constituent in the tariff has allowed private companies to invest in rolling stock park Besides, it allows giving clients a discount on the acting Tariff Regulation, or providing them with a better service for the same sum of money.
I would like to emphasise that a client is ready to pay for the additional services provided to him, i.e. there is a real demand for service. And the demand is fulfilled by transport companies, which have advanced technologies. The second advantage is that a consignor does not pay for idling of private wagons on his tracks, as happens if he uses a Russian Railways’ park. Therefore, a lot of our clients, in particular metallurgical enterprises, save large sums of money, million of dollars.”
The First Cargo Company: More Questions Than Answers
In accordance with the structural reform plan, OAO RZD has started to launch daughter companies in certain segments of the railway transportation market, including very profitable ones. OAO Russian Railways gives all the necessary rolling stock to the companies. Thus, on the market there appear operator companies incorporated into an OAO RZD holding company. But they are not transporters. Thus, in 2006 OAO TransContainer, OAO Refservice and OAO Transles were separated off from OAO RZD. The companies specialise in container, ref cargoes, and timber transportation respectively.
Nowadays, significant changes take place in the market because a new daughter company of Russian Railways – OAO The First Cargo Company has been launched. It owns a large park of freight wagons (over 200,000 rail cars). Later it is planned to launch one more such company specialising in freight transportation, owned by OAO RZD. Experts believe that the economic sense of launching such companies is liberalisation of tariffs in part of the wagon constituent, which is now flexible for private rolling stock and fixed for the OAO RZD park. 
Thus, new companies must compete practically on equal terms with operators owned by independent companies.
On the other hand, some operator companies have been working in the market for many years, and have organised a reliable cargo base, routes and logistics schemes. And they have nobody to rely on but themselves. And if the “game” is fair, private operator companies are sure to survive.
On the other hand, it is possible that, looking after the launch of The First Cargo Company, private operators underestimate the role of the two new companies. According to the online poll “Will the competitiveness of private operators change after the launch of OAO First cargo Company?”, held by RZD-Partner.Ru information agency, the answers were as follows: “their competitiveness will fall” – over 36%, “their competitiveness will increase” – about 17%, and “there will be no any significant changes” – 46.5%. I.e., almost 2/3 of the market players have no fear about the future. 
“We have already passed the point of no return. We are going to compete in the profitable cargo transportation sector. And I guarantee that the competition will be fair. It means we plan to purchase a definite amount of rolling stock. Unfortunately, our rolling stock is older than that of private companies. Consequently, our expenses are bigger. So, we need to cut expenses and increase the efficiency of work. It is difficult to say now what our share in the market will be – much depends on the preferences of cargo owners. Many of them have transport companies, so they will never ask us to carry their cargo, even if we work more efficiently. Still, the situation may be changed by launching Cargo Company, competing with private operators as equals”, says Vladimir Yakunin, President of OAO RZD.  At first, OAO RZD will remain a transporter. The larger part of its rolling stock will be given to the Cargo Company, and OAO RZD will rent it from the company. “Why is the scheme so complicated? We know that the acting legislation envisages presence of only one transporter. And we must provide transportation of any cargo when we have received it. Meanwhile, private operator companies can choose destinations and cargoes to transport. Stage-by-stage, the rented rolling stock will be given back to the Cargo Company, which will replace OAO RZD in the liberalised segments of the market. In the long-term prospect, OAO RZD will turn into a holding company, incorporating cargo companies, specialised operators and some other structures”, says V. Yakunin.
Lack of Law Is A Problem
But for the future threat from the cargo companies, independent operators have enough problems today. One of them is private rolling stock repair. Most operators think that repairs made by OAO RZD are expensive, not very good, and unclear (i.e. it is not always understandable, for what a company is to pay from the tariff, and for what from additional means). Moreover, often OAO RZD park is repaired as a top priority, while private wagons have to wait.
That is why some companies have concluded they have to create their own repair base. Vladimir Prokofyev, President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService comments on it, “Why do we do it? Firstly, our own depot is much more profitable from the price-quality ratio standpoint. Secondly, no repair enterprises offered by OAO RZD suits us because of its location. Besides, lately, a lot of operators have faced the problem of planned depot repair unfulfillment, because in 2007 a lot of new wagons turned out to be defective (according to different estimations, repair was required for 7,000-8,000 new wagons), so the depots had too many orders”. Meanwhile, it is no secret that any Russian operator lacks a legislative base for its functioning. The development of the market has left the development of a normative and legislative base, regulating the activities of the market players, far behind. Nowadays, a number of subordinate legislative acts are to be approved to regulate the activities of operators. Adopting the acts is envisaged by the plan of the third stage of the reform, but it has not been realised so far. 
Nadezhda  Vtorushina
viewpoint
Igor Romashov,
Head of the Federal Agency of Railway Transport:
– Nowadays, there are more than 300,000 private wagons. The amount is almost similar to a half of OAO RZD’s park. Naturally, in these conditions, the importance of state regulating bodies – the RF Ministry of Transport and the Federal Agency of Railway Transport etc. – increases. The market participant used to apply to the Ministry of Railways, then – to OAO RZD. But a monopoly is not interested in solving any problems. One must understand that this company cannot be a locomotive of the transport reform, because in that case it will have to create its own competitors and conditions favourable to them. It is nonsense! The reform is to be carried out, and it is carried out, by federal authorities. It is their task. The function of a joint-stock company is business and getting profit.

Vladimir Prokofyev,
President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService:
–  Everyone understands how difficult it is to reach the target of creating an independent (the second) national transporter (I mean a company alternative to OAO RZD holding company). It is clear that it will hardly appear today. But if we had not set such a target, the reform would be completed with the results similar to present-day situation, i.e. keeping OAO RZD a monopoly. That is why state support is required to form such a structure. The state must give rolling stock operators a clear sign that the process of their integration to form a national transporter is a priority for the state, and will be given a support. Unfortunately, the programme of the sector’s further reformation, adopted by the Governmental committee on May 16, 2007, does not touch upon the significance of the project.

Sergey Guschin,
Director General of OAO Transgarant:
– The carried out railway transport reform, during which an operator has to face different problems in the legislative sector, requires a well-developed legislative base. Obtaining the status of “transporters” by operators is not the necessary target to realise. I believe that there will be the both types of companies – operators and transporters.
The lack of the definition of “an operator” is a large problem for our company as well as for other operators. If the problem is solved, the amount of tax and investment questions will fall. There is another problem: our company is in fact a forwarder, i.e. a middleman in the process of wagon provision. But the larger part of the revenue we get from the client is given to pay the tariff, and our company gets for itself just a small part of the money – the wagon constituent.

Konstantin Uvarov,
Director General of ZAO MAXILOG:
– I believe that the launch of the First Cargo Company, a daughter company of OAO RZD, must not radically influence the activities of private operators. Perhaps, the tariffs will increase, but the modern Russian market of freight transportation resembles a stock exchange: someone bulls and someone bears. At the rapid growth of demand and the transportation volume increase, rates and tariffs are reviewed in all the segments of the transport market. There is a stable growth of prices on such a liberal market as road transportation, in which there are many independent players. The competition there is so tough that we can hardly even think about a cartel agreement between transporters.                  
    [~DETAIL_TEXT] => 
Be Independent to Survive
First, let’s see the definitions of the terms. According to normative documents, a railway transporter is a company, owning rolling stock, including locomotives, and obliged to carry the submitted cargo to the station mentioned in the client’s application on the current price list. OAO RZD is the only transporter in Russia. In its turn, an operator company manages its wagon park and purchases locomotive services from OAO RZD. The company has a right to choose clients, destinations, and can set tariffs, i.e. it can act as an independent structure, free from any public obligations.
Analysing the history of operating companies in Russia, it becomes clear that these subjects did not appear in the market as a result of any reforms – it was a spontaneous process, meeting actual demands of the railway transportation market. When the country was overcoming the scaled economic crisis (the mid of the 1990’s), a number of oil-processing and metallurgical enterprises started to enlarge production volume, consequently, there appeared the demand for this or that type of rolling stock. As a result, industrial companies, in particular, exporting their production, had to purchase wagons to provide continuous transportation of their goods.
At that time, to exploit their growing rolling stock parks, large industrial enterprises started to launch daughter companies, owning rolling stock and providing it to transport cargoes. But these companies were not transporters; hence, at first, operators serviced cargoes of their mother companies. 
There used to be another way for operator companies to emerge: a forwarder bought rolling stock and offered it for goods transportation. Even at that time it was clear that creation of operator companies had a positive impact on the railway transport. Without taking the prospect of competition transport services markets creation, obviously, the process was to help OAO RZD (the Ministry of Railways at that time) to enlarge the wagon park, especially the critical types of rolling stock.
Local Monopolists
While the market was developing as well as large operator companies, the amount of private rolling stock and of the cargo carried in it was rapidly increasing. From a commercial standpoint, operator companies leave behind OAO RZD, taking the revenues from providing rolling stock for the most profitable transportation. In the words of Director General of the Centre of Transport Services of OAO RZD Vyacheslav Petrenko, the first results of the reform, caused by the development of operator companies, showed that operators developed their activities in the highly profitable segments of the transport market in technologically isolated areas. So, “the existing operators are becoming local monopolists in the chosen segments of the transport market”.
Meanwhile, it is very important that formation of prices for operators’ services is quite flexible. Not only do operators work on the profitable directions, they can vary tariffs and discounts, attracting a cargo owner there, where they have a surplus of rolling stock, and increasing prices where a cargo owner is ready to pay a larger sum than is envisaged by the Tariff Regulation. Nowadays, so-called “wagon constituent” is included into the structure of the tariff, paid by the operators to OAO RZD. It is a certain tariff discount, because these companies use their own rolling stock for cargo transportation and not the transporter’s. 
Due to all these factors, by mid-2007, the freight wagons park in Russia amounted to 939,000 units, including 321,000 rail cars of private companies (according to the concept of the railway transport reform, by 2010 the share of private wagons is to make 50% of the total volume). The share of rolling stock owners exceeds one third of the freight transportation sector, the meaning and influence of the companies continues to grow in the market. As for domestic and international transportation, the share of operator companies is 26% and 38% respectively. The companies transport 64% of the total oil bulk volume carried by railway, 22% of ferrous metals, 46% of ore, and 47% of mineral fertilisers. According to the information of OAO RZD, the volume of cargo transportation volume in the company’s park has constantly been falling for the last three years. 
It is possible to say that the rolling stock operating business has developed significantly in Russia. Now operators offer not only a wagon to be loaded, but a pack of services that includes routing to the load station, help to plan delivery of private wagons and OAO RZD’s rail cars, dispatcher control for the wagons during transportation, cooperation with port forwarders, faster unloading, etc.
Alexander Eliseev, Chairman of the Board of Directors of OAO Novaya Perevozochnaya Kompaniya, notes, “Objectively, operator companies have some advantages. Firstly, the wagon constituent in the tariff has allowed private companies to invest in rolling stock park Besides, it allows giving clients a discount on the acting Tariff Regulation, or providing them with a better service for the same sum of money.
I would like to emphasise that a client is ready to pay for the additional services provided to him, i.e. there is a real demand for service. And the demand is fulfilled by transport companies, which have advanced technologies. The second advantage is that a consignor does not pay for idling of private wagons on his tracks, as happens if he uses a Russian Railways’ park. Therefore, a lot of our clients, in particular metallurgical enterprises, save large sums of money, million of dollars.”
The First Cargo Company: More Questions Than Answers
In accordance with the structural reform plan, OAO RZD has started to launch daughter companies in certain segments of the railway transportation market, including very profitable ones. OAO Russian Railways gives all the necessary rolling stock to the companies. Thus, on the market there appear operator companies incorporated into an OAO RZD holding company. But they are not transporters. Thus, in 2006 OAO TransContainer, OAO Refservice and OAO Transles were separated off from OAO RZD. The companies specialise in container, ref cargoes, and timber transportation respectively.
Nowadays, significant changes take place in the market because a new daughter company of Russian Railways – OAO The First Cargo Company has been launched. It owns a large park of freight wagons (over 200,000 rail cars). Later it is planned to launch one more such company specialising in freight transportation, owned by OAO RZD. Experts believe that the economic sense of launching such companies is liberalisation of tariffs in part of the wagon constituent, which is now flexible for private rolling stock and fixed for the OAO RZD park. 
Thus, new companies must compete practically on equal terms with operators owned by independent companies.
On the other hand, some operator companies have been working in the market for many years, and have organised a reliable cargo base, routes and logistics schemes. And they have nobody to rely on but themselves. And if the “game” is fair, private operator companies are sure to survive.
On the other hand, it is possible that, looking after the launch of The First Cargo Company, private operators underestimate the role of the two new companies. According to the online poll “Will the competitiveness of private operators change after the launch of OAO First cargo Company?”, held by RZD-Partner.Ru information agency, the answers were as follows: “their competitiveness will fall” – over 36%, “their competitiveness will increase” – about 17%, and “there will be no any significant changes” – 46.5%. I.e., almost 2/3 of the market players have no fear about the future. 
“We have already passed the point of no return. We are going to compete in the profitable cargo transportation sector. And I guarantee that the competition will be fair. It means we plan to purchase a definite amount of rolling stock. Unfortunately, our rolling stock is older than that of private companies. Consequently, our expenses are bigger. So, we need to cut expenses and increase the efficiency of work. It is difficult to say now what our share in the market will be – much depends on the preferences of cargo owners. Many of them have transport companies, so they will never ask us to carry their cargo, even if we work more efficiently. Still, the situation may be changed by launching Cargo Company, competing with private operators as equals”, says Vladimir Yakunin, President of OAO RZD.  At first, OAO RZD will remain a transporter. The larger part of its rolling stock will be given to the Cargo Company, and OAO RZD will rent it from the company. “Why is the scheme so complicated? We know that the acting legislation envisages presence of only one transporter. And we must provide transportation of any cargo when we have received it. Meanwhile, private operator companies can choose destinations and cargoes to transport. Stage-by-stage, the rented rolling stock will be given back to the Cargo Company, which will replace OAO RZD in the liberalised segments of the market. In the long-term prospect, OAO RZD will turn into a holding company, incorporating cargo companies, specialised operators and some other structures”, says V. Yakunin.
Lack of Law Is A Problem
But for the future threat from the cargo companies, independent operators have enough problems today. One of them is private rolling stock repair. Most operators think that repairs made by OAO RZD are expensive, not very good, and unclear (i.e. it is not always understandable, for what a company is to pay from the tariff, and for what from additional means). Moreover, often OAO RZD park is repaired as a top priority, while private wagons have to wait.
That is why some companies have concluded they have to create their own repair base. Vladimir Prokofyev, President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService comments on it, “Why do we do it? Firstly, our own depot is much more profitable from the price-quality ratio standpoint. Secondly, no repair enterprises offered by OAO RZD suits us because of its location. Besides, lately, a lot of operators have faced the problem of planned depot repair unfulfillment, because in 2007 a lot of new wagons turned out to be defective (according to different estimations, repair was required for 7,000-8,000 new wagons), so the depots had too many orders”. Meanwhile, it is no secret that any Russian operator lacks a legislative base for its functioning. The development of the market has left the development of a normative and legislative base, regulating the activities of the market players, far behind. Nowadays, a number of subordinate legislative acts are to be approved to regulate the activities of operators. Adopting the acts is envisaged by the plan of the third stage of the reform, but it has not been realised so far. 
Nadezhda  Vtorushina
viewpoint
Igor Romashov,
Head of the Federal Agency of Railway Transport:
– Nowadays, there are more than 300,000 private wagons. The amount is almost similar to a half of OAO RZD’s park. Naturally, in these conditions, the importance of state regulating bodies – the RF Ministry of Transport and the Federal Agency of Railway Transport etc. – increases. The market participant used to apply to the Ministry of Railways, then – to OAO RZD. But a monopoly is not interested in solving any problems. One must understand that this company cannot be a locomotive of the transport reform, because in that case it will have to create its own competitors and conditions favourable to them. It is nonsense! The reform is to be carried out, and it is carried out, by federal authorities. It is their task. The function of a joint-stock company is business and getting profit.

Vladimir Prokofyev,
President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService:
–  Everyone understands how difficult it is to reach the target of creating an independent (the second) national transporter (I mean a company alternative to OAO RZD holding company). It is clear that it will hardly appear today. But if we had not set such a target, the reform would be completed with the results similar to present-day situation, i.e. keeping OAO RZD a monopoly. That is why state support is required to form such a structure. The state must give rolling stock operators a clear sign that the process of their integration to form a national transporter is a priority for the state, and will be given a support. Unfortunately, the programme of the sector’s further reformation, adopted by the Governmental committee on May 16, 2007, does not touch upon the significance of the project.

Sergey Guschin,
Director General of OAO Transgarant:
– The carried out railway transport reform, during which an operator has to face different problems in the legislative sector, requires a well-developed legislative base. Obtaining the status of “transporters” by operators is not the necessary target to realise. I believe that there will be the both types of companies – operators and transporters.
The lack of the definition of “an operator” is a large problem for our company as well as for other operators. If the problem is solved, the amount of tax and investment questions will fall. There is another problem: our company is in fact a forwarder, i.e. a middleman in the process of wagon provision. But the larger part of the revenue we get from the client is given to pay the tariff, and our company gets for itself just a small part of the money – the wagon constituent.

Konstantin Uvarov,
Director General of ZAO MAXILOG:
– I believe that the launch of the First Cargo Company, a daughter company of OAO RZD, must not radically influence the activities of private operators. Perhaps, the tariffs will increase, but the modern Russian market of freight transportation resembles a stock exchange: someone bulls and someone bears. At the rapid growth of demand and the transportation volume increase, rates and tariffs are reviewed in all the segments of the transport market. There is a stable growth of prices on such a liberal market as road transportation, in which there are many independent players. The competition there is so tough that we can hardly even think about a cartel agreement between transporters.                  
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2008/1/021.png" border="1" alt=" " hspace="5" width="140" height="110" align="left" />Nowadays the third stage of railway transport structural reform is being carried out in Russia. Its target is creation of real competition in the transportation sector. One of the ways to reach the target is the emergence of transport companies alternative to OAO RZD. Meanwhile, the terms of the third stage of the reform and whether it will be a success – are still debatable questions.
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            [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2008/1/021.png" border="1" alt=" " hspace="5" width="140" height="110" align="left" />Nowadays the third stage of railway transport structural reform is being carried out in Russia. Its target is creation of real competition in the transportation sector. One of the ways to reach the target is the emergence of transport companies alternative to OAO RZD. Meanwhile, the terms of the third stage of the reform and whether it will be a success – are still debatable questions.
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Be Independent to Survive
First, let’s see the definitions of the terms. According to normative documents, a railway transporter is a company, owning rolling stock, including locomotives, and obliged to carry the submitted cargo to the station mentioned in the client’s application on the current price list. OAO RZD is the only transporter in Russia. In its turn, an operator company manages its wagon park and purchases locomotive services from OAO RZD. The company has a right to choose clients, destinations, and can set tariffs, i.e. it can act as an independent structure, free from any public obligations.
Analysing the history of operating companies in Russia, it becomes clear that these subjects did not appear in the market as a result of any reforms – it was a spontaneous process, meeting actual demands of the railway transportation market. When the country was overcoming the scaled economic crisis (the mid of the 1990’s), a number of oil-processing and metallurgical enterprises started to enlarge production volume, consequently, there appeared the demand for this or that type of rolling stock. As a result, industrial companies, in particular, exporting their production, had to purchase wagons to provide continuous transportation of their goods.
At that time, to exploit their growing rolling stock parks, large industrial enterprises started to launch daughter companies, owning rolling stock and providing it to transport cargoes. But these companies were not transporters; hence, at first, operators serviced cargoes of their mother companies. 
There used to be another way for operator companies to emerge: a forwarder bought rolling stock and offered it for goods transportation. Even at that time it was clear that creation of operator companies had a positive impact on the railway transport. Without taking the prospect of competition transport services markets creation, obviously, the process was to help OAO RZD (the Ministry of Railways at that time) to enlarge the wagon park, especially the critical types of rolling stock.
Local Monopolists
While the market was developing as well as large operator companies, the amount of private rolling stock and of the cargo carried in it was rapidly increasing. From a commercial standpoint, operator companies leave behind OAO RZD, taking the revenues from providing rolling stock for the most profitable transportation. In the words of Director General of the Centre of Transport Services of OAO RZD Vyacheslav Petrenko, the first results of the reform, caused by the development of operator companies, showed that operators developed their activities in the highly profitable segments of the transport market in technologically isolated areas. So, “the existing operators are becoming local monopolists in the chosen segments of the transport market”.
Meanwhile, it is very important that formation of prices for operators’ services is quite flexible. Not only do operators work on the profitable directions, they can vary tariffs and discounts, attracting a cargo owner there, where they have a surplus of rolling stock, and increasing prices where a cargo owner is ready to pay a larger sum than is envisaged by the Tariff Regulation. Nowadays, so-called “wagon constituent” is included into the structure of the tariff, paid by the operators to OAO RZD. It is a certain tariff discount, because these companies use their own rolling stock for cargo transportation and not the transporter’s. 
Due to all these factors, by mid-2007, the freight wagons park in Russia amounted to 939,000 units, including 321,000 rail cars of private companies (according to the concept of the railway transport reform, by 2010 the share of private wagons is to make 50% of the total volume). The share of rolling stock owners exceeds one third of the freight transportation sector, the meaning and influence of the companies continues to grow in the market. As for domestic and international transportation, the share of operator companies is 26% and 38% respectively. The companies transport 64% of the total oil bulk volume carried by railway, 22% of ferrous metals, 46% of ore, and 47% of mineral fertilisers. According to the information of OAO RZD, the volume of cargo transportation volume in the company’s park has constantly been falling for the last three years. 
It is possible to say that the rolling stock operating business has developed significantly in Russia. Now operators offer not only a wagon to be loaded, but a pack of services that includes routing to the load station, help to plan delivery of private wagons and OAO RZD’s rail cars, dispatcher control for the wagons during transportation, cooperation with port forwarders, faster unloading, etc.
Alexander Eliseev, Chairman of the Board of Directors of OAO Novaya Perevozochnaya Kompaniya, notes, “Objectively, operator companies have some advantages. Firstly, the wagon constituent in the tariff has allowed private companies to invest in rolling stock park Besides, it allows giving clients a discount on the acting Tariff Regulation, or providing them with a better service for the same sum of money.
I would like to emphasise that a client is ready to pay for the additional services provided to him, i.e. there is a real demand for service. And the demand is fulfilled by transport companies, which have advanced technologies. The second advantage is that a consignor does not pay for idling of private wagons on his tracks, as happens if he uses a Russian Railways’ park. Therefore, a lot of our clients, in particular metallurgical enterprises, save large sums of money, million of dollars.”
The First Cargo Company: More Questions Than Answers
In accordance with the structural reform plan, OAO RZD has started to launch daughter companies in certain segments of the railway transportation market, including very profitable ones. OAO Russian Railways gives all the necessary rolling stock to the companies. Thus, on the market there appear operator companies incorporated into an OAO RZD holding company. But they are not transporters. Thus, in 2006 OAO TransContainer, OAO Refservice and OAO Transles were separated off from OAO RZD. The companies specialise in container, ref cargoes, and timber transportation respectively.
Nowadays, significant changes take place in the market because a new daughter company of Russian Railways – OAO The First Cargo Company has been launched. It owns a large park of freight wagons (over 200,000 rail cars). Later it is planned to launch one more such company specialising in freight transportation, owned by OAO RZD. Experts believe that the economic sense of launching such companies is liberalisation of tariffs in part of the wagon constituent, which is now flexible for private rolling stock and fixed for the OAO RZD park. 
Thus, new companies must compete practically on equal terms with operators owned by independent companies.
On the other hand, some operator companies have been working in the market for many years, and have organised a reliable cargo base, routes and logistics schemes. And they have nobody to rely on but themselves. And if the “game” is fair, private operator companies are sure to survive.
On the other hand, it is possible that, looking after the launch of The First Cargo Company, private operators underestimate the role of the two new companies. According to the online poll “Will the competitiveness of private operators change after the launch of OAO First cargo Company?”, held by RZD-Partner.Ru information agency, the answers were as follows: “their competitiveness will fall” – over 36%, “their competitiveness will increase” – about 17%, and “there will be no any significant changes” – 46.5%. I.e., almost 2/3 of the market players have no fear about the future. 
“We have already passed the point of no return. We are going to compete in the profitable cargo transportation sector. And I guarantee that the competition will be fair. It means we plan to purchase a definite amount of rolling stock. Unfortunately, our rolling stock is older than that of private companies. Consequently, our expenses are bigger. So, we need to cut expenses and increase the efficiency of work. It is difficult to say now what our share in the market will be – much depends on the preferences of cargo owners. Many of them have transport companies, so they will never ask us to carry their cargo, even if we work more efficiently. Still, the situation may be changed by launching Cargo Company, competing with private operators as equals”, says Vladimir Yakunin, President of OAO RZD.  At first, OAO RZD will remain a transporter. The larger part of its rolling stock will be given to the Cargo Company, and OAO RZD will rent it from the company. “Why is the scheme so complicated? We know that the acting legislation envisages presence of only one transporter. And we must provide transportation of any cargo when we have received it. Meanwhile, private operator companies can choose destinations and cargoes to transport. Stage-by-stage, the rented rolling stock will be given back to the Cargo Company, which will replace OAO RZD in the liberalised segments of the market. In the long-term prospect, OAO RZD will turn into a holding company, incorporating cargo companies, specialised operators and some other structures”, says V. Yakunin.
Lack of Law Is A Problem
But for the future threat from the cargo companies, independent operators have enough problems today. One of them is private rolling stock repair. Most operators think that repairs made by OAO RZD are expensive, not very good, and unclear (i.e. it is not always understandable, for what a company is to pay from the tariff, and for what from additional means). Moreover, often OAO RZD park is repaired as a top priority, while private wagons have to wait.
That is why some companies have concluded they have to create their own repair base. Vladimir Prokofyev, President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService comments on it, “Why do we do it? Firstly, our own depot is much more profitable from the price-quality ratio standpoint. Secondly, no repair enterprises offered by OAO RZD suits us because of its location. Besides, lately, a lot of operators have faced the problem of planned depot repair unfulfillment, because in 2007 a lot of new wagons turned out to be defective (according to different estimations, repair was required for 7,000-8,000 new wagons), so the depots had too many orders”. Meanwhile, it is no secret that any Russian operator lacks a legislative base for its functioning. The development of the market has left the development of a normative and legislative base, regulating the activities of the market players, far behind. Nowadays, a number of subordinate legislative acts are to be approved to regulate the activities of operators. Adopting the acts is envisaged by the plan of the third stage of the reform, but it has not been realised so far. 
Nadezhda  Vtorushina
viewpoint
Igor Romashov,
Head of the Federal Agency of Railway Transport:
– Nowadays, there are more than 300,000 private wagons. The amount is almost similar to a half of OAO RZD’s park. Naturally, in these conditions, the importance of state regulating bodies – the RF Ministry of Transport and the Federal Agency of Railway Transport etc. – increases. The market participant used to apply to the Ministry of Railways, then – to OAO RZD. But a monopoly is not interested in solving any problems. One must understand that this company cannot be a locomotive of the transport reform, because in that case it will have to create its own competitors and conditions favourable to them. It is nonsense! The reform is to be carried out, and it is carried out, by federal authorities. It is their task. The function of a joint-stock company is business and getting profit.

Vladimir Prokofyev,
President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService:
–  Everyone understands how difficult it is to reach the target of creating an independent (the second) national transporter (I mean a company alternative to OAO RZD holding company). It is clear that it will hardly appear today. But if we had not set such a target, the reform would be completed with the results similar to present-day situation, i.e. keeping OAO RZD a monopoly. That is why state support is required to form such a structure. The state must give rolling stock operators a clear sign that the process of their integration to form a national transporter is a priority for the state, and will be given a support. Unfortunately, the programme of the sector’s further reformation, adopted by the Governmental committee on May 16, 2007, does not touch upon the significance of the project.

Sergey Guschin,
Director General of OAO Transgarant:
– The carried out railway transport reform, during which an operator has to face different problems in the legislative sector, requires a well-developed legislative base. Obtaining the status of “transporters” by operators is not the necessary target to realise. I believe that there will be the both types of companies – operators and transporters.
The lack of the definition of “an operator” is a large problem for our company as well as for other operators. If the problem is solved, the amount of tax and investment questions will fall. There is another problem: our company is in fact a forwarder, i.e. a middleman in the process of wagon provision. But the larger part of the revenue we get from the client is given to pay the tariff, and our company gets for itself just a small part of the money – the wagon constituent.

Konstantin Uvarov,
Director General of ZAO MAXILOG:
– I believe that the launch of the First Cargo Company, a daughter company of OAO RZD, must not radically influence the activities of private operators. Perhaps, the tariffs will increase, but the modern Russian market of freight transportation resembles a stock exchange: someone bulls and someone bears. At the rapid growth of demand and the transportation volume increase, rates and tariffs are reviewed in all the segments of the transport market. There is a stable growth of prices on such a liberal market as road transportation, in which there are many independent players. The competition there is so tough that we can hardly even think about a cartel agreement between transporters.                  
    [~DETAIL_TEXT] => 
Be Independent to Survive
First, let’s see the definitions of the terms. According to normative documents, a railway transporter is a company, owning rolling stock, including locomotives, and obliged to carry the submitted cargo to the station mentioned in the client’s application on the current price list. OAO RZD is the only transporter in Russia. In its turn, an operator company manages its wagon park and purchases locomotive services from OAO RZD. The company has a right to choose clients, destinations, and can set tariffs, i.e. it can act as an independent structure, free from any public obligations.
Analysing the history of operating companies in Russia, it becomes clear that these subjects did not appear in the market as a result of any reforms – it was a spontaneous process, meeting actual demands of the railway transportation market. When the country was overcoming the scaled economic crisis (the mid of the 1990’s), a number of oil-processing and metallurgical enterprises started to enlarge production volume, consequently, there appeared the demand for this or that type of rolling stock. As a result, industrial companies, in particular, exporting their production, had to purchase wagons to provide continuous transportation of their goods.
At that time, to exploit their growing rolling stock parks, large industrial enterprises started to launch daughter companies, owning rolling stock and providing it to transport cargoes. But these companies were not transporters; hence, at first, operators serviced cargoes of their mother companies. 
There used to be another way for operator companies to emerge: a forwarder bought rolling stock and offered it for goods transportation. Even at that time it was clear that creation of operator companies had a positive impact on the railway transport. Without taking the prospect of competition transport services markets creation, obviously, the process was to help OAO RZD (the Ministry of Railways at that time) to enlarge the wagon park, especially the critical types of rolling stock.
Local Monopolists
While the market was developing as well as large operator companies, the amount of private rolling stock and of the cargo carried in it was rapidly increasing. From a commercial standpoint, operator companies leave behind OAO RZD, taking the revenues from providing rolling stock for the most profitable transportation. In the words of Director General of the Centre of Transport Services of OAO RZD Vyacheslav Petrenko, the first results of the reform, caused by the development of operator companies, showed that operators developed their activities in the highly profitable segments of the transport market in technologically isolated areas. So, “the existing operators are becoming local monopolists in the chosen segments of the transport market”.
Meanwhile, it is very important that formation of prices for operators’ services is quite flexible. Not only do operators work on the profitable directions, they can vary tariffs and discounts, attracting a cargo owner there, where they have a surplus of rolling stock, and increasing prices where a cargo owner is ready to pay a larger sum than is envisaged by the Tariff Regulation. Nowadays, so-called “wagon constituent” is included into the structure of the tariff, paid by the operators to OAO RZD. It is a certain tariff discount, because these companies use their own rolling stock for cargo transportation and not the transporter’s. 
Due to all these factors, by mid-2007, the freight wagons park in Russia amounted to 939,000 units, including 321,000 rail cars of private companies (according to the concept of the railway transport reform, by 2010 the share of private wagons is to make 50% of the total volume). The share of rolling stock owners exceeds one third of the freight transportation sector, the meaning and influence of the companies continues to grow in the market. As for domestic and international transportation, the share of operator companies is 26% and 38% respectively. The companies transport 64% of the total oil bulk volume carried by railway, 22% of ferrous metals, 46% of ore, and 47% of mineral fertilisers. According to the information of OAO RZD, the volume of cargo transportation volume in the company’s park has constantly been falling for the last three years. 
It is possible to say that the rolling stock operating business has developed significantly in Russia. Now operators offer not only a wagon to be loaded, but a pack of services that includes routing to the load station, help to plan delivery of private wagons and OAO RZD’s rail cars, dispatcher control for the wagons during transportation, cooperation with port forwarders, faster unloading, etc.
Alexander Eliseev, Chairman of the Board of Directors of OAO Novaya Perevozochnaya Kompaniya, notes, “Objectively, operator companies have some advantages. Firstly, the wagon constituent in the tariff has allowed private companies to invest in rolling stock park Besides, it allows giving clients a discount on the acting Tariff Regulation, or providing them with a better service for the same sum of money.
I would like to emphasise that a client is ready to pay for the additional services provided to him, i.e. there is a real demand for service. And the demand is fulfilled by transport companies, which have advanced technologies. The second advantage is that a consignor does not pay for idling of private wagons on his tracks, as happens if he uses a Russian Railways’ park. Therefore, a lot of our clients, in particular metallurgical enterprises, save large sums of money, million of dollars.”
The First Cargo Company: More Questions Than Answers
In accordance with the structural reform plan, OAO RZD has started to launch daughter companies in certain segments of the railway transportation market, including very profitable ones. OAO Russian Railways gives all the necessary rolling stock to the companies. Thus, on the market there appear operator companies incorporated into an OAO RZD holding company. But they are not transporters. Thus, in 2006 OAO TransContainer, OAO Refservice and OAO Transles were separated off from OAO RZD. The companies specialise in container, ref cargoes, and timber transportation respectively.
Nowadays, significant changes take place in the market because a new daughter company of Russian Railways – OAO The First Cargo Company has been launched. It owns a large park of freight wagons (over 200,000 rail cars). Later it is planned to launch one more such company specialising in freight transportation, owned by OAO RZD. Experts believe that the economic sense of launching such companies is liberalisation of tariffs in part of the wagon constituent, which is now flexible for private rolling stock and fixed for the OAO RZD park. 
Thus, new companies must compete practically on equal terms with operators owned by independent companies.
On the other hand, some operator companies have been working in the market for many years, and have organised a reliable cargo base, routes and logistics schemes. And they have nobody to rely on but themselves. And if the “game” is fair, private operator companies are sure to survive.
On the other hand, it is possible that, looking after the launch of The First Cargo Company, private operators underestimate the role of the two new companies. According to the online poll “Will the competitiveness of private operators change after the launch of OAO First cargo Company?”, held by RZD-Partner.Ru information agency, the answers were as follows: “their competitiveness will fall” – over 36%, “their competitiveness will increase” – about 17%, and “there will be no any significant changes” – 46.5%. I.e., almost 2/3 of the market players have no fear about the future. 
“We have already passed the point of no return. We are going to compete in the profitable cargo transportation sector. And I guarantee that the competition will be fair. It means we plan to purchase a definite amount of rolling stock. Unfortunately, our rolling stock is older than that of private companies. Consequently, our expenses are bigger. So, we need to cut expenses and increase the efficiency of work. It is difficult to say now what our share in the market will be – much depends on the preferences of cargo owners. Many of them have transport companies, so they will never ask us to carry their cargo, even if we work more efficiently. Still, the situation may be changed by launching Cargo Company, competing with private operators as equals”, says Vladimir Yakunin, President of OAO RZD.  At first, OAO RZD will remain a transporter. The larger part of its rolling stock will be given to the Cargo Company, and OAO RZD will rent it from the company. “Why is the scheme so complicated? We know that the acting legislation envisages presence of only one transporter. And we must provide transportation of any cargo when we have received it. Meanwhile, private operator companies can choose destinations and cargoes to transport. Stage-by-stage, the rented rolling stock will be given back to the Cargo Company, which will replace OAO RZD in the liberalised segments of the market. In the long-term prospect, OAO RZD will turn into a holding company, incorporating cargo companies, specialised operators and some other structures”, says V. Yakunin.
Lack of Law Is A Problem
But for the future threat from the cargo companies, independent operators have enough problems today. One of them is private rolling stock repair. Most operators think that repairs made by OAO RZD are expensive, not very good, and unclear (i.e. it is not always understandable, for what a company is to pay from the tariff, and for what from additional means). Moreover, often OAO RZD park is repaired as a top priority, while private wagons have to wait.
That is why some companies have concluded they have to create their own repair base. Vladimir Prokofyev, President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService comments on it, “Why do we do it? Firstly, our own depot is much more profitable from the price-quality ratio standpoint. Secondly, no repair enterprises offered by OAO RZD suits us because of its location. Besides, lately, a lot of operators have faced the problem of planned depot repair unfulfillment, because in 2007 a lot of new wagons turned out to be defective (according to different estimations, repair was required for 7,000-8,000 new wagons), so the depots had too many orders”. Meanwhile, it is no secret that any Russian operator lacks a legislative base for its functioning. The development of the market has left the development of a normative and legislative base, regulating the activities of the market players, far behind. Nowadays, a number of subordinate legislative acts are to be approved to regulate the activities of operators. Adopting the acts is envisaged by the plan of the third stage of the reform, but it has not been realised so far. 
Nadezhda  Vtorushina
viewpoint
Igor Romashov,
Head of the Federal Agency of Railway Transport:
– Nowadays, there are more than 300,000 private wagons. The amount is almost similar to a half of OAO RZD’s park. Naturally, in these conditions, the importance of state regulating bodies – the RF Ministry of Transport and the Federal Agency of Railway Transport etc. – increases. The market participant used to apply to the Ministry of Railways, then – to OAO RZD. But a monopoly is not interested in solving any problems. One must understand that this company cannot be a locomotive of the transport reform, because in that case it will have to create its own competitors and conditions favourable to them. It is nonsense! The reform is to be carried out, and it is carried out, by federal authorities. It is their task. The function of a joint-stock company is business and getting profit.

Vladimir Prokofyev,
President of the Association of Transporters and Rolling Stock Operators of Russia, CEO of OOO BaltTransService:
–  Everyone understands how difficult it is to reach the target of creating an independent (the second) national transporter (I mean a company alternative to OAO RZD holding company). It is clear that it will hardly appear today. But if we had not set such a target, the reform would be completed with the results similar to present-day situation, i.e. keeping OAO RZD a monopoly. That is why state support is required to form such a structure. The state must give rolling stock operators a clear sign that the process of their integration to form a national transporter is a priority for the state, and will be given a support. Unfortunately, the programme of the sector’s further reformation, adopted by the Governmental committee on May 16, 2007, does not touch upon the significance of the project.

Sergey Guschin,
Director General of OAO Transgarant:
– The carried out railway transport reform, during which an operator has to face different problems in the legislative sector, requires a well-developed legislative base. Obtaining the status of “transporters” by operators is not the necessary target to realise. I believe that there will be the both types of companies – operators and transporters.
The lack of the definition of “an operator” is a large problem for our company as well as for other operators. If the problem is solved, the amount of tax and investment questions will fall. There is another problem: our company is in fact a forwarder, i.e. a middleman in the process of wagon provision. But the larger part of the revenue we get from the client is given to pay the tariff, and our company gets for itself just a small part of the money – the wagon constituent.

Konstantin Uvarov,
Director General of ZAO MAXILOG:
– I believe that the launch of the First Cargo Company, a daughter company of OAO RZD, must not radically influence the activities of private operators. Perhaps, the tariffs will increase, but the modern Russian market of freight transportation resembles a stock exchange: someone bulls and someone bears. At the rapid growth of demand and the transportation volume increase, rates and tariffs are reviewed in all the segments of the transport market. There is a stable growth of prices on such a liberal market as road transportation, in which there are many independent players. The competition there is so tough that we can hardly even think about a cartel agreement between transporters.                  
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In Accordance With The Reform
– Mr Mikhailov, could you tell us about the organisational issues of the company’s new department?
– The targets of our department are clear from its name. It is quite understandable what the tariffs on railway transportation are. “Marketing” here is the set of issues aimed at getting profit by the company. In this sense, I am a business-oriented manager just like my colleagues in any other company operating in the market. The basis of the department is the specialists of the tariff section of the Centre of Railway Services of OAO RZD and some specialists from the economic section of OAO RZD.
– Working for the Ministry of Economic Development and Trade, you specialised in railway tariffs and offered a number of original solutions for many aspects of the problem. Have you changed your views after you started to work for OAO RZD?
– I was a representative of the RF Ministry of Economic Development and Trade to the Board of the Federal Tariff Service. After I changed my place of work, I did not change my views, although it is quite clear that some aspects may change or be corrected because my functions and targets have become different now. However, when we examine the basic principles of the tariff policy, we must understand that it is just a consequence of one of the directions of the reformation ideology, carried out by the state today. Respectively, we must regulate tariffs concerning the total system of principles, targets and events which form part of the reform of railway transport. What are these targets and aims? I would like to remind you that they are fulfilling the economic requirements in cargo transportation, increasing the efficiency of railways and making railway transport more stable and safe. It is well known that the two main efficient instruments to reach the targets are competition in the transport sector and investment in infrastructure, rolling stock and logistics innovations. Respectively, speaking of the tariff policy, I would like to mention two basic principles, in the framework of which the department will carry out a definite ideology. The first of them is that the content of the tariff policy in the conditions of the third stage of the structural reform realisation must be aimed at reaching the common targets. And the second is that the mechanisms of tariff policy realisation must conform with the instruments of reform.
– Can you give an example of the instruments applied to the tariffs?
– For example, modernisation of the current Tariff Regulation № 10-01 or any other normative document must be targeted at development of competition between railways and the other transport modes, as well as at development of the competition between OAO RZD as a transporter and wagon owner with other transporters and wagon owners. Besides, the regular policy of the state treating OAO RZD as a subject of regulation must conform with the tasks set for OAO RZD as an object of the reform or a source for infrastructure project financing. It means the opportunity of taking independent and adequate decisions by the subjects of the market (including the dominating ones) on the investments and on the formation of their resources.
Thus, speaking of such an economic institution as competition, to us it means provision of equal price terms, access to infrastructure for transporters or train operators and making existence of equal technological and normative conditions compulsory. This must be the theme, which is undoubted on the one hand, but on the other hand there are often debates about what technological conditions may be considered single ones.
I am absolutely sure that the level of tariff loading or, on the contrary, tariff preferences must conform to the level of either technological loading or the technological charges and obligations.
In my opinion, the situation in which there were similar tariff terms for a company providing transportation (transporters, train or rolling stock operator, etc.) only where it wants – and for OAO RZD that is to carry cargo everywhere where there are railways – is impossible. Either OAO RZD should have opportunity to choose the terms to work on, or the tariffs on transportation, as well as on access to infrastructure, should take the difference into account.
Fair Competition And Clear Tariff Formation Are Required
– What is your opinion on creation of competitive conditions for freight transportation in public and private parks?
– There have been a lot of debates on the issue. There are enormous segments of the transportation market where the park of OAO RZD is not dominating. There are colossal markets in which there is a real competition for directions and volumes of cargo. A bright example is ferrous metals. Everyone understands that OAO RZD is not a competitor to rolling stock operators. The current level of tariffs, in fact, defends private wagons owners from competition with OAO RZD. From this standpoint, the launch of the First Cargo Company is a response to the pursuit in some definite circles to preserve the situation. But when a part of the inventory park is taken to the market, our position is a principal one. Speaking of freight transportation in the wagons of The First Cargo Company and other rolling stock owners, OAO RZD will place similar tariff and technological requirements on them. The launch of The First Cargo Company is the first step to OAO RZD’s access to the competitive segments of the transportation market, where the market mechanisms of demand and supply are already acting. I hope that after the launch of The First Cargo Company, the tariff set for OAO RZD will stop being an indicator of the efficiency of transportation in private rolling stock on a definite logistic scheme for the most cargo.
– Do you consider fair competition between railways and other transport modes possible?
– There is a similar situation here. We have huge goods segments, where railway transport is not a dominating one in cargo transportation. If the state keeps regulation in the sector (while no other transport mode is regulated), we will hardly be able to form a service required by the market in terms of the price level set for us. Consequently, there is another aspect of the situation: the market does not need the service provided at the regulated price, perhaps it requires a more expensive and a more technological one. A good example is transportation of oversized or packaged cargoes by road hauliers. It is more expensive than transportation by railway, but the level of service is much higher. Who needs preservation of unpopular services? Perhaps the competitors or those who are eager to become an intermediate link between OAO RZD and a cargo owner, do – offering the latter a service of the necessary quality. 
– The infrastructure tariff remains regulated. What should the state policy be in the segment?
– When a tariff is the source of investments, naturally, we must get the revenue covering the expenses defined for us by the state. In other words, the revenue from transportation must be large enough to renew infrastructure, build new railways, make transportation safer, increase speed of transportation, purchase rolling stock, etc. We have plans and programmes approved by the executive federal bodies, envisaging the investment volume and direction to be fulfilled from the revenue from tariffs. Respectively, the proportion of the revenue invested in railway infrastructure, must be reflected in the infrastructure constituent of the tariffs on transportation; and the proportion to be invested in the wagons park – in the wagon constituent. If the state decides that the financing resources are the budget, the investment fund, the pension fund or something else, the situation will be different. 
Game With No Rules
– In Russia, industrial enterprises constantly increase prices for their production without taking care about creation of new capacities. Do you think that the launch of the First Cargo Company, and later the Second Cargo Company, will be a good investment instrument to renew rolling stock?
– There are two aspects to the issue. The first one is putting into operation those types of rolling stock which are more efficient for railways. However, they are often more expensive. If there are no price preferences or special conditions, wagon and locomotive producers will hardly be able to sell their products because the rolling stock is not in demand. For example, a wagon bogie with a smaller track-damaging effect is profitable for OAO RZD as a company that maintains railway infrastructure. But the lack of tariff conditions evaluating the reduction of the damage of the track prevents this feature from being developed by wagon builders. The second aspect is the economic conditions for investment into rolling stock. Cargo companies of OAO RZD will be free to invest in economically efficient projects. So, the cargo companies will have the same impact on park renewal as all other rolling stock operators – ordering the most efficient and popular rolling stock from wagon builders.
I would also like to speak of the technology of transportation. Naturally, we have an average net cost, meanwhile we understand that transportation along direct exit routes is more profitable for OAO RZD and cheaper from the expense standpoint. Transportation on the freight schedule is also more profitable for the company. Development of logistics and technologies to make transportation cheaper should also be stimulated by applying different approaches to applying tariffs on transportation. In other words, the principles of the tariff policy at the third stage of the reform must be formulated in accordance with these approaches. I mean different principles of tariff formation for different levels of participants in the transportation process: transporters, train operators, rolling stock operators, and cargo owners. And records of the necessary investment volume should be kept in accordance with the Programme of Structural Reform and the Strategy of Railway Transport Development. There must be an opportunity to set flexible tariffs on freight transportation by railway. It is very important because, and I repeat, OAO RZD is not always a monopoly and not in all sectors, besides, it is not always a natural monopoly. That is why we speak about such principles as a differentiated approach to price formation if a more efficient rolling stock is used; limitation of state regulation in terms of a real monopolistic sector; setting differentiated tariffs for different participants in the transportation process; comprehensive system of freight transportation market segmentation, etc.
– The segmentation of the competition transportation markets you have mentioned, has been discussed for about five years already. VNIIZHT (Russian Research Institute of Railway Transport) developed different methods and presented them to the Federal Energy Committee of Russia (a predecessor of the Federal Tariff Service), but…
– …The situation has never changed. Meanwhile, it is a key issue. There may be a lot of debates about the influence, the share, the dominating position of OAO RZD or the whole idea of railway transport on the market. But, until the regulator gives us a comprehensive system of requirements, coordinates, estimations and principles, to help us understand whether the market is competitive, dominating or monopolistic, there will be a game without rules. In other words, we have already got the cards, and the game is going on, but there are no rules. It is disorienting for us because it influences our solutions about investing or not investing in the rolling stock. Meanwhile, an unalterable principle must be carried out in practice: tariffs on freight transportation by railway, apart from where there are the characteristics of a natural monopoly, must be formed on the basis of market mechanisms only. As a rule, these can be contractual tariffs between a transporter and a cargo owner, whose parameters may be changed due to different factors. The most important of them is the factor of the paying capacity of cargoes, described in detail by Sergey Vitte, but formulated even earlier. Earl S. Vitte seems to have created the only such global treatise about the ideology and economics of railway transportation.
Personally I found in the book ‘Principles of Railway Tariffs on Freight Transportation’ some definite answers to the questions that appeared during the discussions about tariff formation which took place in Russia lately. And the book was published in 1883 and re-published with some additional information in 1884. Perhaps, few people have read the book by S. Vitte in Russia – and that is the problem.
There Are Business Offers
– What ideas are you going to offer the regulator in 2008?
– I have already mentioned a pack of measures to deregulate prices in competition sectors. Also, we plan to continue unification of tariffs on freight transportation, but for transit. We believe that in March or April we will agree whether the unification will be smooth, or whether it is better to complete it at the end of 2008. Another important issue is unification of tariffs on empty wagon transportation. Today, there are different rates on transportation of empty wagons that have carried different cargoes. It is not normal and we have made some estimations, which are now being discussed with rolling stock operators. According to our research, the decision will not impact the final consumer but it will slightly change the profitability of a private wagon so, for some companies, the situation will improve and for others it will become slightly worse. We hope that the regulator will take our arguments into account. The next thing is a normative base for setting individual, local, and long-term privileged tariffs. We consider that, even in the framework of the current Tariff Regulation, there must be much more flexibility. It is clear that for us long-term tariffs mean normal planning and some hedge of the bets. Individual tariffs allow us to conclude mutually beneficial contracts with those enterprises, whose terms of dealing with OAO RZD differ from the average market ones. Final tariffs may exceed or be smaller than the basic ones. Later on, the acting privileged tariffs are to be transferred into the basic ones or abolished. Why should we keep the situation where a lot of rates are privileged for many years?
A decision must be made to simplify the process and develop the strategy. Besides, we would like the limitation levels of tariffs on freight transportation set in those sectors where OAO RZD is not dominating. i.e. if there is no opportunity to liberalise the tariff, a regulator can set the minimal/ maximum tariffs. Also, we will make suggestions about container cargo and box cars, i.e. we will ask the regulator for the opportunity to install more flexible tariff-setting in sectors where there is serious competition between the railway and road hauliers. Another target for 2008 is leveling the terms of freight transportation of cargo in containers and carload shipments. We used to develop and stimulate container transportation for a long time but it turned out that transportation of, let’s say, coal in containers is cheaper than in gondola cars. This can hardly be considered correct. I would like to note that any of our offers concerning the increase of tariffs on containerised cargo will be accompanied by suggestions about development of the terminal aspect of transportation. It is underdeveloped terminal services and their too high cost that influences the level of tariffs on transportation. These are only some of the issues we are going to initiate in 2008.
– You have mentioned unification of tariffs on empty wagon transportation. When Tariff Regulation №10-01 was created, tariff differentiation was put into operation according to the type of cargo to reach the total balance. Is it possible that the cost of transportation will increase significantly for cargoes, for which empty backhaul amounts to 50%?
– Everything depends on the principles and philosophy of unification. Nowadays, 85% of empty wagons return after transportation of the 1st class cargoes. As a rule, wagons that carried the 2nd and the 3rd class cargoes do not return empty. Everyone knows that after carrying, for example, a 2nd class cargo to the Far East, a gondola car is loaded with a container or coal, then transports it to some place, perhaps 100 km away from the port, gets unloaded there, and after that the empty wagon runs 4,000 km and the tariff for the distance is similar to the one on the 1st class cargo. All of us know it pretty well. The parameters we offer are based on taking the 1st class for the initial tariff level, and making tariffs on 2nd and 3rd class-loaded wagons slightly different for private rolling stock owners. Still, this problem has yet to be discussed because it is not a simple one. We have started to consult with the largest wagon owners. On the one hand, we understand that the created business structure must not be broken and we are to be a predictable partner. On the other hand, the situation must be improved because it only becomes worse every time the tariffs are regulated. Perhaps, in our discussions with businesses and the regulator, we will agree that all the changes must have a multi-stage character. Still, we must understand that such a problem exists, instead of pretending it’s not there. 
Russian Railways Are Ready To Work With Investors
– Recently the Tariff Policy of the CIS for 2008 was approved. Have you got any ideas about transit rates?
– It is a good question. Firstly, we should position our services in the sector clearly enough, and define in which segments of transit transportation we are competitive and in which we are not. In other words, we should define our target group and form services for it. Secondly, we should analyse the volumes we have ‘lost’ for the last five years, because of our own inactivity. Then we will offer our partners, first of all large companies and associations, the opportunity to recommence transit via Russian Federation territory and form coordinated terms of cooperation. We hope that the Ministry of Transport will examine our offers and will give OAO RZD the right to set transit tariffs. I should say, it is a normal practice for many of our neighbours. 
– Today a lot of cargo owners fear that because of the launch of the First Cargo Company, the tariffs on low-profit cargoes, for example coal, in private wagons will increase significantly.
– I think that the top management of the First Cargo Company would give a better answer to those fears than me. I would like to ask everyone to treat the issue from the standpoint of simple economic logic. If there is a demand, the wagon constituent of a tariff can really increase.
If the demand in some sectors is stimulated by the state (for example, coal extraction and its long-distance transportation), the authorities must make a decision suitable for all the market participants. We cannot constantly include all the expenses in the regulated tariff and index it once or twice a year. The railway transport reform, being carried out by the Russian government, is aimed at giving up this hang-the-expense approach. The only option is to liberalise or increase the base of work according to market- deregulated tariffs. What is the problem of the hang-the-expense approach? All the decisions made by the Federal Tariff Service to increase the investment attractiveness of a private wagon by enlarging its wagon constituent made the metallurgists and wagon builders increase prices for their production, which reduced that very attractiveness. Attempts to cheat the market and the economy are useless. The only way out of the situation is to increase the offer or reduce the current aggregate demand for rolling stock.
But the offer may increase only by putting into operation the market mechanisms envisaging price liberalisation and competition development. If there were other methods, we would have already used them. So having decided to speak of market laws and observing them, let’s do it!  
Andrey  Guryev
biografiy
Evgeny Mikhailov Born on October 19, 1973 in Daugavpils (Latvia). In 1997 graduated form the State Academy of Oil and Gas. 
In 1996-1999 worked for ZAO Group of Companies Regent. In 1999-2002 worked for Kazakhstan Temir Zholy. 
In 2003-2007 Deputy Head of Natural Monopolies Restructure Department of the RF Ministry of Economic Development and Trade, Deputy Director of State Tariff Regulation and Infrastructure Reforms, and Evgeny Mikhailov hold the post of Deputy Director of the department until September 2007. 
Since September 2007 has been working for OAO RZD as the Head of Freight Transportation Marketing and Tariff Policy Department. 
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In Accordance With The Reform
– Mr Mikhailov, could you tell us about the organisational issues of the company’s new department?
– The targets of our department are clear from its name. It is quite understandable what the tariffs on railway transportation are. “Marketing” here is the set of issues aimed at getting profit by the company. In this sense, I am a business-oriented manager just like my colleagues in any other company operating in the market. The basis of the department is the specialists of the tariff section of the Centre of Railway Services of OAO RZD and some specialists from the economic section of OAO RZD.
– Working for the Ministry of Economic Development and Trade, you specialised in railway tariffs and offered a number of original solutions for many aspects of the problem. Have you changed your views after you started to work for OAO RZD?
– I was a representative of the RF Ministry of Economic Development and Trade to the Board of the Federal Tariff Service. After I changed my place of work, I did not change my views, although it is quite clear that some aspects may change or be corrected because my functions and targets have become different now. However, when we examine the basic principles of the tariff policy, we must understand that it is just a consequence of one of the directions of the reformation ideology, carried out by the state today. Respectively, we must regulate tariffs concerning the total system of principles, targets and events which form part of the reform of railway transport. What are these targets and aims? I would like to remind you that they are fulfilling the economic requirements in cargo transportation, increasing the efficiency of railways and making railway transport more stable and safe. It is well known that the two main efficient instruments to reach the targets are competition in the transport sector and investment in infrastructure, rolling stock and logistics innovations. Respectively, speaking of the tariff policy, I would like to mention two basic principles, in the framework of which the department will carry out a definite ideology. The first of them is that the content of the tariff policy in the conditions of the third stage of the structural reform realisation must be aimed at reaching the common targets. And the second is that the mechanisms of tariff policy realisation must conform with the instruments of reform.
– Can you give an example of the instruments applied to the tariffs?
– For example, modernisation of the current Tariff Regulation № 10-01 or any other normative document must be targeted at development of competition between railways and the other transport modes, as well as at development of the competition between OAO RZD as a transporter and wagon owner with other transporters and wagon owners. Besides, the regular policy of the state treating OAO RZD as a subject of regulation must conform with the tasks set for OAO RZD as an object of the reform or a source for infrastructure project financing. It means the opportunity of taking independent and adequate decisions by the subjects of the market (including the dominating ones) on the investments and on the formation of their resources.
Thus, speaking of such an economic institution as competition, to us it means provision of equal price terms, access to infrastructure for transporters or train operators and making existence of equal technological and normative conditions compulsory. This must be the theme, which is undoubted on the one hand, but on the other hand there are often debates about what technological conditions may be considered single ones.
I am absolutely sure that the level of tariff loading or, on the contrary, tariff preferences must conform to the level of either technological loading or the technological charges and obligations.
In my opinion, the situation in which there were similar tariff terms for a company providing transportation (transporters, train or rolling stock operator, etc.) only where it wants – and for OAO RZD that is to carry cargo everywhere where there are railways – is impossible. Either OAO RZD should have opportunity to choose the terms to work on, or the tariffs on transportation, as well as on access to infrastructure, should take the difference into account.
Fair Competition And Clear Tariff Formation Are Required
– What is your opinion on creation of competitive conditions for freight transportation in public and private parks?
– There have been a lot of debates on the issue. There are enormous segments of the transportation market where the park of OAO RZD is not dominating. There are colossal markets in which there is a real competition for directions and volumes of cargo. A bright example is ferrous metals. Everyone understands that OAO RZD is not a competitor to rolling stock operators. The current level of tariffs, in fact, defends private wagons owners from competition with OAO RZD. From this standpoint, the launch of the First Cargo Company is a response to the pursuit in some definite circles to preserve the situation. But when a part of the inventory park is taken to the market, our position is a principal one. Speaking of freight transportation in the wagons of The First Cargo Company and other rolling stock owners, OAO RZD will place similar tariff and technological requirements on them. The launch of The First Cargo Company is the first step to OAO RZD’s access to the competitive segments of the transportation market, where the market mechanisms of demand and supply are already acting. I hope that after the launch of The First Cargo Company, the tariff set for OAO RZD will stop being an indicator of the efficiency of transportation in private rolling stock on a definite logistic scheme for the most cargo.
– Do you consider fair competition between railways and other transport modes possible?
– There is a similar situation here. We have huge goods segments, where railway transport is not a dominating one in cargo transportation. If the state keeps regulation in the sector (while no other transport mode is regulated), we will hardly be able to form a service required by the market in terms of the price level set for us. Consequently, there is another aspect of the situation: the market does not need the service provided at the regulated price, perhaps it requires a more expensive and a more technological one. A good example is transportation of oversized or packaged cargoes by road hauliers. It is more expensive than transportation by railway, but the level of service is much higher. Who needs preservation of unpopular services? Perhaps the competitors or those who are eager to become an intermediate link between OAO RZD and a cargo owner, do – offering the latter a service of the necessary quality. 
– The infrastructure tariff remains regulated. What should the state policy be in the segment?
– When a tariff is the source of investments, naturally, we must get the revenue covering the expenses defined for us by the state. In other words, the revenue from transportation must be large enough to renew infrastructure, build new railways, make transportation safer, increase speed of transportation, purchase rolling stock, etc. We have plans and programmes approved by the executive federal bodies, envisaging the investment volume and direction to be fulfilled from the revenue from tariffs. Respectively, the proportion of the revenue invested in railway infrastructure, must be reflected in the infrastructure constituent of the tariffs on transportation; and the proportion to be invested in the wagons park – in the wagon constituent. If the state decides that the financing resources are the budget, the investment fund, the pension fund or something else, the situation will be different. 
Game With No Rules
– In Russia, industrial enterprises constantly increase prices for their production without taking care about creation of new capacities. Do you think that the launch of the First Cargo Company, and later the Second Cargo Company, will be a good investment instrument to renew rolling stock?
– There are two aspects to the issue. The first one is putting into operation those types of rolling stock which are more efficient for railways. However, they are often more expensive. If there are no price preferences or special conditions, wagon and locomotive producers will hardly be able to sell their products because the rolling stock is not in demand. For example, a wagon bogie with a smaller track-damaging effect is profitable for OAO RZD as a company that maintains railway infrastructure. But the lack of tariff conditions evaluating the reduction of the damage of the track prevents this feature from being developed by wagon builders. The second aspect is the economic conditions for investment into rolling stock. Cargo companies of OAO RZD will be free to invest in economically efficient projects. So, the cargo companies will have the same impact on park renewal as all other rolling stock operators – ordering the most efficient and popular rolling stock from wagon builders.
I would also like to speak of the technology of transportation. Naturally, we have an average net cost, meanwhile we understand that transportation along direct exit routes is more profitable for OAO RZD and cheaper from the expense standpoint. Transportation on the freight schedule is also more profitable for the company. Development of logistics and technologies to make transportation cheaper should also be stimulated by applying different approaches to applying tariffs on transportation. In other words, the principles of the tariff policy at the third stage of the reform must be formulated in accordance with these approaches. I mean different principles of tariff formation for different levels of participants in the transportation process: transporters, train operators, rolling stock operators, and cargo owners. And records of the necessary investment volume should be kept in accordance with the Programme of Structural Reform and the Strategy of Railway Transport Development. There must be an opportunity to set flexible tariffs on freight transportation by railway. It is very important because, and I repeat, OAO RZD is not always a monopoly and not in all sectors, besides, it is not always a natural monopoly. That is why we speak about such principles as a differentiated approach to price formation if a more efficient rolling stock is used; limitation of state regulation in terms of a real monopolistic sector; setting differentiated tariffs for different participants in the transportation process; comprehensive system of freight transportation market segmentation, etc.
– The segmentation of the competition transportation markets you have mentioned, has been discussed for about five years already. VNIIZHT (Russian Research Institute of Railway Transport) developed different methods and presented them to the Federal Energy Committee of Russia (a predecessor of the Federal Tariff Service), but…
– …The situation has never changed. Meanwhile, it is a key issue. There may be a lot of debates about the influence, the share, the dominating position of OAO RZD or the whole idea of railway transport on the market. But, until the regulator gives us a comprehensive system of requirements, coordinates, estimations and principles, to help us understand whether the market is competitive, dominating or monopolistic, there will be a game without rules. In other words, we have already got the cards, and the game is going on, but there are no rules. It is disorienting for us because it influences our solutions about investing or not investing in the rolling stock. Meanwhile, an unalterable principle must be carried out in practice: tariffs on freight transportation by railway, apart from where there are the characteristics of a natural monopoly, must be formed on the basis of market mechanisms only. As a rule, these can be contractual tariffs between a transporter and a cargo owner, whose parameters may be changed due to different factors. The most important of them is the factor of the paying capacity of cargoes, described in detail by Sergey Vitte, but formulated even earlier. Earl S. Vitte seems to have created the only such global treatise about the ideology and economics of railway transportation.
Personally I found in the book ‘Principles of Railway Tariffs on Freight Transportation’ some definite answers to the questions that appeared during the discussions about tariff formation which took place in Russia lately. And the book was published in 1883 and re-published with some additional information in 1884. Perhaps, few people have read the book by S. Vitte in Russia – and that is the problem.
There Are Business Offers
– What ideas are you going to offer the regulator in 2008?
– I have already mentioned a pack of measures to deregulate prices in competition sectors. Also, we plan to continue unification of tariffs on freight transportation, but for transit. We believe that in March or April we will agree whether the unification will be smooth, or whether it is better to complete it at the end of 2008. Another important issue is unification of tariffs on empty wagon transportation. Today, there are different rates on transportation of empty wagons that have carried different cargoes. It is not normal and we have made some estimations, which are now being discussed with rolling stock operators. According to our research, the decision will not impact the final consumer but it will slightly change the profitability of a private wagon so, for some companies, the situation will improve and for others it will become slightly worse. We hope that the regulator will take our arguments into account. The next thing is a normative base for setting individual, local, and long-term privileged tariffs. We consider that, even in the framework of the current Tariff Regulation, there must be much more flexibility. It is clear that for us long-term tariffs mean normal planning and some hedge of the bets. Individual tariffs allow us to conclude mutually beneficial contracts with those enterprises, whose terms of dealing with OAO RZD differ from the average market ones. Final tariffs may exceed or be smaller than the basic ones. Later on, the acting privileged tariffs are to be transferred into the basic ones or abolished. Why should we keep the situation where a lot of rates are privileged for many years?
A decision must be made to simplify the process and develop the strategy. Besides, we would like the limitation levels of tariffs on freight transportation set in those sectors where OAO RZD is not dominating. i.e. if there is no opportunity to liberalise the tariff, a regulator can set the minimal/ maximum tariffs. Also, we will make suggestions about container cargo and box cars, i.e. we will ask the regulator for the opportunity to install more flexible tariff-setting in sectors where there is serious competition between the railway and road hauliers. Another target for 2008 is leveling the terms of freight transportation of cargo in containers and carload shipments. We used to develop and stimulate container transportation for a long time but it turned out that transportation of, let’s say, coal in containers is cheaper than in gondola cars. This can hardly be considered correct. I would like to note that any of our offers concerning the increase of tariffs on containerised cargo will be accompanied by suggestions about development of the terminal aspect of transportation. It is underdeveloped terminal services and their too high cost that influences the level of tariffs on transportation. These are only some of the issues we are going to initiate in 2008.
– You have mentioned unification of tariffs on empty wagon transportation. When Tariff Regulation №10-01 was created, tariff differentiation was put into operation according to the type of cargo to reach the total balance. Is it possible that the cost of transportation will increase significantly for cargoes, for which empty backhaul amounts to 50%?
– Everything depends on the principles and philosophy of unification. Nowadays, 85% of empty wagons return after transportation of the 1st class cargoes. As a rule, wagons that carried the 2nd and the 3rd class cargoes do not return empty. Everyone knows that after carrying, for example, a 2nd class cargo to the Far East, a gondola car is loaded with a container or coal, then transports it to some place, perhaps 100 km away from the port, gets unloaded there, and after that the empty wagon runs 4,000 km and the tariff for the distance is similar to the one on the 1st class cargo. All of us know it pretty well. The parameters we offer are based on taking the 1st class for the initial tariff level, and making tariffs on 2nd and 3rd class-loaded wagons slightly different for private rolling stock owners. Still, this problem has yet to be discussed because it is not a simple one. We have started to consult with the largest wagon owners. On the one hand, we understand that the created business structure must not be broken and we are to be a predictable partner. On the other hand, the situation must be improved because it only becomes worse every time the tariffs are regulated. Perhaps, in our discussions with businesses and the regulator, we will agree that all the changes must have a multi-stage character. Still, we must understand that such a problem exists, instead of pretending it’s not there. 
Russian Railways Are Ready To Work With Investors
– Recently the Tariff Policy of the CIS for 2008 was approved. Have you got any ideas about transit rates?
– It is a good question. Firstly, we should position our services in the sector clearly enough, and define in which segments of transit transportation we are competitive and in which we are not. In other words, we should define our target group and form services for it. Secondly, we should analyse the volumes we have ‘lost’ for the last five years, because of our own inactivity. Then we will offer our partners, first of all large companies and associations, the opportunity to recommence transit via Russian Federation territory and form coordinated terms of cooperation. We hope that the Ministry of Transport will examine our offers and will give OAO RZD the right to set transit tariffs. I should say, it is a normal practice for many of our neighbours. 
– Today a lot of cargo owners fear that because of the launch of the First Cargo Company, the tariffs on low-profit cargoes, for example coal, in private wagons will increase significantly.
– I think that the top management of the First Cargo Company would give a better answer to those fears than me. I would like to ask everyone to treat the issue from the standpoint of simple economic logic. If there is a demand, the wagon constituent of a tariff can really increase.
If the demand in some sectors is stimulated by the state (for example, coal extraction and its long-distance transportation), the authorities must make a decision suitable for all the market participants. We cannot constantly include all the expenses in the regulated tariff and index it once or twice a year. The railway transport reform, being carried out by the Russian government, is aimed at giving up this hang-the-expense approach. The only option is to liberalise or increase the base of work according to market- deregulated tariffs. What is the problem of the hang-the-expense approach? All the decisions made by the Federal Tariff Service to increase the investment attractiveness of a private wagon by enlarging its wagon constituent made the metallurgists and wagon builders increase prices for their production, which reduced that very attractiveness. Attempts to cheat the market and the economy are useless. The only way out of the situation is to increase the offer or reduce the current aggregate demand for rolling stock.
But the offer may increase only by putting into operation the market mechanisms envisaging price liberalisation and competition development. If there were other methods, we would have already used them. So having decided to speak of market laws and observing them, let’s do it!  
Andrey  Guryev
biografiy
Evgeny Mikhailov Born on October 19, 1973 in Daugavpils (Latvia). In 1997 graduated form the State Academy of Oil and Gas. 
In 1996-1999 worked for ZAO Group of Companies Regent. In 1999-2002 worked for Kazakhstan Temir Zholy. 
In 2003-2007 Deputy Head of Natural Monopolies Restructure Department of the RF Ministry of Economic Development and Trade, Deputy Director of State Tariff Regulation and Infrastructure Reforms, and Evgeny Mikhailov hold the post of Deputy Director of the department until September 2007. 
Since September 2007 has been working for OAO RZD as the Head of Freight Transportation Marketing and Tariff Policy Department. 
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In Accordance With The Reform
– Mr Mikhailov, could you tell us about the organisational issues of the company’s new department?
– The targets of our department are clear from its name. It is quite understandable what the tariffs on railway transportation are. “Marketing” here is the set of issues aimed at getting profit by the company. In this sense, I am a business-oriented manager just like my colleagues in any other company operating in the market. The basis of the department is the specialists of the tariff section of the Centre of Railway Services of OAO RZD and some specialists from the economic section of OAO RZD.
– Working for the Ministry of Economic Development and Trade, you specialised in railway tariffs and offered a number of original solutions for many aspects of the problem. Have you changed your views after you started to work for OAO RZD?
– I was a representative of the RF Ministry of Economic Development and Trade to the Board of the Federal Tariff Service. After I changed my place of work, I did not change my views, although it is quite clear that some aspects may change or be corrected because my functions and targets have become different now. However, when we examine the basic principles of the tariff policy, we must understand that it is just a consequence of one of the directions of the reformation ideology, carried out by the state today. Respectively, we must regulate tariffs concerning the total system of principles, targets and events which form part of the reform of railway transport. What are these targets and aims? I would like to remind you that they are fulfilling the economic requirements in cargo transportation, increasing the efficiency of railways and making railway transport more stable and safe. It is well known that the two main efficient instruments to reach the targets are competition in the transport sector and investment in infrastructure, rolling stock and logistics innovations. Respectively, speaking of the tariff policy, I would like to mention two basic principles, in the framework of which the department will carry out a definite ideology. The first of them is that the content of the tariff policy in the conditions of the third stage of the structural reform realisation must be aimed at reaching the common targets. And the second is that the mechanisms of tariff policy realisation must conform with the instruments of reform.
– Can you give an example of the instruments applied to the tariffs?
– For example, modernisation of the current Tariff Regulation № 10-01 or any other normative document must be targeted at development of competition between railways and the other transport modes, as well as at development of the competition between OAO RZD as a transporter and wagon owner with other transporters and wagon owners. Besides, the regular policy of the state treating OAO RZD as a subject of regulation must conform with the tasks set for OAO RZD as an object of the reform or a source for infrastructure project financing. It means the opportunity of taking independent and adequate decisions by the subjects of the market (including the dominating ones) on the investments and on the formation of their resources.
Thus, speaking of such an economic institution as competition, to us it means provision of equal price terms, access to infrastructure for transporters or train operators and making existence of equal technological and normative conditions compulsory. This must be the theme, which is undoubted on the one hand, but on the other hand there are often debates about what technological conditions may be considered single ones.
I am absolutely sure that the level of tariff loading or, on the contrary, tariff preferences must conform to the level of either technological loading or the technological charges and obligations.
In my opinion, the situation in which there were similar tariff terms for a company providing transportation (transporters, train or rolling stock operator, etc.) only where it wants – and for OAO RZD that is to carry cargo everywhere where there are railways – is impossible. Either OAO RZD should have opportunity to choose the terms to work on, or the tariffs on transportation, as well as on access to infrastructure, should take the difference into account.
Fair Competition And Clear Tariff Formation Are Required
– What is your opinion on creation of competitive conditions for freight transportation in public and private parks?
– There have been a lot of debates on the issue. There are enormous segments of the transportation market where the park of OAO RZD is not dominating. There are colossal markets in which there is a real competition for directions and volumes of cargo. A bright example is ferrous metals. Everyone understands that OAO RZD is not a competitor to rolling stock operators. The current level of tariffs, in fact, defends private wagons owners from competition with OAO RZD. From this standpoint, the launch of the First Cargo Company is a response to the pursuit in some definite circles to preserve the situation. But when a part of the inventory park is taken to the market, our position is a principal one. Speaking of freight transportation in the wagons of The First Cargo Company and other rolling stock owners, OAO RZD will place similar tariff and technological requirements on them. The launch of The First Cargo Company is the first step to OAO RZD’s access to the competitive segments of the transportation market, where the market mechanisms of demand and supply are already acting. I hope that after the launch of The First Cargo Company, the tariff set for OAO RZD will stop being an indicator of the efficiency of transportation in private rolling stock on a definite logistic scheme for the most cargo.
– Do you consider fair competition between railways and other transport modes possible?
– There is a similar situation here. We have huge goods segments, where railway transport is not a dominating one in cargo transportation. If the state keeps regulation in the sector (while no other transport mode is regulated), we will hardly be able to form a service required by the market in terms of the price level set for us. Consequently, there is another aspect of the situation: the market does not need the service provided at the regulated price, perhaps it requires a more expensive and a more technological one. A good example is transportation of oversized or packaged cargoes by road hauliers. It is more expensive than transportation by railway, but the level of service is much higher. Who needs preservation of unpopular services? Perhaps the competitors or those who are eager to become an intermediate link between OAO RZD and a cargo owner, do – offering the latter a service of the necessary quality. 
– The infrastructure tariff remains regulated. What should the state policy be in the segment?
– When a tariff is the source of investments, naturally, we must get the revenue covering the expenses defined for us by the state. In other words, the revenue from transportation must be large enough to renew infrastructure, build new railways, make transportation safer, increase speed of transportation, purchase rolling stock, etc. We have plans and programmes approved by the executive federal bodies, envisaging the investment volume and direction to be fulfilled from the revenue from tariffs. Respectively, the proportion of the revenue invested in railway infrastructure, must be reflected in the infrastructure constituent of the tariffs on transportation; and the proportion to be invested in the wagons park – in the wagon constituent. If the state decides that the financing resources are the budget, the investment fund, the pension fund or something else, the situation will be different. 
Game With No Rules
– In Russia, industrial enterprises constantly increase prices for their production without taking care about creation of new capacities. Do you think that the launch of the First Cargo Company, and later the Second Cargo Company, will be a good investment instrument to renew rolling stock?
– There are two aspects to the issue. The first one is putting into operation those types of rolling stock which are more efficient for railways. However, they are often more expensive. If there are no price preferences or special conditions, wagon and locomotive producers will hardly be able to sell their products because the rolling stock is not in demand. For example, a wagon bogie with a smaller track-damaging effect is profitable for OAO RZD as a company that maintains railway infrastructure. But the lack of tariff conditions evaluating the reduction of the damage of the track prevents this feature from being developed by wagon builders. The second aspect is the economic conditions for investment into rolling stock. Cargo companies of OAO RZD will be free to invest in economically efficient projects. So, the cargo companies will have the same impact on park renewal as all other rolling stock operators – ordering the most efficient and popular rolling stock from wagon builders.
I would also like to speak of the technology of transportation. Naturally, we have an average net cost, meanwhile we understand that transportation along direct exit routes is more profitable for OAO RZD and cheaper from the expense standpoint. Transportation on the freight schedule is also more profitable for the company. Development of logistics and technologies to make transportation cheaper should also be stimulated by applying different approaches to applying tariffs on transportation. In other words, the principles of the tariff policy at the third stage of the reform must be formulated in accordance with these approaches. I mean different principles of tariff formation for different levels of participants in the transportation process: transporters, train operators, rolling stock operators, and cargo owners. And records of the necessary investment volume should be kept in accordance with the Programme of Structural Reform and the Strategy of Railway Transport Development. There must be an opportunity to set flexible tariffs on freight transportation by railway. It is very important because, and I repeat, OAO RZD is not always a monopoly and not in all sectors, besides, it is not always a natural monopoly. That is why we speak about such principles as a differentiated approach to price formation if a more efficient rolling stock is used; limitation of state regulation in terms of a real monopolistic sector; setting differentiated tariffs for different participants in the transportation process; comprehensive system of freight transportation market segmentation, etc.
– The segmentation of the competition transportation markets you have mentioned, has been discussed for about five years already. VNIIZHT (Russian Research Institute of Railway Transport) developed different methods and presented them to the Federal Energy Committee of Russia (a predecessor of the Federal Tariff Service), but…
– …The situation has never changed. Meanwhile, it is a key issue. There may be a lot of debates about the influence, the share, the dominating position of OAO RZD or the whole idea of railway transport on the market. But, until the regulator gives us a comprehensive system of requirements, coordinates, estimations and principles, to help us understand whether the market is competitive, dominating or monopolistic, there will be a game without rules. In other words, we have already got the cards, and the game is going on, but there are no rules. It is disorienting for us because it influences our solutions about investing or not investing in the rolling stock. Meanwhile, an unalterable principle must be carried out in practice: tariffs on freight transportation by railway, apart from where there are the characteristics of a natural monopoly, must be formed on the basis of market mechanisms only. As a rule, these can be contractual tariffs between a transporter and a cargo owner, whose parameters may be changed due to different factors. The most important of them is the factor of the paying capacity of cargoes, described in detail by Sergey Vitte, but formulated even earlier. Earl S. Vitte seems to have created the only such global treatise about the ideology and economics of railway transportation.
Personally I found in the book ‘Principles of Railway Tariffs on Freight Transportation’ some definite answers to the questions that appeared during the discussions about tariff formation which took place in Russia lately. And the book was published in 1883 and re-published with some additional information in 1884. Perhaps, few people have read the book by S. Vitte in Russia – and that is the problem.
There Are Business Offers
– What ideas are you going to offer the regulator in 2008?
– I have already mentioned a pack of measures to deregulate prices in competition sectors. Also, we plan to continue unification of tariffs on freight transportation, but for transit. We believe that in March or April we will agree whether the unification will be smooth, or whether it is better to complete it at the end of 2008. Another important issue is unification of tariffs on empty wagon transportation. Today, there are different rates on transportation of empty wagons that have carried different cargoes. It is not normal and we have made some estimations, which are now being discussed with rolling stock operators. According to our research, the decision will not impact the final consumer but it will slightly change the profitability of a private wagon so, for some companies, the situation will improve and for others it will become slightly worse. We hope that the regulator will take our arguments into account. The next thing is a normative base for setting individual, local, and long-term privileged tariffs. We consider that, even in the framework of the current Tariff Regulation, there must be much more flexibility. It is clear that for us long-term tariffs mean normal planning and some hedge of the bets. Individual tariffs allow us to conclude mutually beneficial contracts with those enterprises, whose terms of dealing with OAO RZD differ from the average market ones. Final tariffs may exceed or be smaller than the basic ones. Later on, the acting privileged tariffs are to be transferred into the basic ones or abolished. Why should we keep the situation where a lot of rates are privileged for many years?
A decision must be made to simplify the process and develop the strategy. Besides, we would like the limitation levels of tariffs on freight transportation set in those sectors where OAO RZD is not dominating. i.e. if there is no opportunity to liberalise the tariff, a regulator can set the minimal/ maximum tariffs. Also, we will make suggestions about container cargo and box cars, i.e. we will ask the regulator for the opportunity to install more flexible tariff-setting in sectors where there is serious competition between the railway and road hauliers. Another target for 2008 is leveling the terms of freight transportation of cargo in containers and carload shipments. We used to develop and stimulate container transportation for a long time but it turned out that transportation of, let’s say, coal in containers is cheaper than in gondola cars. This can hardly be considered correct. I would like to note that any of our offers concerning the increase of tariffs on containerised cargo will be accompanied by suggestions about development of the terminal aspect of transportation. It is underdeveloped terminal services and their too high cost that influences the level of tariffs on transportation. These are only some of the issues we are going to initiate in 2008.
– You have mentioned unification of tariffs on empty wagon transportation. When Tariff Regulation №10-01 was created, tariff differentiation was put into operation according to the type of cargo to reach the total balance. Is it possible that the cost of transportation will increase significantly for cargoes, for which empty backhaul amounts to 50%?
– Everything depends on the principles and philosophy of unification. Nowadays, 85% of empty wagons return after transportation of the 1st class cargoes. As a rule, wagons that carried the 2nd and the 3rd class cargoes do not return empty. Everyone knows that after carrying, for example, a 2nd class cargo to the Far East, a gondola car is loaded with a container or coal, then transports it to some place, perhaps 100 km away from the port, gets unloaded there, and after that the empty wagon runs 4,000 km and the tariff for the distance is similar to the one on the 1st class cargo. All of us know it pretty well. The parameters we offer are based on taking the 1st class for the initial tariff level, and making tariffs on 2nd and 3rd class-loaded wagons slightly different for private rolling stock owners. Still, this problem has yet to be discussed because it is not a simple one. We have started to consult with the largest wagon owners. On the one hand, we understand that the created business structure must not be broken and we are to be a predictable partner. On the other hand, the situation must be improved because it only becomes worse every time the tariffs are regulated. Perhaps, in our discussions with businesses and the regulator, we will agree that all the changes must have a multi-stage character. Still, we must understand that such a problem exists, instead of pretending it’s not there. 
Russian Railways Are Ready To Work With Investors
– Recently the Tariff Policy of the CIS for 2008 was approved. Have you got any ideas about transit rates?
– It is a good question. Firstly, we should position our services in the sector clearly enough, and define in which segments of transit transportation we are competitive and in which we are not. In other words, we should define our target group and form services for it. Secondly, we should analyse the volumes we have ‘lost’ for the last five years, because of our own inactivity. Then we will offer our partners, first of all large companies and associations, the opportunity to recommence transit via Russian Federation territory and form coordinated terms of cooperation. We hope that the Ministry of Transport will examine our offers and will give OAO RZD the right to set transit tariffs. I should say, it is a normal practice for many of our neighbours. 
– Today a lot of cargo owners fear that because of the launch of the First Cargo Company, the tariffs on low-profit cargoes, for example coal, in private wagons will increase significantly.
– I think that the top management of the First Cargo Company would give a better answer to those fears than me. I would like to ask everyone to treat the issue from the standpoint of simple economic logic. If there is a demand, the wagon constituent of a tariff can really increase.
If the demand in some sectors is stimulated by the state (for example, coal extraction and its long-distance transportation), the authorities must make a decision suitable for all the market participants. We cannot constantly include all the expenses in the regulated tariff and index it once or twice a year. The railway transport reform, being carried out by the Russian government, is aimed at giving up this hang-the-expense approach. The only option is to liberalise or increase the base of work according to market- deregulated tariffs. What is the problem of the hang-the-expense approach? All the decisions made by the Federal Tariff Service to increase the investment attractiveness of a private wagon by enlarging its wagon constituent made the metallurgists and wagon builders increase prices for their production, which reduced that very attractiveness. Attempts to cheat the market and the economy are useless. The only way out of the situation is to increase the offer or reduce the current aggregate demand for rolling stock.
But the offer may increase only by putting into operation the market mechanisms envisaging price liberalisation and competition development. If there were other methods, we would have already used them. So having decided to speak of market laws and observing them, let’s do it!  
Andrey  Guryev
biografiy
Evgeny Mikhailov Born on October 19, 1973 in Daugavpils (Latvia). In 1997 graduated form the State Academy of Oil and Gas. 
In 1996-1999 worked for ZAO Group of Companies Regent. In 1999-2002 worked for Kazakhstan Temir Zholy. 
In 2003-2007 Deputy Head of Natural Monopolies Restructure Department of the RF Ministry of Economic Development and Trade, Deputy Director of State Tariff Regulation and Infrastructure Reforms, and Evgeny Mikhailov hold the post of Deputy Director of the department until September 2007. 
Since September 2007 has been working for OAO RZD as the Head of Freight Transportation Marketing and Tariff Policy Department. 
    [~DETAIL_TEXT] => 
In Accordance With The Reform
– Mr Mikhailov, could you tell us about the organisational issues of the company’s new department?
– The targets of our department are clear from its name. It is quite understandable what the tariffs on railway transportation are. “Marketing” here is the set of issues aimed at getting profit by the company. In this sense, I am a business-oriented manager just like my colleagues in any other company operating in the market. The basis of the department is the specialists of the tariff section of the Centre of Railway Services of OAO RZD and some specialists from the economic section of OAO RZD.
– Working for the Ministry of Economic Development and Trade, you specialised in railway tariffs and offered a number of original solutions for many aspects of the problem. Have you changed your views after you started to work for OAO RZD?
– I was a representative of the RF Ministry of Economic Development and Trade to the Board of the Federal Tariff Service. After I changed my place of work, I did not change my views, although it is quite clear that some aspects may change or be corrected because my functions and targets have become different now. However, when we examine the basic principles of the tariff policy, we must understand that it is just a consequence of one of the directions of the reformation ideology, carried out by the state today. Respectively, we must regulate tariffs concerning the total system of principles, targets and events which form part of the reform of railway transport. What are these targets and aims? I would like to remind you that they are fulfilling the economic requirements in cargo transportation, increasing the efficiency of railways and making railway transport more stable and safe. It is well known that the two main efficient instruments to reach the targets are competition in the transport sector and investment in infrastructure, rolling stock and logistics innovations. Respectively, speaking of the tariff policy, I would like to mention two basic principles, in the framework of which the department will carry out a definite ideology. The first of them is that the content of the tariff policy in the conditions of the third stage of the structural reform realisation must be aimed at reaching the common targets. And the second is that the mechanisms of tariff policy realisation must conform with the instruments of reform.
– Can you give an example of the instruments applied to the tariffs?
– For example, modernisation of the current Tariff Regulation № 10-01 or any other normative document must be targeted at development of competition between railways and the other transport modes, as well as at development of the competition between OAO RZD as a transporter and wagon owner with other transporters and wagon owners. Besides, the regular policy of the state treating OAO RZD as a subject of regulation must conform with the tasks set for OAO RZD as an object of the reform or a source for infrastructure project financing. It means the opportunity of taking independent and adequate decisions by the subjects of the market (including the dominating ones) on the investments and on the formation of their resources.
Thus, speaking of such an economic institution as competition, to us it means provision of equal price terms, access to infrastructure for transporters or train operators and making existence of equal technological and normative conditions compulsory. This must be the theme, which is undoubted on the one hand, but on the other hand there are often debates about what technological conditions may be considered single ones.
I am absolutely sure that the level of tariff loading or, on the contrary, tariff preferences must conform to the level of either technological loading or the technological charges and obligations.
In my opinion, the situation in which there were similar tariff terms for a company providing transportation (transporters, train or rolling stock operator, etc.) only where it wants – and for OAO RZD that is to carry cargo everywhere where there are railways – is impossible. Either OAO RZD should have opportunity to choose the terms to work on, or the tariffs on transportation, as well as on access to infrastructure, should take the difference into account.
Fair Competition And Clear Tariff Formation Are Required
– What is your opinion on creation of competitive conditions for freight transportation in public and private parks?
– There have been a lot of debates on the issue. There are enormous segments of the transportation market where the park of OAO RZD is not dominating. There are colossal markets in which there is a real competition for directions and volumes of cargo. A bright example is ferrous metals. Everyone understands that OAO RZD is not a competitor to rolling stock operators. The current level of tariffs, in fact, defends private wagons owners from competition with OAO RZD. From this standpoint, the launch of the First Cargo Company is a response to the pursuit in some definite circles to preserve the situation. But when a part of the inventory park is taken to the market, our position is a principal one. Speaking of freight transportation in the wagons of The First Cargo Company and other rolling stock owners, OAO RZD will place similar tariff and technological requirements on them. The launch of The First Cargo Company is the first step to OAO RZD’s access to the competitive segments of the transportation market, where the market mechanisms of demand and supply are already acting. I hope that after the launch of The First Cargo Company, the tariff set for OAO RZD will stop being an indicator of the efficiency of transportation in private rolling stock on a definite logistic scheme for the most cargo.
– Do you consider fair competition between railways and other transport modes possible?
– There is a similar situation here. We have huge goods segments, where railway transport is not a dominating one in cargo transportation. If the state keeps regulation in the sector (while no other transport mode is regulated), we will hardly be able to form a service required by the market in terms of the price level set for us. Consequently, there is another aspect of the situation: the market does not need the service provided at the regulated price, perhaps it requires a more expensive and a more technological one. A good example is transportation of oversized or packaged cargoes by road hauliers. It is more expensive than transportation by railway, but the level of service is much higher. Who needs preservation of unpopular services? Perhaps the competitors or those who are eager to become an intermediate link between OAO RZD and a cargo owner, do – offering the latter a service of the necessary quality. 
– The infrastructure tariff remains regulated. What should the state policy be in the segment?
– When a tariff is the source of investments, naturally, we must get the revenue covering the expenses defined for us by the state. In other words, the revenue from transportation must be large enough to renew infrastructure, build new railways, make transportation safer, increase speed of transportation, purchase rolling stock, etc. We have plans and programmes approved by the executive federal bodies, envisaging the investment volume and direction to be fulfilled from the revenue from tariffs. Respectively, the proportion of the revenue invested in railway infrastructure, must be reflected in the infrastructure constituent of the tariffs on transportation; and the proportion to be invested in the wagons park – in the wagon constituent. If the state decides that the financing resources are the budget, the investment fund, the pension fund or something else, the situation will be different. 
Game With No Rules
– In Russia, industrial enterprises constantly increase prices for their production without taking care about creation of new capacities. Do you think that the launch of the First Cargo Company, and later the Second Cargo Company, will be a good investment instrument to renew rolling stock?
– There are two aspects to the issue. The first one is putting into operation those types of rolling stock which are more efficient for railways. However, they are often more expensive. If there are no price preferences or special conditions, wagon and locomotive producers will hardly be able to sell their products because the rolling stock is not in demand. For example, a wagon bogie with a smaller track-damaging effect is profitable for OAO RZD as a company that maintains railway infrastructure. But the lack of tariff conditions evaluating the reduction of the damage of the track prevents this feature from being developed by wagon builders. The second aspect is the economic conditions for investment into rolling stock. Cargo companies of OAO RZD will be free to invest in economically efficient projects. So, the cargo companies will have the same impact on park renewal as all other rolling stock operators – ordering the most efficient and popular rolling stock from wagon builders.
I would also like to speak of the technology of transportation. Naturally, we have an average net cost, meanwhile we understand that transportation along direct exit routes is more profitable for OAO RZD and cheaper from the expense standpoint. Transportation on the freight schedule is also more profitable for the company. Development of logistics and technologies to make transportation cheaper should also be stimulated by applying different approaches to applying tariffs on transportation. In other words, the principles of the tariff policy at the third stage of the reform must be formulated in accordance with these approaches. I mean different principles of tariff formation for different levels of participants in the transportation process: transporters, train operators, rolling stock operators, and cargo owners. And records of the necessary investment volume should be kept in accordance with the Programme of Structural Reform and the Strategy of Railway Transport Development. There must be an opportunity to set flexible tariffs on freight transportation by railway. It is very important because, and I repeat, OAO RZD is not always a monopoly and not in all sectors, besides, it is not always a natural monopoly. That is why we speak about such principles as a differentiated approach to price formation if a more efficient rolling stock is used; limitation of state regulation in terms of a real monopolistic sector; setting differentiated tariffs for different participants in the transportation process; comprehensive system of freight transportation market segmentation, etc.
– The segmentation of the competition transportation markets you have mentioned, has been discussed for about five years already. VNIIZHT (Russian Research Institute of Railway Transport) developed different methods and presented them to the Federal Energy Committee of Russia (a predecessor of the Federal Tariff Service), but…
– …The situation has never changed. Meanwhile, it is a key issue. There may be a lot of debates about the influence, the share, the dominating position of OAO RZD or the whole idea of railway transport on the market. But, until the regulator gives us a comprehensive system of requirements, coordinates, estimations and principles, to help us understand whether the market is competitive, dominating or monopolistic, there will be a game without rules. In other words, we have already got the cards, and the game is going on, but there are no rules. It is disorienting for us because it influences our solutions about investing or not investing in the rolling stock. Meanwhile, an unalterable principle must be carried out in practice: tariffs on freight transportation by railway, apart from where there are the characteristics of a natural monopoly, must be formed on the basis of market mechanisms only. As a rule, these can be contractual tariffs between a transporter and a cargo owner, whose parameters may be changed due to different factors. The most important of them is the factor of the paying capacity of cargoes, described in detail by Sergey Vitte, but formulated even earlier. Earl S. Vitte seems to have created the only such global treatise about the ideology and economics of railway transportation.
Personally I found in the book ‘Principles of Railway Tariffs on Freight Transportation’ some definite answers to the questions that appeared during the discussions about tariff formation which took place in Russia lately. And the book was published in 1883 and re-published with some additional information in 1884. Perhaps, few people have read the book by S. Vitte in Russia – and that is the problem.
There Are Business Offers
– What ideas are you going to offer the regulator in 2008?
– I have already mentioned a pack of measures to deregulate prices in competition sectors. Also, we plan to continue unification of tariffs on freight transportation, but for transit. We believe that in March or April we will agree whether the unification will be smooth, or whether it is better to complete it at the end of 2008. Another important issue is unification of tariffs on empty wagon transportation. Today, there are different rates on transportation of empty wagons that have carried different cargoes. It is not normal and we have made some estimations, which are now being discussed with rolling stock operators. According to our research, the decision will not impact the final consumer but it will slightly change the profitability of a private wagon so, for some companies, the situation will improve and for others it will become slightly worse. We hope that the regulator will take our arguments into account. The next thing is a normative base for setting individual, local, and long-term privileged tariffs. We consider that, even in the framework of the current Tariff Regulation, there must be much more flexibility. It is clear that for us long-term tariffs mean normal planning and some hedge of the bets. Individual tariffs allow us to conclude mutually beneficial contracts with those enterprises, whose terms of dealing with OAO RZD differ from the average market ones. Final tariffs may exceed or be smaller than the basic ones. Later on, the acting privileged tariffs are to be transferred into the basic ones or abolished. Why should we keep the situation where a lot of rates are privileged for many years?
A decision must be made to simplify the process and develop the strategy. Besides, we would like the limitation levels of tariffs on freight transportation set in those sectors where OAO RZD is not dominating. i.e. if there is no opportunity to liberalise the tariff, a regulator can set the minimal/ maximum tariffs. Also, we will make suggestions about container cargo and box cars, i.e. we will ask the regulator for the opportunity to install more flexible tariff-setting in sectors where there is serious competition between the railway and road hauliers. Another target for 2008 is leveling the terms of freight transportation of cargo in containers and carload shipments. We used to develop and stimulate container transportation for a long time but it turned out that transportation of, let’s say, coal in containers is cheaper than in gondola cars. This can hardly be considered correct. I would like to note that any of our offers concerning the increase of tariffs on containerised cargo will be accompanied by suggestions about development of the terminal aspect of transportation. It is underdeveloped terminal services and their too high cost that influences the level of tariffs on transportation. These are only some of the issues we are going to initiate in 2008.
– You have mentioned unification of tariffs on empty wagon transportation. When Tariff Regulation №10-01 was created, tariff differentiation was put into operation according to the type of cargo to reach the total balance. Is it possible that the cost of transportation will increase significantly for cargoes, for which empty backhaul amounts to 50%?
– Everything depends on the principles and philosophy of unification. Nowadays, 85% of empty wagons return after transportation of the 1st class cargoes. As a rule, wagons that carried the 2nd and the 3rd class cargoes do not return empty. Everyone knows that after carrying, for example, a 2nd class cargo to the Far East, a gondola car is loaded with a container or coal, then transports it to some place, perhaps 100 km away from the port, gets unloaded there, and after that the empty wagon runs 4,000 km and the tariff for the distance is similar to the one on the 1st class cargo. All of us know it pretty well. The parameters we offer are based on taking the 1st class for the initial tariff level, and making tariffs on 2nd and 3rd class-loaded wagons slightly different for private rolling stock owners. Still, this problem has yet to be discussed because it is not a simple one. We have started to consult with the largest wagon owners. On the one hand, we understand that the created business structure must not be broken and we are to be a predictable partner. On the other hand, the situation must be improved because it only becomes worse every time the tariffs are regulated. Perhaps, in our discussions with businesses and the regulator, we will agree that all the changes must have a multi-stage character. Still, we must understand that such a problem exists, instead of pretending it’s not there. 
Russian Railways Are Ready To Work With Investors
– Recently the Tariff Policy of the CIS for 2008 was approved. Have you got any ideas about transit rates?
– It is a good question. Firstly, we should position our services in the sector clearly enough, and define in which segments of transit transportation we are competitive and in which we are not. In other words, we should define our target group and form services for it. Secondly, we should analyse the volumes we have ‘lost’ for the last five years, because of our own inactivity. Then we will offer our partners, first of all large companies and associations, the opportunity to recommence transit via Russian Federation territory and form coordinated terms of cooperation. We hope that the Ministry of Transport will examine our offers and will give OAO RZD the right to set transit tariffs. I should say, it is a normal practice for many of our neighbours. 
– Today a lot of cargo owners fear that because of the launch of the First Cargo Company, the tariffs on low-profit cargoes, for example coal, in private wagons will increase significantly.
– I think that the top management of the First Cargo Company would give a better answer to those fears than me. I would like to ask everyone to treat the issue from the standpoint of simple economic logic. If there is a demand, the wagon constituent of a tariff can really increase.
If the demand in some sectors is stimulated by the state (for example, coal extraction and its long-distance transportation), the authorities must make a decision suitable for all the market participants. We cannot constantly include all the expenses in the regulated tariff and index it once or twice a year. The railway transport reform, being carried out by the Russian government, is aimed at giving up this hang-the-expense approach. The only option is to liberalise or increase the base of work according to market- deregulated tariffs. What is the problem of the hang-the-expense approach? All the decisions made by the Federal Tariff Service to increase the investment attractiveness of a private wagon by enlarging its wagon constituent made the metallurgists and wagon builders increase prices for their production, which reduced that very attractiveness. Attempts to cheat the market and the economy are useless. The only way out of the situation is to increase the offer or reduce the current aggregate demand for rolling stock.
But the offer may increase only by putting into operation the market mechanisms envisaging price liberalisation and competition development. If there were other methods, we would have already used them. So having decided to speak of market laws and observing them, let’s do it!  
Andrey  Guryev
biografiy
Evgeny Mikhailov Born on October 19, 1973 in Daugavpils (Latvia). In 1997 graduated form the State Academy of Oil and Gas. 
In 1996-1999 worked for ZAO Group of Companies Regent. In 1999-2002 worked for Kazakhstan Temir Zholy. 
In 2003-2007 Deputy Head of Natural Monopolies Restructure Department of the RF Ministry of Economic Development and Trade, Deputy Director of State Tariff Regulation and Infrastructure Reforms, and Evgeny Mikhailov hold the post of Deputy Director of the department until September 2007. 
Since September 2007 has been working for OAO RZD as the Head of Freight Transportation Marketing and Tariff Policy Department. 
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Foreign Direct Investment in Russia to Rise to $51 Billion in 2010
Foreign direct investment in the Russian economy is expected to rise from $41 billion in 2007 to $51 billion in 2010, the Deputy Minister of Economic Development and Trade said in late December. 
Andrey Belousov said this figure was forecast in a consolidated report on the results and guidelines for the Russian government’s activities in 2008-2010 to be presented at a Government session by Deputy Prime Minister Alexander Zhukov. 
A. Belousov also said the figure was important for Russia to ensure sustainable economic growth in the country. 
In comparison, China had 140% more foreign direct investment than Russia in 2006 ($69.5 billion against $28.7 billion). The Deputy Minister of Economic Development and Trade said Russia needed to develop a competitive market for sustainable economic growth. 
“It is necessary to reduce the share of natural monopolies’ products in our GDP from the current 11% to 8.5% by late 2010”, he stated. 
The consolidated report also stipulates the boosting of labor productivity by more than 20%. This will help reduce unemployment from 6% to 4% by the end of 2010, A. Belousov said. 
The Deputy Minister of Economic Development and Trade also said it was important for Russia to develop hi-tech sectors, particularly civil aviation, ship-building, the space industry and nuclear technologies. 
“These sectors could eventually capture around 10% of the world market”, he concluded.  
UCL Holding B.V. Purchased a Shareholding of OAO Universal Transshipment Complex in Ust-Luga  
Dutch holding company UCL Holding B.V., controlled by Vladimir Lisin, a majority shareholder of OAO Novolipetsk Steel (OAO NLMK), purchased CNP INVESTMENTS N.V. company, which owns a 50% shareholding and is an investor in the construction of a cargo terminal in Ust-Luga port, OAO Universal Transshipment Complex in January.
The purchase was made in accordance with the strategy of UCL Holding B.V., aimed at increasing its presence in the Russian stevedoring market.
All construction work has been finished now and the terminal has been put into operation. At the beginning of 2008, a border crossing is being put into operation at the terminal. During the year, OAO Universal Transshipment Complex plans to purchase additional handling equipment  for the sum of USD 10 million.
Once the terminal starts operating at the projected capacity, the throughput of OAO Universal Transshipment Complex is to reach 4-5 million tons of export and import cargo. In particular, it is planned to handle import coking coal for the metallurgy industry. Redirection of environmentally-unfriendly bulk cargo from the Sea Port of Saint Petersburg to the terminal in Ust-Luga will aid improvement of the ecological situation in Saint Petersburg.
Universal Cargo Logistics Holding B.V. is a transport holding company, controlling the group of companies OAO Sea Port of Saint Petersburg and OAO Taganrog Commercial Sea Port. The total throughput of the companies exceeds 14 million tons annually.
The holding company’s development strategy envisages consolidation of transport assets, including the ones involved in sea, river and railway transportation as well as stevedoring. According to the plan, the enterprises incorporated into the holding company will handle at least 45 million tons of cargo annually by 2010.
E-Signature for Oktyabrskaya Railway     
Last December, Oktyabrskaya Railway (October Railway – an affiliate of OAO RZD) in cooperation with ZAO TransTeleCom company put into operation e-registration of transportation documents (invoice form – GU29) on empty private wagons, whereby the signature on them could be an electronic one.
The technology is implemented in seven stations in Karelia, Saint Petersburg, and the Leningrad, Novgorod and Moscow regions. The stations are Nigozero, Predportovaya, Shusha­ry, Avtovo, Parnas, Novgorod-on-Volkhov and Ostashkov.
Yury Surodin, engineer-in-chief of the Oktya­brskaya Railway Centre of Transport Service, said that the implemented technology allows all the clients serviced by the stations to fill in the document necessary for transportation and sign it with e-signature regardless how far their office is from the station. To do it, a client is to set an AS ETRAN worksite and activate the e-signature 
Thus, it is unnecessary for the client to present it at the station. He gets an opportunity to manage his consignments at all the stations of the network from one controlling centre. Consequently, the time taken for a client’s work falls and he gets an opportunity to change the technology used by his supply departments.
Yury Suvorin emphasised that e-signature use is possible to use for other documents for control of freight transportation and services such as applications for transportation, registration cards, cumulative lists, etc.
Thus, the opportunity to transfer all stages of preparation and organisation of transportation to e-document has been created.
NEVZ Got Conformance Certificate for E5K Electric Locomotives Batch     
Russian Certification Register at the Federal Railway Transport gave a certificate of conformance to the first batch of new E5K type mainline freight electric alternating current locomotives, produced by Novocherkassk Electric Locomotive Building Plant (NEVZ, incorporated into ZAO Transmashholding). 
The certificate is in force until December 24, 2008. According to it, NEVZ is allowed to produce 30 electric locomotives of the type mentioned. The contract concluded by OAO RZD and ZAO Transmashholding envisages that the latter is to deliver 109 locomotives to Russian Railways before the end of 2009.
E5K is a single-section electric locomotive, developed on the base of serial locomotive of 2ES5K type “Ermak”. It is created to provide shunting and removing services and to transport small freight trains. On the Russian railway network, E5K will replace electric locomotives of VL60K type, produced by NEVZ in 1957-1967.
LUKOIL And GAZPROM NEFT Established a Joint Venture
OAO LUKOIL and OAO GAZPROM NEFT established a joint venture, OOO Oil and Gas Company “Regional Development”.
The relevant documents were signed by Vagit Alekperov, President of OAO LUKOIL, and Alexander Dyukov, President of OAO GAZPROM NEFT.
OAO LUKOIL owns a 49 percent stake in the authorised capital of the joint venture, OAO GAZPROM NEFT has a 51 percent stake. The authorised capital of the enterprise will be comprised of monetary contributions. The joint venture will be managed on a parity basis. 
The joint venture will focus on acquiring rights for subsurface use, geological survey of subsurface areas, exploration and production of hydrocarbons, field development, implementation of infrastructure-related projects, transportation and marketing of produced hydrocarbon materials.
“The joint venture of LUKOIL and GAZPROM NEFT is an efficient tool of mutually beneficial cooperation between Russia”s major oil companies which possess the great production and financial potential required for implementing major projects,” Vagit Alekperov said.
In his turn, Alexander Dyukov said, “cooperation between GAZPROM NEFT and LUKOIL within the joint venture framework is going to expand the areas of both companies” presence and enhance the efficiency of new field development.”
TransCreditBank Concluded a Contract with Lohr Industrie S.A 
The TransCreditBank team, led by First Vice-president Alexey Krokhin on a business trip to France, signed on November 21 a letter of intent with Lohr Industrie S.A. – the largest world producer of trailers for transporting cars.
 The agreement provides for: 
• acquisition of a large batch of trailers for further leasing to Russian road transporters;
• financial cooperation of the Bank with existing Russian buyers of Lohr Industrie S.A. products;
• financial cooperation of the Bank with Lohr Industrie S.A. subsidiaries in Russia.
Sergey Pushkin, President of TransCreditBank, said: “This deal is another move of the Bank to become the leading specialised transport sector bank in the country. Under the Bank”s Strategy of Development for 2008-2010 we plan to boost financing of procurement of rolling stock and equipment for Russia”s transport sector, including on a leasing basis. Cooperation with the Ministry of Transport of Russia, with which the Bank entered in the Strategic Cooperation Agreement in December 2006, facilitates achievement of these objectives. The Lohr Industrie S.A. deal is the second major contract with western truck producers. In May 2007 deliveries of MAN trucks to Russian leasing companies started.”
Railways of Yakutia: Revenue Exceeded RUR 1Billion 
“In 2007 the revenue of OJSC “Railroad of Yakutia” exceeded RUR 1 billion, RUR 400 million up year-on-year”, said Vasily Shimokhin, Director General of the company.
“In 2006 the company’s revenue was much smaller – only RUR 600 million”, he highlighted. The head of the company noted that the productive activity also grew significantly. In 2006 “Railroad of Yakutia” transported 1,900 tons of cargo, and last year the figure amounted to 2,200 tons.
“The larger part of the revenue was from transportation of pipes for construction of the oil pipeline East Siberia – the Pacific Ocean. Container and section transportation volume also increased significantly”, emphasised V. Shimokhin.
In his words, in 2008 the volume of pipes for transportation will decrease, because the major part of them was delivered last year.
“We count on the increase of coal transportation volumes. In Yakutia coal companies are increasing coal extraction, since the prices and the demand for the cargo have grown several times over. Small coal enterprises are developing especially well”, highlighted V. Shimokhin. Experts believe that the passenger flow will grow significantly after a railway line to Yakutsk is built. “The year of 2007 gave Yakutian railwaymen some prospects. A lot of social and investment problems were solved. The work of our company became stable and profitable”, said V. Shimokhin.
Ukraine Increases Production of Flat Wagons 
OAO Kryukov Wagon Building Plant (Ukraine), the only Ukrainian manufacturer of both freight and passenger wagons, has completed the development of a new long-base combined wagon for large-capacity container transportation. Model 13-7031 is targeted to carry two 40 TEU containers, and long-length products (pipes and logs).
As the company announced, the new model will allow the consumer to save on transport expenses. The high quality of the production was proved by ground tests. 
    [~DETAIL_TEXT] => 
Foreign Direct Investment in Russia to Rise to $51 Billion in 2010
Foreign direct investment in the Russian economy is expected to rise from $41 billion in 2007 to $51 billion in 2010, the Deputy Minister of Economic Development and Trade said in late December. 
Andrey Belousov said this figure was forecast in a consolidated report on the results and guidelines for the Russian government’s activities in 2008-2010 to be presented at a Government session by Deputy Prime Minister Alexander Zhukov. 
A. Belousov also said the figure was important for Russia to ensure sustainable economic growth in the country. 
In comparison, China had 140% more foreign direct investment than Russia in 2006 ($69.5 billion against $28.7 billion). The Deputy Minister of Economic Development and Trade said Russia needed to develop a competitive market for sustainable economic growth. 
“It is necessary to reduce the share of natural monopolies’ products in our GDP from the current 11% to 8.5% by late 2010”, he stated. 
The consolidated report also stipulates the boosting of labor productivity by more than 20%. This will help reduce unemployment from 6% to 4% by the end of 2010, A. Belousov said. 
The Deputy Minister of Economic Development and Trade also said it was important for Russia to develop hi-tech sectors, particularly civil aviation, ship-building, the space industry and nuclear technologies. 
“These sectors could eventually capture around 10% of the world market”, he concluded.  
UCL Holding B.V. Purchased a Shareholding of OAO Universal Transshipment Complex in Ust-Luga  
Dutch holding company UCL Holding B.V., controlled by Vladimir Lisin, a majority shareholder of OAO Novolipetsk Steel (OAO NLMK), purchased CNP INVESTMENTS N.V. company, which owns a 50% shareholding and is an investor in the construction of a cargo terminal in Ust-Luga port, OAO Universal Transshipment Complex in January.
The purchase was made in accordance with the strategy of UCL Holding B.V., aimed at increasing its presence in the Russian stevedoring market.
All construction work has been finished now and the terminal has been put into operation. At the beginning of 2008, a border crossing is being put into operation at the terminal. During the year, OAO Universal Transshipment Complex plans to purchase additional handling equipment  for the sum of USD 10 million.
Once the terminal starts operating at the projected capacity, the throughput of OAO Universal Transshipment Complex is to reach 4-5 million tons of export and import cargo. In particular, it is planned to handle import coking coal for the metallurgy industry. Redirection of environmentally-unfriendly bulk cargo from the Sea Port of Saint Petersburg to the terminal in Ust-Luga will aid improvement of the ecological situation in Saint Petersburg.
Universal Cargo Logistics Holding B.V. is a transport holding company, controlling the group of companies OAO Sea Port of Saint Petersburg and OAO Taganrog Commercial Sea Port. The total throughput of the companies exceeds 14 million tons annually.
The holding company’s development strategy envisages consolidation of transport assets, including the ones involved in sea, river and railway transportation as well as stevedoring. According to the plan, the enterprises incorporated into the holding company will handle at least 45 million tons of cargo annually by 2010.
E-Signature for Oktyabrskaya Railway     
Last December, Oktyabrskaya Railway (October Railway – an affiliate of OAO RZD) in cooperation with ZAO TransTeleCom company put into operation e-registration of transportation documents (invoice form – GU29) on empty private wagons, whereby the signature on them could be an electronic one.
The technology is implemented in seven stations in Karelia, Saint Petersburg, and the Leningrad, Novgorod and Moscow regions. The stations are Nigozero, Predportovaya, Shusha­ry, Avtovo, Parnas, Novgorod-on-Volkhov and Ostashkov.
Yury Surodin, engineer-in-chief of the Oktya­brskaya Railway Centre of Transport Service, said that the implemented technology allows all the clients serviced by the stations to fill in the document necessary for transportation and sign it with e-signature regardless how far their office is from the station. To do it, a client is to set an AS ETRAN worksite and activate the e-signature 
Thus, it is unnecessary for the client to present it at the station. He gets an opportunity to manage his consignments at all the stations of the network from one controlling centre. Consequently, the time taken for a client’s work falls and he gets an opportunity to change the technology used by his supply departments.
Yury Suvorin emphasised that e-signature use is possible to use for other documents for control of freight transportation and services such as applications for transportation, registration cards, cumulative lists, etc.
Thus, the opportunity to transfer all stages of preparation and organisation of transportation to e-document has been created.
NEVZ Got Conformance Certificate for E5K Electric Locomotives Batch     
Russian Certification Register at the Federal Railway Transport gave a certificate of conformance to the first batch of new E5K type mainline freight electric alternating current locomotives, produced by Novocherkassk Electric Locomotive Building Plant (NEVZ, incorporated into ZAO Transmashholding). 
The certificate is in force until December 24, 2008. According to it, NEVZ is allowed to produce 30 electric locomotives of the type mentioned. The contract concluded by OAO RZD and ZAO Transmashholding envisages that the latter is to deliver 109 locomotives to Russian Railways before the end of 2009.
E5K is a single-section electric locomotive, developed on the base of serial locomotive of 2ES5K type “Ermak”. It is created to provide shunting and removing services and to transport small freight trains. On the Russian railway network, E5K will replace electric locomotives of VL60K type, produced by NEVZ in 1957-1967.
LUKOIL And GAZPROM NEFT Established a Joint Venture
OAO LUKOIL and OAO GAZPROM NEFT established a joint venture, OOO Oil and Gas Company “Regional Development”.
The relevant documents were signed by Vagit Alekperov, President of OAO LUKOIL, and Alexander Dyukov, President of OAO GAZPROM NEFT.
OAO LUKOIL owns a 49 percent stake in the authorised capital of the joint venture, OAO GAZPROM NEFT has a 51 percent stake. The authorised capital of the enterprise will be comprised of monetary contributions. The joint venture will be managed on a parity basis. 
The joint venture will focus on acquiring rights for subsurface use, geological survey of subsurface areas, exploration and production of hydrocarbons, field development, implementation of infrastructure-related projects, transportation and marketing of produced hydrocarbon materials.
“The joint venture of LUKOIL and GAZPROM NEFT is an efficient tool of mutually beneficial cooperation between Russia”s major oil companies which possess the great production and financial potential required for implementing major projects,” Vagit Alekperov said.
In his turn, Alexander Dyukov said, “cooperation between GAZPROM NEFT and LUKOIL within the joint venture framework is going to expand the areas of both companies” presence and enhance the efficiency of new field development.”
TransCreditBank Concluded a Contract with Lohr Industrie S.A 
The TransCreditBank team, led by First Vice-president Alexey Krokhin on a business trip to France, signed on November 21 a letter of intent with Lohr Industrie S.A. – the largest world producer of trailers for transporting cars.
 The agreement provides for: 
• acquisition of a large batch of trailers for further leasing to Russian road transporters;
• financial cooperation of the Bank with existing Russian buyers of Lohr Industrie S.A. products;
• financial cooperation of the Bank with Lohr Industrie S.A. subsidiaries in Russia.
Sergey Pushkin, President of TransCreditBank, said: “This deal is another move of the Bank to become the leading specialised transport sector bank in the country. Under the Bank”s Strategy of Development for 2008-2010 we plan to boost financing of procurement of rolling stock and equipment for Russia”s transport sector, including on a leasing basis. Cooperation with the Ministry of Transport of Russia, with which the Bank entered in the Strategic Cooperation Agreement in December 2006, facilitates achievement of these objectives. The Lohr Industrie S.A. deal is the second major contract with western truck producers. In May 2007 deliveries of MAN trucks to Russian leasing companies started.”
Railways of Yakutia: Revenue Exceeded RUR 1Billion 
“In 2007 the revenue of OJSC “Railroad of Yakutia” exceeded RUR 1 billion, RUR 400 million up year-on-year”, said Vasily Shimokhin, Director General of the company.
“In 2006 the company’s revenue was much smaller – only RUR 600 million”, he highlighted. The head of the company noted that the productive activity also grew significantly. In 2006 “Railroad of Yakutia” transported 1,900 tons of cargo, and last year the figure amounted to 2,200 tons.
“The larger part of the revenue was from transportation of pipes for construction of the oil pipeline East Siberia – the Pacific Ocean. Container and section transportation volume also increased significantly”, emphasised V. Shimokhin.
In his words, in 2008 the volume of pipes for transportation will decrease, because the major part of them was delivered last year.
“We count on the increase of coal transportation volumes. In Yakutia coal companies are increasing coal extraction, since the prices and the demand for the cargo have grown several times over. Small coal enterprises are developing especially well”, highlighted V. Shimokhin. Experts believe that the passenger flow will grow significantly after a railway line to Yakutsk is built. “The year of 2007 gave Yakutian railwaymen some prospects. A lot of social and investment problems were solved. The work of our company became stable and profitable”, said V. Shimokhin.
Ukraine Increases Production of Flat Wagons 
OAO Kryukov Wagon Building Plant (Ukraine), the only Ukrainian manufacturer of both freight and passenger wagons, has completed the development of a new long-base combined wagon for large-capacity container transportation. Model 13-7031 is targeted to carry two 40 TEU containers, and long-length products (pipes and logs).
As the company announced, the new model will allow the consumer to save on transport expenses. The high quality of the production was proved by ground tests. 
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    [PREVIEW_TEXT] => Foreign direct investment in the Russian economy is expected to rise from $41 billion in 2007 to $51 billion in 2010, the Deputy Minister of Economic Development and Trade said in late December.
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Foreign Direct Investment in Russia to Rise to $51 Billion in 2010
Foreign direct investment in the Russian economy is expected to rise from $41 billion in 2007 to $51 billion in 2010, the Deputy Minister of Economic Development and Trade said in late December. 
Andrey Belousov said this figure was forecast in a consolidated report on the results and guidelines for the Russian government’s activities in 2008-2010 to be presented at a Government session by Deputy Prime Minister Alexander Zhukov. 
A. Belousov also said the figure was important for Russia to ensure sustainable economic growth in the country. 
In comparison, China had 140% more foreign direct investment than Russia in 2006 ($69.5 billion against $28.7 billion). The Deputy Minister of Economic Development and Trade said Russia needed to develop a competitive market for sustainable economic growth. 
“It is necessary to reduce the share of natural monopolies’ products in our GDP from the current 11% to 8.5% by late 2010”, he stated. 
The consolidated report also stipulates the boosting of labor productivity by more than 20%. This will help reduce unemployment from 6% to 4% by the end of 2010, A. Belousov said. 
The Deputy Minister of Economic Development and Trade also said it was important for Russia to develop hi-tech sectors, particularly civil aviation, ship-building, the space industry and nuclear technologies. 
“These sectors could eventually capture around 10% of the world market”, he concluded.  
UCL Holding B.V. Purchased a Shareholding of OAO Universal Transshipment Complex in Ust-Luga  
Dutch holding company UCL Holding B.V., controlled by Vladimir Lisin, a majority shareholder of OAO Novolipetsk Steel (OAO NLMK), purchased CNP INVESTMENTS N.V. company, which owns a 50% shareholding and is an investor in the construction of a cargo terminal in Ust-Luga port, OAO Universal Transshipment Complex in January.
The purchase was made in accordance with the strategy of UCL Holding B.V., aimed at increasing its presence in the Russian stevedoring market.
All construction work has been finished now and the terminal has been put into operation. At the beginning of 2008, a border crossing is being put into operation at the terminal. During the year, OAO Universal Transshipment Complex plans to purchase additional handling equipment  for the sum of USD 10 million.
Once the terminal starts operating at the projected capacity, the throughput of OAO Universal Transshipment Complex is to reach 4-5 million tons of export and import cargo. In particular, it is planned to handle import coking coal for the metallurgy industry. Redirection of environmentally-unfriendly bulk cargo from the Sea Port of Saint Petersburg to the terminal in Ust-Luga will aid improvement of the ecological situation in Saint Petersburg.
Universal Cargo Logistics Holding B.V. is a transport holding company, controlling the group of companies OAO Sea Port of Saint Petersburg and OAO Taganrog Commercial Sea Port. The total throughput of the companies exceeds 14 million tons annually.
The holding company’s development strategy envisages consolidation of transport assets, including the ones involved in sea, river and railway transportation as well as stevedoring. According to the plan, the enterprises incorporated into the holding company will handle at least 45 million tons of cargo annually by 2010.
E-Signature for Oktyabrskaya Railway     
Last December, Oktyabrskaya Railway (October Railway – an affiliate of OAO RZD) in cooperation with ZAO TransTeleCom company put into operation e-registration of transportation documents (invoice form – GU29) on empty private wagons, whereby the signature on them could be an electronic one.
The technology is implemented in seven stations in Karelia, Saint Petersburg, and the Leningrad, Novgorod and Moscow regions. The stations are Nigozero, Predportovaya, Shusha­ry, Avtovo, Parnas, Novgorod-on-Volkhov and Ostashkov.
Yury Surodin, engineer-in-chief of the Oktya­brskaya Railway Centre of Transport Service, said that the implemented technology allows all the clients serviced by the stations to fill in the document necessary for transportation and sign it with e-signature regardless how far their office is from the station. To do it, a client is to set an AS ETRAN worksite and activate the e-signature 
Thus, it is unnecessary for the client to present it at the station. He gets an opportunity to manage his consignments at all the stations of the network from one controlling centre. Consequently, the time taken for a client’s work falls and he gets an opportunity to change the technology used by his supply departments.
Yury Suvorin emphasised that e-signature use is possible to use for other documents for control of freight transportation and services such as applications for transportation, registration cards, cumulative lists, etc.
Thus, the opportunity to transfer all stages of preparation and organisation of transportation to e-document has been created.
NEVZ Got Conformance Certificate for E5K Electric Locomotives Batch     
Russian Certification Register at the Federal Railway Transport gave a certificate of conformance to the first batch of new E5K type mainline freight electric alternating current locomotives, produced by Novocherkassk Electric Locomotive Building Plant (NEVZ, incorporated into ZAO Transmashholding). 
The certificate is in force until December 24, 2008. According to it, NEVZ is allowed to produce 30 electric locomotives of the type mentioned. The contract concluded by OAO RZD and ZAO Transmashholding envisages that the latter is to deliver 109 locomotives to Russian Railways before the end of 2009.
E5K is a single-section electric locomotive, developed on the base of serial locomotive of 2ES5K type “Ermak”. It is created to provide shunting and removing services and to transport small freight trains. On the Russian railway network, E5K will replace electric locomotives of VL60K type, produced by NEVZ in 1957-1967.
LUKOIL And GAZPROM NEFT Established a Joint Venture
OAO LUKOIL and OAO GAZPROM NEFT established a joint venture, OOO Oil and Gas Company “Regional Development”.
The relevant documents were signed by Vagit Alekperov, President of OAO LUKOIL, and Alexander Dyukov, President of OAO GAZPROM NEFT.
OAO LUKOIL owns a 49 percent stake in the authorised capital of the joint venture, OAO GAZPROM NEFT has a 51 percent stake. The authorised capital of the enterprise will be comprised of monetary contributions. The joint venture will be managed on a parity basis. 
The joint venture will focus on acquiring rights for subsurface use, geological survey of subsurface areas, exploration and production of hydrocarbons, field development, implementation of infrastructure-related projects, transportation and marketing of produced hydrocarbon materials.
“The joint venture of LUKOIL and GAZPROM NEFT is an efficient tool of mutually beneficial cooperation between Russia”s major oil companies which possess the great production and financial potential required for implementing major projects,” Vagit Alekperov said.
In his turn, Alexander Dyukov said, “cooperation between GAZPROM NEFT and LUKOIL within the joint venture framework is going to expand the areas of both companies” presence and enhance the efficiency of new field development.”
TransCreditBank Concluded a Contract with Lohr Industrie S.A 
The TransCreditBank team, led by First Vice-president Alexey Krokhin on a business trip to France, signed on November 21 a letter of intent with Lohr Industrie S.A. – the largest world producer of trailers for transporting cars.
 The agreement provides for: 
• acquisition of a large batch of trailers for further leasing to Russian road transporters;
• financial cooperation of the Bank with existing Russian buyers of Lohr Industrie S.A. products;
• financial cooperation of the Bank with Lohr Industrie S.A. subsidiaries in Russia.
Sergey Pushkin, President of TransCreditBank, said: “This deal is another move of the Bank to become the leading specialised transport sector bank in the country. Under the Bank”s Strategy of Development for 2008-2010 we plan to boost financing of procurement of rolling stock and equipment for Russia”s transport sector, including on a leasing basis. Cooperation with the Ministry of Transport of Russia, with which the Bank entered in the Strategic Cooperation Agreement in December 2006, facilitates achievement of these objectives. The Lohr Industrie S.A. deal is the second major contract with western truck producers. In May 2007 deliveries of MAN trucks to Russian leasing companies started.”
Railways of Yakutia: Revenue Exceeded RUR 1Billion 
“In 2007 the revenue of OJSC “Railroad of Yakutia” exceeded RUR 1 billion, RUR 400 million up year-on-year”, said Vasily Shimokhin, Director General of the company.
“In 2006 the company’s revenue was much smaller – only RUR 600 million”, he highlighted. The head of the company noted that the productive activity also grew significantly. In 2006 “Railroad of Yakutia” transported 1,900 tons of cargo, and last year the figure amounted to 2,200 tons.
“The larger part of the revenue was from transportation of pipes for construction of the oil pipeline East Siberia – the Pacific Ocean. Container and section transportation volume also increased significantly”, emphasised V. Shimokhin.
In his words, in 2008 the volume of pipes for transportation will decrease, because the major part of them was delivered last year.
“We count on the increase of coal transportation volumes. In Yakutia coal companies are increasing coal extraction, since the prices and the demand for the cargo have grown several times over. Small coal enterprises are developing especially well”, highlighted V. Shimokhin. Experts believe that the passenger flow will grow significantly after a railway line to Yakutsk is built. “The year of 2007 gave Yakutian railwaymen some prospects. A lot of social and investment problems were solved. The work of our company became stable and profitable”, said V. Shimokhin.
Ukraine Increases Production of Flat Wagons 
OAO Kryukov Wagon Building Plant (Ukraine), the only Ukrainian manufacturer of both freight and passenger wagons, has completed the development of a new long-base combined wagon for large-capacity container transportation. Model 13-7031 is targeted to carry two 40 TEU containers, and long-length products (pipes and logs).
As the company announced, the new model will allow the consumer to save on transport expenses. The high quality of the production was proved by ground tests. 
    [~DETAIL_TEXT] => 
Foreign Direct Investment in Russia to Rise to $51 Billion in 2010
Foreign direct investment in the Russian economy is expected to rise from $41 billion in 2007 to $51 billion in 2010, the Deputy Minister of Economic Development and Trade said in late December. 
Andrey Belousov said this figure was forecast in a consolidated report on the results and guidelines for the Russian government’s activities in 2008-2010 to be presented at a Government session by Deputy Prime Minister Alexander Zhukov. 
A. Belousov also said the figure was important for Russia to ensure sustainable economic growth in the country. 
In comparison, China had 140% more foreign direct investment than Russia in 2006 ($69.5 billion against $28.7 billion). The Deputy Minister of Economic Development and Trade said Russia needed to develop a competitive market for sustainable economic growth. 
“It is necessary to reduce the share of natural monopolies’ products in our GDP from the current 11% to 8.5% by late 2010”, he stated. 
The consolidated report also stipulates the boosting of labor productivity by more than 20%. This will help reduce unemployment from 6% to 4% by the end of 2010, A. Belousov said. 
The Deputy Minister of Economic Development and Trade also said it was important for Russia to develop hi-tech sectors, particularly civil aviation, ship-building, the space industry and nuclear technologies. 
“These sectors could eventually capture around 10% of the world market”, he concluded.  
UCL Holding B.V. Purchased a Shareholding of OAO Universal Transshipment Complex in Ust-Luga  
Dutch holding company UCL Holding B.V., controlled by Vladimir Lisin, a majority shareholder of OAO Novolipetsk Steel (OAO NLMK), purchased CNP INVESTMENTS N.V. company, which owns a 50% shareholding and is an investor in the construction of a cargo terminal in Ust-Luga port, OAO Universal Transshipment Complex in January.
The purchase was made in accordance with the strategy of UCL Holding B.V., aimed at increasing its presence in the Russian stevedoring market.
All construction work has been finished now and the terminal has been put into operation. At the beginning of 2008, a border crossing is being put into operation at the terminal. During the year, OAO Universal Transshipment Complex plans to purchase additional handling equipment  for the sum of USD 10 million.
Once the terminal starts operating at the projected capacity, the throughput of OAO Universal Transshipment Complex is to reach 4-5 million tons of export and import cargo. In particular, it is planned to handle import coking coal for the metallurgy industry. Redirection of environmentally-unfriendly bulk cargo from the Sea Port of Saint Petersburg to the terminal in Ust-Luga will aid improvement of the ecological situation in Saint Petersburg.
Universal Cargo Logistics Holding B.V. is a transport holding company, controlling the group of companies OAO Sea Port of Saint Petersburg and OAO Taganrog Commercial Sea Port. The total throughput of the companies exceeds 14 million tons annually.
The holding company’s development strategy envisages consolidation of transport assets, including the ones involved in sea, river and railway transportation as well as stevedoring. According to the plan, the enterprises incorporated into the holding company will handle at least 45 million tons of cargo annually by 2010.
E-Signature for Oktyabrskaya Railway     
Last December, Oktyabrskaya Railway (October Railway – an affiliate of OAO RZD) in cooperation with ZAO TransTeleCom company put into operation e-registration of transportation documents (invoice form – GU29) on empty private wagons, whereby the signature on them could be an electronic one.
The technology is implemented in seven stations in Karelia, Saint Petersburg, and the Leningrad, Novgorod and Moscow regions. The stations are Nigozero, Predportovaya, Shusha­ry, Avtovo, Parnas, Novgorod-on-Volkhov and Ostashkov.
Yury Surodin, engineer-in-chief of the Oktya­brskaya Railway Centre of Transport Service, said that the implemented technology allows all the clients serviced by the stations to fill in the document necessary for transportation and sign it with e-signature regardless how far their office is from the station. To do it, a client is to set an AS ETRAN worksite and activate the e-signature 
Thus, it is unnecessary for the client to present it at the station. He gets an opportunity to manage his consignments at all the stations of the network from one controlling centre. Consequently, the time taken for a client’s work falls and he gets an opportunity to change the technology used by his supply departments.
Yury Suvorin emphasised that e-signature use is possible to use for other documents for control of freight transportation and services such as applications for transportation, registration cards, cumulative lists, etc.
Thus, the opportunity to transfer all stages of preparation and organisation of transportation to e-document has been created.
NEVZ Got Conformance Certificate for E5K Electric Locomotives Batch     
Russian Certification Register at the Federal Railway Transport gave a certificate of conformance to the first batch of new E5K type mainline freight electric alternating current locomotives, produced by Novocherkassk Electric Locomotive Building Plant (NEVZ, incorporated into ZAO Transmashholding). 
The certificate is in force until December 24, 2008. According to it, NEVZ is allowed to produce 30 electric locomotives of the type mentioned. The contract concluded by OAO RZD and ZAO Transmashholding envisages that the latter is to deliver 109 locomotives to Russian Railways before the end of 2009.
E5K is a single-section electric locomotive, developed on the base of serial locomotive of 2ES5K type “Ermak”. It is created to provide shunting and removing services and to transport small freight trains. On the Russian railway network, E5K will replace electric locomotives of VL60K type, produced by NEVZ in 1957-1967.
LUKOIL And GAZPROM NEFT Established a Joint Venture
OAO LUKOIL and OAO GAZPROM NEFT established a joint venture, OOO Oil and Gas Company “Regional Development”.
The relevant documents were signed by Vagit Alekperov, President of OAO LUKOIL, and Alexander Dyukov, President of OAO GAZPROM NEFT.
OAO LUKOIL owns a 49 percent stake in the authorised capital of the joint venture, OAO GAZPROM NEFT has a 51 percent stake. The authorised capital of the enterprise will be comprised of monetary contributions. The joint venture will be managed on a parity basis. 
The joint venture will focus on acquiring rights for subsurface use, geological survey of subsurface areas, exploration and production of hydrocarbons, field development, implementation of infrastructure-related projects, transportation and marketing of produced hydrocarbon materials.
“The joint venture of LUKOIL and GAZPROM NEFT is an efficient tool of mutually beneficial cooperation between Russia”s major oil companies which possess the great production and financial potential required for implementing major projects,” Vagit Alekperov said.
In his turn, Alexander Dyukov said, “cooperation between GAZPROM NEFT and LUKOIL within the joint venture framework is going to expand the areas of both companies” presence and enhance the efficiency of new field development.”
TransCreditBank Concluded a Contract with Lohr Industrie S.A 
The TransCreditBank team, led by First Vice-president Alexey Krokhin on a business trip to France, signed on November 21 a letter of intent with Lohr Industrie S.A. – the largest world producer of trailers for transporting cars.
 The agreement provides for: 
• acquisition of a large batch of trailers for further leasing to Russian road transporters;
• financial cooperation of the Bank with existing Russian buyers of Lohr Industrie S.A. products;
• financial cooperation of the Bank with Lohr Industrie S.A. subsidiaries in Russia.
Sergey Pushkin, President of TransCreditBank, said: “This deal is another move of the Bank to become the leading specialised transport sector bank in the country. Under the Bank”s Strategy of Development for 2008-2010 we plan to boost financing of procurement of rolling stock and equipment for Russia”s transport sector, including on a leasing basis. Cooperation with the Ministry of Transport of Russia, with which the Bank entered in the Strategic Cooperation Agreement in December 2006, facilitates achievement of these objectives. The Lohr Industrie S.A. deal is the second major contract with western truck producers. In May 2007 deliveries of MAN trucks to Russian leasing companies started.”
Railways of Yakutia: Revenue Exceeded RUR 1Billion 
“In 2007 the revenue of OJSC “Railroad of Yakutia” exceeded RUR 1 billion, RUR 400 million up year-on-year”, said Vasily Shimokhin, Director General of the company.
“In 2006 the company’s revenue was much smaller – only RUR 600 million”, he highlighted. The head of the company noted that the productive activity also grew significantly. In 2006 “Railroad of Yakutia” transported 1,900 tons of cargo, and last year the figure amounted to 2,200 tons.
“The larger part of the revenue was from transportation of pipes for construction of the oil pipeline East Siberia – the Pacific Ocean. Container and section transportation volume also increased significantly”, emphasised V. Shimokhin.
In his words, in 2008 the volume of pipes for transportation will decrease, because the major part of them was delivered last year.
“We count on the increase of coal transportation volumes. In Yakutia coal companies are increasing coal extraction, since the prices and the demand for the cargo have grown several times over. Small coal enterprises are developing especially well”, highlighted V. Shimokhin. Experts believe that the passenger flow will grow significantly after a railway line to Yakutsk is built. “The year of 2007 gave Yakutian railwaymen some prospects. A lot of social and investment problems were solved. The work of our company became stable and profitable”, said V. Shimokhin.
Ukraine Increases Production of Flat Wagons 
OAO Kryukov Wagon Building Plant (Ukraine), the only Ukrainian manufacturer of both freight and passenger wagons, has completed the development of a new long-base combined wagon for large-capacity container transportation. Model 13-7031 is targeted to carry two 40 TEU containers, and long-length products (pipes and logs).
As the company announced, the new model will allow the consumer to save on transport expenses. The high quality of the production was proved by ground tests. 
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Peculiarities of Russia   
Russian ports have certain specific features which must be considered when analysing their current position and development prospects. Firstly, climatic and geographical factors. 31 Russian ports are shallow-water, which limits their opportunities: stevedoring companies operating in such ports cannot service vessels with the freight capacity of over 10,000 tons. There are only 10 ports in the state which can service modern vessels with a deadweight of over 50,000 tons. Only one Russian port – the port of Murmansk – can service vessels with the deadweight of over 150,000 tons.
Most Russian ports are located on freezing seas and the lack of tax and customs preferences for stevedoring companies, traditional in international practice, also plays an important role. The foundational law “On Sea Ports” was approved in Russia at the end of 2007, and a year will pass before the law will work properly. The law on port special economic zones, discussed for a long time, was adopted in 2007. 
Another common feature is an underdeveloped port logistics infrastructure and insufficient railway and road approaches to berths. Nowadays, no large Russian port has a direct exit to any federal motorway. Apart from these common features, every region of the country – Southern, North-Western and the Far East – have individual peculiarities. 
South: Novorossiysk Developing According to the Plan
The throughput of all the Black Sea ports is limited because of the carrying capacity of the Turkish straights, and nowadays they work at full capacity without having any potential for growth. This caused changes in the list of cargoes transported via the Southern basin. In 2007 the ports handled about 160 million tons of cargo, of which oil and oil products made 70% of the volume. Meanwhile, solid bulk handling increased by more than 6% year-on-year, while liquid bulk handling fell by almost 2%. According to experts’ estimations, liquid bulk is being re-routed to the Far East and North-West of the country.
The RF Ministry of Transport considers the priority ports on the basin to be Novorossiysk, Taman, and Kavkaz. Development of the ports must increase throughput to 230 million tons by 2015 (45% up in comparison with 2006). 
The port of Novorossiysk is the largest port in the region and is now subject to investment project “Complex Development of Novorossiysk Transport Junction”. “In December 2006, the port of Novorossiysk won the federal tender for making a feasibility study of the investments in the framework of the project “Complex Development of Novorossiysk Transport Junction”, says Igor Vilinov, Director General of OAO Novorossiysk Commercial Sea Port. “We created a working group consisting of specialists from our company and OAO RZD. The aim of the specialists is to make the feasibility study, which will allow the junction complex project to be carried out efficiently”. He also highlights that: “The railway constituent plays a rather important role in every part of our project. Today, both our colleague railwaymen and us understand that development of the port capacities without development of the port railway infrastructure will hardly allow us to reach the set targets”, i.e. increase of export and import cargo transportation volumes via the Novorossiysk transport junction to 100 million tons by 2010. This will be possible also due to the growth of transportation volumes of export and import freight by railway to 50 million tons.
In the port of Tuapse it is planned to develop capacities for liquid bulk handling, with coal from this port re-routed to the new port of Taman. The port of Astrakhan will also be unloaded by creating a new port, Olya, located 100 km away along the Volga river.
Far East: Stake On Transit Cargoes From Asia        
There are 25 ports in the Far Eastern basin. Six of them are in the Primorsk region, four in the Khabarovsk region, eight in Sakhalin region, one in Magadan region, two in Kamchatka region, and the final four in Chukotka autonomous region. Also, eight fish ports are now functioning in the Far Eastern region, and six of them have adjacent water areas with commercial ports.
In 2007, the total throughput of the stevedoring companies in the Far Eastern region amounted to about 73 million tons (17% of that was liquid bulk), or 17% of the total throughput of all Russian ports. The main cargoes handled there are coal (about 30%), oil and oil products (over 25%).
It is worth noting that all Russian ports exceeded the results of the Soviet Union ports (1990) in 2005 but the Far Eastern ports only in 2007. Nevertheless, according to the assessment of RF Transport Minister Igor Levitin, the main port capacities of the region are working almost at their full capacity. Meanwhile, the structure of the cargoes serviced changed: the handling volume of liquid bulk and bulked cargoes increased, and general cargo handling fell. The Russian Ministry of Transport considers that the priority ports in the basin are Vostochny, Vanino, Kozmino, Prigorodnoye (Sakhalin island), Petropavlovsk-Kamchatsky and Vladivostok. The ports are to be developed so that their throughput is to increase to 145 million tons by 2015 (a twofold increase in comparison with 2006).
Investors and the Government of Russia pay much attention to development of Nakhodka and Vladivostok ports. Thus, the managing company of the South Korean port Busan, known as Busan Port Authority (BPA), is going to invest USD 109 million into building a container terminal in the port of Nakhodka. The capacity of the new terminal will amount to 400,000 TEU by 2010. Its first stage, with the capacity of 150,000 TEU, will have been built by July, 2008 (at a cost of USD 21.8 million).
The group of companies N-Trans is also going to invest into the container terminal “Vostochny” (Nakhodka) to enlarge its capacity to 2.5 million TEU per annum. By 2015, the capacity of the container terminal is to increase to 5 million containers, the coal terminal to 20 million tons. Also, a new terminal for grain handling with a capacity of 5 million tons is to be built by then.
Development of the port of Nakhodka is restricted by the territory of the city and insufficient depths at the berths. These problems may be solved by taking the line of the existing berths 50 metres away to the sea. It is planned to construct a modern passenger complex in the port of Vladivostok. The complex will be able to simultaneously service three cruise vessels with a length of 350 metres and passenger carrying capacity of over 3,000 people. The annual capacity of the complex will be up to 500,000 tourists.
In the framework of the pipeline system Eastern Siberia – the Pacific Ocean, the first stage of the sea terminal for oil handling is to be constructed in the port in Kozmino bay in 2008-2010. Its annual capacity will be 15 million tons. Also, a new port for oil and gas transportation will be constructed in Ilyinsky settlement (Sakhalin). To handle export coal, it is planned to modernise the port of Vanino, and build specialised terminals in Muchka bay. The projects to be carried out in the near future are further development of onland transport infrastructure – Vladivostok- Nakhodka – Vostochny port and Khabarovsk – Lidoga – Vanino motorways, and modernisation of the eastern part of Baikalo-Amurskaya Railway (the BAM). 
North-Western Region Lacks Space
The ports of the North-Western basin handle over 45% of the total throughput. According to the data of the Ministry of Transport, the stevedoring companies operating in the North-Western basin increased cargo handling volumes by 9.7% year-on-year in 2007. The major cargoes handled are oil and oil products (over 60%) and coal (over 10%).             
In spite of the fact that cargo handling volumes in the ports of North-Western region amount to 1.5 million TEU, the lack of capacity in the port of Saint Petersburg is about 25%. 
The fishing sea port of Saint Petersburg has its own problems. Konstantin Skovoroda, Director General of the group of companies Russian Transport Lines, which is an international logistics services provider, notes: “The port lacks area for cargo storage, organisation of the full pack of services, terminal management experience, IT systems for managing terminals, warehouses, and an operative data exchange between all the participants of the process “producer – operator – state bodies - dealer”. Other problems are the lack of registered sea lines, and administrative difficulties in organisation of border crossings and terminals (ports)”.
Alexander Golovizin, Deputy Director General of OAO Managing Company of Ust-Luga, says, “We worry about the problem of cargo transportation out of the port. Nowadays, the capacity of railway approaches is sufficient but we have to make enormous efforts to control the process, since the situation at railway approaches to ports further down the line is rather complicated.
Also, we need a motorway Ust-Luga – Novgorod, which has an exit to the federal road connecting Moscow and Saint Petersburg. It takes much time to make and implement all the suggestions for transport infrastructure development; if nothing is changed, a real shortage of capacity will take hold in the North-Western region in 2009-2010”.
In spite of a number of serous problems, not all market participants consider that the ports of the North-Western region have started to work at a full capacity. “Due to the common tendency of the ports to transfer to servicing enlarged cargo packages, including package-by-package cargo, pallets, containers and ro-ro cargoes, there is a lack of warehousing capacities, but it is not correct to speak about an excess of their handling capacities. A lot of companies – sea ports operators are already developing port territories and constructing distant “dry” ports to increase the efficiency of sea port functioning as handling but not warehousing complexes,” emphasises Ev­geny Korotkov, Director of the Port Block of Oslo Marine group of companies. 
The RF Ministry of Transport considers that the priority ports in the basin are Murmansk, Saint Petersburg, Primorsk, Ust-Luga, and Kaliningrad. And the Ministry is ready to solve their problems. Due to development of the mentioned ports, their throughput is to increase to 314 million tons by 2015 (60% growth in comparison with 2006).
In 2007, the cost of the sea terminals development projects – declared and being carried out in the Russian North-West – is USD 2.5 billion. The largest of them is “Baltic Container Terminal” in the port of Ust-Luga, owned by National Container Company and German operator Eurogate. The first stage is to be completed at the end of 2008. Also, the General scheme of Ust-Luga port development is now being corrected so that its capacities increase to 125 million tons by 2015, including 85 million tons of solid bulk and 40 million tons of liquid bulk. 
Sea Port of Saint Petersburg is going to construct a container terminal with a capacity of 1.4 million TEU on the territory of its stevedores. In several years, the group of companies N-Trans will increase the container turnover of the recently purchased OAO Petrolesport to 2 million TEU, i.e. fivefold. Moreover, N-Trans plans to put into operation the first stage of “dry” terminals (container and railway terminals) in Yanino settlements near Saint Petersburg at the end of 2008. A modern container terminal of Oslo Marine group will appear at the terminals for log handling in the port of Vyborg.
Among the car terminals, the largest projects of the year were “South-2” in Ust-Luga, the first stage of which is to be put into operation by May 2008, and a ro-ro terminal in the territory of the Sea Port of Saint Petersburg, that is to be launched in 2008. 
As for the port of Murmansk, the western shore of Kola Bay will be developed. A coal terminal with an annual capacity of 15 million tons will be built there as well as terminals for general cargo (with a 3 million ton capacity) and oil bulk handling (25-35 million tons).
Resume
The scale of projects is so large that, in the near future, the Russian Government may solve the problems of the RF ports. The question is whether there will be enough money and insistence by officials.

By Alexey  Strigin
    [~DETAIL_TEXT] => 
Peculiarities of Russia   
Russian ports have certain specific features which must be considered when analysing their current position and development prospects. Firstly, climatic and geographical factors. 31 Russian ports are shallow-water, which limits their opportunities: stevedoring companies operating in such ports cannot service vessels with the freight capacity of over 10,000 tons. There are only 10 ports in the state which can service modern vessels with a deadweight of over 50,000 tons. Only one Russian port – the port of Murmansk – can service vessels with the deadweight of over 150,000 tons.
Most Russian ports are located on freezing seas and the lack of tax and customs preferences for stevedoring companies, traditional in international practice, also plays an important role. The foundational law “On Sea Ports” was approved in Russia at the end of 2007, and a year will pass before the law will work properly. The law on port special economic zones, discussed for a long time, was adopted in 2007. 
Another common feature is an underdeveloped port logistics infrastructure and insufficient railway and road approaches to berths. Nowadays, no large Russian port has a direct exit to any federal motorway. Apart from these common features, every region of the country – Southern, North-Western and the Far East – have individual peculiarities. 
South: Novorossiysk Developing According to the Plan
The throughput of all the Black Sea ports is limited because of the carrying capacity of the Turkish straights, and nowadays they work at full capacity without having any potential for growth. This caused changes in the list of cargoes transported via the Southern basin. In 2007 the ports handled about 160 million tons of cargo, of which oil and oil products made 70% of the volume. Meanwhile, solid bulk handling increased by more than 6% year-on-year, while liquid bulk handling fell by almost 2%. According to experts’ estimations, liquid bulk is being re-routed to the Far East and North-West of the country.
The RF Ministry of Transport considers the priority ports on the basin to be Novorossiysk, Taman, and Kavkaz. Development of the ports must increase throughput to 230 million tons by 2015 (45% up in comparison with 2006). 
The port of Novorossiysk is the largest port in the region and is now subject to investment project “Complex Development of Novorossiysk Transport Junction”. “In December 2006, the port of Novorossiysk won the federal tender for making a feasibility study of the investments in the framework of the project “Complex Development of Novorossiysk Transport Junction”, says Igor Vilinov, Director General of OAO Novorossiysk Commercial Sea Port. “We created a working group consisting of specialists from our company and OAO RZD. The aim of the specialists is to make the feasibility study, which will allow the junction complex project to be carried out efficiently”. He also highlights that: “The railway constituent plays a rather important role in every part of our project. Today, both our colleague railwaymen and us understand that development of the port capacities without development of the port railway infrastructure will hardly allow us to reach the set targets”, i.e. increase of export and import cargo transportation volumes via the Novorossiysk transport junction to 100 million tons by 2010. This will be possible also due to the growth of transportation volumes of export and import freight by railway to 50 million tons.
In the port of Tuapse it is planned to develop capacities for liquid bulk handling, with coal from this port re-routed to the new port of Taman. The port of Astrakhan will also be unloaded by creating a new port, Olya, located 100 km away along the Volga river.
Far East: Stake On Transit Cargoes From Asia        
There are 25 ports in the Far Eastern basin. Six of them are in the Primorsk region, four in the Khabarovsk region, eight in Sakhalin region, one in Magadan region, two in Kamchatka region, and the final four in Chukotka autonomous region. Also, eight fish ports are now functioning in the Far Eastern region, and six of them have adjacent water areas with commercial ports.
In 2007, the total throughput of the stevedoring companies in the Far Eastern region amounted to about 73 million tons (17% of that was liquid bulk), or 17% of the total throughput of all Russian ports. The main cargoes handled there are coal (about 30%), oil and oil products (over 25%).
It is worth noting that all Russian ports exceeded the results of the Soviet Union ports (1990) in 2005 but the Far Eastern ports only in 2007. Nevertheless, according to the assessment of RF Transport Minister Igor Levitin, the main port capacities of the region are working almost at their full capacity. Meanwhile, the structure of the cargoes serviced changed: the handling volume of liquid bulk and bulked cargoes increased, and general cargo handling fell. The Russian Ministry of Transport considers that the priority ports in the basin are Vostochny, Vanino, Kozmino, Prigorodnoye (Sakhalin island), Petropavlovsk-Kamchatsky and Vladivostok. The ports are to be developed so that their throughput is to increase to 145 million tons by 2015 (a twofold increase in comparison with 2006).
Investors and the Government of Russia pay much attention to development of Nakhodka and Vladivostok ports. Thus, the managing company of the South Korean port Busan, known as Busan Port Authority (BPA), is going to invest USD 109 million into building a container terminal in the port of Nakhodka. The capacity of the new terminal will amount to 400,000 TEU by 2010. Its first stage, with the capacity of 150,000 TEU, will have been built by July, 2008 (at a cost of USD 21.8 million).
The group of companies N-Trans is also going to invest into the container terminal “Vostochny” (Nakhodka) to enlarge its capacity to 2.5 million TEU per annum. By 2015, the capacity of the container terminal is to increase to 5 million containers, the coal terminal to 20 million tons. Also, a new terminal for grain handling with a capacity of 5 million tons is to be built by then.
Development of the port of Nakhodka is restricted by the territory of the city and insufficient depths at the berths. These problems may be solved by taking the line of the existing berths 50 metres away to the sea. It is planned to construct a modern passenger complex in the port of Vladivostok. The complex will be able to simultaneously service three cruise vessels with a length of 350 metres and passenger carrying capacity of over 3,000 people. The annual capacity of the complex will be up to 500,000 tourists.
In the framework of the pipeline system Eastern Siberia – the Pacific Ocean, the first stage of the sea terminal for oil handling is to be constructed in the port in Kozmino bay in 2008-2010. Its annual capacity will be 15 million tons. Also, a new port for oil and gas transportation will be constructed in Ilyinsky settlement (Sakhalin). To handle export coal, it is planned to modernise the port of Vanino, and build specialised terminals in Muchka bay. The projects to be carried out in the near future are further development of onland transport infrastructure – Vladivostok- Nakhodka – Vostochny port and Khabarovsk – Lidoga – Vanino motorways, and modernisation of the eastern part of Baikalo-Amurskaya Railway (the BAM). 
North-Western Region Lacks Space
The ports of the North-Western basin handle over 45% of the total throughput. According to the data of the Ministry of Transport, the stevedoring companies operating in the North-Western basin increased cargo handling volumes by 9.7% year-on-year in 2007. The major cargoes handled are oil and oil products (over 60%) and coal (over 10%).             
In spite of the fact that cargo handling volumes in the ports of North-Western region amount to 1.5 million TEU, the lack of capacity in the port of Saint Petersburg is about 25%. 
The fishing sea port of Saint Petersburg has its own problems. Konstantin Skovoroda, Director General of the group of companies Russian Transport Lines, which is an international logistics services provider, notes: “The port lacks area for cargo storage, organisation of the full pack of services, terminal management experience, IT systems for managing terminals, warehouses, and an operative data exchange between all the participants of the process “producer – operator – state bodies - dealer”. Other problems are the lack of registered sea lines, and administrative difficulties in organisation of border crossings and terminals (ports)”.
Alexander Golovizin, Deputy Director General of OAO Managing Company of Ust-Luga, says, “We worry about the problem of cargo transportation out of the port. Nowadays, the capacity of railway approaches is sufficient but we have to make enormous efforts to control the process, since the situation at railway approaches to ports further down the line is rather complicated.
Also, we need a motorway Ust-Luga – Novgorod, which has an exit to the federal road connecting Moscow and Saint Petersburg. It takes much time to make and implement all the suggestions for transport infrastructure development; if nothing is changed, a real shortage of capacity will take hold in the North-Western region in 2009-2010”.
In spite of a number of serous problems, not all market participants consider that the ports of the North-Western region have started to work at a full capacity. “Due to the common tendency of the ports to transfer to servicing enlarged cargo packages, including package-by-package cargo, pallets, containers and ro-ro cargoes, there is a lack of warehousing capacities, but it is not correct to speak about an excess of their handling capacities. A lot of companies – sea ports operators are already developing port territories and constructing distant “dry” ports to increase the efficiency of sea port functioning as handling but not warehousing complexes,” emphasises Ev­geny Korotkov, Director of the Port Block of Oslo Marine group of companies. 
The RF Ministry of Transport considers that the priority ports in the basin are Murmansk, Saint Petersburg, Primorsk, Ust-Luga, and Kaliningrad. And the Ministry is ready to solve their problems. Due to development of the mentioned ports, their throughput is to increase to 314 million tons by 2015 (60% growth in comparison with 2006).
In 2007, the cost of the sea terminals development projects – declared and being carried out in the Russian North-West – is USD 2.5 billion. The largest of them is “Baltic Container Terminal” in the port of Ust-Luga, owned by National Container Company and German operator Eurogate. The first stage is to be completed at the end of 2008. Also, the General scheme of Ust-Luga port development is now being corrected so that its capacities increase to 125 million tons by 2015, including 85 million tons of solid bulk and 40 million tons of liquid bulk. 
Sea Port of Saint Petersburg is going to construct a container terminal with a capacity of 1.4 million TEU on the territory of its stevedores. In several years, the group of companies N-Trans will increase the container turnover of the recently purchased OAO Petrolesport to 2 million TEU, i.e. fivefold. Moreover, N-Trans plans to put into operation the first stage of “dry” terminals (container and railway terminals) in Yanino settlements near Saint Petersburg at the end of 2008. A modern container terminal of Oslo Marine group will appear at the terminals for log handling in the port of Vyborg.
Among the car terminals, the largest projects of the year were “South-2” in Ust-Luga, the first stage of which is to be put into operation by May 2008, and a ro-ro terminal in the territory of the Sea Port of Saint Petersburg, that is to be launched in 2008. 
As for the port of Murmansk, the western shore of Kola Bay will be developed. A coal terminal with an annual capacity of 15 million tons will be built there as well as terminals for general cargo (with a 3 million ton capacity) and oil bulk handling (25-35 million tons).
Resume
The scale of projects is so large that, in the near future, the Russian Government may solve the problems of the RF ports. The question is whether there will be enough money and insistence by officials.

By Alexey  Strigin
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    [DETAIL_TEXT] => 
Peculiarities of Russia   
Russian ports have certain specific features which must be considered when analysing their current position and development prospects. Firstly, climatic and geographical factors. 31 Russian ports are shallow-water, which limits their opportunities: stevedoring companies operating in such ports cannot service vessels with the freight capacity of over 10,000 tons. There are only 10 ports in the state which can service modern vessels with a deadweight of over 50,000 tons. Only one Russian port – the port of Murmansk – can service vessels with the deadweight of over 150,000 tons.
Most Russian ports are located on freezing seas and the lack of tax and customs preferences for stevedoring companies, traditional in international practice, also plays an important role. The foundational law “On Sea Ports” was approved in Russia at the end of 2007, and a year will pass before the law will work properly. The law on port special economic zones, discussed for a long time, was adopted in 2007. 
Another common feature is an underdeveloped port logistics infrastructure and insufficient railway and road approaches to berths. Nowadays, no large Russian port has a direct exit to any federal motorway. Apart from these common features, every region of the country – Southern, North-Western and the Far East – have individual peculiarities. 
South: Novorossiysk Developing According to the Plan
The throughput of all the Black Sea ports is limited because of the carrying capacity of the Turkish straights, and nowadays they work at full capacity without having any potential for growth. This caused changes in the list of cargoes transported via the Southern basin. In 2007 the ports handled about 160 million tons of cargo, of which oil and oil products made 70% of the volume. Meanwhile, solid bulk handling increased by more than 6% year-on-year, while liquid bulk handling fell by almost 2%. According to experts’ estimations, liquid bulk is being re-routed to the Far East and North-West of the country.
The RF Ministry of Transport considers the priority ports on the basin to be Novorossiysk, Taman, and Kavkaz. Development of the ports must increase throughput to 230 million tons by 2015 (45% up in comparison with 2006). 
The port of Novorossiysk is the largest port in the region and is now subject to investment project “Complex Development of Novorossiysk Transport Junction”. “In December 2006, the port of Novorossiysk won the federal tender for making a feasibility study of the investments in the framework of the project “Complex Development of Novorossiysk Transport Junction”, says Igor Vilinov, Director General of OAO Novorossiysk Commercial Sea Port. “We created a working group consisting of specialists from our company and OAO RZD. The aim of the specialists is to make the feasibility study, which will allow the junction complex project to be carried out efficiently”. He also highlights that: “The railway constituent plays a rather important role in every part of our project. Today, both our colleague railwaymen and us understand that development of the port capacities without development of the port railway infrastructure will hardly allow us to reach the set targets”, i.e. increase of export and import cargo transportation volumes via the Novorossiysk transport junction to 100 million tons by 2010. This will be possible also due to the growth of transportation volumes of export and import freight by railway to 50 million tons.
In the port of Tuapse it is planned to develop capacities for liquid bulk handling, with coal from this port re-routed to the new port of Taman. The port of Astrakhan will also be unloaded by creating a new port, Olya, located 100 km away along the Volga river.
Far East: Stake On Transit Cargoes From Asia        
There are 25 ports in the Far Eastern basin. Six of them are in the Primorsk region, four in the Khabarovsk region, eight in Sakhalin region, one in Magadan region, two in Kamchatka region, and the final four in Chukotka autonomous region. Also, eight fish ports are now functioning in the Far Eastern region, and six of them have adjacent water areas with commercial ports.
In 2007, the total throughput of the stevedoring companies in the Far Eastern region amounted to about 73 million tons (17% of that was liquid bulk), or 17% of the total throughput of all Russian ports. The main cargoes handled there are coal (about 30%), oil and oil products (over 25%).
It is worth noting that all Russian ports exceeded the results of the Soviet Union ports (1990) in 2005 but the Far Eastern ports only in 2007. Nevertheless, according to the assessment of RF Transport Minister Igor Levitin, the main port capacities of the region are working almost at their full capacity. Meanwhile, the structure of the cargoes serviced changed: the handling volume of liquid bulk and bulked cargoes increased, and general cargo handling fell. The Russian Ministry of Transport considers that the priority ports in the basin are Vostochny, Vanino, Kozmino, Prigorodnoye (Sakhalin island), Petropavlovsk-Kamchatsky and Vladivostok. The ports are to be developed so that their throughput is to increase to 145 million tons by 2015 (a twofold increase in comparison with 2006).
Investors and the Government of Russia pay much attention to development of Nakhodka and Vladivostok ports. Thus, the managing company of the South Korean port Busan, known as Busan Port Authority (BPA), is going to invest USD 109 million into building a container terminal in the port of Nakhodka. The capacity of the new terminal will amount to 400,000 TEU by 2010. Its first stage, with the capacity of 150,000 TEU, will have been built by July, 2008 (at a cost of USD 21.8 million).
The group of companies N-Trans is also going to invest into the container terminal “Vostochny” (Nakhodka) to enlarge its capacity to 2.5 million TEU per annum. By 2015, the capacity of the container terminal is to increase to 5 million containers, the coal terminal to 20 million tons. Also, a new terminal for grain handling with a capacity of 5 million tons is to be built by then.
Development of the port of Nakhodka is restricted by the territory of the city and insufficient depths at the berths. These problems may be solved by taking the line of the existing berths 50 metres away to the sea. It is planned to construct a modern passenger complex in the port of Vladivostok. The complex will be able to simultaneously service three cruise vessels with a length of 350 metres and passenger carrying capacity of over 3,000 people. The annual capacity of the complex will be up to 500,000 tourists.
In the framework of the pipeline system Eastern Siberia – the Pacific Ocean, the first stage of the sea terminal for oil handling is to be constructed in the port in Kozmino bay in 2008-2010. Its annual capacity will be 15 million tons. Also, a new port for oil and gas transportation will be constructed in Ilyinsky settlement (Sakhalin). To handle export coal, it is planned to modernise the port of Vanino, and build specialised terminals in Muchka bay. The projects to be carried out in the near future are further development of onland transport infrastructure – Vladivostok- Nakhodka – Vostochny port and Khabarovsk – Lidoga – Vanino motorways, and modernisation of the eastern part of Baikalo-Amurskaya Railway (the BAM). 
North-Western Region Lacks Space
The ports of the North-Western basin handle over 45% of the total throughput. According to the data of the Ministry of Transport, the stevedoring companies operating in the North-Western basin increased cargo handling volumes by 9.7% year-on-year in 2007. The major cargoes handled are oil and oil products (over 60%) and coal (over 10%).             
In spite of the fact that cargo handling volumes in the ports of North-Western region amount to 1.5 million TEU, the lack of capacity in the port of Saint Petersburg is about 25%. 
The fishing sea port of Saint Petersburg has its own problems. Konstantin Skovoroda, Director General of the group of companies Russian Transport Lines, which is an international logistics services provider, notes: “The port lacks area for cargo storage, organisation of the full pack of services, terminal management experience, IT systems for managing terminals, warehouses, and an operative data exchange between all the participants of the process “producer – operator – state bodies - dealer”. Other problems are the lack of registered sea lines, and administrative difficulties in organisation of border crossings and terminals (ports)”.
Alexander Golovizin, Deputy Director General of OAO Managing Company of Ust-Luga, says, “We worry about the problem of cargo transportation out of the port. Nowadays, the capacity of railway approaches is sufficient but we have to make enormous efforts to control the process, since the situation at railway approaches to ports further down the line is rather complicated.
Also, we need a motorway Ust-Luga – Novgorod, which has an exit to the federal road connecting Moscow and Saint Petersburg. It takes much time to make and implement all the suggestions for transport infrastructure development; if nothing is changed, a real shortage of capacity will take hold in the North-Western region in 2009-2010”.
In spite of a number of serous problems, not all market participants consider that the ports of the North-Western region have started to work at a full capacity. “Due to the common tendency of the ports to transfer to servicing enlarged cargo packages, including package-by-package cargo, pallets, containers and ro-ro cargoes, there is a lack of warehousing capacities, but it is not correct to speak about an excess of their handling capacities. A lot of companies – sea ports operators are already developing port territories and constructing distant “dry” ports to increase the efficiency of sea port functioning as handling but not warehousing complexes,” emphasises Ev­geny Korotkov, Director of the Port Block of Oslo Marine group of companies. 
The RF Ministry of Transport considers that the priority ports in the basin are Murmansk, Saint Petersburg, Primorsk, Ust-Luga, and Kaliningrad. And the Ministry is ready to solve their problems. Due to development of the mentioned ports, their throughput is to increase to 314 million tons by 2015 (60% growth in comparison with 2006).
In 2007, the cost of the sea terminals development projects – declared and being carried out in the Russian North-West – is USD 2.5 billion. The largest of them is “Baltic Container Terminal” in the port of Ust-Luga, owned by National Container Company and German operator Eurogate. The first stage is to be completed at the end of 2008. Also, the General scheme of Ust-Luga port development is now being corrected so that its capacities increase to 125 million tons by 2015, including 85 million tons of solid bulk and 40 million tons of liquid bulk. 
Sea Port of Saint Petersburg is going to construct a container terminal with a capacity of 1.4 million TEU on the territory of its stevedores. In several years, the group of companies N-Trans will increase the container turnover of the recently purchased OAO Petrolesport to 2 million TEU, i.e. fivefold. Moreover, N-Trans plans to put into operation the first stage of “dry” terminals (container and railway terminals) in Yanino settlements near Saint Petersburg at the end of 2008. A modern container terminal of Oslo Marine group will appear at the terminals for log handling in the port of Vyborg.
Among the car terminals, the largest projects of the year were “South-2” in Ust-Luga, the first stage of which is to be put into operation by May 2008, and a ro-ro terminal in the territory of the Sea Port of Saint Petersburg, that is to be launched in 2008. 
As for the port of Murmansk, the western shore of Kola Bay will be developed. A coal terminal with an annual capacity of 15 million tons will be built there as well as terminals for general cargo (with a 3 million ton capacity) and oil bulk handling (25-35 million tons).
Resume
The scale of projects is so large that, in the near future, the Russian Government may solve the problems of the RF ports. The question is whether there will be enough money and insistence by officials.

By Alexey  Strigin
    [~DETAIL_TEXT] => 
Peculiarities of Russia   
Russian ports have certain specific features which must be considered when analysing their current position and development prospects. Firstly, climatic and geographical factors. 31 Russian ports are shallow-water, which limits their opportunities: stevedoring companies operating in such ports cannot service vessels with the freight capacity of over 10,000 tons. There are only 10 ports in the state which can service modern vessels with a deadweight of over 50,000 tons. Only one Russian port – the port of Murmansk – can service vessels with the deadweight of over 150,000 tons.
Most Russian ports are located on freezing seas and the lack of tax and customs preferences for stevedoring companies, traditional in international practice, also plays an important role. The foundational law “On Sea Ports” was approved in Russia at the end of 2007, and a year will pass before the law will work properly. The law on port special economic zones, discussed for a long time, was adopted in 2007. 
Another common feature is an underdeveloped port logistics infrastructure and insufficient railway and road approaches to berths. Nowadays, no large Russian port has a direct exit to any federal motorway. Apart from these common features, every region of the country – Southern, North-Western and the Far East – have individual peculiarities. 
South: Novorossiysk Developing According to the Plan
The throughput of all the Black Sea ports is limited because of the carrying capacity of the Turkish straights, and nowadays they work at full capacity without having any potential for growth. This caused changes in the list of cargoes transported via the Southern basin. In 2007 the ports handled about 160 million tons of cargo, of which oil and oil products made 70% of the volume. Meanwhile, solid bulk handling increased by more than 6% year-on-year, while liquid bulk handling fell by almost 2%. According to experts’ estimations, liquid bulk is being re-routed to the Far East and North-West of the country.
The RF Ministry of Transport considers the priority ports on the basin to be Novorossiysk, Taman, and Kavkaz. Development of the ports must increase throughput to 230 million tons by 2015 (45% up in comparison with 2006). 
The port of Novorossiysk is the largest port in the region and is now subject to investment project “Complex Development of Novorossiysk Transport Junction”. “In December 2006, the port of Novorossiysk won the federal tender for making a feasibility study of the investments in the framework of the project “Complex Development of Novorossiysk Transport Junction”, says Igor Vilinov, Director General of OAO Novorossiysk Commercial Sea Port. “We created a working group consisting of specialists from our company and OAO RZD. The aim of the specialists is to make the feasibility study, which will allow the junction complex project to be carried out efficiently”. He also highlights that: “The railway constituent plays a rather important role in every part of our project. Today, both our colleague railwaymen and us understand that development of the port capacities without development of the port railway infrastructure will hardly allow us to reach the set targets”, i.e. increase of export and import cargo transportation volumes via the Novorossiysk transport junction to 100 million tons by 2010. This will be possible also due to the growth of transportation volumes of export and import freight by railway to 50 million tons.
In the port of Tuapse it is planned to develop capacities for liquid bulk handling, with coal from this port re-routed to the new port of Taman. The port of Astrakhan will also be unloaded by creating a new port, Olya, located 100 km away along the Volga river.
Far East: Stake On Transit Cargoes From Asia        
There are 25 ports in the Far Eastern basin. Six of them are in the Primorsk region, four in the Khabarovsk region, eight in Sakhalin region, one in Magadan region, two in Kamchatka region, and the final four in Chukotka autonomous region. Also, eight fish ports are now functioning in the Far Eastern region, and six of them have adjacent water areas with commercial ports.
In 2007, the total throughput of the stevedoring companies in the Far Eastern region amounted to about 73 million tons (17% of that was liquid bulk), or 17% of the total throughput of all Russian ports. The main cargoes handled there are coal (about 30%), oil and oil products (over 25%).
It is worth noting that all Russian ports exceeded the results of the Soviet Union ports (1990) in 2005 but the Far Eastern ports only in 2007. Nevertheless, according to the assessment of RF Transport Minister Igor Levitin, the main port capacities of the region are working almost at their full capacity. Meanwhile, the structure of the cargoes serviced changed: the handling volume of liquid bulk and bulked cargoes increased, and general cargo handling fell. The Russian Ministry of Transport considers that the priority ports in the basin are Vostochny, Vanino, Kozmino, Prigorodnoye (Sakhalin island), Petropavlovsk-Kamchatsky and Vladivostok. The ports are to be developed so that their throughput is to increase to 145 million tons by 2015 (a twofold increase in comparison with 2006).
Investors and the Government of Russia pay much attention to development of Nakhodka and Vladivostok ports. Thus, the managing company of the South Korean port Busan, known as Busan Port Authority (BPA), is going to invest USD 109 million into building a container terminal in the port of Nakhodka. The capacity of the new terminal will amount to 400,000 TEU by 2010. Its first stage, with the capacity of 150,000 TEU, will have been built by July, 2008 (at a cost of USD 21.8 million).
The group of companies N-Trans is also going to invest into the container terminal “Vostochny” (Nakhodka) to enlarge its capacity to 2.5 million TEU per annum. By 2015, the capacity of the container terminal is to increase to 5 million containers, the coal terminal to 20 million tons. Also, a new terminal for grain handling with a capacity of 5 million tons is to be built by then.
Development of the port of Nakhodka is restricted by the territory of the city and insufficient depths at the berths. These problems may be solved by taking the line of the existing berths 50 metres away to the sea. It is planned to construct a modern passenger complex in the port of Vladivostok. The complex will be able to simultaneously service three cruise vessels with a length of 350 metres and passenger carrying capacity of over 3,000 people. The annual capacity of the complex will be up to 500,000 tourists.
In the framework of the pipeline system Eastern Siberia – the Pacific Ocean, the first stage of the sea terminal for oil handling is to be constructed in the port in Kozmino bay in 2008-2010. Its annual capacity will be 15 million tons. Also, a new port for oil and gas transportation will be constructed in Ilyinsky settlement (Sakhalin). To handle export coal, it is planned to modernise the port of Vanino, and build specialised terminals in Muchka bay. The projects to be carried out in the near future are further development of onland transport infrastructure – Vladivostok- Nakhodka – Vostochny port and Khabarovsk – Lidoga – Vanino motorways, and modernisation of the eastern part of Baikalo-Amurskaya Railway (the BAM). 
North-Western Region Lacks Space
The ports of the North-Western basin handle over 45% of the total throughput. According to the data of the Ministry of Transport, the stevedoring companies operating in the North-Western basin increased cargo handling volumes by 9.7% year-on-year in 2007. The major cargoes handled are oil and oil products (over 60%) and coal (over 10%).             
In spite of the fact that cargo handling volumes in the ports of North-Western region amount to 1.5 million TEU, the lack of capacity in the port of Saint Petersburg is about 25%. 
The fishing sea port of Saint Petersburg has its own problems. Konstantin Skovoroda, Director General of the group of companies Russian Transport Lines, which is an international logistics services provider, notes: “The port lacks area for cargo storage, organisation of the full pack of services, terminal management experience, IT systems for managing terminals, warehouses, and an operative data exchange between all the participants of the process “producer – operator – state bodies - dealer”. Other problems are the lack of registered sea lines, and administrative difficulties in organisation of border crossings and terminals (ports)”.
Alexander Golovizin, Deputy Director General of OAO Managing Company of Ust-Luga, says, “We worry about the problem of cargo transportation out of the port. Nowadays, the capacity of railway approaches is sufficient but we have to make enormous efforts to control the process, since the situation at railway approaches to ports further down the line is rather complicated.
Also, we need a motorway Ust-Luga – Novgorod, which has an exit to the federal road connecting Moscow and Saint Petersburg. It takes much time to make and implement all the suggestions for transport infrastructure development; if nothing is changed, a real shortage of capacity will take hold in the North-Western region in 2009-2010”.
In spite of a number of serous problems, not all market participants consider that the ports of the North-Western region have started to work at a full capacity. “Due to the common tendency of the ports to transfer to servicing enlarged cargo packages, including package-by-package cargo, pallets, containers and ro-ro cargoes, there is a lack of warehousing capacities, but it is not correct to speak about an excess of their handling capacities. A lot of companies – sea ports operators are already developing port territories and constructing distant “dry” ports to increase the efficiency of sea port functioning as handling but not warehousing complexes,” emphasises Ev­geny Korotkov, Director of the Port Block of Oslo Marine group of companies. 
The RF Ministry of Transport considers that the priority ports in the basin are Murmansk, Saint Petersburg, Primorsk, Ust-Luga, and Kaliningrad. And the Ministry is ready to solve their problems. Due to development of the mentioned ports, their throughput is to increase to 314 million tons by 2015 (60% growth in comparison with 2006).
In 2007, the cost of the sea terminals development projects – declared and being carried out in the Russian North-West – is USD 2.5 billion. The largest of them is “Baltic Container Terminal” in the port of Ust-Luga, owned by National Container Company and German operator Eurogate. The first stage is to be completed at the end of 2008. Also, the General scheme of Ust-Luga port development is now being corrected so that its capacities increase to 125 million tons by 2015, including 85 million tons of solid bulk and 40 million tons of liquid bulk. 
Sea Port of Saint Petersburg is going to construct a container terminal with a capacity of 1.4 million TEU on the territory of its stevedores. In several years, the group of companies N-Trans will increase the container turnover of the recently purchased OAO Petrolesport to 2 million TEU, i.e. fivefold. Moreover, N-Trans plans to put into operation the first stage of “dry” terminals (container and railway terminals) in Yanino settlements near Saint Petersburg at the end of 2008. A modern container terminal of Oslo Marine group will appear at the terminals for log handling in the port of Vyborg.
Among the car terminals, the largest projects of the year were “South-2” in Ust-Luga, the first stage of which is to be put into operation by May 2008, and a ro-ro terminal in the territory of the Sea Port of Saint Petersburg, that is to be launched in 2008. 
As for the port of Murmansk, the western shore of Kola Bay will be developed. A coal terminal with an annual capacity of 15 million tons will be built there as well as terminals for general cargo (with a 3 million ton capacity) and oil bulk handling (25-35 million tons).
Resume
The scale of projects is so large that, in the near future, the Russian Government may solve the problems of the RF ports. The question is whether there will be enough money and insistence by officials.

By Alexey  Strigin
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“We Must Create Conditions To Return Vessels”
In 2007, special attention was paid to the issues of sea transport development in the RF. This most popular transport mode, which provides almost 90% of international freight transportation, accounts for 60% of Russian foreign trade throughput. 
The RF President determined the main aspect of the federal executive body’s activity – to restore the status of the Russian sea fleet and make it meet international standards: “We must create all the conditions to put the vessels stage-by-stage under the Russian flag. This work must be started now, without any delays”.
According to him, the competitiveness of the Russian sea fleet must be based on a number of parameters. For example, creating tax schemes for Russian ship owners to provide conditions for keeping competitive charter rates on the transport services world market. This is because the level of charter has become the main regulator in competition between shipping companies getting access to the freight base. It is also necessary to fulfil all the requirements of international conventions on navigation safety and technical condition of vessels, because it has become a significant factor in competition between countries with developed fleets for access to the transport services market. Another obligatory measure is Russian fleet renewal. A vessel is considered competitive if its age is less than 12-15 years. 
Another urgent problem is the quality of human resources for sea fleet training. The qualification standards of the crew are especially important, in particular, due to navigational complexities and the growth in volume of transportation of hazardous cargoes. 
It Took Seven Years to Adopt The Law
Much time usually passes until the declared principles of development are put into action. It took legislative bodies seven years to develop the law on a Russian International Register of Vessels. It seems that after the federal law was put in force (almost two years ago), Russian shipping companies have got other preferences. But the misfortunes that emerged when the bill was developed have continued after it was adopted.
The main reason why ship owners do not traditionally register their fleet in the national Registers is the taxes on a vessel, which amount to 70% of its cost in Russia. For the sake of comparison, under flags of convenience the sum is sometimes less than 1%. While the RF law, targeted at the creation of the country’s own international Register, was developed, the number of modern vessels owned by Russian companies increased significantly. For example, the merged group of Sovcomflot and Novoship (Russia’s largest shipping companies) has one of the largest tanker fleets in the world nowadays, and most vessels in it fly a flag of convenience. 
The task of the legislators was to return a part of the fleet owned by Russian companies to the RF flag. The ship-owners got a promise that their expenses would reduce significantly because they would be exempted from VAT, property and profits taxes, and entrance customs duty.
During the first year, when the law was in force, the basic organisational problems were solved, i.e. the list of 12 sea ports, providing registration in the Register, was approved, the rules of registration were developed and adopted, special forms were distributed and the captains of the ports received their instructions.  
Difficult to Use
However, when the new law was put into operation, there appeared some difficulties, because the Federal Customs Service (the FTS) refused to recognise the fact that the law on the second Register as well as any federal normative and legislative act has direct power. So, the FTS demanded that a special governmental decree on the customs procedures to fulfil the law was adopted.
A relative decree was approved only last July (№448 “On the Order of Application of Tariff Preference in the form of Entrance Customs Duty Exempt for Vessels registered in Russian International Register of Vessels” from 16.07.2007). Thus, in the words of one of the authors of the law on the second Register, Deputy Director General for scientific research of the Sea Fleet Central Research Institute, Sergey Buyanov, the law on a Russian International Register of Vessels came into real force only several months ago.    
In the opinion of S. Buyanov, ship-owners are wary of the register, and do not hurry to transfer under its jurisdiction, in particular, due to the damage caused by the FTS.  
Experts agree that another important obstacle was the difficulties in the insurance sector. The ban on fleet insurance from foreign insurance companies made it unattractive for large ship owners and owners of expensive tanker fleets, who can get much bigger insurance compensation from foreign insurers than from Russian ones.
This problem was solved recently: the amendment to the Federal Law “On Organisation of Insurance Business in the RF” was put in November 2007; it allowed shipping companies to insure the vessels registered in the second Register abroad.
Besides, large ship owners are not eager to register their vessels in the second Register because, if they take on credit in a foreign bank to purchase a vessel, the bank does not allow them to register the vessel in the RF Register until the load is disbursed. 
Not A Bad Result
According to the data of the Sea Fleet Central Research Institute, by the end of 2007, 199 vessels were registered in the Russian International Register of Vessels. Most of the ships registered in the new Register have a small deadweight and, as a rule, are of river-sea class or bareboat-charter ones. 
In the words of Mikhail Romanovsky, President of the Russian Ship Owners Union (SOROSS), the number of vessels is a good result for the two first years the Register has been in force. The adopted federal law had some disputable points and, to destroy them, amendments were put into other acting federal laws and special governmental decrees were  adopted. He believes that the transfer of river-sea vessels under the Russian flag is mainly explained by the fact that foreign companies have no right to operate on the RF inner waterways, thus it is a good chance for Russian river shipping companies to successfully provide international transportation.
Representatives of the RF Ministry of Transport as well as the Head of SOROSS consider the first results of the Register good enough. In the words of Alexey Klyavin, Director of the State Policy in Sea and River Transport Department of the Transport Ministry, a tendency has appeared toward registering large-capacity sea vessels in the register. In particular, there are several ships from the Murmansk and Novorossiysk sea shipping companies. According to the RF Ministry of Transport, OAO Sovcomflot plans to register a large-capacity Arctic tanker “Vasily Dinkov” under the Russian flag in the near future.  
Recently, the RF Ministry of Transport developed a bill suggesting amendments to some decrees of the RF Government concerning sea and river transport. In particular, it envisages the possible use of the fleet registered in the second Register for coasting, which is especially important for vessels with a small deadweight. So, it is possible that after the document is adopted, the fleet registered in the second Register will swell with vessels of river-sea class. 
“We have completed development of the relative normative base and see no obstacles for it to start working properly”, emphasised A. Klyavin. 
Besides, the Head of the Department pays special attention to the fact that attracting the fleet to the second Register is a long-term and capital-intensive process which took foreign countries three to five years to complete.
Resume
In opinion of M. Romanovsky, a lot of large-capacity vessels are unlikely to be registered in the register in the near future. Such an opportunity would be more possible if Russian ship-owners took a political decision on transportation of export cargo. Most countries practice giving priority to national carriers. “In the Soviet Union, about 60% of export cargo was carried by national transport, and now the figure is about 5%”, worries the Head of SOROSS.
It took a lot of time to develop and adopt the law on Russian International Register of Vessels. And it turned out to be different from what was wanted. The legislative problems that emerged postponed its realisation for a long time. We can only hope that it works properly at last, and the register will grow along with modern sea fleets owned by Russia’s largest ship owners. 
By Nadezhda Vtorushina
interview
Russian Register of Vessels? Forget About It!
 Michael Sillato, Vice-President of Ganado&Associates company which specializes in legal services for ship-owners who want to register their vessels under the Maltese flag, doesn't believe in prospective successes of Russian International Navigable Register. He advises to Russian officials to solve urge problems.
– Mr Sillato, how would you value the efforts made by the Russian government to create an efficient register and to reregister Russian vessels under the national flag? 
– My evaluation of the efforts made by the Russian Administration to create an efficient register that would attract Russian shipowners to flag their vessels in Russia is that it is a practically impossible task. I have no solid proof of this, of course, because I am not familiar with Russian legislation, however, this talk of creating a Russian register attractive enough to bring back Russian tonnage back to the fold has been going on for at least ten years and although internationally renowned lawfirms and audit firms have been engaged from time to time, it has still not materialised. 
I can state that there are many proposals in Malta for amendments to our maritime law which would make the flag even more attractive worldwide, however, these would not be compatible with other laws of the state and would create huge difficulties in the internal running of the country (this is not to mention other complications that would arise with the EU - but this does not have much meaning to Russia as the case does not apply).
– I doubt that you propose to the Russian officials to forgo their efforts. Government should try to defend national interests…
– Which brings me to your second question - What the Russian Government should do, in my humble opinion, is to accept the fact the “open registers” are here to stay - after all they have been around for more than 50 years and they are still getting stronger - and to study (perhaps even with participation and intervention of other open flag states) ways and means of extracting benefits out of the current state of affairs. In other words, they have to accept that most private ship-owners would have to flag their vessels under “open registers” but that upon repatriation of profits, there would be sufficient investment, or possibly more employment, or other situations that would be of benefit to the Russian economy. Something similar was achieved by Germany, for example, when there was general (unwritten) agreement from the shipping community to create more jobs in Germany in exchange of the creation of Tonnage Tax. In actual fact, what is happening is that the German ship-owners are registering their ships in Germany but bareboat chartering out to “open registers” and operate their ships under other flags, but in the meantime a huge number of jobs were created, first on board ships (but these ran out very quickly because of the small number of German officers available) and then by increasing the number of technical management companies and the number of people in their employ - and we saw a considerable number of German management companies that had set up shop in Cyprus returning to Germany. 
Although Russia is full of highly qualified seafarers - and I say this very seriously because Russian seafarers are among the finest in the world - there are few technical management companies capable of taking on the management of ships, not necessarily flying the Russian flag, but at least that are beneficially owned by Russian ship-owners. In fact, what I can see is a number of Russian seafarers that have moved to European states and conducting their management from outside Russia. This, to me, represents an even more important leakage of revenue, particularly because of the multiplier effect it would have, than that of loss of ships from the Russian Register.
– I think that such a decision will be incorrect from politic standpoint. Maybe it’s a political question: the RF Government can make Russian shipping companies to register in Russia in exchange of the strong measures absence. Don’t you fear that political will of the Government can hinder your business? 
– As long as the Russian shipowners have a better option (cheaper) than the Russian flag, they will continue to register ships with open registers - Malta happens to be an open register, it has an excellent record with Port State Control and is on the white list of Paris MOU, it is a European flag, which is attractive to many charterers, and therefore it is always practical for the private shipowner to register in Malta. It is useless to try to make the Russian flag more attractive than it is today but not quite as attractive as that of an open register because the private entrepreneur will only consider the best option and nothing else. 
– You say it because the task of your business is attraction of large quantity of ship-owners under your flag… 
– I do not have statistics of Russian owned vessels registered under the Malta flag, but I can tell you that we have a huge number of vessels, there is a mixture of tankers, bulk carriers and even river barges registered in Malta. As far as I can tell, there are no reliable statistics on the number, type or tonnage bracket of ships registered under the Malta flag because, especially with the big international shipping companies it is very difficult to establish exactly where the beneficial ownership is.
The Malta flag is already attractive to the Russian ship-owner, simply because it is a cheaper option to registration in Russia. Moreover Maltese law is very similar to English law and therefore most of the law firms acting for international financiers find it easy to work with the (Malta) Merchant Shipping Act. To my mind what is a very urgent matter for the Russian Government is to find ways and means of making foreign mortgages more enforceable even in Russian inland waters as this would open very important avenues to Western banks to finance the building of new tonnage and generate more wealth within Russia as this would create more jobs and revenue to the Government through its multiplier effect, rather than trying to invent the wheel and going for a law which has so far proved too elusive.

Interviewed by Ivan Stupachenko 
    [~DETAIL_TEXT] => 
“We Must Create Conditions To Return Vessels”
In 2007, special attention was paid to the issues of sea transport development in the RF. This most popular transport mode, which provides almost 90% of international freight transportation, accounts for 60% of Russian foreign trade throughput. 
The RF President determined the main aspect of the federal executive body’s activity – to restore the status of the Russian sea fleet and make it meet international standards: “We must create all the conditions to put the vessels stage-by-stage under the Russian flag. This work must be started now, without any delays”.
According to him, the competitiveness of the Russian sea fleet must be based on a number of parameters. For example, creating tax schemes for Russian ship owners to provide conditions for keeping competitive charter rates on the transport services world market. This is because the level of charter has become the main regulator in competition between shipping companies getting access to the freight base. It is also necessary to fulfil all the requirements of international conventions on navigation safety and technical condition of vessels, because it has become a significant factor in competition between countries with developed fleets for access to the transport services market. Another obligatory measure is Russian fleet renewal. A vessel is considered competitive if its age is less than 12-15 years. 
Another urgent problem is the quality of human resources for sea fleet training. The qualification standards of the crew are especially important, in particular, due to navigational complexities and the growth in volume of transportation of hazardous cargoes. 
It Took Seven Years to Adopt The Law
Much time usually passes until the declared principles of development are put into action. It took legislative bodies seven years to develop the law on a Russian International Register of Vessels. It seems that after the federal law was put in force (almost two years ago), Russian shipping companies have got other preferences. But the misfortunes that emerged when the bill was developed have continued after it was adopted.
The main reason why ship owners do not traditionally register their fleet in the national Registers is the taxes on a vessel, which amount to 70% of its cost in Russia. For the sake of comparison, under flags of convenience the sum is sometimes less than 1%. While the RF law, targeted at the creation of the country’s own international Register, was developed, the number of modern vessels owned by Russian companies increased significantly. For example, the merged group of Sovcomflot and Novoship (Russia’s largest shipping companies) has one of the largest tanker fleets in the world nowadays, and most vessels in it fly a flag of convenience. 
The task of the legislators was to return a part of the fleet owned by Russian companies to the RF flag. The ship-owners got a promise that their expenses would reduce significantly because they would be exempted from VAT, property and profits taxes, and entrance customs duty.
During the first year, when the law was in force, the basic organisational problems were solved, i.e. the list of 12 sea ports, providing registration in the Register, was approved, the rules of registration were developed and adopted, special forms were distributed and the captains of the ports received their instructions.  
Difficult to Use
However, when the new law was put into operation, there appeared some difficulties, because the Federal Customs Service (the FTS) refused to recognise the fact that the law on the second Register as well as any federal normative and legislative act has direct power. So, the FTS demanded that a special governmental decree on the customs procedures to fulfil the law was adopted.
A relative decree was approved only last July (№448 “On the Order of Application of Tariff Preference in the form of Entrance Customs Duty Exempt for Vessels registered in Russian International Register of Vessels” from 16.07.2007). Thus, in the words of one of the authors of the law on the second Register, Deputy Director General for scientific research of the Sea Fleet Central Research Institute, Sergey Buyanov, the law on a Russian International Register of Vessels came into real force only several months ago.    
In the opinion of S. Buyanov, ship-owners are wary of the register, and do not hurry to transfer under its jurisdiction, in particular, due to the damage caused by the FTS.  
Experts agree that another important obstacle was the difficulties in the insurance sector. The ban on fleet insurance from foreign insurance companies made it unattractive for large ship owners and owners of expensive tanker fleets, who can get much bigger insurance compensation from foreign insurers than from Russian ones.
This problem was solved recently: the amendment to the Federal Law “On Organisation of Insurance Business in the RF” was put in November 2007; it allowed shipping companies to insure the vessels registered in the second Register abroad.
Besides, large ship owners are not eager to register their vessels in the second Register because, if they take on credit in a foreign bank to purchase a vessel, the bank does not allow them to register the vessel in the RF Register until the load is disbursed. 
Not A Bad Result
According to the data of the Sea Fleet Central Research Institute, by the end of 2007, 199 vessels were registered in the Russian International Register of Vessels. Most of the ships registered in the new Register have a small deadweight and, as a rule, are of river-sea class or bareboat-charter ones. 
In the words of Mikhail Romanovsky, President of the Russian Ship Owners Union (SOROSS), the number of vessels is a good result for the two first years the Register has been in force. The adopted federal law had some disputable points and, to destroy them, amendments were put into other acting federal laws and special governmental decrees were  adopted. He believes that the transfer of river-sea vessels under the Russian flag is mainly explained by the fact that foreign companies have no right to operate on the RF inner waterways, thus it is a good chance for Russian river shipping companies to successfully provide international transportation.
Representatives of the RF Ministry of Transport as well as the Head of SOROSS consider the first results of the Register good enough. In the words of Alexey Klyavin, Director of the State Policy in Sea and River Transport Department of the Transport Ministry, a tendency has appeared toward registering large-capacity sea vessels in the register. In particular, there are several ships from the Murmansk and Novorossiysk sea shipping companies. According to the RF Ministry of Transport, OAO Sovcomflot plans to register a large-capacity Arctic tanker “Vasily Dinkov” under the Russian flag in the near future.  
Recently, the RF Ministry of Transport developed a bill suggesting amendments to some decrees of the RF Government concerning sea and river transport. In particular, it envisages the possible use of the fleet registered in the second Register for coasting, which is especially important for vessels with a small deadweight. So, it is possible that after the document is adopted, the fleet registered in the second Register will swell with vessels of river-sea class. 
“We have completed development of the relative normative base and see no obstacles for it to start working properly”, emphasised A. Klyavin. 
Besides, the Head of the Department pays special attention to the fact that attracting the fleet to the second Register is a long-term and capital-intensive process which took foreign countries three to five years to complete.
Resume
In opinion of M. Romanovsky, a lot of large-capacity vessels are unlikely to be registered in the register in the near future. Such an opportunity would be more possible if Russian ship-owners took a political decision on transportation of export cargo. Most countries practice giving priority to national carriers. “In the Soviet Union, about 60% of export cargo was carried by national transport, and now the figure is about 5%”, worries the Head of SOROSS.
It took a lot of time to develop and adopt the law on Russian International Register of Vessels. And it turned out to be different from what was wanted. The legislative problems that emerged postponed its realisation for a long time. We can only hope that it works properly at last, and the register will grow along with modern sea fleets owned by Russia’s largest ship owners. 
By Nadezhda Vtorushina
interview
Russian Register of Vessels? Forget About It!
 Michael Sillato, Vice-President of Ganado&Associates company which specializes in legal services for ship-owners who want to register their vessels under the Maltese flag, doesn't believe in prospective successes of Russian International Navigable Register. He advises to Russian officials to solve urge problems.
– Mr Sillato, how would you value the efforts made by the Russian government to create an efficient register and to reregister Russian vessels under the national flag? 
– My evaluation of the efforts made by the Russian Administration to create an efficient register that would attract Russian shipowners to flag their vessels in Russia is that it is a practically impossible task. I have no solid proof of this, of course, because I am not familiar with Russian legislation, however, this talk of creating a Russian register attractive enough to bring back Russian tonnage back to the fold has been going on for at least ten years and although internationally renowned lawfirms and audit firms have been engaged from time to time, it has still not materialised. 
I can state that there are many proposals in Malta for amendments to our maritime law which would make the flag even more attractive worldwide, however, these would not be compatible with other laws of the state and would create huge difficulties in the internal running of the country (this is not to mention other complications that would arise with the EU - but this does not have much meaning to Russia as the case does not apply).
– I doubt that you propose to the Russian officials to forgo their efforts. Government should try to defend national interests…
– Which brings me to your second question - What the Russian Government should do, in my humble opinion, is to accept the fact the “open registers” are here to stay - after all they have been around for more than 50 years and they are still getting stronger - and to study (perhaps even with participation and intervention of other open flag states) ways and means of extracting benefits out of the current state of affairs. In other words, they have to accept that most private ship-owners would have to flag their vessels under “open registers” but that upon repatriation of profits, there would be sufficient investment, or possibly more employment, or other situations that would be of benefit to the Russian economy. Something similar was achieved by Germany, for example, when there was general (unwritten) agreement from the shipping community to create more jobs in Germany in exchange of the creation of Tonnage Tax. In actual fact, what is happening is that the German ship-owners are registering their ships in Germany but bareboat chartering out to “open registers” and operate their ships under other flags, but in the meantime a huge number of jobs were created, first on board ships (but these ran out very quickly because of the small number of German officers available) and then by increasing the number of technical management companies and the number of people in their employ - and we saw a considerable number of German management companies that had set up shop in Cyprus returning to Germany. 
Although Russia is full of highly qualified seafarers - and I say this very seriously because Russian seafarers are among the finest in the world - there are few technical management companies capable of taking on the management of ships, not necessarily flying the Russian flag, but at least that are beneficially owned by Russian ship-owners. In fact, what I can see is a number of Russian seafarers that have moved to European states and conducting their management from outside Russia. This, to me, represents an even more important leakage of revenue, particularly because of the multiplier effect it would have, than that of loss of ships from the Russian Register.
– I think that such a decision will be incorrect from politic standpoint. Maybe it’s a political question: the RF Government can make Russian shipping companies to register in Russia in exchange of the strong measures absence. Don’t you fear that political will of the Government can hinder your business? 
– As long as the Russian shipowners have a better option (cheaper) than the Russian flag, they will continue to register ships with open registers - Malta happens to be an open register, it has an excellent record with Port State Control and is on the white list of Paris MOU, it is a European flag, which is attractive to many charterers, and therefore it is always practical for the private shipowner to register in Malta. It is useless to try to make the Russian flag more attractive than it is today but not quite as attractive as that of an open register because the private entrepreneur will only consider the best option and nothing else. 
– You say it because the task of your business is attraction of large quantity of ship-owners under your flag… 
– I do not have statistics of Russian owned vessels registered under the Malta flag, but I can tell you that we have a huge number of vessels, there is a mixture of tankers, bulk carriers and even river barges registered in Malta. As far as I can tell, there are no reliable statistics on the number, type or tonnage bracket of ships registered under the Malta flag because, especially with the big international shipping companies it is very difficult to establish exactly where the beneficial ownership is.
The Malta flag is already attractive to the Russian ship-owner, simply because it is a cheaper option to registration in Russia. Moreover Maltese law is very similar to English law and therefore most of the law firms acting for international financiers find it easy to work with the (Malta) Merchant Shipping Act. To my mind what is a very urgent matter for the Russian Government is to find ways and means of making foreign mortgages more enforceable even in Russian inland waters as this would open very important avenues to Western banks to finance the building of new tonnage and generate more wealth within Russia as this would create more jobs and revenue to the Government through its multiplier effect, rather than trying to invent the wheel and going for a law which has so far proved too elusive.

Interviewed by Ivan Stupachenko 
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“We Must Create Conditions To Return Vessels”
In 2007, special attention was paid to the issues of sea transport development in the RF. This most popular transport mode, which provides almost 90% of international freight transportation, accounts for 60% of Russian foreign trade throughput. 
The RF President determined the main aspect of the federal executive body’s activity – to restore the status of the Russian sea fleet and make it meet international standards: “We must create all the conditions to put the vessels stage-by-stage under the Russian flag. This work must be started now, without any delays”.
According to him, the competitiveness of the Russian sea fleet must be based on a number of parameters. For example, creating tax schemes for Russian ship owners to provide conditions for keeping competitive charter rates on the transport services world market. This is because the level of charter has become the main regulator in competition between shipping companies getting access to the freight base. It is also necessary to fulfil all the requirements of international conventions on navigation safety and technical condition of vessels, because it has become a significant factor in competition between countries with developed fleets for access to the transport services market. Another obligatory measure is Russian fleet renewal. A vessel is considered competitive if its age is less than 12-15 years. 
Another urgent problem is the quality of human resources for sea fleet training. The qualification standards of the crew are especially important, in particular, due to navigational complexities and the growth in volume of transportation of hazardous cargoes. 
It Took Seven Years to Adopt The Law
Much time usually passes until the declared principles of development are put into action. It took legislative bodies seven years to develop the law on a Russian International Register of Vessels. It seems that after the federal law was put in force (almost two years ago), Russian shipping companies have got other preferences. But the misfortunes that emerged when the bill was developed have continued after it was adopted.
The main reason why ship owners do not traditionally register their fleet in the national Registers is the taxes on a vessel, which amount to 70% of its cost in Russia. For the sake of comparison, under flags of convenience the sum is sometimes less than 1%. While the RF law, targeted at the creation of the country’s own international Register, was developed, the number of modern vessels owned by Russian companies increased significantly. For example, the merged group of Sovcomflot and Novoship (Russia’s largest shipping companies) has one of the largest tanker fleets in the world nowadays, and most vessels in it fly a flag of convenience. 
The task of the legislators was to return a part of the fleet owned by Russian companies to the RF flag. The ship-owners got a promise that their expenses would reduce significantly because they would be exempted from VAT, property and profits taxes, and entrance customs duty.
During the first year, when the law was in force, the basic organisational problems were solved, i.e. the list of 12 sea ports, providing registration in the Register, was approved, the rules of registration were developed and adopted, special forms were distributed and the captains of the ports received their instructions.  
Difficult to Use
However, when the new law was put into operation, there appeared some difficulties, because the Federal Customs Service (the FTS) refused to recognise the fact that the law on the second Register as well as any federal normative and legislative act has direct power. So, the FTS demanded that a special governmental decree on the customs procedures to fulfil the law was adopted.
A relative decree was approved only last July (№448 “On the Order of Application of Tariff Preference in the form of Entrance Customs Duty Exempt for Vessels registered in Russian International Register of Vessels” from 16.07.2007). Thus, in the words of one of the authors of the law on the second Register, Deputy Director General for scientific research of the Sea Fleet Central Research Institute, Sergey Buyanov, the law on a Russian International Register of Vessels came into real force only several months ago.    
In the opinion of S. Buyanov, ship-owners are wary of the register, and do not hurry to transfer under its jurisdiction, in particular, due to the damage caused by the FTS.  
Experts agree that another important obstacle was the difficulties in the insurance sector. The ban on fleet insurance from foreign insurance companies made it unattractive for large ship owners and owners of expensive tanker fleets, who can get much bigger insurance compensation from foreign insurers than from Russian ones.
This problem was solved recently: the amendment to the Federal Law “On Organisation of Insurance Business in the RF” was put in November 2007; it allowed shipping companies to insure the vessels registered in the second Register abroad.
Besides, large ship owners are not eager to register their vessels in the second Register because, if they take on credit in a foreign bank to purchase a vessel, the bank does not allow them to register the vessel in the RF Register until the load is disbursed. 
Not A Bad Result
According to the data of the Sea Fleet Central Research Institute, by the end of 2007, 199 vessels were registered in the Russian International Register of Vessels. Most of the ships registered in the new Register have a small deadweight and, as a rule, are of river-sea class or bareboat-charter ones. 
In the words of Mikhail Romanovsky, President of the Russian Ship Owners Union (SOROSS), the number of vessels is a good result for the two first years the Register has been in force. The adopted federal law had some disputable points and, to destroy them, amendments were put into other acting federal laws and special governmental decrees were  adopted. He believes that the transfer of river-sea vessels under the Russian flag is mainly explained by the fact that foreign companies have no right to operate on the RF inner waterways, thus it is a good chance for Russian river shipping companies to successfully provide international transportation.
Representatives of the RF Ministry of Transport as well as the Head of SOROSS consider the first results of the Register good enough. In the words of Alexey Klyavin, Director of the State Policy in Sea and River Transport Department of the Transport Ministry, a tendency has appeared toward registering large-capacity sea vessels in the register. In particular, there are several ships from the Murmansk and Novorossiysk sea shipping companies. According to the RF Ministry of Transport, OAO Sovcomflot plans to register a large-capacity Arctic tanker “Vasily Dinkov” under the Russian flag in the near future.  
Recently, the RF Ministry of Transport developed a bill suggesting amendments to some decrees of the RF Government concerning sea and river transport. In particular, it envisages the possible use of the fleet registered in the second Register for coasting, which is especially important for vessels with a small deadweight. So, it is possible that after the document is adopted, the fleet registered in the second Register will swell with vessels of river-sea class. 
“We have completed development of the relative normative base and see no obstacles for it to start working properly”, emphasised A. Klyavin. 
Besides, the Head of the Department pays special attention to the fact that attracting the fleet to the second Register is a long-term and capital-intensive process which took foreign countries three to five years to complete.
Resume
In opinion of M. Romanovsky, a lot of large-capacity vessels are unlikely to be registered in the register in the near future. Such an opportunity would be more possible if Russian ship-owners took a political decision on transportation of export cargo. Most countries practice giving priority to national carriers. “In the Soviet Union, about 60% of export cargo was carried by national transport, and now the figure is about 5%”, worries the Head of SOROSS.
It took a lot of time to develop and adopt the law on Russian International Register of Vessels. And it turned out to be different from what was wanted. The legislative problems that emerged postponed its realisation for a long time. We can only hope that it works properly at last, and the register will grow along with modern sea fleets owned by Russia’s largest ship owners. 
By Nadezhda Vtorushina
interview
Russian Register of Vessels? Forget About It!
 Michael Sillato, Vice-President of Ganado&Associates company which specializes in legal services for ship-owners who want to register their vessels under the Maltese flag, doesn't believe in prospective successes of Russian International Navigable Register. He advises to Russian officials to solve urge problems.
– Mr Sillato, how would you value the efforts made by the Russian government to create an efficient register and to reregister Russian vessels under the national flag? 
– My evaluation of the efforts made by the Russian Administration to create an efficient register that would attract Russian shipowners to flag their vessels in Russia is that it is a practically impossible task. I have no solid proof of this, of course, because I am not familiar with Russian legislation, however, this talk of creating a Russian register attractive enough to bring back Russian tonnage back to the fold has been going on for at least ten years and although internationally renowned lawfirms and audit firms have been engaged from time to time, it has still not materialised. 
I can state that there are many proposals in Malta for amendments to our maritime law which would make the flag even more attractive worldwide, however, these would not be compatible with other laws of the state and would create huge difficulties in the internal running of the country (this is not to mention other complications that would arise with the EU - but this does not have much meaning to Russia as the case does not apply).
– I doubt that you propose to the Russian officials to forgo their efforts. Government should try to defend national interests…
– Which brings me to your second question - What the Russian Government should do, in my humble opinion, is to accept the fact the “open registers” are here to stay - after all they have been around for more than 50 years and they are still getting stronger - and to study (perhaps even with participation and intervention of other open flag states) ways and means of extracting benefits out of the current state of affairs. In other words, they have to accept that most private ship-owners would have to flag their vessels under “open registers” but that upon repatriation of profits, there would be sufficient investment, or possibly more employment, or other situations that would be of benefit to the Russian economy. Something similar was achieved by Germany, for example, when there was general (unwritten) agreement from the shipping community to create more jobs in Germany in exchange of the creation of Tonnage Tax. In actual fact, what is happening is that the German ship-owners are registering their ships in Germany but bareboat chartering out to “open registers” and operate their ships under other flags, but in the meantime a huge number of jobs were created, first on board ships (but these ran out very quickly because of the small number of German officers available) and then by increasing the number of technical management companies and the number of people in their employ - and we saw a considerable number of German management companies that had set up shop in Cyprus returning to Germany. 
Although Russia is full of highly qualified seafarers - and I say this very seriously because Russian seafarers are among the finest in the world - there are few technical management companies capable of taking on the management of ships, not necessarily flying the Russian flag, but at least that are beneficially owned by Russian ship-owners. In fact, what I can see is a number of Russian seafarers that have moved to European states and conducting their management from outside Russia. This, to me, represents an even more important leakage of revenue, particularly because of the multiplier effect it would have, than that of loss of ships from the Russian Register.
– I think that such a decision will be incorrect from politic standpoint. Maybe it’s a political question: the RF Government can make Russian shipping companies to register in Russia in exchange of the strong measures absence. Don’t you fear that political will of the Government can hinder your business? 
– As long as the Russian shipowners have a better option (cheaper) than the Russian flag, they will continue to register ships with open registers - Malta happens to be an open register, it has an excellent record with Port State Control and is on the white list of Paris MOU, it is a European flag, which is attractive to many charterers, and therefore it is always practical for the private shipowner to register in Malta. It is useless to try to make the Russian flag more attractive than it is today but not quite as attractive as that of an open register because the private entrepreneur will only consider the best option and nothing else. 
– You say it because the task of your business is attraction of large quantity of ship-owners under your flag… 
– I do not have statistics of Russian owned vessels registered under the Malta flag, but I can tell you that we have a huge number of vessels, there is a mixture of tankers, bulk carriers and even river barges registered in Malta. As far as I can tell, there are no reliable statistics on the number, type or tonnage bracket of ships registered under the Malta flag because, especially with the big international shipping companies it is very difficult to establish exactly where the beneficial ownership is.
The Malta flag is already attractive to the Russian ship-owner, simply because it is a cheaper option to registration in Russia. Moreover Maltese law is very similar to English law and therefore most of the law firms acting for international financiers find it easy to work with the (Malta) Merchant Shipping Act. To my mind what is a very urgent matter for the Russian Government is to find ways and means of making foreign mortgages more enforceable even in Russian inland waters as this would open very important avenues to Western banks to finance the building of new tonnage and generate more wealth within Russia as this would create more jobs and revenue to the Government through its multiplier effect, rather than trying to invent the wheel and going for a law which has so far proved too elusive.

Interviewed by Ivan Stupachenko 
    [~DETAIL_TEXT] => 
“We Must Create Conditions To Return Vessels”
In 2007, special attention was paid to the issues of sea transport development in the RF. This most popular transport mode, which provides almost 90% of international freight transportation, accounts for 60% of Russian foreign trade throughput. 
The RF President determined the main aspect of the federal executive body’s activity – to restore the status of the Russian sea fleet and make it meet international standards: “We must create all the conditions to put the vessels stage-by-stage under the Russian flag. This work must be started now, without any delays”.
According to him, the competitiveness of the Russian sea fleet must be based on a number of parameters. For example, creating tax schemes for Russian ship owners to provide conditions for keeping competitive charter rates on the transport services world market. This is because the level of charter has become the main regulator in competition between shipping companies getting access to the freight base. It is also necessary to fulfil all the requirements of international conventions on navigation safety and technical condition of vessels, because it has become a significant factor in competition between countries with developed fleets for access to the transport services market. Another obligatory measure is Russian fleet renewal. A vessel is considered competitive if its age is less than 12-15 years. 
Another urgent problem is the quality of human resources for sea fleet training. The qualification standards of the crew are especially important, in particular, due to navigational complexities and the growth in volume of transportation of hazardous cargoes. 
It Took Seven Years to Adopt The Law
Much time usually passes until the declared principles of development are put into action. It took legislative bodies seven years to develop the law on a Russian International Register of Vessels. It seems that after the federal law was put in force (almost two years ago), Russian shipping companies have got other preferences. But the misfortunes that emerged when the bill was developed have continued after it was adopted.
The main reason why ship owners do not traditionally register their fleet in the national Registers is the taxes on a vessel, which amount to 70% of its cost in Russia. For the sake of comparison, under flags of convenience the sum is sometimes less than 1%. While the RF law, targeted at the creation of the country’s own international Register, was developed, the number of modern vessels owned by Russian companies increased significantly. For example, the merged group of Sovcomflot and Novoship (Russia’s largest shipping companies) has one of the largest tanker fleets in the world nowadays, and most vessels in it fly a flag of convenience. 
The task of the legislators was to return a part of the fleet owned by Russian companies to the RF flag. The ship-owners got a promise that their expenses would reduce significantly because they would be exempted from VAT, property and profits taxes, and entrance customs duty.
During the first year, when the law was in force, the basic organisational problems were solved, i.e. the list of 12 sea ports, providing registration in the Register, was approved, the rules of registration were developed and adopted, special forms were distributed and the captains of the ports received their instructions.  
Difficult to Use
However, when the new law was put into operation, there appeared some difficulties, because the Federal Customs Service (the FTS) refused to recognise the fact that the law on the second Register as well as any federal normative and legislative act has direct power. So, the FTS demanded that a special governmental decree on the customs procedures to fulfil the law was adopted.
A relative decree was approved only last July (№448 “On the Order of Application of Tariff Preference in the form of Entrance Customs Duty Exempt for Vessels registered in Russian International Register of Vessels” from 16.07.2007). Thus, in the words of one of the authors of the law on the second Register, Deputy Director General for scientific research of the Sea Fleet Central Research Institute, Sergey Buyanov, the law on a Russian International Register of Vessels came into real force only several months ago.    
In the opinion of S. Buyanov, ship-owners are wary of the register, and do not hurry to transfer under its jurisdiction, in particular, due to the damage caused by the FTS.  
Experts agree that another important obstacle was the difficulties in the insurance sector. The ban on fleet insurance from foreign insurance companies made it unattractive for large ship owners and owners of expensive tanker fleets, who can get much bigger insurance compensation from foreign insurers than from Russian ones.
This problem was solved recently: the amendment to the Federal Law “On Organisation of Insurance Business in the RF” was put in November 2007; it allowed shipping companies to insure the vessels registered in the second Register abroad.
Besides, large ship owners are not eager to register their vessels in the second Register because, if they take on credit in a foreign bank to purchase a vessel, the bank does not allow them to register the vessel in the RF Register until the load is disbursed. 
Not A Bad Result
According to the data of the Sea Fleet Central Research Institute, by the end of 2007, 199 vessels were registered in the Russian International Register of Vessels. Most of the ships registered in the new Register have a small deadweight and, as a rule, are of river-sea class or bareboat-charter ones. 
In the words of Mikhail Romanovsky, President of the Russian Ship Owners Union (SOROSS), the number of vessels is a good result for the two first years the Register has been in force. The adopted federal law had some disputable points and, to destroy them, amendments were put into other acting federal laws and special governmental decrees were  adopted. He believes that the transfer of river-sea vessels under the Russian flag is mainly explained by the fact that foreign companies have no right to operate on the RF inner waterways, thus it is a good chance for Russian river shipping companies to successfully provide international transportation.
Representatives of the RF Ministry of Transport as well as the Head of SOROSS consider the first results of the Register good enough. In the words of Alexey Klyavin, Director of the State Policy in Sea and River Transport Department of the Transport Ministry, a tendency has appeared toward registering large-capacity sea vessels in the register. In particular, there are several ships from the Murmansk and Novorossiysk sea shipping companies. According to the RF Ministry of Transport, OAO Sovcomflot plans to register a large-capacity Arctic tanker “Vasily Dinkov” under the Russian flag in the near future.  
Recently, the RF Ministry of Transport developed a bill suggesting amendments to some decrees of the RF Government concerning sea and river transport. In particular, it envisages the possible use of the fleet registered in the second Register for coasting, which is especially important for vessels with a small deadweight. So, it is possible that after the document is adopted, the fleet registered in the second Register will swell with vessels of river-sea class. 
“We have completed development of the relative normative base and see no obstacles for it to start working properly”, emphasised A. Klyavin. 
Besides, the Head of the Department pays special attention to the fact that attracting the fleet to the second Register is a long-term and capital-intensive process which took foreign countries three to five years to complete.
Resume
In opinion of M. Romanovsky, a lot of large-capacity vessels are unlikely to be registered in the register in the near future. Such an opportunity would be more possible if Russian ship-owners took a political decision on transportation of export cargo. Most countries practice giving priority to national carriers. “In the Soviet Union, about 60% of export cargo was carried by national transport, and now the figure is about 5%”, worries the Head of SOROSS.
It took a lot of time to develop and adopt the law on Russian International Register of Vessels. And it turned out to be different from what was wanted. The legislative problems that emerged postponed its realisation for a long time. We can only hope that it works properly at last, and the register will grow along with modern sea fleets owned by Russia’s largest ship owners. 
By Nadezhda Vtorushina
interview
Russian Register of Vessels? Forget About It!
 Michael Sillato, Vice-President of Ganado&Associates company which specializes in legal services for ship-owners who want to register their vessels under the Maltese flag, doesn't believe in prospective successes of Russian International Navigable Register. He advises to Russian officials to solve urge problems.
– Mr Sillato, how would you value the efforts made by the Russian government to create an efficient register and to reregister Russian vessels under the national flag? 
– My evaluation of the efforts made by the Russian Administration to create an efficient register that would attract Russian shipowners to flag their vessels in Russia is that it is a practically impossible task. I have no solid proof of this, of course, because I am not familiar with Russian legislation, however, this talk of creating a Russian register attractive enough to bring back Russian tonnage back to the fold has been going on for at least ten years and although internationally renowned lawfirms and audit firms have been engaged from time to time, it has still not materialised. 
I can state that there are many proposals in Malta for amendments to our maritime law which would make the flag even more attractive worldwide, however, these would not be compatible with other laws of the state and would create huge difficulties in the internal running of the country (this is not to mention other complications that would arise with the EU - but this does not have much meaning to Russia as the case does not apply).
– I doubt that you propose to the Russian officials to forgo their efforts. Government should try to defend national interests…
– Which brings me to your second question - What the Russian Government should do, in my humble opinion, is to accept the fact the “open registers” are here to stay - after all they have been around for more than 50 years and they are still getting stronger - and to study (perhaps even with participation and intervention of other open flag states) ways and means of extracting benefits out of the current state of affairs. In other words, they have to accept that most private ship-owners would have to flag their vessels under “open registers” but that upon repatriation of profits, there would be sufficient investment, or possibly more employment, or other situations that would be of benefit to the Russian economy. Something similar was achieved by Germany, for example, when there was general (unwritten) agreement from the shipping community to create more jobs in Germany in exchange of the creation of Tonnage Tax. In actual fact, what is happening is that the German ship-owners are registering their ships in Germany but bareboat chartering out to “open registers” and operate their ships under other flags, but in the meantime a huge number of jobs were created, first on board ships (but these ran out very quickly because of the small number of German officers available) and then by increasing the number of technical management companies and the number of people in their employ - and we saw a considerable number of German management companies that had set up shop in Cyprus returning to Germany. 
Although Russia is full of highly qualified seafarers - and I say this very seriously because Russian seafarers are among the finest in the world - there are few technical management companies capable of taking on the management of ships, not necessarily flying the Russian flag, but at least that are beneficially owned by Russian ship-owners. In fact, what I can see is a number of Russian seafarers that have moved to European states and conducting their management from outside Russia. This, to me, represents an even more important leakage of revenue, particularly because of the multiplier effect it would have, than that of loss of ships from the Russian Register.
– I think that such a decision will be incorrect from politic standpoint. Maybe it’s a political question: the RF Government can make Russian shipping companies to register in Russia in exchange of the strong measures absence. Don’t you fear that political will of the Government can hinder your business? 
– As long as the Russian shipowners have a better option (cheaper) than the Russian flag, they will continue to register ships with open registers - Malta happens to be an open register, it has an excellent record with Port State Control and is on the white list of Paris MOU, it is a European flag, which is attractive to many charterers, and therefore it is always practical for the private shipowner to register in Malta. It is useless to try to make the Russian flag more attractive than it is today but not quite as attractive as that of an open register because the private entrepreneur will only consider the best option and nothing else. 
– You say it because the task of your business is attraction of large quantity of ship-owners under your flag… 
– I do not have statistics of Russian owned vessels registered under the Malta flag, but I can tell you that we have a huge number of vessels, there is a mixture of tankers, bulk carriers and even river barges registered in Malta. As far as I can tell, there are no reliable statistics on the number, type or tonnage bracket of ships registered under the Malta flag because, especially with the big international shipping companies it is very difficult to establish exactly where the beneficial ownership is.
The Malta flag is already attractive to the Russian ship-owner, simply because it is a cheaper option to registration in Russia. Moreover Maltese law is very similar to English law and therefore most of the law firms acting for international financiers find it easy to work with the (Malta) Merchant Shipping Act. To my mind what is a very urgent matter for the Russian Government is to find ways and means of making foreign mortgages more enforceable even in Russian inland waters as this would open very important avenues to Western banks to finance the building of new tonnage and generate more wealth within Russia as this would create more jobs and revenue to the Government through its multiplier effect, rather than trying to invent the wheel and going for a law which has so far proved too elusive.

Interviewed by Ivan Stupachenko 
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    [~PREVIEW_TEXT] => After the law "On an International Register of Vessels" aimed at putting the Russian fleet under national jurisdiction was adopted in 2005, the RF Government has taken a number of other legislative measures. In particular, the ban on insuring vessels listed in the register at foreign insurance companies was removed. Nevertheless, experts, including foreign ones, are not sure about the prospects of the Russian register.
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International Problem
In 2003-2007, freight carried by road transport across the border between Russia and Finland, Estonia, Latvia and Poland increased significantly. According to the RF Ministry of Transport, the number of trucks entering the country via the international border crossing at Kunichina Gora (Pskov region, Russian-Estonian border), grew by almost 180% in 2005-2006, and at Torfyanovka border crossing (Leningrad region, Russian-Finnish border) – by 150%. At other border crossings in the RF North-West, the rates growth in cargo turnover was the same.
Meanwhile, the border crossings can hardly cope with the increasing truck flow, and their technical abilities fall behind modern requirements. Consequently, the time taken for customs checks and cargo and vehicle registration exceeds target standards. Thus, on average, it takes two to four hours to check one loaded vehicle; in some cases the procedure lasts several days.
The largest and longest-lasting truck queues were on the Russian-Finnish border. Due to its developed transport and logistics sector, Suomi is a transit hub for goods destined for Russia.
According to Silja Ruokola, the Director of Unit for Logistics and Russia Cooperation at the Finnish Transport and Communication Ministry, the losses of the companies whose trucks sit idle waiting for customs clearance at the Russian-Finnish border, amount to EUR 900 million annually. 
The border queues at the Russian-Finnish border appeared long ago but became a real problem in 2005-2006. “The border crossings were launched in 1996 and, at that time, they met the standards. Nowadays, the cargo flow has increased, and the border crossings fail to service it properly”, says Evgeny Vensko, Head of the PR service of the North-Western Customs, part of the Federal Customs Service. “After the collapse of the USSR, every former Republic had to organise its own border and create border crossings”, says Vitaly Eremenko, former head of different customs offices in Russia and Lithuania. “In the early 1990”s, I used to work in the North-West of Russia, constructing border crossings at the border with Latvia and other countries. At that time we did not even dream that the volume of cargoes crossing the border would grow like this in a decade!”
In 2006, the queues became an international problem to which the authorities of the interested states paid much attention. In particular, Urmas Paet, Estonian Minister of Foreign Affairs, at the meeting with his colleagues from the European Union offered to discuss the issue at the summit of Russia – the European Union in Portugal. “Kilometres-long queues on the EU-Russian land border contradict normal practice as well as internationally-recognised trade rules”, stated the minister.      
The problem of traffic jams becomes more and more crucial every year. In September, the length of queues at the Vaalimaa border crossing set a new record – 80 km, and Tommi Kivilaakso, Head of the Eastern Customs District of Finland, threatened to ban Russian vehicles from entering the country temporarily. 
First of all, the reason for the queues is the growing import of cars. Also, trucks carry to Russia expensive containerised and refrigerated cargoes - household appliances, electronics, clothes and equipment. “This year, about 800,000 cars will be imported into Russia via Finland, 60% up year-on-year”, forecasts S. Ruokola.
Another reason for the traffic jams is the problems faced by the foreign trade participants during the customs clearance procedure. Most experts believe that the greatest difficulty is the “handwritten” registration of the cargo.
“Up to 90% of the details delivered to us are from North America. And not less than six different documents must be drawn up for every delivery. And all of them must be certified by a notary”, said Albert Bokhov, Managing Director for Joint Supply Organization of Magna GAZ Group Joint Supply Organization. “Today some of the documents, in particular the data mentioned in bills, are sent from Finland to Russia in the form of an e-declaration. Still, we need to increase the number of e-documents used to simplify and speed up the customs clearance procedure and, consequently, to reduce time spent by a vehicle at the border crossing. We believe that the main factor prolonging the time a truck stays at the Finnish-Russian border is paper document turnover”, complains Minna Lehtinen, VR Ltd Leading Specialist for Forwarding and Customs (for more information read “E-Declaration: Fast, Reliable, But Not Used Yet” on pp. 14–15).   
Railway Is Still Losing The Game
It seems that having learnt about the problems of road carriers, cargo owners must start to use an alternative transport mode – the railway. But most experts claim that railways lack necessary infrastructure and rolling stock, the customs transit is not stable, and quick border crossings have not been organised until now.
It is worth mentioning that railwaymen understand the problems and are ready to solve them. In 2007, OAO RZD launched a specialised daughter company – OAO RailTransAuto, which now has a park of 2,000 modern wagons for car transportation and several terminals. “We believe that the share of railway transportation in the total volume of cargo carried from Finland may increase to 30% by 2010. And the Finnish direction may be unloaded by means of changing the logistic schemes of car delivery. Thus, Japanese and Korean cars may be transported much faster via Far Eastern ports and the Transsiberian railway. And OAO RailTransAuto, which owns the Zarubino terminal in the Troitsy Bay sea port (Primorsk region), plans to organise such transportation. A new terminal of OAO RailTransAuto in Chernyakhovsk (Kaliningrad region) will simplify transportation of European cars by railway. The terminal has railway approaches with the gauge of European and Russian width, so a European enterprise’s production can be carried by railway without using other transport modes”, is sure Ekaterina Kulbaka Director of the Strategic Development Department of RailTransAuto. In her words, both European and Asian car producers are ready to deliver cars by railway via the terminals mentioned above in the near future.
But she says that “while the acting tariffs are in force, we can hardly compete with trucks properly. Even if we carry cargo with zero profitability, the cost of transportation by railway will be higher than by motor transport. In this case, the problem can be solved only with support from the state and the Federal Tariff Service”. According to her, the company can compete if cargo is carried to Yekaterinburg or Rostov-on-Don, i.e. owing to the length of the haul. “But now the major flow of cars is destined for Moscow and we are not able to compete there,” claims E. Kulbaka. Representatives of Finnish VR Ltd agree with her and consider the tariffs one of the main factors preventing cargo flow switching from motor transport to railways.
The cargo flow switching from trucks to wagons will be stimulated by the concentration of customs procedures in the destination point, which will simplify the work of cargo owners. Thus, another problem appears to slow down the growth of cargo transportation by railway. In Russia the practical procedures for transportation of goods through customs from the border to the destination point have not been developed that far.
In other words, a simplified scheme for customs transit is required. Now the transported cargo for a consignee to Russia can only be delivered by railway to him from Moscow or its suburbs to specific railway station, says Matti Andersson, Head of the Freight Transportation Marketing Department at VR Ltd. In his opinion, it is necessary that customs transit envisage other types of delivery. For example, it should be permitted to unload cargo on trucks at one of the railway stations and then carry it to a temporary storage warehouse, where the cargo owner could get it after customs clearance.
There are similar problems with another prospective cargo – containers. “We launched a regular block train. There is a route but still there are problems with customs clearance of containers, which prevent us from increasing the flow. The Customs Service understands the urgency of the problem. We met with the Head of the North-Western Customs to discuss the issue. There are some legislative acts to which amendments must be made to change the acting order and procedures. But the problem will be solved,” promises Viktor Stepov, Head of Oktyabrskaya (October) railway – affiliate of OAO RZD.

By Maria  Shevchenko
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International Problem
In 2003-2007, freight carried by road transport across the border between Russia and Finland, Estonia, Latvia and Poland increased significantly. According to the RF Ministry of Transport, the number of trucks entering the country via the international border crossing at Kunichina Gora (Pskov region, Russian-Estonian border), grew by almost 180% in 2005-2006, and at Torfyanovka border crossing (Leningrad region, Russian-Finnish border) – by 150%. At other border crossings in the RF North-West, the rates growth in cargo turnover was the same.
Meanwhile, the border crossings can hardly cope with the increasing truck flow, and their technical abilities fall behind modern requirements. Consequently, the time taken for customs checks and cargo and vehicle registration exceeds target standards. Thus, on average, it takes two to four hours to check one loaded vehicle; in some cases the procedure lasts several days.
The largest and longest-lasting truck queues were on the Russian-Finnish border. Due to its developed transport and logistics sector, Suomi is a transit hub for goods destined for Russia.
According to Silja Ruokola, the Director of Unit for Logistics and Russia Cooperation at the Finnish Transport and Communication Ministry, the losses of the companies whose trucks sit idle waiting for customs clearance at the Russian-Finnish border, amount to EUR 900 million annually. 
The border queues at the Russian-Finnish border appeared long ago but became a real problem in 2005-2006. “The border crossings were launched in 1996 and, at that time, they met the standards. Nowadays, the cargo flow has increased, and the border crossings fail to service it properly”, says Evgeny Vensko, Head of the PR service of the North-Western Customs, part of the Federal Customs Service. “After the collapse of the USSR, every former Republic had to organise its own border and create border crossings”, says Vitaly Eremenko, former head of different customs offices in Russia and Lithuania. “In the early 1990”s, I used to work in the North-West of Russia, constructing border crossings at the border with Latvia and other countries. At that time we did not even dream that the volume of cargoes crossing the border would grow like this in a decade!”
In 2006, the queues became an international problem to which the authorities of the interested states paid much attention. In particular, Urmas Paet, Estonian Minister of Foreign Affairs, at the meeting with his colleagues from the European Union offered to discuss the issue at the summit of Russia – the European Union in Portugal. “Kilometres-long queues on the EU-Russian land border contradict normal practice as well as internationally-recognised trade rules”, stated the minister.      
The problem of traffic jams becomes more and more crucial every year. In September, the length of queues at the Vaalimaa border crossing set a new record – 80 km, and Tommi Kivilaakso, Head of the Eastern Customs District of Finland, threatened to ban Russian vehicles from entering the country temporarily. 
First of all, the reason for the queues is the growing import of cars. Also, trucks carry to Russia expensive containerised and refrigerated cargoes - household appliances, electronics, clothes and equipment. “This year, about 800,000 cars will be imported into Russia via Finland, 60% up year-on-year”, forecasts S. Ruokola.
Another reason for the traffic jams is the problems faced by the foreign trade participants during the customs clearance procedure. Most experts believe that the greatest difficulty is the “handwritten” registration of the cargo.
“Up to 90% of the details delivered to us are from North America. And not less than six different documents must be drawn up for every delivery. And all of them must be certified by a notary”, said Albert Bokhov, Managing Director for Joint Supply Organization of Magna GAZ Group Joint Supply Organization. “Today some of the documents, in particular the data mentioned in bills, are sent from Finland to Russia in the form of an e-declaration. Still, we need to increase the number of e-documents used to simplify and speed up the customs clearance procedure and, consequently, to reduce time spent by a vehicle at the border crossing. We believe that the main factor prolonging the time a truck stays at the Finnish-Russian border is paper document turnover”, complains Minna Lehtinen, VR Ltd Leading Specialist for Forwarding and Customs (for more information read “E-Declaration: Fast, Reliable, But Not Used Yet” on pp. 14–15).   
Railway Is Still Losing The Game
It seems that having learnt about the problems of road carriers, cargo owners must start to use an alternative transport mode – the railway. But most experts claim that railways lack necessary infrastructure and rolling stock, the customs transit is not stable, and quick border crossings have not been organised until now.
It is worth mentioning that railwaymen understand the problems and are ready to solve them. In 2007, OAO RZD launched a specialised daughter company – OAO RailTransAuto, which now has a park of 2,000 modern wagons for car transportation and several terminals. “We believe that the share of railway transportation in the total volume of cargo carried from Finland may increase to 30% by 2010. And the Finnish direction may be unloaded by means of changing the logistic schemes of car delivery. Thus, Japanese and Korean cars may be transported much faster via Far Eastern ports and the Transsiberian railway. And OAO RailTransAuto, which owns the Zarubino terminal in the Troitsy Bay sea port (Primorsk region), plans to organise such transportation. A new terminal of OAO RailTransAuto in Chernyakhovsk (Kaliningrad region) will simplify transportation of European cars by railway. The terminal has railway approaches with the gauge of European and Russian width, so a European enterprise’s production can be carried by railway without using other transport modes”, is sure Ekaterina Kulbaka Director of the Strategic Development Department of RailTransAuto. In her words, both European and Asian car producers are ready to deliver cars by railway via the terminals mentioned above in the near future.
But she says that “while the acting tariffs are in force, we can hardly compete with trucks properly. Even if we carry cargo with zero profitability, the cost of transportation by railway will be higher than by motor transport. In this case, the problem can be solved only with support from the state and the Federal Tariff Service”. According to her, the company can compete if cargo is carried to Yekaterinburg or Rostov-on-Don, i.e. owing to the length of the haul. “But now the major flow of cars is destined for Moscow and we are not able to compete there,” claims E. Kulbaka. Representatives of Finnish VR Ltd agree with her and consider the tariffs one of the main factors preventing cargo flow switching from motor transport to railways.
The cargo flow switching from trucks to wagons will be stimulated by the concentration of customs procedures in the destination point, which will simplify the work of cargo owners. Thus, another problem appears to slow down the growth of cargo transportation by railway. In Russia the practical procedures for transportation of goods through customs from the border to the destination point have not been developed that far.
In other words, a simplified scheme for customs transit is required. Now the transported cargo for a consignee to Russia can only be delivered by railway to him from Moscow or its suburbs to specific railway station, says Matti Andersson, Head of the Freight Transportation Marketing Department at VR Ltd. In his opinion, it is necessary that customs transit envisage other types of delivery. For example, it should be permitted to unload cargo on trucks at one of the railway stations and then carry it to a temporary storage warehouse, where the cargo owner could get it after customs clearance.
There are similar problems with another prospective cargo – containers. “We launched a regular block train. There is a route but still there are problems with customs clearance of containers, which prevent us from increasing the flow. The Customs Service understands the urgency of the problem. We met with the Head of the North-Western Customs to discuss the issue. There are some legislative acts to which amendments must be made to change the acting order and procedures. But the problem will be solved,” promises Viktor Stepov, Head of Oktyabrskaya (October) railway – affiliate of OAO RZD.

By Maria  Shevchenko
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2008/1/018.png" border="1" alt=" " hspace="5" width="140" height="110" align="left" />Kilometres-long truck queues on the border of the Russian Federation and EU countries Finland, Latvia and Estonia became one of the most popular themes even in the non-specialist mass media in 2007. Meanwhile, cargo owners are not eager to transport their freight by railway. The problem lies with the terms of customs transit and railway tariffs.
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International Problem
In 2003-2007, freight carried by road transport across the border between Russia and Finland, Estonia, Latvia and Poland increased significantly. According to the RF Ministry of Transport, the number of trucks entering the country via the international border crossing at Kunichina Gora (Pskov region, Russian-Estonian border), grew by almost 180% in 2005-2006, and at Torfyanovka border crossing (Leningrad region, Russian-Finnish border) – by 150%. At other border crossings in the RF North-West, the rates growth in cargo turnover was the same.
Meanwhile, the border crossings can hardly cope with the increasing truck flow, and their technical abilities fall behind modern requirements. Consequently, the time taken for customs checks and cargo and vehicle registration exceeds target standards. Thus, on average, it takes two to four hours to check one loaded vehicle; in some cases the procedure lasts several days.
The largest and longest-lasting truck queues were on the Russian-Finnish border. Due to its developed transport and logistics sector, Suomi is a transit hub for goods destined for Russia.
According to Silja Ruokola, the Director of Unit for Logistics and Russia Cooperation at the Finnish Transport and Communication Ministry, the losses of the companies whose trucks sit idle waiting for customs clearance at the Russian-Finnish border, amount to EUR 900 million annually. 
The border queues at the Russian-Finnish border appeared long ago but became a real problem in 2005-2006. “The border crossings were launched in 1996 and, at that time, they met the standards. Nowadays, the cargo flow has increased, and the border crossings fail to service it properly”, says Evgeny Vensko, Head of the PR service of the North-Western Customs, part of the Federal Customs Service. “After the collapse of the USSR, every former Republic had to organise its own border and create border crossings”, says Vitaly Eremenko, former head of different customs offices in Russia and Lithuania. “In the early 1990”s, I used to work in the North-West of Russia, constructing border crossings at the border with Latvia and other countries. At that time we did not even dream that the volume of cargoes crossing the border would grow like this in a decade!”
In 2006, the queues became an international problem to which the authorities of the interested states paid much attention. In particular, Urmas Paet, Estonian Minister of Foreign Affairs, at the meeting with his colleagues from the European Union offered to discuss the issue at the summit of Russia – the European Union in Portugal. “Kilometres-long queues on the EU-Russian land border contradict normal practice as well as internationally-recognised trade rules”, stated the minister.      
The problem of traffic jams becomes more and more crucial every year. In September, the length of queues at the Vaalimaa border crossing set a new record – 80 km, and Tommi Kivilaakso, Head of the Eastern Customs District of Finland, threatened to ban Russian vehicles from entering the country temporarily. 
First of all, the reason for the queues is the growing import of cars. Also, trucks carry to Russia expensive containerised and refrigerated cargoes - household appliances, electronics, clothes and equipment. “This year, about 800,000 cars will be imported into Russia via Finland, 60% up year-on-year”, forecasts S. Ruokola.
Another reason for the traffic jams is the problems faced by the foreign trade participants during the customs clearance procedure. Most experts believe that the greatest difficulty is the “handwritten” registration of the cargo.
“Up to 90% of the details delivered to us are from North America. And not less than six different documents must be drawn up for every delivery. And all of them must be certified by a notary”, said Albert Bokhov, Managing Director for Joint Supply Organization of Magna GAZ Group Joint Supply Organization. “Today some of the documents, in particular the data mentioned in bills, are sent from Finland to Russia in the form of an e-declaration. Still, we need to increase the number of e-documents used to simplify and speed up the customs clearance procedure and, consequently, to reduce time spent by a vehicle at the border crossing. We believe that the main factor prolonging the time a truck stays at the Finnish-Russian border is paper document turnover”, complains Minna Lehtinen, VR Ltd Leading Specialist for Forwarding and Customs (for more information read “E-Declaration: Fast, Reliable, But Not Used Yet” on pp. 14–15).   
Railway Is Still Losing The Game
It seems that having learnt about the problems of road carriers, cargo owners must start to use an alternative transport mode – the railway. But most experts claim that railways lack necessary infrastructure and rolling stock, the customs transit is not stable, and quick border crossings have not been organised until now.
It is worth mentioning that railwaymen understand the problems and are ready to solve them. In 2007, OAO RZD launched a specialised daughter company – OAO RailTransAuto, which now has a park of 2,000 modern wagons for car transportation and several terminals. “We believe that the share of railway transportation in the total volume of cargo carried from Finland may increase to 30% by 2010. And the Finnish direction may be unloaded by means of changing the logistic schemes of car delivery. Thus, Japanese and Korean cars may be transported much faster via Far Eastern ports and the Transsiberian railway. And OAO RailTransAuto, which owns the Zarubino terminal in the Troitsy Bay sea port (Primorsk region), plans to organise such transportation. A new terminal of OAO RailTransAuto in Chernyakhovsk (Kaliningrad region) will simplify transportation of European cars by railway. The terminal has railway approaches with the gauge of European and Russian width, so a European enterprise’s production can be carried by railway without using other transport modes”, is sure Ekaterina Kulbaka Director of the Strategic Development Department of RailTransAuto. In her words, both European and Asian car producers are ready to deliver cars by railway via the terminals mentioned above in the near future.
But she says that “while the acting tariffs are in force, we can hardly compete with trucks properly. Even if we carry cargo with zero profitability, the cost of transportation by railway will be higher than by motor transport. In this case, the problem can be solved only with support from the state and the Federal Tariff Service”. According to her, the company can compete if cargo is carried to Yekaterinburg or Rostov-on-Don, i.e. owing to the length of the haul. “But now the major flow of cars is destined for Moscow and we are not able to compete there,” claims E. Kulbaka. Representatives of Finnish VR Ltd agree with her and consider the tariffs one of the main factors preventing cargo flow switching from motor transport to railways.
The cargo flow switching from trucks to wagons will be stimulated by the concentration of customs procedures in the destination point, which will simplify the work of cargo owners. Thus, another problem appears to slow down the growth of cargo transportation by railway. In Russia the practical procedures for transportation of goods through customs from the border to the destination point have not been developed that far.
In other words, a simplified scheme for customs transit is required. Now the transported cargo for a consignee to Russia can only be delivered by railway to him from Moscow or its suburbs to specific railway station, says Matti Andersson, Head of the Freight Transportation Marketing Department at VR Ltd. In his opinion, it is necessary that customs transit envisage other types of delivery. For example, it should be permitted to unload cargo on trucks at one of the railway stations and then carry it to a temporary storage warehouse, where the cargo owner could get it after customs clearance.
There are similar problems with another prospective cargo – containers. “We launched a regular block train. There is a route but still there are problems with customs clearance of containers, which prevent us from increasing the flow. The Customs Service understands the urgency of the problem. We met with the Head of the North-Western Customs to discuss the issue. There are some legislative acts to which amendments must be made to change the acting order and procedures. But the problem will be solved,” promises Viktor Stepov, Head of Oktyabrskaya (October) railway – affiliate of OAO RZD.

By Maria  Shevchenko
    [~DETAIL_TEXT] => 
International Problem
In 2003-2007, freight carried by road transport across the border between Russia and Finland, Estonia, Latvia and Poland increased significantly. According to the RF Ministry of Transport, the number of trucks entering the country via the international border crossing at Kunichina Gora (Pskov region, Russian-Estonian border), grew by almost 180% in 2005-2006, and at Torfyanovka border crossing (Leningrad region, Russian-Finnish border) – by 150%. At other border crossings in the RF North-West, the rates growth in cargo turnover was the same.
Meanwhile, the border crossings can hardly cope with the increasing truck flow, and their technical abilities fall behind modern requirements. Consequently, the time taken for customs checks and cargo and vehicle registration exceeds target standards. Thus, on average, it takes two to four hours to check one loaded vehicle; in some cases the procedure lasts several days.
The largest and longest-lasting truck queues were on the Russian-Finnish border. Due to its developed transport and logistics sector, Suomi is a transit hub for goods destined for Russia.
According to Silja Ruokola, the Director of Unit for Logistics and Russia Cooperation at the Finnish Transport and Communication Ministry, the losses of the companies whose trucks sit idle waiting for customs clearance at the Russian-Finnish border, amount to EUR 900 million annually. 
The border queues at the Russian-Finnish border appeared long ago but became a real problem in 2005-2006. “The border crossings were launched in 1996 and, at that time, they met the standards. Nowadays, the cargo flow has increased, and the border crossings fail to service it properly”, says Evgeny Vensko, Head of the PR service of the North-Western Customs, part of the Federal Customs Service. “After the collapse of the USSR, every former Republic had to organise its own border and create border crossings”, says Vitaly Eremenko, former head of different customs offices in Russia and Lithuania. “In the early 1990”s, I used to work in the North-West of Russia, constructing border crossings at the border with Latvia and other countries. At that time we did not even dream that the volume of cargoes crossing the border would grow like this in a decade!”
In 2006, the queues became an international problem to which the authorities of the interested states paid much attention. In particular, Urmas Paet, Estonian Minister of Foreign Affairs, at the meeting with his colleagues from the European Union offered to discuss the issue at the summit of Russia – the European Union in Portugal. “Kilometres-long queues on the EU-Russian land border contradict normal practice as well as internationally-recognised trade rules”, stated the minister.      
The problem of traffic jams becomes more and more crucial every year. In September, the length of queues at the Vaalimaa border crossing set a new record – 80 km, and Tommi Kivilaakso, Head of the Eastern Customs District of Finland, threatened to ban Russian vehicles from entering the country temporarily. 
First of all, the reason for the queues is the growing import of cars. Also, trucks carry to Russia expensive containerised and refrigerated cargoes - household appliances, electronics, clothes and equipment. “This year, about 800,000 cars will be imported into Russia via Finland, 60% up year-on-year”, forecasts S. Ruokola.
Another reason for the traffic jams is the problems faced by the foreign trade participants during the customs clearance procedure. Most experts believe that the greatest difficulty is the “handwritten” registration of the cargo.
“Up to 90% of the details delivered to us are from North America. And not less than six different documents must be drawn up for every delivery. And all of them must be certified by a notary”, said Albert Bokhov, Managing Director for Joint Supply Organization of Magna GAZ Group Joint Supply Organization. “Today some of the documents, in particular the data mentioned in bills, are sent from Finland to Russia in the form of an e-declaration. Still, we need to increase the number of e-documents used to simplify and speed up the customs clearance procedure and, consequently, to reduce time spent by a vehicle at the border crossing. We believe that the main factor prolonging the time a truck stays at the Finnish-Russian border is paper document turnover”, complains Minna Lehtinen, VR Ltd Leading Specialist for Forwarding and Customs (for more information read “E-Declaration: Fast, Reliable, But Not Used Yet” on pp. 14–15).   
Railway Is Still Losing The Game
It seems that having learnt about the problems of road carriers, cargo owners must start to use an alternative transport mode – the railway. But most experts claim that railways lack necessary infrastructure and rolling stock, the customs transit is not stable, and quick border crossings have not been organised until now.
It is worth mentioning that railwaymen understand the problems and are ready to solve them. In 2007, OAO RZD launched a specialised daughter company – OAO RailTransAuto, which now has a park of 2,000 modern wagons for car transportation and several terminals. “We believe that the share of railway transportation in the total volume of cargo carried from Finland may increase to 30% by 2010. And the Finnish direction may be unloaded by means of changing the logistic schemes of car delivery. Thus, Japanese and Korean cars may be transported much faster via Far Eastern ports and the Transsiberian railway. And OAO RailTransAuto, which owns the Zarubino terminal in the Troitsy Bay sea port (Primorsk region), plans to organise such transportation. A new terminal of OAO RailTransAuto in Chernyakhovsk (Kaliningrad region) will simplify transportation of European cars by railway. The terminal has railway approaches with the gauge of European and Russian width, so a European enterprise’s production can be carried by railway without using other transport modes”, is sure Ekaterina Kulbaka Director of the Strategic Development Department of RailTransAuto. In her words, both European and Asian car producers are ready to deliver cars by railway via the terminals mentioned above in the near future.
But she says that “while the acting tariffs are in force, we can hardly compete with trucks properly. Even if we carry cargo with zero profitability, the cost of transportation by railway will be higher than by motor transport. In this case, the problem can be solved only with support from the state and the Federal Tariff Service”. According to her, the company can compete if cargo is carried to Yekaterinburg or Rostov-on-Don, i.e. owing to the length of the haul. “But now the major flow of cars is destined for Moscow and we are not able to compete there,” claims E. Kulbaka. Representatives of Finnish VR Ltd agree with her and consider the tariffs one of the main factors preventing cargo flow switching from motor transport to railways.
The cargo flow switching from trucks to wagons will be stimulated by the concentration of customs procedures in the destination point, which will simplify the work of cargo owners. Thus, another problem appears to slow down the growth of cargo transportation by railway. In Russia the practical procedures for transportation of goods through customs from the border to the destination point have not been developed that far.
In other words, a simplified scheme for customs transit is required. Now the transported cargo for a consignee to Russia can only be delivered by railway to him from Moscow or its suburbs to specific railway station, says Matti Andersson, Head of the Freight Transportation Marketing Department at VR Ltd. In his opinion, it is necessary that customs transit envisage other types of delivery. For example, it should be permitted to unload cargo on trucks at one of the railway stations and then carry it to a temporary storage warehouse, where the cargo owner could get it after customs clearance.
There are similar problems with another prospective cargo – containers. “We launched a regular block train. There is a route but still there are problems with customs clearance of containers, which prevent us from increasing the flow. The Customs Service understands the urgency of the problem. We met with the Head of the North-Western Customs to discuss the issue. There are some legislative acts to which amendments must be made to change the acting order and procedures. But the problem will be solved,” promises Viktor Stepov, Head of Oktyabrskaya (October) railway – affiliate of OAO RZD.

By Maria  Shevchenko
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To Paris Via Berlin…
The through wagon Moscow-Paris that became a part of train №12/13 Moscow-Berlin, ran its first trip on the first new route of OAO RZD. Mikhail Akulov, Vice President of Russian Railways, emphasised that the launch of the route was the next step to strengthening cooperation between Russia and France, and a good opportunity for the Russia to learn more about French culture.
In winter time the wagon makes two trips a week, and from May 24 to October 2 there will be three trips. Due to the active support of Byelorussian, Polish, French and German railways, the route was prepared in a very short period of time – just one year. Nowadays Europe is increasing the amount of faster and high-speed trains and reducing the number of night ones, so the only good option was to organise the route with train №242/243 Berlin-Paris of Deutsche Bahn (German Railways). The wagon of OAO RZD was coupled up to the train in Berlin. German railwaymen paid special attention to the initiative of their Russian colleagues and decided to take one of their own wagons out of the train to make boarding and alighting more comfortable.
Travel time on the route Moscow-Paris is 51 hours and 14 minutes, and back – 45 hours and 49 minutes. When the wagon runs to Paris, the stop in Berlin lasts about 12 hours, and on the way back it is about 7 hours. However, the passengers will barely have time to get bored. They will be offered special tourist programmes developed by OAO “RZD-Tour”. Head of the company, Alexander Gendelev, said that there are different programmes for the travelers to and from Paris.
 They include taking a tour of architecture, museums and other sights in Berlin. Besides, there may be changes in the programme for tourist groups. In the words of Mr Gendelev, this makes the route interesting for tourist companies, especially considering the discount on booking tickets for the through wagon for organised groups. 
The top management of OAO RZD consider that the project will be profitable due to the price policy. A one-way adult second-class ticket (the route is serviced by a wagon similar to Ritz rail car with convertible two- and three-berth compartments for first and second-class passengers) costs EUR 333, and EUR 479 for first-class. A single compartment for one passenger costs EUR 545. A ticket for a child is about 50% cheaper. For the sake of comparison: travelling by airplane economy-class from the Russian capital to the French one costs about EUR 400.   
…And Not Only to Paris
As well as the through wagon Moscow-Paris, OAO RZD launched several other international routes. Mikhail Akulov explained that putting them into the schedule now is connected with putting in force the new passenger train traffic timetable in Europe.
OAO RZD organised passenger communication between Moscow and Amsterdam (the Netherlands). Now the through wagon runs on the route Moscow – Warsaw – Berlin – Hannover – Cologne – Amsterdam. The total travel time is 39 hours and 18 minutes. Passenger routes between Moscow and Munich (Germany) has also been opened. The route of the through wagon includes Warsaw, Berlin, Hannover, Fulda, and Nurnberg. Travel time is 37 hours and 48 minutes.
At the end of 2007, the through wagon between Moscow and Basel (Switzerland) made its first trip. It takes the wagon almost 40 hours to run via Warsaw, Berlin, Hannover, Fulda and Frankfurt-am-Main.
All the wagons servicing the routes will run daily as part of train № 11/12 Moscow – Warsaw; in Warsaw they will be re-coupled to train № 346/347 Warsaw - Amsterdam. And then, at the Hannover railway station the wagons Moscow-Basel and Moscow – Munich will be re-coupled to the trains of Deutsche Bahn.       
OAO RZD decided to increase its volume of international passenger transportation because of the constantly growing demand for such services. A lot of international trains were cancelled in the early 1990’s. But then the old routes were brought back into service, stage by stage, and new ones were launched. For example, in June 2004, a direct passenger train started to service the Moscow – Brussels line, replacing through wagons Moscow – Cologne used before. At that time new international direct routes Chelyabinsk – Berlin, Sverdlovsk – Berlin, Ufa – Berlin were launched. In summer 2004, a through wagon Moscow – Thessaloniki was put into operation, running via Romania and Bulgaria. In October 2004, new passenger service Chita- Manchuria was launched, and in June 2005 regular summer international through wagons were put into operation on the lines Saint Petersburg – Varna and Saint Petersburg – Constanta. In December 2005, a route servicing Moscow – Frankfurt-am-Main was recommenced (it was cancelled in 2000). After coming to agreement with Deutsche Bahn, OAO RZD prolonged the route of the through wagon Rostov – Berlin to Adler. In June 2006 the decision to put into operation a through wagon Kazan - Varna during the summer (June - September) was brought to life. OAO RZD took, and continues to take, measures to optimise the routes and reduce travel time, thus making the trains more attractive for passengers.
Nowadays trains and through wagons of OAO RZD run along 52 international routes and are serviced by Russian railways as well as Polish, Czech, Slovak, Finnish, Mongolian, Chinese and North Korean railways.
Poland And Finland Are Leaders… Yet    
In 2006, OAO RZD transported about 800million passengers to and from Europe, China, Mongolia and Korea. Last year there was a 15% growth in international passenger transportation volumes. The launch of the new routes from Moscow to Venice (Italy), Thessaloniki (Greece) and Malborik (Poland) were responsible. On the whole, Poland has become the leader in the railway passenger communication sector in Central Europe. In May 2007, the international passenger train “Polonaise” servicing the Moscow – Warsaw route was recommenced. It is maintained equally by Russian Railway and Polish Railways. According to the information of the Moscow Regional Direction for Passenger Servicing, OAO RZD Federal Passenger Direction, its occupancy was 60-80% in summer.
Finland remains the most popular destination among Russian and foreign passengers. In 2004-2006, the amount of return tickets sold by OAO RZD increased by 20% each year. In 2007, the share of the passenger transportation volume to Finland serviced by OAO RZD made a half of the company’s total international passenger flow. Recognising that the destination is becoming more and more popular, OAO RZD and VR Ltd (Finnish Railways) decided to launch a joint venture named Oy Karelian Trains Ltd (The RZD-Partner International wrote about the project in 2007).  
OAO RZD will continue to organise new international routes. It plans to open through passenger railway communication between Moscow and Krakow (Poland). The Polish Railways plans to run its wagons along the route Moscow – Minsk – Brest – Warsaw – Krakow. The volume of passenger transportation to Austria will increase. The through wagon Moscow – Vienna will run daily all year round.
In May 2008, international weekly services Irkutsk – Berlin and Irkutsk – Warsaw will be launched. They will be serviced by through wagons. 
New Rolling Stock Required
On the new routes launched in December, OAO RZD used the new mechanism of ticket sales for the first time. It is similar to the price formation mechanism in Europe – at a so-called “global price”. Russian Scientific and Research Institute of Railway Transport (VNIIZhT) developed the necessary software in the shortest time possible. The point of a “global price” is that a passenger wishing to make a trip to Europe, firstly purchases a seat (in other words, reserves it, buying the right to be transported), and when he chooses the date and the train, he purchases the whole ticket. Also in December, people from Europe got an opportunity to buy tickets for Russian domestic trains. A booking office of OAO RZD was opened in Berlin.
Nevertheless, one of the crucial issues for international transportation organisation is rolling stock. Europe has established high standards for rolling stock, including a certain level of safety, fire- and climate-control systems meeting international requirements. 
In the park of OAO RZD there are wagons similar to Ritz rail cars that meet the standard. They can run at a speed of 200 kph. This type of rolling stock has never been produced in the CIS. It is constructed by wagon-building plants in Germany and Poland. The top management of OAO RZD has decided to renew and enlarge the company’s wagon park with passenger rail cars of the “Ritz” type. In 2009-2011, it is planned to purchase 200 such wagons. The Federal Passenger Direction of OAO RZD in cooperation with Roszheldorsnab has started the work to conclude and execute international contracts in pursuit of such a supply of wagons. VNIIZhT is currently developing the technical requirements to the wagons.
Resume
Making his speech at the presentation of the Moscow-Paris wagon, Vice President of OAO RZD Mikhail Akulov named it an important day for Russian Railways. In his words, by launching new routes, OAO RZD recoups its position in Central Europe in the passenger transportation sector. “We hope that the terms of the trip, developed by OAO RZD, and the offered tariff programme will be interesting and attractive for those who choose to travel by train,” he stated.

By  Alexandra  Fetisova
    [~DETAIL_TEXT] => 
To Paris Via Berlin…
The through wagon Moscow-Paris that became a part of train №12/13 Moscow-Berlin, ran its first trip on the first new route of OAO RZD. Mikhail Akulov, Vice President of Russian Railways, emphasised that the launch of the route was the next step to strengthening cooperation between Russia and France, and a good opportunity for the Russia to learn more about French culture.
In winter time the wagon makes two trips a week, and from May 24 to October 2 there will be three trips. Due to the active support of Byelorussian, Polish, French and German railways, the route was prepared in a very short period of time – just one year. Nowadays Europe is increasing the amount of faster and high-speed trains and reducing the number of night ones, so the only good option was to organise the route with train №242/243 Berlin-Paris of Deutsche Bahn (German Railways). The wagon of OAO RZD was coupled up to the train in Berlin. German railwaymen paid special attention to the initiative of their Russian colleagues and decided to take one of their own wagons out of the train to make boarding and alighting more comfortable.
Travel time on the route Moscow-Paris is 51 hours and 14 minutes, and back – 45 hours and 49 minutes. When the wagon runs to Paris, the stop in Berlin lasts about 12 hours, and on the way back it is about 7 hours. However, the passengers will barely have time to get bored. They will be offered special tourist programmes developed by OAO “RZD-Tour”. Head of the company, Alexander Gendelev, said that there are different programmes for the travelers to and from Paris.
 They include taking a tour of architecture, museums and other sights in Berlin. Besides, there may be changes in the programme for tourist groups. In the words of Mr Gendelev, this makes the route interesting for tourist companies, especially considering the discount on booking tickets for the through wagon for organised groups. 
The top management of OAO RZD consider that the project will be profitable due to the price policy. A one-way adult second-class ticket (the route is serviced by a wagon similar to Ritz rail car with convertible two- and three-berth compartments for first and second-class passengers) costs EUR 333, and EUR 479 for first-class. A single compartment for one passenger costs EUR 545. A ticket for a child is about 50% cheaper. For the sake of comparison: travelling by airplane economy-class from the Russian capital to the French one costs about EUR 400.   
…And Not Only to Paris
As well as the through wagon Moscow-Paris, OAO RZD launched several other international routes. Mikhail Akulov explained that putting them into the schedule now is connected with putting in force the new passenger train traffic timetable in Europe.
OAO RZD organised passenger communication between Moscow and Amsterdam (the Netherlands). Now the through wagon runs on the route Moscow – Warsaw – Berlin – Hannover – Cologne – Amsterdam. The total travel time is 39 hours and 18 minutes. Passenger routes between Moscow and Munich (Germany) has also been opened. The route of the through wagon includes Warsaw, Berlin, Hannover, Fulda, and Nurnberg. Travel time is 37 hours and 48 minutes.
At the end of 2007, the through wagon between Moscow and Basel (Switzerland) made its first trip. It takes the wagon almost 40 hours to run via Warsaw, Berlin, Hannover, Fulda and Frankfurt-am-Main.
All the wagons servicing the routes will run daily as part of train № 11/12 Moscow – Warsaw; in Warsaw they will be re-coupled to train № 346/347 Warsaw - Amsterdam. And then, at the Hannover railway station the wagons Moscow-Basel and Moscow – Munich will be re-coupled to the trains of Deutsche Bahn.       
OAO RZD decided to increase its volume of international passenger transportation because of the constantly growing demand for such services. A lot of international trains were cancelled in the early 1990’s. But then the old routes were brought back into service, stage by stage, and new ones were launched. For example, in June 2004, a direct passenger train started to service the Moscow – Brussels line, replacing through wagons Moscow – Cologne used before. At that time new international direct routes Chelyabinsk – Berlin, Sverdlovsk – Berlin, Ufa – Berlin were launched. In summer 2004, a through wagon Moscow – Thessaloniki was put into operation, running via Romania and Bulgaria. In October 2004, new passenger service Chita- Manchuria was launched, and in June 2005 regular summer international through wagons were put into operation on the lines Saint Petersburg – Varna and Saint Petersburg – Constanta. In December 2005, a route servicing Moscow – Frankfurt-am-Main was recommenced (it was cancelled in 2000). After coming to agreement with Deutsche Bahn, OAO RZD prolonged the route of the through wagon Rostov – Berlin to Adler. In June 2006 the decision to put into operation a through wagon Kazan - Varna during the summer (June - September) was brought to life. OAO RZD took, and continues to take, measures to optimise the routes and reduce travel time, thus making the trains more attractive for passengers.
Nowadays trains and through wagons of OAO RZD run along 52 international routes and are serviced by Russian railways as well as Polish, Czech, Slovak, Finnish, Mongolian, Chinese and North Korean railways.
Poland And Finland Are Leaders… Yet    
In 2006, OAO RZD transported about 800million passengers to and from Europe, China, Mongolia and Korea. Last year there was a 15% growth in international passenger transportation volumes. The launch of the new routes from Moscow to Venice (Italy), Thessaloniki (Greece) and Malborik (Poland) were responsible. On the whole, Poland has become the leader in the railway passenger communication sector in Central Europe. In May 2007, the international passenger train “Polonaise” servicing the Moscow – Warsaw route was recommenced. It is maintained equally by Russian Railway and Polish Railways. According to the information of the Moscow Regional Direction for Passenger Servicing, OAO RZD Federal Passenger Direction, its occupancy was 60-80% in summer.
Finland remains the most popular destination among Russian and foreign passengers. In 2004-2006, the amount of return tickets sold by OAO RZD increased by 20% each year. In 2007, the share of the passenger transportation volume to Finland serviced by OAO RZD made a half of the company’s total international passenger flow. Recognising that the destination is becoming more and more popular, OAO RZD and VR Ltd (Finnish Railways) decided to launch a joint venture named Oy Karelian Trains Ltd (The RZD-Partner International wrote about the project in 2007).  
OAO RZD will continue to organise new international routes. It plans to open through passenger railway communication between Moscow and Krakow (Poland). The Polish Railways plans to run its wagons along the route Moscow – Minsk – Brest – Warsaw – Krakow. The volume of passenger transportation to Austria will increase. The through wagon Moscow – Vienna will run daily all year round.
In May 2008, international weekly services Irkutsk – Berlin and Irkutsk – Warsaw will be launched. They will be serviced by through wagons. 
New Rolling Stock Required
On the new routes launched in December, OAO RZD used the new mechanism of ticket sales for the first time. It is similar to the price formation mechanism in Europe – at a so-called “global price”. Russian Scientific and Research Institute of Railway Transport (VNIIZhT) developed the necessary software in the shortest time possible. The point of a “global price” is that a passenger wishing to make a trip to Europe, firstly purchases a seat (in other words, reserves it, buying the right to be transported), and when he chooses the date and the train, he purchases the whole ticket. Also in December, people from Europe got an opportunity to buy tickets for Russian domestic trains. A booking office of OAO RZD was opened in Berlin.
Nevertheless, one of the crucial issues for international transportation organisation is rolling stock. Europe has established high standards for rolling stock, including a certain level of safety, fire- and climate-control systems meeting international requirements. 
In the park of OAO RZD there are wagons similar to Ritz rail cars that meet the standard. They can run at a speed of 200 kph. This type of rolling stock has never been produced in the CIS. It is constructed by wagon-building plants in Germany and Poland. The top management of OAO RZD has decided to renew and enlarge the company’s wagon park with passenger rail cars of the “Ritz” type. In 2009-2011, it is planned to purchase 200 such wagons. The Federal Passenger Direction of OAO RZD in cooperation with Roszheldorsnab has started the work to conclude and execute international contracts in pursuit of such a supply of wagons. VNIIZhT is currently developing the technical requirements to the wagons.
Resume
Making his speech at the presentation of the Moscow-Paris wagon, Vice President of OAO RZD Mikhail Akulov named it an important day for Russian Railways. In his words, by launching new routes, OAO RZD recoups its position in Central Europe in the passenger transportation sector. “We hope that the terms of the trip, developed by OAO RZD, and the offered tariff programme will be interesting and attractive for those who choose to travel by train,” he stated.

By  Alexandra  Fetisova
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To Paris Via Berlin…
The through wagon Moscow-Paris that became a part of train №12/13 Moscow-Berlin, ran its first trip on the first new route of OAO RZD. Mikhail Akulov, Vice President of Russian Railways, emphasised that the launch of the route was the next step to strengthening cooperation between Russia and France, and a good opportunity for the Russia to learn more about French culture.
In winter time the wagon makes two trips a week, and from May 24 to October 2 there will be three trips. Due to the active support of Byelorussian, Polish, French and German railways, the route was prepared in a very short period of time – just one year. Nowadays Europe is increasing the amount of faster and high-speed trains and reducing the number of night ones, so the only good option was to organise the route with train №242/243 Berlin-Paris of Deutsche Bahn (German Railways). The wagon of OAO RZD was coupled up to the train in Berlin. German railwaymen paid special attention to the initiative of their Russian colleagues and decided to take one of their own wagons out of the train to make boarding and alighting more comfortable.
Travel time on the route Moscow-Paris is 51 hours and 14 minutes, and back – 45 hours and 49 minutes. When the wagon runs to Paris, the stop in Berlin lasts about 12 hours, and on the way back it is about 7 hours. However, the passengers will barely have time to get bored. They will be offered special tourist programmes developed by OAO “RZD-Tour”. Head of the company, Alexander Gendelev, said that there are different programmes for the travelers to and from Paris.
 They include taking a tour of architecture, museums and other sights in Berlin. Besides, there may be changes in the programme for tourist groups. In the words of Mr Gendelev, this makes the route interesting for tourist companies, especially considering the discount on booking tickets for the through wagon for organised groups. 
The top management of OAO RZD consider that the project will be profitable due to the price policy. A one-way adult second-class ticket (the route is serviced by a wagon similar to Ritz rail car with convertible two- and three-berth compartments for first and second-class passengers) costs EUR 333, and EUR 479 for first-class. A single compartment for one passenger costs EUR 545. A ticket for a child is about 50% cheaper. For the sake of comparison: travelling by airplane economy-class from the Russian capital to the French one costs about EUR 400.   
…And Not Only to Paris
As well as the through wagon Moscow-Paris, OAO RZD launched several other international routes. Mikhail Akulov explained that putting them into the schedule now is connected with putting in force the new passenger train traffic timetable in Europe.
OAO RZD organised passenger communication between Moscow and Amsterdam (the Netherlands). Now the through wagon runs on the route Moscow – Warsaw – Berlin – Hannover – Cologne – Amsterdam. The total travel time is 39 hours and 18 minutes. Passenger routes between Moscow and Munich (Germany) has also been opened. The route of the through wagon includes Warsaw, Berlin, Hannover, Fulda, and Nurnberg. Travel time is 37 hours and 48 minutes.
At the end of 2007, the through wagon between Moscow and Basel (Switzerland) made its first trip. It takes the wagon almost 40 hours to run via Warsaw, Berlin, Hannover, Fulda and Frankfurt-am-Main.
All the wagons servicing the routes will run daily as part of train № 11/12 Moscow – Warsaw; in Warsaw they will be re-coupled to train № 346/347 Warsaw - Amsterdam. And then, at the Hannover railway station the wagons Moscow-Basel and Moscow – Munich will be re-coupled to the trains of Deutsche Bahn.       
OAO RZD decided to increase its volume of international passenger transportation because of the constantly growing demand for such services. A lot of international trains were cancelled in the early 1990’s. But then the old routes were brought back into service, stage by stage, and new ones were launched. For example, in June 2004, a direct passenger train started to service the Moscow – Brussels line, replacing through wagons Moscow – Cologne used before. At that time new international direct routes Chelyabinsk – Berlin, Sverdlovsk – Berlin, Ufa – Berlin were launched. In summer 2004, a through wagon Moscow – Thessaloniki was put into operation, running via Romania and Bulgaria. In October 2004, new passenger service Chita- Manchuria was launched, and in June 2005 regular summer international through wagons were put into operation on the lines Saint Petersburg – Varna and Saint Petersburg – Constanta. In December 2005, a route servicing Moscow – Frankfurt-am-Main was recommenced (it was cancelled in 2000). After coming to agreement with Deutsche Bahn, OAO RZD prolonged the route of the through wagon Rostov – Berlin to Adler. In June 2006 the decision to put into operation a through wagon Kazan - Varna during the summer (June - September) was brought to life. OAO RZD took, and continues to take, measures to optimise the routes and reduce travel time, thus making the trains more attractive for passengers.
Nowadays trains and through wagons of OAO RZD run along 52 international routes and are serviced by Russian railways as well as Polish, Czech, Slovak, Finnish, Mongolian, Chinese and North Korean railways.
Poland And Finland Are Leaders… Yet    
In 2006, OAO RZD transported about 800million passengers to and from Europe, China, Mongolia and Korea. Last year there was a 15% growth in international passenger transportation volumes. The launch of the new routes from Moscow to Venice (Italy), Thessaloniki (Greece) and Malborik (Poland) were responsible. On the whole, Poland has become the leader in the railway passenger communication sector in Central Europe. In May 2007, the international passenger train “Polonaise” servicing the Moscow – Warsaw route was recommenced. It is maintained equally by Russian Railway and Polish Railways. According to the information of the Moscow Regional Direction for Passenger Servicing, OAO RZD Federal Passenger Direction, its occupancy was 60-80% in summer.
Finland remains the most popular destination among Russian and foreign passengers. In 2004-2006, the amount of return tickets sold by OAO RZD increased by 20% each year. In 2007, the share of the passenger transportation volume to Finland serviced by OAO RZD made a half of the company’s total international passenger flow. Recognising that the destination is becoming more and more popular, OAO RZD and VR Ltd (Finnish Railways) decided to launch a joint venture named Oy Karelian Trains Ltd (The RZD-Partner International wrote about the project in 2007).  
OAO RZD will continue to organise new international routes. It plans to open through passenger railway communication between Moscow and Krakow (Poland). The Polish Railways plans to run its wagons along the route Moscow – Minsk – Brest – Warsaw – Krakow. The volume of passenger transportation to Austria will increase. The through wagon Moscow – Vienna will run daily all year round.
In May 2008, international weekly services Irkutsk – Berlin and Irkutsk – Warsaw will be launched. They will be serviced by through wagons. 
New Rolling Stock Required
On the new routes launched in December, OAO RZD used the new mechanism of ticket sales for the first time. It is similar to the price formation mechanism in Europe – at a so-called “global price”. Russian Scientific and Research Institute of Railway Transport (VNIIZhT) developed the necessary software in the shortest time possible. The point of a “global price” is that a passenger wishing to make a trip to Europe, firstly purchases a seat (in other words, reserves it, buying the right to be transported), and when he chooses the date and the train, he purchases the whole ticket. Also in December, people from Europe got an opportunity to buy tickets for Russian domestic trains. A booking office of OAO RZD was opened in Berlin.
Nevertheless, one of the crucial issues for international transportation organisation is rolling stock. Europe has established high standards for rolling stock, including a certain level of safety, fire- and climate-control systems meeting international requirements. 
In the park of OAO RZD there are wagons similar to Ritz rail cars that meet the standard. They can run at a speed of 200 kph. This type of rolling stock has never been produced in the CIS. It is constructed by wagon-building plants in Germany and Poland. The top management of OAO RZD has decided to renew and enlarge the company’s wagon park with passenger rail cars of the “Ritz” type. In 2009-2011, it is planned to purchase 200 such wagons. The Federal Passenger Direction of OAO RZD in cooperation with Roszheldorsnab has started the work to conclude and execute international contracts in pursuit of such a supply of wagons. VNIIZhT is currently developing the technical requirements to the wagons.
Resume
Making his speech at the presentation of the Moscow-Paris wagon, Vice President of OAO RZD Mikhail Akulov named it an important day for Russian Railways. In his words, by launching new routes, OAO RZD recoups its position in Central Europe in the passenger transportation sector. “We hope that the terms of the trip, developed by OAO RZD, and the offered tariff programme will be interesting and attractive for those who choose to travel by train,” he stated.

By  Alexandra  Fetisova
    [~DETAIL_TEXT] => 
To Paris Via Berlin…
The through wagon Moscow-Paris that became a part of train №12/13 Moscow-Berlin, ran its first trip on the first new route of OAO RZD. Mikhail Akulov, Vice President of Russian Railways, emphasised that the launch of the route was the next step to strengthening cooperation between Russia and France, and a good opportunity for the Russia to learn more about French culture.
In winter time the wagon makes two trips a week, and from May 24 to October 2 there will be three trips. Due to the active support of Byelorussian, Polish, French and German railways, the route was prepared in a very short period of time – just one year. Nowadays Europe is increasing the amount of faster and high-speed trains and reducing the number of night ones, so the only good option was to organise the route with train №242/243 Berlin-Paris of Deutsche Bahn (German Railways). The wagon of OAO RZD was coupled up to the train in Berlin. German railwaymen paid special attention to the initiative of their Russian colleagues and decided to take one of their own wagons out of the train to make boarding and alighting more comfortable.
Travel time on the route Moscow-Paris is 51 hours and 14 minutes, and back – 45 hours and 49 minutes. When the wagon runs to Paris, the stop in Berlin lasts about 12 hours, and on the way back it is about 7 hours. However, the passengers will barely have time to get bored. They will be offered special tourist programmes developed by OAO “RZD-Tour”. Head of the company, Alexander Gendelev, said that there are different programmes for the travelers to and from Paris.
 They include taking a tour of architecture, museums and other sights in Berlin. Besides, there may be changes in the programme for tourist groups. In the words of Mr Gendelev, this makes the route interesting for tourist companies, especially considering the discount on booking tickets for the through wagon for organised groups. 
The top management of OAO RZD consider that the project will be profitable due to the price policy. A one-way adult second-class ticket (the route is serviced by a wagon similar to Ritz rail car with convertible two- and three-berth compartments for first and second-class passengers) costs EUR 333, and EUR 479 for first-class. A single compartment for one passenger costs EUR 545. A ticket for a child is about 50% cheaper. For the sake of comparison: travelling by airplane economy-class from the Russian capital to the French one costs about EUR 400.   
…And Not Only to Paris
As well as the through wagon Moscow-Paris, OAO RZD launched several other international routes. Mikhail Akulov explained that putting them into the schedule now is connected with putting in force the new passenger train traffic timetable in Europe.
OAO RZD organised passenger communication between Moscow and Amsterdam (the Netherlands). Now the through wagon runs on the route Moscow – Warsaw – Berlin – Hannover – Cologne – Amsterdam. The total travel time is 39 hours and 18 minutes. Passenger routes between Moscow and Munich (Germany) has also been opened. The route of the through wagon includes Warsaw, Berlin, Hannover, Fulda, and Nurnberg. Travel time is 37 hours and 48 minutes.
At the end of 2007, the through wagon between Moscow and Basel (Switzerland) made its first trip. It takes the wagon almost 40 hours to run via Warsaw, Berlin, Hannover, Fulda and Frankfurt-am-Main.
All the wagons servicing the routes will run daily as part of train № 11/12 Moscow – Warsaw; in Warsaw they will be re-coupled to train № 346/347 Warsaw - Amsterdam. And then, at the Hannover railway station the wagons Moscow-Basel and Moscow – Munich will be re-coupled to the trains of Deutsche Bahn.       
OAO RZD decided to increase its volume of international passenger transportation because of the constantly growing demand for such services. A lot of international trains were cancelled in the early 1990’s. But then the old routes were brought back into service, stage by stage, and new ones were launched. For example, in June 2004, a direct passenger train started to service the Moscow – Brussels line, replacing through wagons Moscow – Cologne used before. At that time new international direct routes Chelyabinsk – Berlin, Sverdlovsk – Berlin, Ufa – Berlin were launched. In summer 2004, a through wagon Moscow – Thessaloniki was put into operation, running via Romania and Bulgaria. In October 2004, new passenger service Chita- Manchuria was launched, and in June 2005 regular summer international through wagons were put into operation on the lines Saint Petersburg – Varna and Saint Petersburg – Constanta. In December 2005, a route servicing Moscow – Frankfurt-am-Main was recommenced (it was cancelled in 2000). After coming to agreement with Deutsche Bahn, OAO RZD prolonged the route of the through wagon Rostov – Berlin to Adler. In June 2006 the decision to put into operation a through wagon Kazan - Varna during the summer (June - September) was brought to life. OAO RZD took, and continues to take, measures to optimise the routes and reduce travel time, thus making the trains more attractive for passengers.
Nowadays trains and through wagons of OAO RZD run along 52 international routes and are serviced by Russian railways as well as Polish, Czech, Slovak, Finnish, Mongolian, Chinese and North Korean railways.
Poland And Finland Are Leaders… Yet    
In 2006, OAO RZD transported about 800million passengers to and from Europe, China, Mongolia and Korea. Last year there was a 15% growth in international passenger transportation volumes. The launch of the new routes from Moscow to Venice (Italy), Thessaloniki (Greece) and Malborik (Poland) were responsible. On the whole, Poland has become the leader in the railway passenger communication sector in Central Europe. In May 2007, the international passenger train “Polonaise” servicing the Moscow – Warsaw route was recommenced. It is maintained equally by Russian Railway and Polish Railways. According to the information of the Moscow Regional Direction for Passenger Servicing, OAO RZD Federal Passenger Direction, its occupancy was 60-80% in summer.
Finland remains the most popular destination among Russian and foreign passengers. In 2004-2006, the amount of return tickets sold by OAO RZD increased by 20% each year. In 2007, the share of the passenger transportation volume to Finland serviced by OAO RZD made a half of the company’s total international passenger flow. Recognising that the destination is becoming more and more popular, OAO RZD and VR Ltd (Finnish Railways) decided to launch a joint venture named Oy Karelian Trains Ltd (The RZD-Partner International wrote about the project in 2007).  
OAO RZD will continue to organise new international routes. It plans to open through passenger railway communication between Moscow and Krakow (Poland). The Polish Railways plans to run its wagons along the route Moscow – Minsk – Brest – Warsaw – Krakow. The volume of passenger transportation to Austria will increase. The through wagon Moscow – Vienna will run daily all year round.
In May 2008, international weekly services Irkutsk – Berlin and Irkutsk – Warsaw will be launched. They will be serviced by through wagons. 
New Rolling Stock Required
On the new routes launched in December, OAO RZD used the new mechanism of ticket sales for the first time. It is similar to the price formation mechanism in Europe – at a so-called “global price”. Russian Scientific and Research Institute of Railway Transport (VNIIZhT) developed the necessary software in the shortest time possible. The point of a “global price” is that a passenger wishing to make a trip to Europe, firstly purchases a seat (in other words, reserves it, buying the right to be transported), and when he chooses the date and the train, he purchases the whole ticket. Also in December, people from Europe got an opportunity to buy tickets for Russian domestic trains. A booking office of OAO RZD was opened in Berlin.
Nevertheless, one of the crucial issues for international transportation organisation is rolling stock. Europe has established high standards for rolling stock, including a certain level of safety, fire- and climate-control systems meeting international requirements. 
In the park of OAO RZD there are wagons similar to Ritz rail cars that meet the standard. They can run at a speed of 200 kph. This type of rolling stock has never been produced in the CIS. It is constructed by wagon-building plants in Germany and Poland. The top management of OAO RZD has decided to renew and enlarge the company’s wagon park with passenger rail cars of the “Ritz” type. In 2009-2011, it is planned to purchase 200 such wagons. The Federal Passenger Direction of OAO RZD in cooperation with Roszheldorsnab has started the work to conclude and execute international contracts in pursuit of such a supply of wagons. VNIIZhT is currently developing the technical requirements to the wagons.
Resume
Making his speech at the presentation of the Moscow-Paris wagon, Vice President of OAO RZD Mikhail Akulov named it an important day for Russian Railways. In his words, by launching new routes, OAO RZD recoups its position in Central Europe in the passenger transportation sector. “We hope that the terms of the trip, developed by OAO RZD, and the offered tariff programme will be interesting and attractive for those who choose to travel by train,” he stated.

By  Alexandra  Fetisova
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