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Russia Still Lacks Warehouses
This year, developers in Russia will put into operation not more than 50% of the storage facilities they announced use of. The demand for warehouses exceeds the supply by 50%, and the rent contracts are concluded long before the construction is finished and it is put into operation.
This tendency – putting into operation only half of the facilities to be implemented – has been continuing for five years. For example, in 2007 no more than 1 million sq. m. of storage facilities was put into operation, i.e. half as much as had been declared. And there are several reasons for that: a lack of land for construction (especially in the central region) and a shortage of investment, together with the growth of prices for land (in the Moscow region prices are increasing by 20-40% per annum) and construction materials. It happened because of “the liquidity crisis and, consequently, small developers had problems with project financing”, says Nikolay Ditsman, Head of Marketing Department of Eurasia Logistic company.
As a result, the rent rates on this real estate grow constantly. Meanwhile, the profitability of warehousing facilities in Russia is twice as much as in Europe, i.e. about 15%. Alexander Misharin, Deputy Transport Minister, forecast that the share of container transportation in Russia would grow tenfold by 2010. That means that if the rate increase is the same, the shortage of warehouses will turn into a crisis.
The problem of available warehouses is especially urgent in the central region. Today in Moscow and the Moscow region there is about 8 million sq. m. of storage facilities. That includes 2.19 million sq. m. of A-class warehouses, 1.4 million sq. m. of B-class warehouses, but the rest facilities do not meet international standards – they are of C and D classes. Meanwhile, about 1-3% of the facilities are empty (the European average is 10%). The share of A-class empty facilities is 0.5% on average and for B-class it is less than 3%. The shortage of warehousing by area is 4 million sq. m. It has been declared that 6 million sq. m. will be built by 2010. The total sum of investments in 2007 and 2008 amounts to USD 10 billion but already experts doubt that these plans will come to fruition.     

Rent Rates Increasing...
Naturally, in this situation, the rates on storage facilities rent are growing. In 2007 they increased by 10-15% and in the central region of Russia they became the same as in Europe. Experts forecast that this year growth will be at least 15%. The rates on renting high-quality storage facilities amount on average to USD 130 for a square metre per annum (without taking into account the VAT and operational expenditures); operational expenses on A-class warehouse are USD 30-40 for a square metre annually. Because of the lack of supply, the rates on renting B-class warehouses approximates those of the A-class.
The growth of rent rate was caused by an increase in land cost and reduction of the profitability of the warehousing business: in 2007 the prime cost of construction was USD 1,000 per square metre (about 15% annually, payback period is about 8 years), in 2006 it was USD 800 (payback period was 6 years then). So, the payback period for such projects is longer than for offices or shopping centres, which is why there are two kinds of investors in the sector: financial groups and Western investment funds that come to the Russian market together with logistic operators.      

... And Quality Remains the Same
In this situation developers pay little attention to clients’ demands – the build-to-suit format is hardly developed in the Russian market. The larger share of the RF warehousing market is partly reconstructed workshops in Soviet plants, where there is no necessary infrastructure such as equipment, loaders, climate-control as well as conditions for servicing large cargo flows, parking and other areas. The worst shortage is in the special warehouses segment – cold-storage and pharmaceutical storage facilities.
Experts say that one of the basic reasons for such an attitude to a client is the “shady” character of some sectors of the Russian economy, which do not demand high-tech infrastructure. Nevertheless, there are also some positive trends: when constructing new storage facilities, Russian developers charge all the expenditures on construction to clients’ expenses, agreeing with them the size of the profit from the project. 
The lack of supply makes trade companies go in for warehousing development. For example, X5 Retail Group is going to invest USD 1billion into a logistics system. The company plans to put into operation warehousing logistic terminals with a total area of 600,000 – 700,000 sq. m. in the European part of Russia. Tikkurila, a Finnish producer of paints, has also declared it will construct warehouses.
 To the Provinces!
In 2007 all the basic players of the market have started to develop regions actively because of the high expenses on construction and the lack of land in the central region. The most prospective cities after Moscow and Saint Petersburg are Yekaterinburg, Novosibirsk (the central city connecting the Far East and the European part of Russian), Krasnoyarsk, Omsk and Irkutsk (the “Russian window to China” and to the North).
The demand for regions is explained by intensive construction of large trade centres, retailers entering the regional market, and large logistics structures coming to the regions, and the natural shortage of warehouses of a European level. Already now some experts consider that the entrance of some large companies into the regional markets is being postponed because of the lack of storage facilities. 
“International logistic partnership” is going to invest USD 800 million into the creation of a large network of storage facilities on RF territory by the end of 2008. The network will consist of two warehouses in the Moscow region, two storage facilities (about 200,000 sq. m. each) in Saint Petersburg, and warehouses with an area of 100,000 sq. m. each in large cities such as Yekaterinburg, Novosibirsk, Rostov-on-Don, Kazan, etc.
The Megalogix project carried out by Raven Russia company envisages investments of over USD 1.2 billion in construction of A-class warehouses and offices in 15 regions of Russia. New warehouses are to be built in Saint Petersburg (130,000 sq. m.), Rostov-on-Don (220,000 sq. m.), Novosibirsk (250,000 sq. m.) and in other cities.
Phenomenon of Saint Petersburg
Saint Petersburg takes a special position in the regional development of the storage facility market. There are several reasons for the city’s pretension to be Russian car cluster №1, including its good geographical location. The city makes efforts to be a competitor to Moscow. “The storage facilities of Saint Petersburg are more “opened”, more available”, considers Yaroslavna Kramarenko, Director General of Baltic Shark logistic company. “In future we will leave Moscow behind in the sector of warehouse construction”. To avoid a crisis, in April 2007, the government of Saint Petersburg examined “The Strategy of Development of Transport and Logistic Complex of Saint Petersburg in 2007-2015”, which envisages a single system of transport sector development, united by a logistics system coordinating the activities of all the sectors.
According to the estimations of experts, investment in real estate in Saint Petersburg and the Leningrad region will grow fourfold (to USD 4billion) in 2008-2009. In 2008, about one million sq. m. is to be put into operation in the city and the region; and by 2010 the existing capacities are to double.
Today there are over 5 million sq. m. of storage facilities in Saint Petersburg, and if we consider the ones in the city’s suburban reaches, the area is more than 6million sq. m. The shortage of warehousing areas is still about 1.5 million sq. m.
According to experts, the share of storage facilities of A and B classes is about 10% of the total offer, but in the next 2-3 years it will increase to 20-30%. And A- and B-class warehouses will be filled to almost 100%.


Resume 
The RF Ministry of Transport also confirms there is a critical situation in the Russian warehousing sector, and that 70% of storage facilities are in the Moscow region. At the end of March, at a meeting devoted to the issues of Moscow transport junction development, Russian Transport Minister Igor Levitin emphasised that, “if no serious measures are taken to develop the Moscow transport junction, the situation in the region may become critical”. And if there is such a difficult situation in the centre of Russia, one can easily imagine what happens in other regions.
 
by Alexey Strigin 
    [~DETAIL_TEXT] => 
Russia Still Lacks Warehouses
This year, developers in Russia will put into operation not more than 50% of the storage facilities they announced use of. The demand for warehouses exceeds the supply by 50%, and the rent contracts are concluded long before the construction is finished and it is put into operation.
This tendency – putting into operation only half of the facilities to be implemented – has been continuing for five years. For example, in 2007 no more than 1 million sq. m. of storage facilities was put into operation, i.e. half as much as had been declared. And there are several reasons for that: a lack of land for construction (especially in the central region) and a shortage of investment, together with the growth of prices for land (in the Moscow region prices are increasing by 20-40% per annum) and construction materials. It happened because of “the liquidity crisis and, consequently, small developers had problems with project financing”, says Nikolay Ditsman, Head of Marketing Department of Eurasia Logistic company.
As a result, the rent rates on this real estate grow constantly. Meanwhile, the profitability of warehousing facilities in Russia is twice as much as in Europe, i.e. about 15%. Alexander Misharin, Deputy Transport Minister, forecast that the share of container transportation in Russia would grow tenfold by 2010. That means that if the rate increase is the same, the shortage of warehouses will turn into a crisis.
The problem of available warehouses is especially urgent in the central region. Today in Moscow and the Moscow region there is about 8 million sq. m. of storage facilities. That includes 2.19 million sq. m. of A-class warehouses, 1.4 million sq. m. of B-class warehouses, but the rest facilities do not meet international standards – they are of C and D classes. Meanwhile, about 1-3% of the facilities are empty (the European average is 10%). The share of A-class empty facilities is 0.5% on average and for B-class it is less than 3%. The shortage of warehousing by area is 4 million sq. m. It has been declared that 6 million sq. m. will be built by 2010. The total sum of investments in 2007 and 2008 amounts to USD 10 billion but already experts doubt that these plans will come to fruition.     

Rent Rates Increasing...
Naturally, in this situation, the rates on storage facilities rent are growing. In 2007 they increased by 10-15% and in the central region of Russia they became the same as in Europe. Experts forecast that this year growth will be at least 15%. The rates on renting high-quality storage facilities amount on average to USD 130 for a square metre per annum (without taking into account the VAT and operational expenditures); operational expenses on A-class warehouse are USD 30-40 for a square metre annually. Because of the lack of supply, the rates on renting B-class warehouses approximates those of the A-class.
The growth of rent rate was caused by an increase in land cost and reduction of the profitability of the warehousing business: in 2007 the prime cost of construction was USD 1,000 per square metre (about 15% annually, payback period is about 8 years), in 2006 it was USD 800 (payback period was 6 years then). So, the payback period for such projects is longer than for offices or shopping centres, which is why there are two kinds of investors in the sector: financial groups and Western investment funds that come to the Russian market together with logistic operators.      

... And Quality Remains the Same
In this situation developers pay little attention to clients’ demands – the build-to-suit format is hardly developed in the Russian market. The larger share of the RF warehousing market is partly reconstructed workshops in Soviet plants, where there is no necessary infrastructure such as equipment, loaders, climate-control as well as conditions for servicing large cargo flows, parking and other areas. The worst shortage is in the special warehouses segment – cold-storage and pharmaceutical storage facilities.
Experts say that one of the basic reasons for such an attitude to a client is the “shady” character of some sectors of the Russian economy, which do not demand high-tech infrastructure. Nevertheless, there are also some positive trends: when constructing new storage facilities, Russian developers charge all the expenditures on construction to clients’ expenses, agreeing with them the size of the profit from the project. 
The lack of supply makes trade companies go in for warehousing development. For example, X5 Retail Group is going to invest USD 1billion into a logistics system. The company plans to put into operation warehousing logistic terminals with a total area of 600,000 – 700,000 sq. m. in the European part of Russia. Tikkurila, a Finnish producer of paints, has also declared it will construct warehouses.
 To the Provinces!
In 2007 all the basic players of the market have started to develop regions actively because of the high expenses on construction and the lack of land in the central region. The most prospective cities after Moscow and Saint Petersburg are Yekaterinburg, Novosibirsk (the central city connecting the Far East and the European part of Russian), Krasnoyarsk, Omsk and Irkutsk (the “Russian window to China” and to the North).
The demand for regions is explained by intensive construction of large trade centres, retailers entering the regional market, and large logistics structures coming to the regions, and the natural shortage of warehouses of a European level. Already now some experts consider that the entrance of some large companies into the regional markets is being postponed because of the lack of storage facilities. 
“International logistic partnership” is going to invest USD 800 million into the creation of a large network of storage facilities on RF territory by the end of 2008. The network will consist of two warehouses in the Moscow region, two storage facilities (about 200,000 sq. m. each) in Saint Petersburg, and warehouses with an area of 100,000 sq. m. each in large cities such as Yekaterinburg, Novosibirsk, Rostov-on-Don, Kazan, etc.
The Megalogix project carried out by Raven Russia company envisages investments of over USD 1.2 billion in construction of A-class warehouses and offices in 15 regions of Russia. New warehouses are to be built in Saint Petersburg (130,000 sq. m.), Rostov-on-Don (220,000 sq. m.), Novosibirsk (250,000 sq. m.) and in other cities.
Phenomenon of Saint Petersburg
Saint Petersburg takes a special position in the regional development of the storage facility market. There are several reasons for the city’s pretension to be Russian car cluster №1, including its good geographical location. The city makes efforts to be a competitor to Moscow. “The storage facilities of Saint Petersburg are more “opened”, more available”, considers Yaroslavna Kramarenko, Director General of Baltic Shark logistic company. “In future we will leave Moscow behind in the sector of warehouse construction”. To avoid a crisis, in April 2007, the government of Saint Petersburg examined “The Strategy of Development of Transport and Logistic Complex of Saint Petersburg in 2007-2015”, which envisages a single system of transport sector development, united by a logistics system coordinating the activities of all the sectors.
According to the estimations of experts, investment in real estate in Saint Petersburg and the Leningrad region will grow fourfold (to USD 4billion) in 2008-2009. In 2008, about one million sq. m. is to be put into operation in the city and the region; and by 2010 the existing capacities are to double.
Today there are over 5 million sq. m. of storage facilities in Saint Petersburg, and if we consider the ones in the city’s suburban reaches, the area is more than 6million sq. m. The shortage of warehousing areas is still about 1.5 million sq. m.
According to experts, the share of storage facilities of A and B classes is about 10% of the total offer, but in the next 2-3 years it will increase to 20-30%. And A- and B-class warehouses will be filled to almost 100%.


Resume 
The RF Ministry of Transport also confirms there is a critical situation in the Russian warehousing sector, and that 70% of storage facilities are in the Moscow region. At the end of March, at a meeting devoted to the issues of Moscow transport junction development, Russian Transport Minister Igor Levitin emphasised that, “if no serious measures are taken to develop the Moscow transport junction, the situation in the region may become critical”. And if there is such a difficult situation in the centre of Russia, one can easily imagine what happens in other regions.
 
by Alexey Strigin 
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Russia Still Lacks Warehouses
This year, developers in Russia will put into operation not more than 50% of the storage facilities they announced use of. The demand for warehouses exceeds the supply by 50%, and the rent contracts are concluded long before the construction is finished and it is put into operation.
This tendency – putting into operation only half of the facilities to be implemented – has been continuing for five years. For example, in 2007 no more than 1 million sq. m. of storage facilities was put into operation, i.e. half as much as had been declared. And there are several reasons for that: a lack of land for construction (especially in the central region) and a shortage of investment, together with the growth of prices for land (in the Moscow region prices are increasing by 20-40% per annum) and construction materials. It happened because of “the liquidity crisis and, consequently, small developers had problems with project financing”, says Nikolay Ditsman, Head of Marketing Department of Eurasia Logistic company.
As a result, the rent rates on this real estate grow constantly. Meanwhile, the profitability of warehousing facilities in Russia is twice as much as in Europe, i.e. about 15%. Alexander Misharin, Deputy Transport Minister, forecast that the share of container transportation in Russia would grow tenfold by 2010. That means that if the rate increase is the same, the shortage of warehouses will turn into a crisis.
The problem of available warehouses is especially urgent in the central region. Today in Moscow and the Moscow region there is about 8 million sq. m. of storage facilities. That includes 2.19 million sq. m. of A-class warehouses, 1.4 million sq. m. of B-class warehouses, but the rest facilities do not meet international standards – they are of C and D classes. Meanwhile, about 1-3% of the facilities are empty (the European average is 10%). The share of A-class empty facilities is 0.5% on average and for B-class it is less than 3%. The shortage of warehousing by area is 4 million sq. m. It has been declared that 6 million sq. m. will be built by 2010. The total sum of investments in 2007 and 2008 amounts to USD 10 billion but already experts doubt that these plans will come to fruition.     

Rent Rates Increasing...
Naturally, in this situation, the rates on storage facilities rent are growing. In 2007 they increased by 10-15% and in the central region of Russia they became the same as in Europe. Experts forecast that this year growth will be at least 15%. The rates on renting high-quality storage facilities amount on average to USD 130 for a square metre per annum (without taking into account the VAT and operational expenditures); operational expenses on A-class warehouse are USD 30-40 for a square metre annually. Because of the lack of supply, the rates on renting B-class warehouses approximates those of the A-class.
The growth of rent rate was caused by an increase in land cost and reduction of the profitability of the warehousing business: in 2007 the prime cost of construction was USD 1,000 per square metre (about 15% annually, payback period is about 8 years), in 2006 it was USD 800 (payback period was 6 years then). So, the payback period for such projects is longer than for offices or shopping centres, which is why there are two kinds of investors in the sector: financial groups and Western investment funds that come to the Russian market together with logistic operators.      

... And Quality Remains the Same
In this situation developers pay little attention to clients’ demands – the build-to-suit format is hardly developed in the Russian market. The larger share of the RF warehousing market is partly reconstructed workshops in Soviet plants, where there is no necessary infrastructure such as equipment, loaders, climate-control as well as conditions for servicing large cargo flows, parking and other areas. The worst shortage is in the special warehouses segment – cold-storage and pharmaceutical storage facilities.
Experts say that one of the basic reasons for such an attitude to a client is the “shady” character of some sectors of the Russian economy, which do not demand high-tech infrastructure. Nevertheless, there are also some positive trends: when constructing new storage facilities, Russian developers charge all the expenditures on construction to clients’ expenses, agreeing with them the size of the profit from the project. 
The lack of supply makes trade companies go in for warehousing development. For example, X5 Retail Group is going to invest USD 1billion into a logistics system. The company plans to put into operation warehousing logistic terminals with a total area of 600,000 – 700,000 sq. m. in the European part of Russia. Tikkurila, a Finnish producer of paints, has also declared it will construct warehouses.
 To the Provinces!
In 2007 all the basic players of the market have started to develop regions actively because of the high expenses on construction and the lack of land in the central region. The most prospective cities after Moscow and Saint Petersburg are Yekaterinburg, Novosibirsk (the central city connecting the Far East and the European part of Russian), Krasnoyarsk, Omsk and Irkutsk (the “Russian window to China” and to the North).
The demand for regions is explained by intensive construction of large trade centres, retailers entering the regional market, and large logistics structures coming to the regions, and the natural shortage of warehouses of a European level. Already now some experts consider that the entrance of some large companies into the regional markets is being postponed because of the lack of storage facilities. 
“International logistic partnership” is going to invest USD 800 million into the creation of a large network of storage facilities on RF territory by the end of 2008. The network will consist of two warehouses in the Moscow region, two storage facilities (about 200,000 sq. m. each) in Saint Petersburg, and warehouses with an area of 100,000 sq. m. each in large cities such as Yekaterinburg, Novosibirsk, Rostov-on-Don, Kazan, etc.
The Megalogix project carried out by Raven Russia company envisages investments of over USD 1.2 billion in construction of A-class warehouses and offices in 15 regions of Russia. New warehouses are to be built in Saint Petersburg (130,000 sq. m.), Rostov-on-Don (220,000 sq. m.), Novosibirsk (250,000 sq. m.) and in other cities.
Phenomenon of Saint Petersburg
Saint Petersburg takes a special position in the regional development of the storage facility market. There are several reasons for the city’s pretension to be Russian car cluster №1, including its good geographical location. The city makes efforts to be a competitor to Moscow. “The storage facilities of Saint Petersburg are more “opened”, more available”, considers Yaroslavna Kramarenko, Director General of Baltic Shark logistic company. “In future we will leave Moscow behind in the sector of warehouse construction”. To avoid a crisis, in April 2007, the government of Saint Petersburg examined “The Strategy of Development of Transport and Logistic Complex of Saint Petersburg in 2007-2015”, which envisages a single system of transport sector development, united by a logistics system coordinating the activities of all the sectors.
According to the estimations of experts, investment in real estate in Saint Petersburg and the Leningrad region will grow fourfold (to USD 4billion) in 2008-2009. In 2008, about one million sq. m. is to be put into operation in the city and the region; and by 2010 the existing capacities are to double.
Today there are over 5 million sq. m. of storage facilities in Saint Petersburg, and if we consider the ones in the city’s suburban reaches, the area is more than 6million sq. m. The shortage of warehousing areas is still about 1.5 million sq. m.
According to experts, the share of storage facilities of A and B classes is about 10% of the total offer, but in the next 2-3 years it will increase to 20-30%. And A- and B-class warehouses will be filled to almost 100%.


Resume 
The RF Ministry of Transport also confirms there is a critical situation in the Russian warehousing sector, and that 70% of storage facilities are in the Moscow region. At the end of March, at a meeting devoted to the issues of Moscow transport junction development, Russian Transport Minister Igor Levitin emphasised that, “if no serious measures are taken to develop the Moscow transport junction, the situation in the region may become critical”. And if there is such a difficult situation in the centre of Russia, one can easily imagine what happens in other regions.
 
by Alexey Strigin 
    [~DETAIL_TEXT] => 
Russia Still Lacks Warehouses
This year, developers in Russia will put into operation not more than 50% of the storage facilities they announced use of. The demand for warehouses exceeds the supply by 50%, and the rent contracts are concluded long before the construction is finished and it is put into operation.
This tendency – putting into operation only half of the facilities to be implemented – has been continuing for five years. For example, in 2007 no more than 1 million sq. m. of storage facilities was put into operation, i.e. half as much as had been declared. And there are several reasons for that: a lack of land for construction (especially in the central region) and a shortage of investment, together with the growth of prices for land (in the Moscow region prices are increasing by 20-40% per annum) and construction materials. It happened because of “the liquidity crisis and, consequently, small developers had problems with project financing”, says Nikolay Ditsman, Head of Marketing Department of Eurasia Logistic company.
As a result, the rent rates on this real estate grow constantly. Meanwhile, the profitability of warehousing facilities in Russia is twice as much as in Europe, i.e. about 15%. Alexander Misharin, Deputy Transport Minister, forecast that the share of container transportation in Russia would grow tenfold by 2010. That means that if the rate increase is the same, the shortage of warehouses will turn into a crisis.
The problem of available warehouses is especially urgent in the central region. Today in Moscow and the Moscow region there is about 8 million sq. m. of storage facilities. That includes 2.19 million sq. m. of A-class warehouses, 1.4 million sq. m. of B-class warehouses, but the rest facilities do not meet international standards – they are of C and D classes. Meanwhile, about 1-3% of the facilities are empty (the European average is 10%). The share of A-class empty facilities is 0.5% on average and for B-class it is less than 3%. The shortage of warehousing by area is 4 million sq. m. It has been declared that 6 million sq. m. will be built by 2010. The total sum of investments in 2007 and 2008 amounts to USD 10 billion but already experts doubt that these plans will come to fruition.     

Rent Rates Increasing...
Naturally, in this situation, the rates on storage facilities rent are growing. In 2007 they increased by 10-15% and in the central region of Russia they became the same as in Europe. Experts forecast that this year growth will be at least 15%. The rates on renting high-quality storage facilities amount on average to USD 130 for a square metre per annum (without taking into account the VAT and operational expenditures); operational expenses on A-class warehouse are USD 30-40 for a square metre annually. Because of the lack of supply, the rates on renting B-class warehouses approximates those of the A-class.
The growth of rent rate was caused by an increase in land cost and reduction of the profitability of the warehousing business: in 2007 the prime cost of construction was USD 1,000 per square metre (about 15% annually, payback period is about 8 years), in 2006 it was USD 800 (payback period was 6 years then). So, the payback period for such projects is longer than for offices or shopping centres, which is why there are two kinds of investors in the sector: financial groups and Western investment funds that come to the Russian market together with logistic operators.      

... And Quality Remains the Same
In this situation developers pay little attention to clients’ demands – the build-to-suit format is hardly developed in the Russian market. The larger share of the RF warehousing market is partly reconstructed workshops in Soviet plants, where there is no necessary infrastructure such as equipment, loaders, climate-control as well as conditions for servicing large cargo flows, parking and other areas. The worst shortage is in the special warehouses segment – cold-storage and pharmaceutical storage facilities.
Experts say that one of the basic reasons for such an attitude to a client is the “shady” character of some sectors of the Russian economy, which do not demand high-tech infrastructure. Nevertheless, there are also some positive trends: when constructing new storage facilities, Russian developers charge all the expenditures on construction to clients’ expenses, agreeing with them the size of the profit from the project. 
The lack of supply makes trade companies go in for warehousing development. For example, X5 Retail Group is going to invest USD 1billion into a logistics system. The company plans to put into operation warehousing logistic terminals with a total area of 600,000 – 700,000 sq. m. in the European part of Russia. Tikkurila, a Finnish producer of paints, has also declared it will construct warehouses.
 To the Provinces!
In 2007 all the basic players of the market have started to develop regions actively because of the high expenses on construction and the lack of land in the central region. The most prospective cities after Moscow and Saint Petersburg are Yekaterinburg, Novosibirsk (the central city connecting the Far East and the European part of Russian), Krasnoyarsk, Omsk and Irkutsk (the “Russian window to China” and to the North).
The demand for regions is explained by intensive construction of large trade centres, retailers entering the regional market, and large logistics structures coming to the regions, and the natural shortage of warehouses of a European level. Already now some experts consider that the entrance of some large companies into the regional markets is being postponed because of the lack of storage facilities. 
“International logistic partnership” is going to invest USD 800 million into the creation of a large network of storage facilities on RF territory by the end of 2008. The network will consist of two warehouses in the Moscow region, two storage facilities (about 200,000 sq. m. each) in Saint Petersburg, and warehouses with an area of 100,000 sq. m. each in large cities such as Yekaterinburg, Novosibirsk, Rostov-on-Don, Kazan, etc.
The Megalogix project carried out by Raven Russia company envisages investments of over USD 1.2 billion in construction of A-class warehouses and offices in 15 regions of Russia. New warehouses are to be built in Saint Petersburg (130,000 sq. m.), Rostov-on-Don (220,000 sq. m.), Novosibirsk (250,000 sq. m.) and in other cities.
Phenomenon of Saint Petersburg
Saint Petersburg takes a special position in the regional development of the storage facility market. There are several reasons for the city’s pretension to be Russian car cluster №1, including its good geographical location. The city makes efforts to be a competitor to Moscow. “The storage facilities of Saint Petersburg are more “opened”, more available”, considers Yaroslavna Kramarenko, Director General of Baltic Shark logistic company. “In future we will leave Moscow behind in the sector of warehouse construction”. To avoid a crisis, in April 2007, the government of Saint Petersburg examined “The Strategy of Development of Transport and Logistic Complex of Saint Petersburg in 2007-2015”, which envisages a single system of transport sector development, united by a logistics system coordinating the activities of all the sectors.
According to the estimations of experts, investment in real estate in Saint Petersburg and the Leningrad region will grow fourfold (to USD 4billion) in 2008-2009. In 2008, about one million sq. m. is to be put into operation in the city and the region; and by 2010 the existing capacities are to double.
Today there are over 5 million sq. m. of storage facilities in Saint Petersburg, and if we consider the ones in the city’s suburban reaches, the area is more than 6million sq. m. The shortage of warehousing areas is still about 1.5 million sq. m.
According to experts, the share of storage facilities of A and B classes is about 10% of the total offer, but in the next 2-3 years it will increase to 20-30%. And A- and B-class warehouses will be filled to almost 100%.


Resume 
The RF Ministry of Transport also confirms there is a critical situation in the Russian warehousing sector, and that 70% of storage facilities are in the Moscow region. At the end of March, at a meeting devoted to the issues of Moscow transport junction development, Russian Transport Minister Igor Levitin emphasised that, “if no serious measures are taken to develop the Moscow transport junction, the situation in the region may become critical”. And if there is such a difficult situation in the centre of Russia, one can easily imagine what happens in other regions.
 
by Alexey Strigin 
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Non-Typical Behaviour
In the first working days of 2008, the index of Russian Trade System (RTS, the leading stock exchange in Russia) started its falling, which is sometimes replaced by separate leaps. At the background of other industries, the equities of which are placed on Russian stock exchanges, transport looks pale. The industry has a dozen issuers, and only four of them are actively traded – ОАО Aeroflot (leading national air carrier), OAO Far Eastern Shipping Company (FESCO group, intermodal operator, incorporates a shipping company, a number of port assets, and a railway operator), OAO Novorossiysk Commercial Sea Port and OAO Novorossiysk Sea Shipping Company (Novoship). The equities of OAO Primorsk Shipping Company, OAO Volga Shipping , OAO Air Company Sibir S7 etc. are less popular.
“I do not think that in the near future the trading volume of transport companies’ equities can be compared with the ones of more popular industries, especially telecommunication. Almost half of shares of fixed line telecommunications providers are free floated”, notes Evgeny Shago, Director of Analytical Department of OAO Managing Company Ingosstrakh-Investments. “The liquidity of transport companies” shares leaves much to be desired”.
Alexander Churikov, analyst of AntantaCapital investment company stresses that the issuers from the transport sector have been “moving” in different directions since the end of 2007. As an example, he mentions air carriers. The prices for jet fuel grew by 32%, nevertheless, their shares are still profitable (according to mid-March data). Aeroflot increased by 23%, UTair – by 10%, and Sibir S7 – by 6%. It is a great result, if we take into account the 10% fall of the RTS index that started at the beginning of 2008.
“We keep our positive opinion on the shares. We are optimistic, since the passenger flow continues to grow (+18% in 2007), the revenue of population rises, and the airplane park is being renewed”, forecasts A. Churikov.
In the opinion of the representative of AntantaCapital, the equities of Novoship (+10.6%) and the Primorsk Sea Shipping Company (+0.66%) are worth noting. The shares of FESCO and the Novorossiysk Commercial Sea Port (NMPT) fell in price – by 5.6% and 12.4% respectively. 
But if we have a look at the context, it seems the reason for the decrease is the wish of investors to fix the profit – last year the cost of FESCO grew by 2.3 times, and the one of NMTP, a newcomer in the stock market, rose sixfold. In his turn, Mikhail Saino, analyst of BrokerCreditService company says that last year the RTS grew by 20%, while the price of FESCO, Aeroflot and Novoship increased by 129%, 72% and 58% respectively.

Weakness Is the Power
The situation is like this: last year the actively traded shares of transport companies were growing faster than the market. It confirms the thesis that the sector is underestimated. This year they either continue to increase or fall (an exception it is!) at the same rate as the RTS.
We could make a conclusion that this is a small but interesting segment, allowing investors to earn much if there is a growth in the market, or to have some stability in a volatile period. However, a thorough analysis shows that “non-typical” (in comparison with the total situation in the stock exchange) movement of transport companies’ shares can be easily explained: they are still not popular with investors and speculators. 
“The mass correction that started in the stock market in the middle of January has influenced the shares of all companies. There were no exceptions. The only difference is that the second tier shares, including the ones of transport companies, react to the external fluctuations after a definite time lag”, considers Marina Irkly, analyst for machine building industry and transport, VELES Capital investment company. “The equities of transport companies can hardly be called liquid. That’s why their prices fell less than the blue-chips’”, explains Mr Shago. “Investors purchasing such shares orient at a long-term growth in the sector. They invest money for a long period, so they do not fear the threat of recession in the USD. Something much more serious must happen for them to start selling the equities”, he says.
“The share capital market is a popular source to attract finances. It is the cheapest and allows financing scaled investment programmes or contracts on mergers and acquisitions, keeping good results of the balance-liquidity structure. It’s important to understand, however, that it is an absolutely different level of requirements to a company in part of transparency, openness, timely accountant reports, constant work with shareholders. I would not state that analysts and investors do not understand the transport sector. Well, it is not so easy for understanding as natural resources extraction, but the interest to it is very large”, tells Stanislav Vartanyan, Director of Corporate Communication Department of FESCO transport group. 

Locomotive of the Industry
Financial director of OOO Firma Transgarant Alexey Barbariush is sure that today the volume of business of, for example, Russian railway operators is not so large, so it is senseless for them to enter the stock market (see articles about railway operators’ business in The RZD-Partner International №1 and on p. 70 of f this issue). In a year or two, however, the situation may change.
Analysts share the opinion. Moreover, it is possible to say that the market is expecting the float of transport companies, especially the large ones, and is ready to work with their equities. According to financiers’ estimations, all the sectors of the transport industry listed at the stock exchange – shipping, air and railway transport – may become the points of growth. Besides, the railway transport is likely to become the “locomotive” of the process. On the one hand, it is due to the corporate reform of OAO RZD, during which daughter companies are separated off, on the other hand, there appear and enlarge private companies-operators in the market.
“I believe, the float of OAO RZD’s daughter companies will increase the capitalisation of the sector. Besides, we can expect IPO of independent railway operators. The segment is enlarging very fast now. Floating to attract funds seems quite expensive nowadays, but it can be a reality in a year or two”, says E. Shago.
By the way, OAO TransContainer (a subsidiary of OAO RZD) sold its 15% shareholding in the off-exchange market, and it plans to make an IPO in the near future. Besides, the President of OAO RZD said at the end of 2007 that the holding company may also launch an IPO. It may take place after 2010. 
“Our attitude to TransContainer is only positive. The company owns a part of OAO RZD rolling stock, besides it has tariff privileges. All this make the operator the leader in the container transportation market”, says the analyst. “OAO RZD is an interesting potential participant of the stock market as well as independent operators. Diversification will always be popular, so any fundamental interesting issuer, especially in such sector, will attract investors, in first of all the institutional ones. If there is an IPO of OAO RZD, there will emerge the “monopoly chip” effect – the prices for shares will grow fast, since the insurer has a unique position”, says Anastasiya Marinina, the analyst of InvestFunds web-portal.
“Private transport companies will hardly become a locomotive of the stock market, because their total capitalisation will never be similar to that one of gas, oil and power supply companies. But they are sure to become an interesting and dynamical stock market segment”, consider S. Vartanyan.

Resume
British equity company Bridgepoint purchased Polish CTL Logistics, one of the most dynamically developing operators in Poland as well as in the whole Europe. Khai Tan, partner responsible for Bridgepoint’s investment activities in Central and Eastern Europe, said that CTL had achieved growth rates in excess of its competitors and with further investment from Bridgepoint would be ready for further international growth. Deutsche Bahn is entering British market by purchasing English Welsh and Scottish Railway Holdings Ltd. And Finnish group of companies VR used to hold negotiations to buy a shareholding in TransContainer. The epoque of transborder contracts is going on in the railway sector. Now both traded and non-traded at a stock exchange shares are relatively cheap. Their price may increase significantly in several years. Don’t be late! 
by Ivan Stupachenko 
 
Viewpoint
Evgeny Shago, 
Director of Analytical Department, OAO Managing Company Ingosstrakh-Investments:   
- Nowadays, the shares of shipping companies and air carriers are traded in the stock exchange. In future there will appear railway carriers too. The choice is small, however this sector should not be ignored. Transport companies’ shares have a lot of advantages. For example, they become attractive, when the prices for oil fall. Meanwhile, all other Russian companies lose if it happens.

Mikhail Saino,
Analyst of BrokerCreditService: 
- If volatility is regarded as the price spread, the one of the transport market is higher than the whole market’s. But it is “good” volatility, because the shares grew. Such dynamics is caused by the favourable results as well as the change of investors’ attitude to transport sector in the developing countries. It is supposed to develop rapidly, and Russia will not be an exception in this sense.

Marina Irkly, 
Analyst for Machine Building Industry and Transport, VELES Capital investment company:
- It would be interesting to unite all the transport companies, considering them “safe area”. Meanwhile, they differ in the profitability and liquidity significantly. Besides, there will appear new issuers. The most interesting of them will be Sovcomflot and TransContainer and others.

Anastasiya Marinina, 
Analyst of Invest-Funds web-portal:
- Transport companies turned out to be in a better position than other ones, since the crisis impacted the representatives of the financial sector. For the sake of comparison, from January 9 to February 29 of 2008, OAO Vneshtorgbank’s shares fell by 25.3%. The ones of Aeroflot and UTair, on the contrary, grew by 12.15% and 7.95% respectively. The shares of the Primorsk Sea Shipping Company fell by 1.96% only. A lot of analysts started to pay special attention to the equities of transport companies, regarding them as “protecting” ones, since such issuers less depend on the external market situation – the major part of their revenues is generated by domestic demand, that makes them more resistant to external crisis.
    [~DETAIL_TEXT] => 
Non-Typical Behaviour
In the first working days of 2008, the index of Russian Trade System (RTS, the leading stock exchange in Russia) started its falling, which is sometimes replaced by separate leaps. At the background of other industries, the equities of which are placed on Russian stock exchanges, transport looks pale. The industry has a dozen issuers, and only four of them are actively traded – ОАО Aeroflot (leading national air carrier), OAO Far Eastern Shipping Company (FESCO group, intermodal operator, incorporates a shipping company, a number of port assets, and a railway operator), OAO Novorossiysk Commercial Sea Port and OAO Novorossiysk Sea Shipping Company (Novoship). The equities of OAO Primorsk Shipping Company, OAO Volga Shipping , OAO Air Company Sibir S7 etc. are less popular.
“I do not think that in the near future the trading volume of transport companies’ equities can be compared with the ones of more popular industries, especially telecommunication. Almost half of shares of fixed line telecommunications providers are free floated”, notes Evgeny Shago, Director of Analytical Department of OAO Managing Company Ingosstrakh-Investments. “The liquidity of transport companies” shares leaves much to be desired”.
Alexander Churikov, analyst of AntantaCapital investment company stresses that the issuers from the transport sector have been “moving” in different directions since the end of 2007. As an example, he mentions air carriers. The prices for jet fuel grew by 32%, nevertheless, their shares are still profitable (according to mid-March data). Aeroflot increased by 23%, UTair – by 10%, and Sibir S7 – by 6%. It is a great result, if we take into account the 10% fall of the RTS index that started at the beginning of 2008.
“We keep our positive opinion on the shares. We are optimistic, since the passenger flow continues to grow (+18% in 2007), the revenue of population rises, and the airplane park is being renewed”, forecasts A. Churikov.
In the opinion of the representative of AntantaCapital, the equities of Novoship (+10.6%) and the Primorsk Sea Shipping Company (+0.66%) are worth noting. The shares of FESCO and the Novorossiysk Commercial Sea Port (NMPT) fell in price – by 5.6% and 12.4% respectively. 
But if we have a look at the context, it seems the reason for the decrease is the wish of investors to fix the profit – last year the cost of FESCO grew by 2.3 times, and the one of NMTP, a newcomer in the stock market, rose sixfold. In his turn, Mikhail Saino, analyst of BrokerCreditService company says that last year the RTS grew by 20%, while the price of FESCO, Aeroflot and Novoship increased by 129%, 72% and 58% respectively.

Weakness Is the Power
The situation is like this: last year the actively traded shares of transport companies were growing faster than the market. It confirms the thesis that the sector is underestimated. This year they either continue to increase or fall (an exception it is!) at the same rate as the RTS.
We could make a conclusion that this is a small but interesting segment, allowing investors to earn much if there is a growth in the market, or to have some stability in a volatile period. However, a thorough analysis shows that “non-typical” (in comparison with the total situation in the stock exchange) movement of transport companies’ shares can be easily explained: they are still not popular with investors and speculators. 
“The mass correction that started in the stock market in the middle of January has influenced the shares of all companies. There were no exceptions. The only difference is that the second tier shares, including the ones of transport companies, react to the external fluctuations after a definite time lag”, considers Marina Irkly, analyst for machine building industry and transport, VELES Capital investment company. “The equities of transport companies can hardly be called liquid. That’s why their prices fell less than the blue-chips’”, explains Mr Shago. “Investors purchasing such shares orient at a long-term growth in the sector. They invest money for a long period, so they do not fear the threat of recession in the USD. Something much more serious must happen for them to start selling the equities”, he says.
“The share capital market is a popular source to attract finances. It is the cheapest and allows financing scaled investment programmes or contracts on mergers and acquisitions, keeping good results of the balance-liquidity structure. It’s important to understand, however, that it is an absolutely different level of requirements to a company in part of transparency, openness, timely accountant reports, constant work with shareholders. I would not state that analysts and investors do not understand the transport sector. Well, it is not so easy for understanding as natural resources extraction, but the interest to it is very large”, tells Stanislav Vartanyan, Director of Corporate Communication Department of FESCO transport group. 

Locomotive of the Industry
Financial director of OOO Firma Transgarant Alexey Barbariush is sure that today the volume of business of, for example, Russian railway operators is not so large, so it is senseless for them to enter the stock market (see articles about railway operators’ business in The RZD-Partner International №1 and on p. 70 of f this issue). In a year or two, however, the situation may change.
Analysts share the opinion. Moreover, it is possible to say that the market is expecting the float of transport companies, especially the large ones, and is ready to work with their equities. According to financiers’ estimations, all the sectors of the transport industry listed at the stock exchange – shipping, air and railway transport – may become the points of growth. Besides, the railway transport is likely to become the “locomotive” of the process. On the one hand, it is due to the corporate reform of OAO RZD, during which daughter companies are separated off, on the other hand, there appear and enlarge private companies-operators in the market.
“I believe, the float of OAO RZD’s daughter companies will increase the capitalisation of the sector. Besides, we can expect IPO of independent railway operators. The segment is enlarging very fast now. Floating to attract funds seems quite expensive nowadays, but it can be a reality in a year or two”, says E. Shago.
By the way, OAO TransContainer (a subsidiary of OAO RZD) sold its 15% shareholding in the off-exchange market, and it plans to make an IPO in the near future. Besides, the President of OAO RZD said at the end of 2007 that the holding company may also launch an IPO. It may take place after 2010. 
“Our attitude to TransContainer is only positive. The company owns a part of OAO RZD rolling stock, besides it has tariff privileges. All this make the operator the leader in the container transportation market”, says the analyst. “OAO RZD is an interesting potential participant of the stock market as well as independent operators. Diversification will always be popular, so any fundamental interesting issuer, especially in such sector, will attract investors, in first of all the institutional ones. If there is an IPO of OAO RZD, there will emerge the “monopoly chip” effect – the prices for shares will grow fast, since the insurer has a unique position”, says Anastasiya Marinina, the analyst of InvestFunds web-portal.
“Private transport companies will hardly become a locomotive of the stock market, because their total capitalisation will never be similar to that one of gas, oil and power supply companies. But they are sure to become an interesting and dynamical stock market segment”, consider S. Vartanyan.

Resume
British equity company Bridgepoint purchased Polish CTL Logistics, one of the most dynamically developing operators in Poland as well as in the whole Europe. Khai Tan, partner responsible for Bridgepoint’s investment activities in Central and Eastern Europe, said that CTL had achieved growth rates in excess of its competitors and with further investment from Bridgepoint would be ready for further international growth. Deutsche Bahn is entering British market by purchasing English Welsh and Scottish Railway Holdings Ltd. And Finnish group of companies VR used to hold negotiations to buy a shareholding in TransContainer. The epoque of transborder contracts is going on in the railway sector. Now both traded and non-traded at a stock exchange shares are relatively cheap. Their price may increase significantly in several years. Don’t be late! 
by Ivan Stupachenko 
 
Viewpoint
Evgeny Shago, 
Director of Analytical Department, OAO Managing Company Ingosstrakh-Investments:   
- Nowadays, the shares of shipping companies and air carriers are traded in the stock exchange. In future there will appear railway carriers too. The choice is small, however this sector should not be ignored. Transport companies’ shares have a lot of advantages. For example, they become attractive, when the prices for oil fall. Meanwhile, all other Russian companies lose if it happens.

Mikhail Saino,
Analyst of BrokerCreditService: 
- If volatility is regarded as the price spread, the one of the transport market is higher than the whole market’s. But it is “good” volatility, because the shares grew. Such dynamics is caused by the favourable results as well as the change of investors’ attitude to transport sector in the developing countries. It is supposed to develop rapidly, and Russia will not be an exception in this sense.

Marina Irkly, 
Analyst for Machine Building Industry and Transport, VELES Capital investment company:
- It would be interesting to unite all the transport companies, considering them “safe area”. Meanwhile, they differ in the profitability and liquidity significantly. Besides, there will appear new issuers. The most interesting of them will be Sovcomflot and TransContainer and others.

Anastasiya Marinina, 
Analyst of Invest-Funds web-portal:
- Transport companies turned out to be in a better position than other ones, since the crisis impacted the representatives of the financial sector. For the sake of comparison, from January 9 to February 29 of 2008, OAO Vneshtorgbank’s shares fell by 25.3%. The ones of Aeroflot and UTair, on the contrary, grew by 12.15% and 7.95% respectively. The shares of the Primorsk Sea Shipping Company fell by 1.96% only. A lot of analysts started to pay special attention to the equities of transport companies, regarding them as “protecting” ones, since such issuers less depend on the external market situation – the major part of their revenues is generated by domestic demand, that makes them more resistant to external crisis.
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Non-Typical Behaviour
In the first working days of 2008, the index of Russian Trade System (RTS, the leading stock exchange in Russia) started its falling, which is sometimes replaced by separate leaps. At the background of other industries, the equities of which are placed on Russian stock exchanges, transport looks pale. The industry has a dozen issuers, and only four of them are actively traded – ОАО Aeroflot (leading national air carrier), OAO Far Eastern Shipping Company (FESCO group, intermodal operator, incorporates a shipping company, a number of port assets, and a railway operator), OAO Novorossiysk Commercial Sea Port and OAO Novorossiysk Sea Shipping Company (Novoship). The equities of OAO Primorsk Shipping Company, OAO Volga Shipping , OAO Air Company Sibir S7 etc. are less popular.
“I do not think that in the near future the trading volume of transport companies’ equities can be compared with the ones of more popular industries, especially telecommunication. Almost half of shares of fixed line telecommunications providers are free floated”, notes Evgeny Shago, Director of Analytical Department of OAO Managing Company Ingosstrakh-Investments. “The liquidity of transport companies” shares leaves much to be desired”.
Alexander Churikov, analyst of AntantaCapital investment company stresses that the issuers from the transport sector have been “moving” in different directions since the end of 2007. As an example, he mentions air carriers. The prices for jet fuel grew by 32%, nevertheless, their shares are still profitable (according to mid-March data). Aeroflot increased by 23%, UTair – by 10%, and Sibir S7 – by 6%. It is a great result, if we take into account the 10% fall of the RTS index that started at the beginning of 2008.
“We keep our positive opinion on the shares. We are optimistic, since the passenger flow continues to grow (+18% in 2007), the revenue of population rises, and the airplane park is being renewed”, forecasts A. Churikov.
In the opinion of the representative of AntantaCapital, the equities of Novoship (+10.6%) and the Primorsk Sea Shipping Company (+0.66%) are worth noting. The shares of FESCO and the Novorossiysk Commercial Sea Port (NMPT) fell in price – by 5.6% and 12.4% respectively. 
But if we have a look at the context, it seems the reason for the decrease is the wish of investors to fix the profit – last year the cost of FESCO grew by 2.3 times, and the one of NMTP, a newcomer in the stock market, rose sixfold. In his turn, Mikhail Saino, analyst of BrokerCreditService company says that last year the RTS grew by 20%, while the price of FESCO, Aeroflot and Novoship increased by 129%, 72% and 58% respectively.

Weakness Is the Power
The situation is like this: last year the actively traded shares of transport companies were growing faster than the market. It confirms the thesis that the sector is underestimated. This year they either continue to increase or fall (an exception it is!) at the same rate as the RTS.
We could make a conclusion that this is a small but interesting segment, allowing investors to earn much if there is a growth in the market, or to have some stability in a volatile period. However, a thorough analysis shows that “non-typical” (in comparison with the total situation in the stock exchange) movement of transport companies’ shares can be easily explained: they are still not popular with investors and speculators. 
“The mass correction that started in the stock market in the middle of January has influenced the shares of all companies. There were no exceptions. The only difference is that the second tier shares, including the ones of transport companies, react to the external fluctuations after a definite time lag”, considers Marina Irkly, analyst for machine building industry and transport, VELES Capital investment company. “The equities of transport companies can hardly be called liquid. That’s why their prices fell less than the blue-chips’”, explains Mr Shago. “Investors purchasing such shares orient at a long-term growth in the sector. They invest money for a long period, so they do not fear the threat of recession in the USD. Something much more serious must happen for them to start selling the equities”, he says.
“The share capital market is a popular source to attract finances. It is the cheapest and allows financing scaled investment programmes or contracts on mergers and acquisitions, keeping good results of the balance-liquidity structure. It’s important to understand, however, that it is an absolutely different level of requirements to a company in part of transparency, openness, timely accountant reports, constant work with shareholders. I would not state that analysts and investors do not understand the transport sector. Well, it is not so easy for understanding as natural resources extraction, but the interest to it is very large”, tells Stanislav Vartanyan, Director of Corporate Communication Department of FESCO transport group. 

Locomotive of the Industry
Financial director of OOO Firma Transgarant Alexey Barbariush is sure that today the volume of business of, for example, Russian railway operators is not so large, so it is senseless for them to enter the stock market (see articles about railway operators’ business in The RZD-Partner International №1 and on p. 70 of f this issue). In a year or two, however, the situation may change.
Analysts share the opinion. Moreover, it is possible to say that the market is expecting the float of transport companies, especially the large ones, and is ready to work with their equities. According to financiers’ estimations, all the sectors of the transport industry listed at the stock exchange – shipping, air and railway transport – may become the points of growth. Besides, the railway transport is likely to become the “locomotive” of the process. On the one hand, it is due to the corporate reform of OAO RZD, during which daughter companies are separated off, on the other hand, there appear and enlarge private companies-operators in the market.
“I believe, the float of OAO RZD’s daughter companies will increase the capitalisation of the sector. Besides, we can expect IPO of independent railway operators. The segment is enlarging very fast now. Floating to attract funds seems quite expensive nowadays, but it can be a reality in a year or two”, says E. Shago.
By the way, OAO TransContainer (a subsidiary of OAO RZD) sold its 15% shareholding in the off-exchange market, and it plans to make an IPO in the near future. Besides, the President of OAO RZD said at the end of 2007 that the holding company may also launch an IPO. It may take place after 2010. 
“Our attitude to TransContainer is only positive. The company owns a part of OAO RZD rolling stock, besides it has tariff privileges. All this make the operator the leader in the container transportation market”, says the analyst. “OAO RZD is an interesting potential participant of the stock market as well as independent operators. Diversification will always be popular, so any fundamental interesting issuer, especially in such sector, will attract investors, in first of all the institutional ones. If there is an IPO of OAO RZD, there will emerge the “monopoly chip” effect – the prices for shares will grow fast, since the insurer has a unique position”, says Anastasiya Marinina, the analyst of InvestFunds web-portal.
“Private transport companies will hardly become a locomotive of the stock market, because their total capitalisation will never be similar to that one of gas, oil and power supply companies. But they are sure to become an interesting and dynamical stock market segment”, consider S. Vartanyan.

Resume
British equity company Bridgepoint purchased Polish CTL Logistics, one of the most dynamically developing operators in Poland as well as in the whole Europe. Khai Tan, partner responsible for Bridgepoint’s investment activities in Central and Eastern Europe, said that CTL had achieved growth rates in excess of its competitors and with further investment from Bridgepoint would be ready for further international growth. Deutsche Bahn is entering British market by purchasing English Welsh and Scottish Railway Holdings Ltd. And Finnish group of companies VR used to hold negotiations to buy a shareholding in TransContainer. The epoque of transborder contracts is going on in the railway sector. Now both traded and non-traded at a stock exchange shares are relatively cheap. Their price may increase significantly in several years. Don’t be late! 
by Ivan Stupachenko 
 
Viewpoint
Evgeny Shago, 
Director of Analytical Department, OAO Managing Company Ingosstrakh-Investments:   
- Nowadays, the shares of shipping companies and air carriers are traded in the stock exchange. In future there will appear railway carriers too. The choice is small, however this sector should not be ignored. Transport companies’ shares have a lot of advantages. For example, they become attractive, when the prices for oil fall. Meanwhile, all other Russian companies lose if it happens.

Mikhail Saino,
Analyst of BrokerCreditService: 
- If volatility is regarded as the price spread, the one of the transport market is higher than the whole market’s. But it is “good” volatility, because the shares grew. Such dynamics is caused by the favourable results as well as the change of investors’ attitude to transport sector in the developing countries. It is supposed to develop rapidly, and Russia will not be an exception in this sense.

Marina Irkly, 
Analyst for Machine Building Industry and Transport, VELES Capital investment company:
- It would be interesting to unite all the transport companies, considering them “safe area”. Meanwhile, they differ in the profitability and liquidity significantly. Besides, there will appear new issuers. The most interesting of them will be Sovcomflot and TransContainer and others.

Anastasiya Marinina, 
Analyst of Invest-Funds web-portal:
- Transport companies turned out to be in a better position than other ones, since the crisis impacted the representatives of the financial sector. For the sake of comparison, from January 9 to February 29 of 2008, OAO Vneshtorgbank’s shares fell by 25.3%. The ones of Aeroflot and UTair, on the contrary, grew by 12.15% and 7.95% respectively. The shares of the Primorsk Sea Shipping Company fell by 1.96% only. A lot of analysts started to pay special attention to the equities of transport companies, regarding them as “protecting” ones, since such issuers less depend on the external market situation – the major part of their revenues is generated by domestic demand, that makes them more resistant to external crisis.
    [~DETAIL_TEXT] => 
Non-Typical Behaviour
In the first working days of 2008, the index of Russian Trade System (RTS, the leading stock exchange in Russia) started its falling, which is sometimes replaced by separate leaps. At the background of other industries, the equities of which are placed on Russian stock exchanges, transport looks pale. The industry has a dozen issuers, and only four of them are actively traded – ОАО Aeroflot (leading national air carrier), OAO Far Eastern Shipping Company (FESCO group, intermodal operator, incorporates a shipping company, a number of port assets, and a railway operator), OAO Novorossiysk Commercial Sea Port and OAO Novorossiysk Sea Shipping Company (Novoship). The equities of OAO Primorsk Shipping Company, OAO Volga Shipping , OAO Air Company Sibir S7 etc. are less popular.
“I do not think that in the near future the trading volume of transport companies’ equities can be compared with the ones of more popular industries, especially telecommunication. Almost half of shares of fixed line telecommunications providers are free floated”, notes Evgeny Shago, Director of Analytical Department of OAO Managing Company Ingosstrakh-Investments. “The liquidity of transport companies” shares leaves much to be desired”.
Alexander Churikov, analyst of AntantaCapital investment company stresses that the issuers from the transport sector have been “moving” in different directions since the end of 2007. As an example, he mentions air carriers. The prices for jet fuel grew by 32%, nevertheless, their shares are still profitable (according to mid-March data). Aeroflot increased by 23%, UTair – by 10%, and Sibir S7 – by 6%. It is a great result, if we take into account the 10% fall of the RTS index that started at the beginning of 2008.
“We keep our positive opinion on the shares. We are optimistic, since the passenger flow continues to grow (+18% in 2007), the revenue of population rises, and the airplane park is being renewed”, forecasts A. Churikov.
In the opinion of the representative of AntantaCapital, the equities of Novoship (+10.6%) and the Primorsk Sea Shipping Company (+0.66%) are worth noting. The shares of FESCO and the Novorossiysk Commercial Sea Port (NMPT) fell in price – by 5.6% and 12.4% respectively. 
But if we have a look at the context, it seems the reason for the decrease is the wish of investors to fix the profit – last year the cost of FESCO grew by 2.3 times, and the one of NMTP, a newcomer in the stock market, rose sixfold. In his turn, Mikhail Saino, analyst of BrokerCreditService company says that last year the RTS grew by 20%, while the price of FESCO, Aeroflot and Novoship increased by 129%, 72% and 58% respectively.

Weakness Is the Power
The situation is like this: last year the actively traded shares of transport companies were growing faster than the market. It confirms the thesis that the sector is underestimated. This year they either continue to increase or fall (an exception it is!) at the same rate as the RTS.
We could make a conclusion that this is a small but interesting segment, allowing investors to earn much if there is a growth in the market, or to have some stability in a volatile period. However, a thorough analysis shows that “non-typical” (in comparison with the total situation in the stock exchange) movement of transport companies’ shares can be easily explained: they are still not popular with investors and speculators. 
“The mass correction that started in the stock market in the middle of January has influenced the shares of all companies. There were no exceptions. The only difference is that the second tier shares, including the ones of transport companies, react to the external fluctuations after a definite time lag”, considers Marina Irkly, analyst for machine building industry and transport, VELES Capital investment company. “The equities of transport companies can hardly be called liquid. That’s why their prices fell less than the blue-chips’”, explains Mr Shago. “Investors purchasing such shares orient at a long-term growth in the sector. They invest money for a long period, so they do not fear the threat of recession in the USD. Something much more serious must happen for them to start selling the equities”, he says.
“The share capital market is a popular source to attract finances. It is the cheapest and allows financing scaled investment programmes or contracts on mergers and acquisitions, keeping good results of the balance-liquidity structure. It’s important to understand, however, that it is an absolutely different level of requirements to a company in part of transparency, openness, timely accountant reports, constant work with shareholders. I would not state that analysts and investors do not understand the transport sector. Well, it is not so easy for understanding as natural resources extraction, but the interest to it is very large”, tells Stanislav Vartanyan, Director of Corporate Communication Department of FESCO transport group. 

Locomotive of the Industry
Financial director of OOO Firma Transgarant Alexey Barbariush is sure that today the volume of business of, for example, Russian railway operators is not so large, so it is senseless for them to enter the stock market (see articles about railway operators’ business in The RZD-Partner International №1 and on p. 70 of f this issue). In a year or two, however, the situation may change.
Analysts share the opinion. Moreover, it is possible to say that the market is expecting the float of transport companies, especially the large ones, and is ready to work with their equities. According to financiers’ estimations, all the sectors of the transport industry listed at the stock exchange – shipping, air and railway transport – may become the points of growth. Besides, the railway transport is likely to become the “locomotive” of the process. On the one hand, it is due to the corporate reform of OAO RZD, during which daughter companies are separated off, on the other hand, there appear and enlarge private companies-operators in the market.
“I believe, the float of OAO RZD’s daughter companies will increase the capitalisation of the sector. Besides, we can expect IPO of independent railway operators. The segment is enlarging very fast now. Floating to attract funds seems quite expensive nowadays, but it can be a reality in a year or two”, says E. Shago.
By the way, OAO TransContainer (a subsidiary of OAO RZD) sold its 15% shareholding in the off-exchange market, and it plans to make an IPO in the near future. Besides, the President of OAO RZD said at the end of 2007 that the holding company may also launch an IPO. It may take place after 2010. 
“Our attitude to TransContainer is only positive. The company owns a part of OAO RZD rolling stock, besides it has tariff privileges. All this make the operator the leader in the container transportation market”, says the analyst. “OAO RZD is an interesting potential participant of the stock market as well as independent operators. Diversification will always be popular, so any fundamental interesting issuer, especially in such sector, will attract investors, in first of all the institutional ones. If there is an IPO of OAO RZD, there will emerge the “monopoly chip” effect – the prices for shares will grow fast, since the insurer has a unique position”, says Anastasiya Marinina, the analyst of InvestFunds web-portal.
“Private transport companies will hardly become a locomotive of the stock market, because their total capitalisation will never be similar to that one of gas, oil and power supply companies. But they are sure to become an interesting and dynamical stock market segment”, consider S. Vartanyan.

Resume
British equity company Bridgepoint purchased Polish CTL Logistics, one of the most dynamically developing operators in Poland as well as in the whole Europe. Khai Tan, partner responsible for Bridgepoint’s investment activities in Central and Eastern Europe, said that CTL had achieved growth rates in excess of its competitors and with further investment from Bridgepoint would be ready for further international growth. Deutsche Bahn is entering British market by purchasing English Welsh and Scottish Railway Holdings Ltd. And Finnish group of companies VR used to hold negotiations to buy a shareholding in TransContainer. The epoque of transborder contracts is going on in the railway sector. Now both traded and non-traded at a stock exchange shares are relatively cheap. Their price may increase significantly in several years. Don’t be late! 
by Ivan Stupachenko 
 
Viewpoint
Evgeny Shago, 
Director of Analytical Department, OAO Managing Company Ingosstrakh-Investments:   
- Nowadays, the shares of shipping companies and air carriers are traded in the stock exchange. In future there will appear railway carriers too. The choice is small, however this sector should not be ignored. Transport companies’ shares have a lot of advantages. For example, they become attractive, when the prices for oil fall. Meanwhile, all other Russian companies lose if it happens.

Mikhail Saino,
Analyst of BrokerCreditService: 
- If volatility is regarded as the price spread, the one of the transport market is higher than the whole market’s. But it is “good” volatility, because the shares grew. Such dynamics is caused by the favourable results as well as the change of investors’ attitude to transport sector in the developing countries. It is supposed to develop rapidly, and Russia will not be an exception in this sense.

Marina Irkly, 
Analyst for Machine Building Industry and Transport, VELES Capital investment company:
- It would be interesting to unite all the transport companies, considering them “safe area”. Meanwhile, they differ in the profitability and liquidity significantly. Besides, there will appear new issuers. The most interesting of them will be Sovcomflot and TransContainer and others.

Anastasiya Marinina, 
Analyst of Invest-Funds web-portal:
- Transport companies turned out to be in a better position than other ones, since the crisis impacted the representatives of the financial sector. For the sake of comparison, from January 9 to February 29 of 2008, OAO Vneshtorgbank’s shares fell by 25.3%. The ones of Aeroflot and UTair, on the contrary, grew by 12.15% and 7.95% respectively. The shares of the Primorsk Sea Shipping Company fell by 1.96% only. A lot of analysts started to pay special attention to the equities of transport companies, regarding them as “protecting” ones, since such issuers less depend on the external market situation – the major part of their revenues is generated by domestic demand, that makes them more resistant to external crisis.
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    [DETAIL_TEXT] => 
Three Eternal Problems of Wagon Repair

According to OAO RZD, 116,900 private wagons were given for repair last year, while in 2006 the figure was 127,100 units.
“The number of uncouplings set for repairs fell by 8% year-on-year. Last year, 123,700 private wagons were repaired, and 115,400 in 2006, meaning repair volume grew by 8,300 units”, announced Sergey Kaletin, First Deputy Head of the Wagon Economy Department, at a meeting with rolling stock owners.

In 2007 the number of defective private wagons, which failed to undergone maintenance repair, was 1,500-2,000 units. 
Meanwhile, railwaymen confirm that up to 5,500 private cargo wagons are uncoupled for repair because of the same defect. Out of them 1,400-1,500 private rail cars, or 25 per cent, are set for repair because earlier repairs were not good enough.

In spite of this, the prices for repair are not falling. Market players believe that now the scheduled repair costs as much as one sixth of the revenue earned by the wagon this year.

On average, the term of a wagon staying in a depot for repair was five days. But it took workers 3 hours on average to repair a wagon. 

According to statistics from railwaymen, the works depots reduced the term of a wagon being in a repair depot by 3-4 days year-on-year, although there were such cases when idling amounted to 40 or even 70 days. Representatives of wagon owners say that the reason for this is the lack of locomotives as well as an unreliable system of spares supply. In their turn, representatives of OAO RZD claim they often have to spend a lot of time finding the owner of a wagon (especially if it is a small company) and, consequently, getting the payment for the provided services.

An important bone of contention is that wagon owners are expected to purchase, deliver and pay for keeping the spares in the warehouse of a depot. Operators do not often like the quality of products used by repair enterprises. Thus, they have to either organise delivery of cast details to the depot (and suffer additional expenses) or wait until the wagons of OAO RZD are repaired. Only then will the turn of their rail cars come and even then the quality of fulfilled works will not meet expectations.

To Buy or to Build?

Considering the increasing demand of private companies for wagon repair, the analysts are evaluating the potential opportunities and prospects of this segment’s development after its liberalisation.

In the words of Alla Uvarova, CEO of audit and consulting group Business Systems Development, the basic factors for competition development in the wagon repair sector are organisational changes and investment attraction. Although the reorganisation process has already started, it is quite difficult to say when the rolling stock repair sector will be financed by private companies.

Nowadays, OAO RZD is going to sell 22 wagon repair depots. The possible separation of wagon repair enterprises was discussed in 2006. At the beginning of 2008, representatives of Central Directorate for Wagon Repair mentioned that a pack of documents necessary for holding a tender is being developed. The terms offered to investors envisage that the specialisation of the enterprises must not be changed for five years, thus the capacities of the repair infrastructure will not only be kept but even enlarged in future. The winner of the tender is to hire the workers of the wagon repair enterprises he purchases for at least two years. They will work for the organisation launched on the basis of the bought property. 

Besides, OAO RZD and the winner are to conclude a contract to rent or sell the traction tracks necessary for organisation of the work. Traction tracks are a basic constituent of the technological repair process and now they are to be taken off the books. To rent or sell them they must be taken out of the producing and technological complexes at the stations. According to the preliminary estimation, it is a rather expensive process. About RUR 1.8billion will be required for that.

“Unfortunately, we have no experience in privatising wagon repair depots. I believe any market player can hardly say when the process of separating wagon repair depots will start. Maybe, this year won’t be a key one. Still, we hope the decision will be made eventually. We also hope the pilot projects for selling depots, through joint ventures or long-term renting of a wagon depot with a hire-purchase option, will start”, says Irina Chiganashkina, Deputy Director of the Rolling Stock Owners Association.

She has also appealed several times to OAO RZD, the Ministry of Economic Development and Trade, and the Ministry of Transport for their actions. For example, all of the 22 separated depots repair wagon components for the maintenance depots nearby. In future, this may give rise to the problem of balanced delivery of components to repair public and private stock parks.

However, no radical changes have happened so far, since the tender has not been held. There is no proper normative and legislative base for that, as well as a precedent for purchasing railway enterprises. Besides, the attractiveness of the objects for sale is rather disputable, since the infrastructure is underdeveloped there and they are not located on the main lines of freight transportation. I.e. an investor faces the task of modernising repair facilities as well as building additional tracks. In fact, representatives of OAO RZD do not conceal the fact that the objects for sale are not the most interesting ones. “These are the depots, the capacities of which we can replace, i.e. rearrange the volume of works fulfilled by the depots to other enterprises. They were less financed and their characteristic feature is a high level of deterioration in basic assets”, explains Pert Pyrenkov, Head of Strategic Development Department of OAO RZD. There appears a question over whether the private rolling stock owners will rush to participate in the tender, and which of them can afford investing billions into such an enterprise?
Of course, they have an alternative – construction of a new depot. But that is not so easy either.

Resume
Even optimists can hardly say when a competitive market in rolling stock repair will appear. Until it is clear, the interested parties hope the Ministry of Transport will act as an arbitrator. And the cargo owner, which badly needs to reduce expenses, continues to suffer. 

by Tatyana Ovcharova 

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Three Eternal Problems of Wagon Repair

According to OAO RZD, 116,900 private wagons were given for repair last year, while in 2006 the figure was 127,100 units.
“The number of uncouplings set for repairs fell by 8% year-on-year. Last year, 123,700 private wagons were repaired, and 115,400 in 2006, meaning repair volume grew by 8,300 units”, announced Sergey Kaletin, First Deputy Head of the Wagon Economy Department, at a meeting with rolling stock owners.

In 2007 the number of defective private wagons, which failed to undergone maintenance repair, was 1,500-2,000 units. 
Meanwhile, railwaymen confirm that up to 5,500 private cargo wagons are uncoupled for repair because of the same defect. Out of them 1,400-1,500 private rail cars, or 25 per cent, are set for repair because earlier repairs were not good enough.

In spite of this, the prices for repair are not falling. Market players believe that now the scheduled repair costs as much as one sixth of the revenue earned by the wagon this year.

On average, the term of a wagon staying in a depot for repair was five days. But it took workers 3 hours on average to repair a wagon. 

According to statistics from railwaymen, the works depots reduced the term of a wagon being in a repair depot by 3-4 days year-on-year, although there were such cases when idling amounted to 40 or even 70 days. Representatives of wagon owners say that the reason for this is the lack of locomotives as well as an unreliable system of spares supply. In their turn, representatives of OAO RZD claim they often have to spend a lot of time finding the owner of a wagon (especially if it is a small company) and, consequently, getting the payment for the provided services.

An important bone of contention is that wagon owners are expected to purchase, deliver and pay for keeping the spares in the warehouse of a depot. Operators do not often like the quality of products used by repair enterprises. Thus, they have to either organise delivery of cast details to the depot (and suffer additional expenses) or wait until the wagons of OAO RZD are repaired. Only then will the turn of their rail cars come and even then the quality of fulfilled works will not meet expectations.

To Buy or to Build?

Considering the increasing demand of private companies for wagon repair, the analysts are evaluating the potential opportunities and prospects of this segment’s development after its liberalisation.

In the words of Alla Uvarova, CEO of audit and consulting group Business Systems Development, the basic factors for competition development in the wagon repair sector are organisational changes and investment attraction. Although the reorganisation process has already started, it is quite difficult to say when the rolling stock repair sector will be financed by private companies.

Nowadays, OAO RZD is going to sell 22 wagon repair depots. The possible separation of wagon repair enterprises was discussed in 2006. At the beginning of 2008, representatives of Central Directorate for Wagon Repair mentioned that a pack of documents necessary for holding a tender is being developed. The terms offered to investors envisage that the specialisation of the enterprises must not be changed for five years, thus the capacities of the repair infrastructure will not only be kept but even enlarged in future. The winner of the tender is to hire the workers of the wagon repair enterprises he purchases for at least two years. They will work for the organisation launched on the basis of the bought property. 

Besides, OAO RZD and the winner are to conclude a contract to rent or sell the traction tracks necessary for organisation of the work. Traction tracks are a basic constituent of the technological repair process and now they are to be taken off the books. To rent or sell them they must be taken out of the producing and technological complexes at the stations. According to the preliminary estimation, it is a rather expensive process. About RUR 1.8billion will be required for that.

“Unfortunately, we have no experience in privatising wagon repair depots. I believe any market player can hardly say when the process of separating wagon repair depots will start. Maybe, this year won’t be a key one. Still, we hope the decision will be made eventually. We also hope the pilot projects for selling depots, through joint ventures or long-term renting of a wagon depot with a hire-purchase option, will start”, says Irina Chiganashkina, Deputy Director of the Rolling Stock Owners Association.

She has also appealed several times to OAO RZD, the Ministry of Economic Development and Trade, and the Ministry of Transport for their actions. For example, all of the 22 separated depots repair wagon components for the maintenance depots nearby. In future, this may give rise to the problem of balanced delivery of components to repair public and private stock parks.

However, no radical changes have happened so far, since the tender has not been held. There is no proper normative and legislative base for that, as well as a precedent for purchasing railway enterprises. Besides, the attractiveness of the objects for sale is rather disputable, since the infrastructure is underdeveloped there and they are not located on the main lines of freight transportation. I.e. an investor faces the task of modernising repair facilities as well as building additional tracks. In fact, representatives of OAO RZD do not conceal the fact that the objects for sale are not the most interesting ones. “These are the depots, the capacities of which we can replace, i.e. rearrange the volume of works fulfilled by the depots to other enterprises. They were less financed and their characteristic feature is a high level of deterioration in basic assets”, explains Pert Pyrenkov, Head of Strategic Development Department of OAO RZD. There appears a question over whether the private rolling stock owners will rush to participate in the tender, and which of them can afford investing billions into such an enterprise?
Of course, they have an alternative – construction of a new depot. But that is not so easy either.

Resume
Even optimists can hardly say when a competitive market in rolling stock repair will appear. Until it is clear, the interested parties hope the Ministry of Transport will act as an arbitrator. And the cargo owner, which badly needs to reduce expenses, continues to suffer. 

by Tatyana Ovcharova 

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    [DETAIL_TEXT] => 
Three Eternal Problems of Wagon Repair

According to OAO RZD, 116,900 private wagons were given for repair last year, while in 2006 the figure was 127,100 units.
“The number of uncouplings set for repairs fell by 8% year-on-year. Last year, 123,700 private wagons were repaired, and 115,400 in 2006, meaning repair volume grew by 8,300 units”, announced Sergey Kaletin, First Deputy Head of the Wagon Economy Department, at a meeting with rolling stock owners.

In 2007 the number of defective private wagons, which failed to undergone maintenance repair, was 1,500-2,000 units. 
Meanwhile, railwaymen confirm that up to 5,500 private cargo wagons are uncoupled for repair because of the same defect. Out of them 1,400-1,500 private rail cars, or 25 per cent, are set for repair because earlier repairs were not good enough.

In spite of this, the prices for repair are not falling. Market players believe that now the scheduled repair costs as much as one sixth of the revenue earned by the wagon this year.

On average, the term of a wagon staying in a depot for repair was five days. But it took workers 3 hours on average to repair a wagon. 

According to statistics from railwaymen, the works depots reduced the term of a wagon being in a repair depot by 3-4 days year-on-year, although there were such cases when idling amounted to 40 or even 70 days. Representatives of wagon owners say that the reason for this is the lack of locomotives as well as an unreliable system of spares supply. In their turn, representatives of OAO RZD claim they often have to spend a lot of time finding the owner of a wagon (especially if it is a small company) and, consequently, getting the payment for the provided services.

An important bone of contention is that wagon owners are expected to purchase, deliver and pay for keeping the spares in the warehouse of a depot. Operators do not often like the quality of products used by repair enterprises. Thus, they have to either organise delivery of cast details to the depot (and suffer additional expenses) or wait until the wagons of OAO RZD are repaired. Only then will the turn of their rail cars come and even then the quality of fulfilled works will not meet expectations.

To Buy or to Build?

Considering the increasing demand of private companies for wagon repair, the analysts are evaluating the potential opportunities and prospects of this segment’s development after its liberalisation.

In the words of Alla Uvarova, CEO of audit and consulting group Business Systems Development, the basic factors for competition development in the wagon repair sector are organisational changes and investment attraction. Although the reorganisation process has already started, it is quite difficult to say when the rolling stock repair sector will be financed by private companies.

Nowadays, OAO RZD is going to sell 22 wagon repair depots. The possible separation of wagon repair enterprises was discussed in 2006. At the beginning of 2008, representatives of Central Directorate for Wagon Repair mentioned that a pack of documents necessary for holding a tender is being developed. The terms offered to investors envisage that the specialisation of the enterprises must not be changed for five years, thus the capacities of the repair infrastructure will not only be kept but even enlarged in future. The winner of the tender is to hire the workers of the wagon repair enterprises he purchases for at least two years. They will work for the organisation launched on the basis of the bought property. 

Besides, OAO RZD and the winner are to conclude a contract to rent or sell the traction tracks necessary for organisation of the work. Traction tracks are a basic constituent of the technological repair process and now they are to be taken off the books. To rent or sell them they must be taken out of the producing and technological complexes at the stations. According to the preliminary estimation, it is a rather expensive process. About RUR 1.8billion will be required for that.

“Unfortunately, we have no experience in privatising wagon repair depots. I believe any market player can hardly say when the process of separating wagon repair depots will start. Maybe, this year won’t be a key one. Still, we hope the decision will be made eventually. We also hope the pilot projects for selling depots, through joint ventures or long-term renting of a wagon depot with a hire-purchase option, will start”, says Irina Chiganashkina, Deputy Director of the Rolling Stock Owners Association.

She has also appealed several times to OAO RZD, the Ministry of Economic Development and Trade, and the Ministry of Transport for their actions. For example, all of the 22 separated depots repair wagon components for the maintenance depots nearby. In future, this may give rise to the problem of balanced delivery of components to repair public and private stock parks.

However, no radical changes have happened so far, since the tender has not been held. There is no proper normative and legislative base for that, as well as a precedent for purchasing railway enterprises. Besides, the attractiveness of the objects for sale is rather disputable, since the infrastructure is underdeveloped there and they are not located on the main lines of freight transportation. I.e. an investor faces the task of modernising repair facilities as well as building additional tracks. In fact, representatives of OAO RZD do not conceal the fact that the objects for sale are not the most interesting ones. “These are the depots, the capacities of which we can replace, i.e. rearrange the volume of works fulfilled by the depots to other enterprises. They were less financed and their characteristic feature is a high level of deterioration in basic assets”, explains Pert Pyrenkov, Head of Strategic Development Department of OAO RZD. There appears a question over whether the private rolling stock owners will rush to participate in the tender, and which of them can afford investing billions into such an enterprise?
Of course, they have an alternative – construction of a new depot. But that is not so easy either.

Resume
Even optimists can hardly say when a competitive market in rolling stock repair will appear. Until it is clear, the interested parties hope the Ministry of Transport will act as an arbitrator. And the cargo owner, which badly needs to reduce expenses, continues to suffer. 

by Tatyana Ovcharova 

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Three Eternal Problems of Wagon Repair

According to OAO RZD, 116,900 private wagons were given for repair last year, while in 2006 the figure was 127,100 units.
“The number of uncouplings set for repairs fell by 8% year-on-year. Last year, 123,700 private wagons were repaired, and 115,400 in 2006, meaning repair volume grew by 8,300 units”, announced Sergey Kaletin, First Deputy Head of the Wagon Economy Department, at a meeting with rolling stock owners.

In 2007 the number of defective private wagons, which failed to undergone maintenance repair, was 1,500-2,000 units. 
Meanwhile, railwaymen confirm that up to 5,500 private cargo wagons are uncoupled for repair because of the same defect. Out of them 1,400-1,500 private rail cars, or 25 per cent, are set for repair because earlier repairs were not good enough.

In spite of this, the prices for repair are not falling. Market players believe that now the scheduled repair costs as much as one sixth of the revenue earned by the wagon this year.

On average, the term of a wagon staying in a depot for repair was five days. But it took workers 3 hours on average to repair a wagon. 

According to statistics from railwaymen, the works depots reduced the term of a wagon being in a repair depot by 3-4 days year-on-year, although there were such cases when idling amounted to 40 or even 70 days. Representatives of wagon owners say that the reason for this is the lack of locomotives as well as an unreliable system of spares supply. In their turn, representatives of OAO RZD claim they often have to spend a lot of time finding the owner of a wagon (especially if it is a small company) and, consequently, getting the payment for the provided services.

An important bone of contention is that wagon owners are expected to purchase, deliver and pay for keeping the spares in the warehouse of a depot. Operators do not often like the quality of products used by repair enterprises. Thus, they have to either organise delivery of cast details to the depot (and suffer additional expenses) or wait until the wagons of OAO RZD are repaired. Only then will the turn of their rail cars come and even then the quality of fulfilled works will not meet expectations.

To Buy or to Build?

Considering the increasing demand of private companies for wagon repair, the analysts are evaluating the potential opportunities and prospects of this segment’s development after its liberalisation.

In the words of Alla Uvarova, CEO of audit and consulting group Business Systems Development, the basic factors for competition development in the wagon repair sector are organisational changes and investment attraction. Although the reorganisation process has already started, it is quite difficult to say when the rolling stock repair sector will be financed by private companies.

Nowadays, OAO RZD is going to sell 22 wagon repair depots. The possible separation of wagon repair enterprises was discussed in 2006. At the beginning of 2008, representatives of Central Directorate for Wagon Repair mentioned that a pack of documents necessary for holding a tender is being developed. The terms offered to investors envisage that the specialisation of the enterprises must not be changed for five years, thus the capacities of the repair infrastructure will not only be kept but even enlarged in future. The winner of the tender is to hire the workers of the wagon repair enterprises he purchases for at least two years. They will work for the organisation launched on the basis of the bought property. 

Besides, OAO RZD and the winner are to conclude a contract to rent or sell the traction tracks necessary for organisation of the work. Traction tracks are a basic constituent of the technological repair process and now they are to be taken off the books. To rent or sell them they must be taken out of the producing and technological complexes at the stations. According to the preliminary estimation, it is a rather expensive process. About RUR 1.8billion will be required for that.

“Unfortunately, we have no experience in privatising wagon repair depots. I believe any market player can hardly say when the process of separating wagon repair depots will start. Maybe, this year won’t be a key one. Still, we hope the decision will be made eventually. We also hope the pilot projects for selling depots, through joint ventures or long-term renting of a wagon depot with a hire-purchase option, will start”, says Irina Chiganashkina, Deputy Director of the Rolling Stock Owners Association.

She has also appealed several times to OAO RZD, the Ministry of Economic Development and Trade, and the Ministry of Transport for their actions. For example, all of the 22 separated depots repair wagon components for the maintenance depots nearby. In future, this may give rise to the problem of balanced delivery of components to repair public and private stock parks.

However, no radical changes have happened so far, since the tender has not been held. There is no proper normative and legislative base for that, as well as a precedent for purchasing railway enterprises. Besides, the attractiveness of the objects for sale is rather disputable, since the infrastructure is underdeveloped there and they are not located on the main lines of freight transportation. I.e. an investor faces the task of modernising repair facilities as well as building additional tracks. In fact, representatives of OAO RZD do not conceal the fact that the objects for sale are not the most interesting ones. “These are the depots, the capacities of which we can replace, i.e. rearrange the volume of works fulfilled by the depots to other enterprises. They were less financed and their characteristic feature is a high level of deterioration in basic assets”, explains Pert Pyrenkov, Head of Strategic Development Department of OAO RZD. There appears a question over whether the private rolling stock owners will rush to participate in the tender, and which of them can afford investing billions into such an enterprise?
Of course, they have an alternative – construction of a new depot. But that is not so easy either.

Resume
Even optimists can hardly say when a competitive market in rolling stock repair will appear. Until it is clear, the interested parties hope the Ministry of Transport will act as an arbitrator. And the cargo owner, which badly needs to reduce expenses, continues to suffer. 

by Tatyana Ovcharova 

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    [DETAIL_TEXT] => 
Behind Different Barriers 

To discuss the above-mentioned issue, the current state of the Russian railway market should be briefly described. OAO RZD, having separated off the Ministry of Railways and Communications, currently performs as the only public carrier.   The company operates its own rail and locomotive park and is obliged to satisfy any transportation request claimed by any customer independently of how profitable this transportation might be for it. Prices for the carrier’s services are set by the state. Independent operators who have their own rail-car park (and, very occasionally, have their own locomotives for some routes) purchase locomotive haulage from OAO RZD. They have the freedom to set prices for rail-cars and their respective services for their clients. Most independent operators nowadays are private companies, independent of OAO RZD. 

Frequent complaints about a lack of legislative norms desired by operators have already become commonplace in the transport business. Market development has significantly overtaken development of the normative and legislative base in the field of transport. Thus, there is no proper system to regulate market players’ activities. Initially, there were plans to set the rules and mechanisms for the legal status of the new players but now the sector is mostly focused on accepting the current state and clarifying relations between the state carrier and private operator companies.  

Clause 2 of the Federal Law «On railway Transport in the Russian Federation» states that, «the basics of the legal regulation of railway operators» activities and their relations with carriers are defined by the RF Government». The terms to fulfil this clause in practice have been set several times including in the Restructuring Programme, developed and approved by the RF Government. Initial efforts to develop such a document were made by the Ministry for the Anti-monopoly Policy and Support of Entrepreneurship in 2002 (this institution was later restructured in the Federal Anti-monopoly Services).

Since the start of this document’s development, five years have passed. Operator companies have grown, acquired experience and some of them today are taking prominent positions in the market. That is the reason why they insist on an attitude of respect for them from OAO RZD – the only monopolist in transport sector. In 2002-2007, several versions of government regulations were made public, though not one was given official approval due to disagreements among concerned market participants about the fundamental principles of the document.  
It is likely, 2008 will be a turning point in the solving of  crucial problems. The Ministry of Transport and operators are eager to approve the document setting the rules of the game. However, the carrier is inclined to support its own interest for its own gain. To understand the essence of the problem and see the market’s prospects, which are crucially important for European cargo owners and transport companies, it would be wise to get acquainted with both sides’ arguments. 

Discussion will be heated 

It is impossible to start without giving the latest version of the regulations, issued late 2007. In particular, it gives definition to such terms as “operator activities” and regulates their relations with carriers. Thus, clause 3 of the project says: «Railway operator activity is work and services within contractual obligations with carriers in the field of cargo transportation with use of rolling stock and containers (giving rolling stock and containers to implement transportation according to requests on transportation, fulfillment of single operations for cargo transportation, providing technical conveniences of rolling stock)». Despite the fact that, according to some experts, this definition is rather open to dispute the very idea of setting this term legally is an enormously progressive step. The regulations also state that a carrier which dominates the market and operator’s relations must be regulated by an agreement that would consider many different conditions. These terms are to include reciprocal liabilities of carrier and operator, methods of rolling stock use, payment, etc. 

Particular attention is paid to the fact that the carrier is strictly forbidden from preventing conclusion of this agreement. Moreover, the list of operators that concluded contracts of such sort with the carrier should be made public.

This project also focuses on issues to do with rolling stock repair in depots controlled by OAO RZD. The document says that prices set by private companies are not to exceed the tariffs set by the corporation on the same types of repair work. However, some exceptions are possible. This occurs when the positive effect of setting different tariffs, including those of a socio-economic nature, exceeds negative consequences for the market in cargo rolling stock repair.

According to repeated remarks by Vladimir Prokofyev, President of the Association of Carriers and Operators and CEO of BaltTransService JSC, operators are ready to support the project because, although this version has lost some of initial ideas, it comprises basic regulations developed by the Association. 

According to Anatoly Golomolzin, Deputy Head of the Federal Tariff Service, the document’s aim is to regulate relations between operator and carrier. It will help responsible state structures to create non-discriminatory access to the market in rolling stock repair, in order to form competition, to be later expanded to the transportation market itself. 

This situation became crucial in regards to separating The First Cargo Company from OAO RZD. The newly launched company is a daughter company of the monopolist and received a portion of OAO RZD’s rolling stock park and operator status. Theoretically, the new economic body is to perform as an operator of railway rolling stock and needs legal rules to play on the market. This shows a growing need to set clear legal standards for operator activities. 

However, OAO RZD’s representatives take a specific position on this problem. In this respect, one point of particular interest is the opinion held by Yevgeny Mikhailov, who had been promoting his idea while working for the Ministry of Economic Development and Trade. First of all, he believes that, according to the Civil Code of the Russian Federation, there are only three models by which operators can transport cargo using their own rolling stock. Within the framework of all these models, operators have to cooperate with the cargo owner immediately.  Thus, operators who use their own rolling stock are affected by a current legal and normative base. 

Moreover, he feels negative about including the clause on rolling stock repair into the final version of the document. He believes that declaration about discriminatory or non-discriminatory access to the repair base cannot help solve the problem. In his opinion, the solution has to do with separating the industrial capacities of OAO RZD and creating competition conditions. Also, he argues against making public the list of operators who have contracts with OAO RZD, as this is not supported by the law. 

Monopolist’s Arguments 

Because the sides take different positions, long-awaited regulation is still only a project. The most disputed question, on whether monopolist and private companies should agree contracts of reciprocal liability, is also still unsolved. 

Moreover, after the regulation project was discussed and made ready for  approval, Alexander Zhukov, Deputy Chairman of the RF Government who performs also as Chairman of OAO RZD Board, received a request forwarded by Vladimir Yakunin, OAO RZD President, asking for further amendments developed by the monopolist to be considered.  

This, in effect, returned negotiations to square one, with the saga starting once again from the very beginning. 

According to Yevgeny Mikhailov, even if the discussed project is approved it won’t resolve any of the current problems. He believes this will only result in a formal application of the law “On railway transport’” in its current form. The question to answer is, how wise is it to approve a normative document just for the sake of its approval? Besides that, lawmakers plan to consider a new version of the Federal Law “On Railway Transport” which clarifies the definition of a railway rolling stock operator. That is why it is quite logical to ask whether to approve by-laws on operators’ activities after amendments are introduced into Federal Law. 

Summing Up 

Thus, exhausting discussions have not yet yielded any practical results. The arguments put forward by the various sides remain the same as before. The question as to whether the monopolist can successfully insist on maintaining its position or accepts a legally-binding balance between it and private companies is still open. 
 
by Nadezhda Vtorushina 
    [~DETAIL_TEXT] => 
Behind Different Barriers 

To discuss the above-mentioned issue, the current state of the Russian railway market should be briefly described. OAO RZD, having separated off the Ministry of Railways and Communications, currently performs as the only public carrier.   The company operates its own rail and locomotive park and is obliged to satisfy any transportation request claimed by any customer independently of how profitable this transportation might be for it. Prices for the carrier’s services are set by the state. Independent operators who have their own rail-car park (and, very occasionally, have their own locomotives for some routes) purchase locomotive haulage from OAO RZD. They have the freedom to set prices for rail-cars and their respective services for their clients. Most independent operators nowadays are private companies, independent of OAO RZD. 

Frequent complaints about a lack of legislative norms desired by operators have already become commonplace in the transport business. Market development has significantly overtaken development of the normative and legislative base in the field of transport. Thus, there is no proper system to regulate market players’ activities. Initially, there were plans to set the rules and mechanisms for the legal status of the new players but now the sector is mostly focused on accepting the current state and clarifying relations between the state carrier and private operator companies.  

Clause 2 of the Federal Law «On railway Transport in the Russian Federation» states that, «the basics of the legal regulation of railway operators» activities and their relations with carriers are defined by the RF Government». The terms to fulfil this clause in practice have been set several times including in the Restructuring Programme, developed and approved by the RF Government. Initial efforts to develop such a document were made by the Ministry for the Anti-monopoly Policy and Support of Entrepreneurship in 2002 (this institution was later restructured in the Federal Anti-monopoly Services).

Since the start of this document’s development, five years have passed. Operator companies have grown, acquired experience and some of them today are taking prominent positions in the market. That is the reason why they insist on an attitude of respect for them from OAO RZD – the only monopolist in transport sector. In 2002-2007, several versions of government regulations were made public, though not one was given official approval due to disagreements among concerned market participants about the fundamental principles of the document.  
It is likely, 2008 will be a turning point in the solving of  crucial problems. The Ministry of Transport and operators are eager to approve the document setting the rules of the game. However, the carrier is inclined to support its own interest for its own gain. To understand the essence of the problem and see the market’s prospects, which are crucially important for European cargo owners and transport companies, it would be wise to get acquainted with both sides’ arguments. 

Discussion will be heated 

It is impossible to start without giving the latest version of the regulations, issued late 2007. In particular, it gives definition to such terms as “operator activities” and regulates their relations with carriers. Thus, clause 3 of the project says: «Railway operator activity is work and services within contractual obligations with carriers in the field of cargo transportation with use of rolling stock and containers (giving rolling stock and containers to implement transportation according to requests on transportation, fulfillment of single operations for cargo transportation, providing technical conveniences of rolling stock)». Despite the fact that, according to some experts, this definition is rather open to dispute the very idea of setting this term legally is an enormously progressive step. The regulations also state that a carrier which dominates the market and operator’s relations must be regulated by an agreement that would consider many different conditions. These terms are to include reciprocal liabilities of carrier and operator, methods of rolling stock use, payment, etc. 

Particular attention is paid to the fact that the carrier is strictly forbidden from preventing conclusion of this agreement. Moreover, the list of operators that concluded contracts of such sort with the carrier should be made public.

This project also focuses on issues to do with rolling stock repair in depots controlled by OAO RZD. The document says that prices set by private companies are not to exceed the tariffs set by the corporation on the same types of repair work. However, some exceptions are possible. This occurs when the positive effect of setting different tariffs, including those of a socio-economic nature, exceeds negative consequences for the market in cargo rolling stock repair.

According to repeated remarks by Vladimir Prokofyev, President of the Association of Carriers and Operators and CEO of BaltTransService JSC, operators are ready to support the project because, although this version has lost some of initial ideas, it comprises basic regulations developed by the Association. 

According to Anatoly Golomolzin, Deputy Head of the Federal Tariff Service, the document’s aim is to regulate relations between operator and carrier. It will help responsible state structures to create non-discriminatory access to the market in rolling stock repair, in order to form competition, to be later expanded to the transportation market itself. 

This situation became crucial in regards to separating The First Cargo Company from OAO RZD. The newly launched company is a daughter company of the monopolist and received a portion of OAO RZD’s rolling stock park and operator status. Theoretically, the new economic body is to perform as an operator of railway rolling stock and needs legal rules to play on the market. This shows a growing need to set clear legal standards for operator activities. 

However, OAO RZD’s representatives take a specific position on this problem. In this respect, one point of particular interest is the opinion held by Yevgeny Mikhailov, who had been promoting his idea while working for the Ministry of Economic Development and Trade. First of all, he believes that, according to the Civil Code of the Russian Federation, there are only three models by which operators can transport cargo using their own rolling stock. Within the framework of all these models, operators have to cooperate with the cargo owner immediately.  Thus, operators who use their own rolling stock are affected by a current legal and normative base. 

Moreover, he feels negative about including the clause on rolling stock repair into the final version of the document. He believes that declaration about discriminatory or non-discriminatory access to the repair base cannot help solve the problem. In his opinion, the solution has to do with separating the industrial capacities of OAO RZD and creating competition conditions. Also, he argues against making public the list of operators who have contracts with OAO RZD, as this is not supported by the law. 

Monopolist’s Arguments 

Because the sides take different positions, long-awaited regulation is still only a project. The most disputed question, on whether monopolist and private companies should agree contracts of reciprocal liability, is also still unsolved. 

Moreover, after the regulation project was discussed and made ready for  approval, Alexander Zhukov, Deputy Chairman of the RF Government who performs also as Chairman of OAO RZD Board, received a request forwarded by Vladimir Yakunin, OAO RZD President, asking for further amendments developed by the monopolist to be considered.  

This, in effect, returned negotiations to square one, with the saga starting once again from the very beginning. 

According to Yevgeny Mikhailov, even if the discussed project is approved it won’t resolve any of the current problems. He believes this will only result in a formal application of the law “On railway transport’” in its current form. The question to answer is, how wise is it to approve a normative document just for the sake of its approval? Besides that, lawmakers plan to consider a new version of the Federal Law “On Railway Transport” which clarifies the definition of a railway rolling stock operator. That is why it is quite logical to ask whether to approve by-laws on operators’ activities after amendments are introduced into Federal Law. 

Summing Up 

Thus, exhausting discussions have not yet yielded any practical results. The arguments put forward by the various sides remain the same as before. The question as to whether the monopolist can successfully insist on maintaining its position or accepts a legally-binding balance between it and private companies is still open. 
 
by Nadezhda Vtorushina 
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Behind Different Barriers 

To discuss the above-mentioned issue, the current state of the Russian railway market should be briefly described. OAO RZD, having separated off the Ministry of Railways and Communications, currently performs as the only public carrier.   The company operates its own rail and locomotive park and is obliged to satisfy any transportation request claimed by any customer independently of how profitable this transportation might be for it. Prices for the carrier’s services are set by the state. Independent operators who have their own rail-car park (and, very occasionally, have their own locomotives for some routes) purchase locomotive haulage from OAO RZD. They have the freedom to set prices for rail-cars and their respective services for their clients. Most independent operators nowadays are private companies, independent of OAO RZD. 

Frequent complaints about a lack of legislative norms desired by operators have already become commonplace in the transport business. Market development has significantly overtaken development of the normative and legislative base in the field of transport. Thus, there is no proper system to regulate market players’ activities. Initially, there were plans to set the rules and mechanisms for the legal status of the new players but now the sector is mostly focused on accepting the current state and clarifying relations between the state carrier and private operator companies.  

Clause 2 of the Federal Law «On railway Transport in the Russian Federation» states that, «the basics of the legal regulation of railway operators» activities and their relations with carriers are defined by the RF Government». The terms to fulfil this clause in practice have been set several times including in the Restructuring Programme, developed and approved by the RF Government. Initial efforts to develop such a document were made by the Ministry for the Anti-monopoly Policy and Support of Entrepreneurship in 2002 (this institution was later restructured in the Federal Anti-monopoly Services).

Since the start of this document’s development, five years have passed. Operator companies have grown, acquired experience and some of them today are taking prominent positions in the market. That is the reason why they insist on an attitude of respect for them from OAO RZD – the only monopolist in transport sector. In 2002-2007, several versions of government regulations were made public, though not one was given official approval due to disagreements among concerned market participants about the fundamental principles of the document.  
It is likely, 2008 will be a turning point in the solving of  crucial problems. The Ministry of Transport and operators are eager to approve the document setting the rules of the game. However, the carrier is inclined to support its own interest for its own gain. To understand the essence of the problem and see the market’s prospects, which are crucially important for European cargo owners and transport companies, it would be wise to get acquainted with both sides’ arguments. 

Discussion will be heated 

It is impossible to start without giving the latest version of the regulations, issued late 2007. In particular, it gives definition to such terms as “operator activities” and regulates their relations with carriers. Thus, clause 3 of the project says: «Railway operator activity is work and services within contractual obligations with carriers in the field of cargo transportation with use of rolling stock and containers (giving rolling stock and containers to implement transportation according to requests on transportation, fulfillment of single operations for cargo transportation, providing technical conveniences of rolling stock)». Despite the fact that, according to some experts, this definition is rather open to dispute the very idea of setting this term legally is an enormously progressive step. The regulations also state that a carrier which dominates the market and operator’s relations must be regulated by an agreement that would consider many different conditions. These terms are to include reciprocal liabilities of carrier and operator, methods of rolling stock use, payment, etc. 

Particular attention is paid to the fact that the carrier is strictly forbidden from preventing conclusion of this agreement. Moreover, the list of operators that concluded contracts of such sort with the carrier should be made public.

This project also focuses on issues to do with rolling stock repair in depots controlled by OAO RZD. The document says that prices set by private companies are not to exceed the tariffs set by the corporation on the same types of repair work. However, some exceptions are possible. This occurs when the positive effect of setting different tariffs, including those of a socio-economic nature, exceeds negative consequences for the market in cargo rolling stock repair.

According to repeated remarks by Vladimir Prokofyev, President of the Association of Carriers and Operators and CEO of BaltTransService JSC, operators are ready to support the project because, although this version has lost some of initial ideas, it comprises basic regulations developed by the Association. 

According to Anatoly Golomolzin, Deputy Head of the Federal Tariff Service, the document’s aim is to regulate relations between operator and carrier. It will help responsible state structures to create non-discriminatory access to the market in rolling stock repair, in order to form competition, to be later expanded to the transportation market itself. 

This situation became crucial in regards to separating The First Cargo Company from OAO RZD. The newly launched company is a daughter company of the monopolist and received a portion of OAO RZD’s rolling stock park and operator status. Theoretically, the new economic body is to perform as an operator of railway rolling stock and needs legal rules to play on the market. This shows a growing need to set clear legal standards for operator activities. 

However, OAO RZD’s representatives take a specific position on this problem. In this respect, one point of particular interest is the opinion held by Yevgeny Mikhailov, who had been promoting his idea while working for the Ministry of Economic Development and Trade. First of all, he believes that, according to the Civil Code of the Russian Federation, there are only three models by which operators can transport cargo using their own rolling stock. Within the framework of all these models, operators have to cooperate with the cargo owner immediately.  Thus, operators who use their own rolling stock are affected by a current legal and normative base. 

Moreover, he feels negative about including the clause on rolling stock repair into the final version of the document. He believes that declaration about discriminatory or non-discriminatory access to the repair base cannot help solve the problem. In his opinion, the solution has to do with separating the industrial capacities of OAO RZD and creating competition conditions. Also, he argues against making public the list of operators who have contracts with OAO RZD, as this is not supported by the law. 

Monopolist’s Arguments 

Because the sides take different positions, long-awaited regulation is still only a project. The most disputed question, on whether monopolist and private companies should agree contracts of reciprocal liability, is also still unsolved. 

Moreover, after the regulation project was discussed and made ready for  approval, Alexander Zhukov, Deputy Chairman of the RF Government who performs also as Chairman of OAO RZD Board, received a request forwarded by Vladimir Yakunin, OAO RZD President, asking for further amendments developed by the monopolist to be considered.  

This, in effect, returned negotiations to square one, with the saga starting once again from the very beginning. 

According to Yevgeny Mikhailov, even if the discussed project is approved it won’t resolve any of the current problems. He believes this will only result in a formal application of the law “On railway transport’” in its current form. The question to answer is, how wise is it to approve a normative document just for the sake of its approval? Besides that, lawmakers plan to consider a new version of the Federal Law “On Railway Transport” which clarifies the definition of a railway rolling stock operator. That is why it is quite logical to ask whether to approve by-laws on operators’ activities after amendments are introduced into Federal Law. 

Summing Up 

Thus, exhausting discussions have not yet yielded any practical results. The arguments put forward by the various sides remain the same as before. The question as to whether the monopolist can successfully insist on maintaining its position or accepts a legally-binding balance between it and private companies is still open. 
 
by Nadezhda Vtorushina 
    [~DETAIL_TEXT] => 
Behind Different Barriers 

To discuss the above-mentioned issue, the current state of the Russian railway market should be briefly described. OAO RZD, having separated off the Ministry of Railways and Communications, currently performs as the only public carrier.   The company operates its own rail and locomotive park and is obliged to satisfy any transportation request claimed by any customer independently of how profitable this transportation might be for it. Prices for the carrier’s services are set by the state. Independent operators who have their own rail-car park (and, very occasionally, have their own locomotives for some routes) purchase locomotive haulage from OAO RZD. They have the freedom to set prices for rail-cars and their respective services for their clients. Most independent operators nowadays are private companies, independent of OAO RZD. 

Frequent complaints about a lack of legislative norms desired by operators have already become commonplace in the transport business. Market development has significantly overtaken development of the normative and legislative base in the field of transport. Thus, there is no proper system to regulate market players’ activities. Initially, there were plans to set the rules and mechanisms for the legal status of the new players but now the sector is mostly focused on accepting the current state and clarifying relations between the state carrier and private operator companies.  

Clause 2 of the Federal Law «On railway Transport in the Russian Federation» states that, «the basics of the legal regulation of railway operators» activities and their relations with carriers are defined by the RF Government». The terms to fulfil this clause in practice have been set several times including in the Restructuring Programme, developed and approved by the RF Government. Initial efforts to develop such a document were made by the Ministry for the Anti-monopoly Policy and Support of Entrepreneurship in 2002 (this institution was later restructured in the Federal Anti-monopoly Services).

Since the start of this document’s development, five years have passed. Operator companies have grown, acquired experience and some of them today are taking prominent positions in the market. That is the reason why they insist on an attitude of respect for them from OAO RZD – the only monopolist in transport sector. In 2002-2007, several versions of government regulations were made public, though not one was given official approval due to disagreements among concerned market participants about the fundamental principles of the document.  
It is likely, 2008 will be a turning point in the solving of  crucial problems. The Ministry of Transport and operators are eager to approve the document setting the rules of the game. However, the carrier is inclined to support its own interest for its own gain. To understand the essence of the problem and see the market’s prospects, which are crucially important for European cargo owners and transport companies, it would be wise to get acquainted with both sides’ arguments. 

Discussion will be heated 

It is impossible to start without giving the latest version of the regulations, issued late 2007. In particular, it gives definition to such terms as “operator activities” and regulates their relations with carriers. Thus, clause 3 of the project says: «Railway operator activity is work and services within contractual obligations with carriers in the field of cargo transportation with use of rolling stock and containers (giving rolling stock and containers to implement transportation according to requests on transportation, fulfillment of single operations for cargo transportation, providing technical conveniences of rolling stock)». Despite the fact that, according to some experts, this definition is rather open to dispute the very idea of setting this term legally is an enormously progressive step. The regulations also state that a carrier which dominates the market and operator’s relations must be regulated by an agreement that would consider many different conditions. These terms are to include reciprocal liabilities of carrier and operator, methods of rolling stock use, payment, etc. 

Particular attention is paid to the fact that the carrier is strictly forbidden from preventing conclusion of this agreement. Moreover, the list of operators that concluded contracts of such sort with the carrier should be made public.

This project also focuses on issues to do with rolling stock repair in depots controlled by OAO RZD. The document says that prices set by private companies are not to exceed the tariffs set by the corporation on the same types of repair work. However, some exceptions are possible. This occurs when the positive effect of setting different tariffs, including those of a socio-economic nature, exceeds negative consequences for the market in cargo rolling stock repair.

According to repeated remarks by Vladimir Prokofyev, President of the Association of Carriers and Operators and CEO of BaltTransService JSC, operators are ready to support the project because, although this version has lost some of initial ideas, it comprises basic regulations developed by the Association. 

According to Anatoly Golomolzin, Deputy Head of the Federal Tariff Service, the document’s aim is to regulate relations between operator and carrier. It will help responsible state structures to create non-discriminatory access to the market in rolling stock repair, in order to form competition, to be later expanded to the transportation market itself. 

This situation became crucial in regards to separating The First Cargo Company from OAO RZD. The newly launched company is a daughter company of the monopolist and received a portion of OAO RZD’s rolling stock park and operator status. Theoretically, the new economic body is to perform as an operator of railway rolling stock and needs legal rules to play on the market. This shows a growing need to set clear legal standards for operator activities. 

However, OAO RZD’s representatives take a specific position on this problem. In this respect, one point of particular interest is the opinion held by Yevgeny Mikhailov, who had been promoting his idea while working for the Ministry of Economic Development and Trade. First of all, he believes that, according to the Civil Code of the Russian Federation, there are only three models by which operators can transport cargo using their own rolling stock. Within the framework of all these models, operators have to cooperate with the cargo owner immediately.  Thus, operators who use their own rolling stock are affected by a current legal and normative base. 

Moreover, he feels negative about including the clause on rolling stock repair into the final version of the document. He believes that declaration about discriminatory or non-discriminatory access to the repair base cannot help solve the problem. In his opinion, the solution has to do with separating the industrial capacities of OAO RZD and creating competition conditions. Also, he argues against making public the list of operators who have contracts with OAO RZD, as this is not supported by the law. 

Monopolist’s Arguments 

Because the sides take different positions, long-awaited regulation is still only a project. The most disputed question, on whether monopolist and private companies should agree contracts of reciprocal liability, is also still unsolved. 

Moreover, after the regulation project was discussed and made ready for  approval, Alexander Zhukov, Deputy Chairman of the RF Government who performs also as Chairman of OAO RZD Board, received a request forwarded by Vladimir Yakunin, OAO RZD President, asking for further amendments developed by the monopolist to be considered.  

This, in effect, returned negotiations to square one, with the saga starting once again from the very beginning. 

According to Yevgeny Mikhailov, even if the discussed project is approved it won’t resolve any of the current problems. He believes this will only result in a formal application of the law “On railway transport’” in its current form. The question to answer is, how wise is it to approve a normative document just for the sake of its approval? Besides that, lawmakers plan to consider a new version of the Federal Law “On Railway Transport” which clarifies the definition of a railway rolling stock operator. That is why it is quite logical to ask whether to approve by-laws on operators’ activities after amendments are introduced into Federal Law. 

Summing Up 

Thus, exhausting discussions have not yet yielded any practical results. The arguments put forward by the various sides remain the same as before. The question as to whether the monopolist can successfully insist on maintaining its position or accepts a legally-binding balance between it and private companies is still open. 
 
by Nadezhda Vtorushina 
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– Mr Stepanov, what are the main advantages for cargo owners in using cargo-luggage in comparison with the other types of transportation, such as motor and air transport?

– First of all, I must explain: cargo-luggage transportation means a quick delivery of small lots of expensive cargoes. The capacity of a luggage wagon is 120 cubic metres. Carrying capacity is less than 26 tonnes. Luggage wagons are set in the stocks of passenger trains. For example, it takes cargo-luggage 36 hours to get from Moscow to Chelyabinsk (2,000 km), and 40 hours from Moscow to Murmansk (2,100 km). None of the transport modes (except air transport) can provide such delivery speed.

In addition to speed, comparatively low rates is a trump card of cargo-luggage transportation. Thus, the delivery price from Moscow to Chelyabinsk is RUR 4.5 for one kilo, and it’s RUR 4.6 to Murmansk.

Finally, cargo transportation in a luggage wagon makes for maximum cargo safety. A wagon has a hermetic body. There are 2-3 cargo compartments and a guard’s accommodation. Guards follow the cargo, heat the wagon and give the freight out at the stations. That’s why a lot of expensive cargoes – medicines, office equipment, costly furniture, glass, dishes – are being transported this way. 

Typical cargo-luggage means small lots of commercial cargoes, owned by people or small-scale businesses.

– What are the main trends for the industry’s development?

– I can say that the cargo-luggage market in Russia is already formed. And the quantity of services is being transformed step–by-step into quality services. Taking into account the increasing need for quick delivery of small dispatches over rather long distances, this kind of transportation is growing rapidly.

In spite of the fact that cargo-luggage takes only 1.5% of freight turnover, it is of great social importance. It is the way to deliver post, periodical press, costly and special cargoes – jewelry and money, for example.

– What about the different “forces” on the market?

– In the last 4-5 years private wagon owners – members of the Association of Rail Shippers “Union of Transport Companies” (UTC) – transported about 60-65% of cargo-luggage. FGUP (federal state unitary enterprise) “Russian Post” carried 15-20% of the volume, and the share of OAO RZD was 13-20%.

UTC was organised in 2003. It consolidates forwarding companies specialising in cargo-luggage transportation via their own and leased wagons. Organisations incorporated in UTC own more than 800 luggage wagons. For comparison, the park of luggage wagons owned by OAO RZD doesn’t exceed 500 units.

Some companies - founders of UTC that have hundreds of luggage wagons – have already grown into large logistics operators. They add auto transport to their rolling stock and use their motor park for local and long-distance transportation. Such logistics companies have pretty good results in terms of cargo delivery speed through door-to-door schemes.

– How is the international aspect of your activity developing?

– In 2008, we want to recommence the use of luggage wagons in the stocks of passenger trains Moscow – Helsinki, Moscow – Warsaw, Moscow-Tallinn. It will create an opportunity for express delivery of costly cargoes from Europe to Moscow. Particularly, at the moment we are negotiating the recommencing of postal-baggage traffic between Moscow and Lithuania (Riga, Tallinn, Vilnius) and also Moscow and Warsaw (as a part of the “Polonaise” firm train).

– Are there any innovations on railway rolling stock?

– Yes, we built our own wagon-repair depot. So we depend on OAO RZD no longer but carry out all the necessary kinds of wagon repair ourselves. One year ago, with the help of OAO Tver Wagon-Building Plant, we began to design a new railway vehicle for postage and luggage transportation. The new wagon will be comfortable and roomy. In addition to comfortable guard’s accommodation there will be a cargo compartment inside with enough room to store 26,000 tonnes of cargo (150 cubic meters). 

The cargo compartment itself will be divided into two parts: heated in winter and a “cold” section. The warm part will allow safe transport of cargoes that need special temperature conditions – medicines, flowers, etc.

The new type of a wagon will make cargo-luggage transportation cheaper and more comfortable.
 
by Ivan Stupachenko 
    [~DETAIL_TEXT] => 
– Mr Stepanov, what are the main advantages for cargo owners in using cargo-luggage in comparison with the other types of transportation, such as motor and air transport?

– First of all, I must explain: cargo-luggage transportation means a quick delivery of small lots of expensive cargoes. The capacity of a luggage wagon is 120 cubic metres. Carrying capacity is less than 26 tonnes. Luggage wagons are set in the stocks of passenger trains. For example, it takes cargo-luggage 36 hours to get from Moscow to Chelyabinsk (2,000 km), and 40 hours from Moscow to Murmansk (2,100 km). None of the transport modes (except air transport) can provide such delivery speed.

In addition to speed, comparatively low rates is a trump card of cargo-luggage transportation. Thus, the delivery price from Moscow to Chelyabinsk is RUR 4.5 for one kilo, and it’s RUR 4.6 to Murmansk.

Finally, cargo transportation in a luggage wagon makes for maximum cargo safety. A wagon has a hermetic body. There are 2-3 cargo compartments and a guard’s accommodation. Guards follow the cargo, heat the wagon and give the freight out at the stations. That’s why a lot of expensive cargoes – medicines, office equipment, costly furniture, glass, dishes – are being transported this way. 

Typical cargo-luggage means small lots of commercial cargoes, owned by people or small-scale businesses.

– What are the main trends for the industry’s development?

– I can say that the cargo-luggage market in Russia is already formed. And the quantity of services is being transformed step–by-step into quality services. Taking into account the increasing need for quick delivery of small dispatches over rather long distances, this kind of transportation is growing rapidly.

In spite of the fact that cargo-luggage takes only 1.5% of freight turnover, it is of great social importance. It is the way to deliver post, periodical press, costly and special cargoes – jewelry and money, for example.

– What about the different “forces” on the market?

– In the last 4-5 years private wagon owners – members of the Association of Rail Shippers “Union of Transport Companies” (UTC) – transported about 60-65% of cargo-luggage. FGUP (federal state unitary enterprise) “Russian Post” carried 15-20% of the volume, and the share of OAO RZD was 13-20%.

UTC was organised in 2003. It consolidates forwarding companies specialising in cargo-luggage transportation via their own and leased wagons. Organisations incorporated in UTC own more than 800 luggage wagons. For comparison, the park of luggage wagons owned by OAO RZD doesn’t exceed 500 units.

Some companies - founders of UTC that have hundreds of luggage wagons – have already grown into large logistics operators. They add auto transport to their rolling stock and use their motor park for local and long-distance transportation. Such logistics companies have pretty good results in terms of cargo delivery speed through door-to-door schemes.

– How is the international aspect of your activity developing?

– In 2008, we want to recommence the use of luggage wagons in the stocks of passenger trains Moscow – Helsinki, Moscow – Warsaw, Moscow-Tallinn. It will create an opportunity for express delivery of costly cargoes from Europe to Moscow. Particularly, at the moment we are negotiating the recommencing of postal-baggage traffic between Moscow and Lithuania (Riga, Tallinn, Vilnius) and also Moscow and Warsaw (as a part of the “Polonaise” firm train).

– Are there any innovations on railway rolling stock?

– Yes, we built our own wagon-repair depot. So we depend on OAO RZD no longer but carry out all the necessary kinds of wagon repair ourselves. One year ago, with the help of OAO Tver Wagon-Building Plant, we began to design a new railway vehicle for postage and luggage transportation. The new wagon will be comfortable and roomy. In addition to comfortable guard’s accommodation there will be a cargo compartment inside with enough room to store 26,000 tonnes of cargo (150 cubic meters). 

The cargo compartment itself will be divided into two parts: heated in winter and a “cold” section. The warm part will allow safe transport of cargoes that need special temperature conditions – medicines, flowers, etc.

The new type of a wagon will make cargo-luggage transportation cheaper and more comfortable.
 
by Ivan Stupachenko 
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– Mr Stepanov, what are the main advantages for cargo owners in using cargo-luggage in comparison with the other types of transportation, such as motor and air transport?

– First of all, I must explain: cargo-luggage transportation means a quick delivery of small lots of expensive cargoes. The capacity of a luggage wagon is 120 cubic metres. Carrying capacity is less than 26 tonnes. Luggage wagons are set in the stocks of passenger trains. For example, it takes cargo-luggage 36 hours to get from Moscow to Chelyabinsk (2,000 km), and 40 hours from Moscow to Murmansk (2,100 km). None of the transport modes (except air transport) can provide such delivery speed.

In addition to speed, comparatively low rates is a trump card of cargo-luggage transportation. Thus, the delivery price from Moscow to Chelyabinsk is RUR 4.5 for one kilo, and it’s RUR 4.6 to Murmansk.

Finally, cargo transportation in a luggage wagon makes for maximum cargo safety. A wagon has a hermetic body. There are 2-3 cargo compartments and a guard’s accommodation. Guards follow the cargo, heat the wagon and give the freight out at the stations. That’s why a lot of expensive cargoes – medicines, office equipment, costly furniture, glass, dishes – are being transported this way. 

Typical cargo-luggage means small lots of commercial cargoes, owned by people or small-scale businesses.

– What are the main trends for the industry’s development?

– I can say that the cargo-luggage market in Russia is already formed. And the quantity of services is being transformed step–by-step into quality services. Taking into account the increasing need for quick delivery of small dispatches over rather long distances, this kind of transportation is growing rapidly.

In spite of the fact that cargo-luggage takes only 1.5% of freight turnover, it is of great social importance. It is the way to deliver post, periodical press, costly and special cargoes – jewelry and money, for example.

– What about the different “forces” on the market?

– In the last 4-5 years private wagon owners – members of the Association of Rail Shippers “Union of Transport Companies” (UTC) – transported about 60-65% of cargo-luggage. FGUP (federal state unitary enterprise) “Russian Post” carried 15-20% of the volume, and the share of OAO RZD was 13-20%.

UTC was organised in 2003. It consolidates forwarding companies specialising in cargo-luggage transportation via their own and leased wagons. Organisations incorporated in UTC own more than 800 luggage wagons. For comparison, the park of luggage wagons owned by OAO RZD doesn’t exceed 500 units.

Some companies - founders of UTC that have hundreds of luggage wagons – have already grown into large logistics operators. They add auto transport to their rolling stock and use their motor park for local and long-distance transportation. Such logistics companies have pretty good results in terms of cargo delivery speed through door-to-door schemes.

– How is the international aspect of your activity developing?

– In 2008, we want to recommence the use of luggage wagons in the stocks of passenger trains Moscow – Helsinki, Moscow – Warsaw, Moscow-Tallinn. It will create an opportunity for express delivery of costly cargoes from Europe to Moscow. Particularly, at the moment we are negotiating the recommencing of postal-baggage traffic between Moscow and Lithuania (Riga, Tallinn, Vilnius) and also Moscow and Warsaw (as a part of the “Polonaise” firm train).

– Are there any innovations on railway rolling stock?

– Yes, we built our own wagon-repair depot. So we depend on OAO RZD no longer but carry out all the necessary kinds of wagon repair ourselves. One year ago, with the help of OAO Tver Wagon-Building Plant, we began to design a new railway vehicle for postage and luggage transportation. The new wagon will be comfortable and roomy. In addition to comfortable guard’s accommodation there will be a cargo compartment inside with enough room to store 26,000 tonnes of cargo (150 cubic meters). 

The cargo compartment itself will be divided into two parts: heated in winter and a “cold” section. The warm part will allow safe transport of cargoes that need special temperature conditions – medicines, flowers, etc.

The new type of a wagon will make cargo-luggage transportation cheaper and more comfortable.
 
by Ivan Stupachenko 
    [~DETAIL_TEXT] => 
– Mr Stepanov, what are the main advantages for cargo owners in using cargo-luggage in comparison with the other types of transportation, such as motor and air transport?

– First of all, I must explain: cargo-luggage transportation means a quick delivery of small lots of expensive cargoes. The capacity of a luggage wagon is 120 cubic metres. Carrying capacity is less than 26 tonnes. Luggage wagons are set in the stocks of passenger trains. For example, it takes cargo-luggage 36 hours to get from Moscow to Chelyabinsk (2,000 km), and 40 hours from Moscow to Murmansk (2,100 km). None of the transport modes (except air transport) can provide such delivery speed.

In addition to speed, comparatively low rates is a trump card of cargo-luggage transportation. Thus, the delivery price from Moscow to Chelyabinsk is RUR 4.5 for one kilo, and it’s RUR 4.6 to Murmansk.

Finally, cargo transportation in a luggage wagon makes for maximum cargo safety. A wagon has a hermetic body. There are 2-3 cargo compartments and a guard’s accommodation. Guards follow the cargo, heat the wagon and give the freight out at the stations. That’s why a lot of expensive cargoes – medicines, office equipment, costly furniture, glass, dishes – are being transported this way. 

Typical cargo-luggage means small lots of commercial cargoes, owned by people or small-scale businesses.

– What are the main trends for the industry’s development?

– I can say that the cargo-luggage market in Russia is already formed. And the quantity of services is being transformed step–by-step into quality services. Taking into account the increasing need for quick delivery of small dispatches over rather long distances, this kind of transportation is growing rapidly.

In spite of the fact that cargo-luggage takes only 1.5% of freight turnover, it is of great social importance. It is the way to deliver post, periodical press, costly and special cargoes – jewelry and money, for example.

– What about the different “forces” on the market?

– In the last 4-5 years private wagon owners – members of the Association of Rail Shippers “Union of Transport Companies” (UTC) – transported about 60-65% of cargo-luggage. FGUP (federal state unitary enterprise) “Russian Post” carried 15-20% of the volume, and the share of OAO RZD was 13-20%.

UTC was organised in 2003. It consolidates forwarding companies specialising in cargo-luggage transportation via their own and leased wagons. Organisations incorporated in UTC own more than 800 luggage wagons. For comparison, the park of luggage wagons owned by OAO RZD doesn’t exceed 500 units.

Some companies - founders of UTC that have hundreds of luggage wagons – have already grown into large logistics operators. They add auto transport to their rolling stock and use their motor park for local and long-distance transportation. Such logistics companies have pretty good results in terms of cargo delivery speed through door-to-door schemes.

– How is the international aspect of your activity developing?

– In 2008, we want to recommence the use of luggage wagons in the stocks of passenger trains Moscow – Helsinki, Moscow – Warsaw, Moscow-Tallinn. It will create an opportunity for express delivery of costly cargoes from Europe to Moscow. Particularly, at the moment we are negotiating the recommencing of postal-baggage traffic between Moscow and Lithuania (Riga, Tallinn, Vilnius) and also Moscow and Warsaw (as a part of the “Polonaise” firm train).

– Are there any innovations on railway rolling stock?

– Yes, we built our own wagon-repair depot. So we depend on OAO RZD no longer but carry out all the necessary kinds of wagon repair ourselves. One year ago, with the help of OAO Tver Wagon-Building Plant, we began to design a new railway vehicle for postage and luggage transportation. The new wagon will be comfortable and roomy. In addition to comfortable guard’s accommodation there will be a cargo compartment inside with enough room to store 26,000 tonnes of cargo (150 cubic meters). 

The cargo compartment itself will be divided into two parts: heated in winter and a “cold” section. The warm part will allow safe transport of cargoes that need special temperature conditions – medicines, flowers, etc.

The new type of a wagon will make cargo-luggage transportation cheaper and more comfortable.
 
by Ivan Stupachenko 
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“EVEN THE BEST SYSTEM MAY BE HAMPERED BY ITS NEIGHBOUR’S TROUBLE”

– Mr Nerdal, which opportunities does UIC provide to RF transport companies?

– UIC has traditionally been a technical-focused organisation working primarily on a European level. UIC is today the only railway organisation on a world level and the focus is global. This positive global development has been strongly influenced by UIC’s Deputy Chief Executive, Mr Vipin C. Sharma. UIC has more than 180 members from all continents. In addition to UIC’s traditional, and very important, activities, UIC works actively on capturing opportunities for the railways. We are for instance developing transportation concepts and route characteristics, O-D matrix studies (market studies), developing market potential through demonstration runs and facilitating business processes in general. Our perspective is global and we emphasise the important role the railways have in international logistics chains. We have a strong focus on international corridors, where the President of RZD, Mr Yakunin chairs UIC’s work on a global level. 

– In your opinion, which factors restrict development of railway freight transportation between Europe and Asia? Is it possible to reduce the influence of these factors? How can it be done? Will volumes of railway freight transportation fall or increase in the coming years? 

– International railway transportation is a complex issue and there are several challenges to fight. There are “hard” impediments such as different gauges, lack of infrastructure or outmoded material. It is important to notice that the national railways are on different development levels. Some are ahead of technological development while others have to improve. When doing international transport, involving many countries and operators, we have to consider the transportation from origin to destination as a logistical chain consisting of several links. 

Regardless of where the chain breaks, the cargo will not arrive as desired and the customer will not be satisfied. If one country has an excellent system, but is surrounded by countries where the system is not functioning, even the best system will be hampered by its neighbor’s trouble when doing international transport. International cooperation is therefore very important.

In addition to the “hard” impediments we have the “softer” impediments, which often cause even more trouble than, for instance, gauge variations. These impediments are not always easy to see and customers may be disappointed because the challenge was not expected. The railway system has no common transport law, which creates difficulties when crossing borders as well as additional paperwork. 

However, important initiatives and work have improved the situation, like a common SMGS/CIM note. We also find challenges when it comes to information systems – tracing, tracking and electronic documentation. Freight rates are important – they should of course be lower but they should also be transparent. It is not good for the reputation of the railways when international railway rates fluctuate too much or changed by more or less random political decisions. Market-oriented customers avoid situations like this, and freight will be like water – it will find the path of least resistance.

The railways and the railway organisations are fully aware of these kinds of challenges and professional railway people and experts outside the railway organisations are working on these issues. I believe railway transport will grow and the railways will capture a larger share of the market because the professional work carried out will bear fruit but also because the environmental situation requires a stronger focus on railways transport. The global environment will not be saved by political resolutions but by practical contributions dedicated to the huge investments required and more market-oriented operations. Political authorities should not consider the railways as a target in itself but as an important means to support customer demand.

– Russia plans to extend the railway with the Russian width of gauge 1520mm to Europe. Does Europe need the Russian type of railway? Will that simplify the operations of European freight forwarders? 

– The conceptual idea is good because the ambition is to reduce the number of “discontinue” points in the logistical chain. The reloading operation between different gauges is costly, money-wise as well as in terms of time and other aspects. When we know that speed is one of the railway’s main advantages, a common gauge is of course a benefit. However, infrastructure investments are costly and only a concrete economic analysis will tell. We have several gauges around the world and in many regions we find the same thoughts and visions, like the idea of expanding the 1435mm gauge through Kazakhstan, linking China to the west.

A common gauge will of course to some extent simplify forwarding operations but I do not think this is the most important issue. It will simplify the technical reloading operation dramatically while the impact on the pure forwarding business, which is mainly paperwork, will be more modest. 

POSSIBILITIES AND OBSTACLES OF TRANSIT VIA RUSSIA

– Most European forwarders prefer to transport freight from Asia to Europe by sea. Why don’t they prefer Russian and CIS railway transfers? What must be done to raise the attractiveness of the RF transit routes, e.g. Transsib? 

– Deep-sea ocean transport has many advantages compared with railway transport. The obvious one is lower rates because large vessels have huge economies of scale when they are operating on full capacity. The largest vessels to day have a space capacity of 14-15,000 TEUs while their real capacity (limited by deadweight restrictions) is perhaps 11-12,000 TEUs. This is 75 to100 times more than a TSR train, which is one of the  largest-capacity trains in Europe/Asia. Sea transport does also have a common legal system and the ocean carriers have always been in a competitive market and they operate in a very professional manner when it comes to customer support. However, ships cannot operate onshore and, for many intermodal routes, the railways will be a natural partner for the shipping lines. I don’t believe that port-to-port services by rail between Asian ports and European ports can compete with the shipping lines when it comes to rates – definitely not today but perhaps in the future.  They can compete when it comes to transit time but the through time depends on effective railway operation. To many stops, border crossing challenges, different legal systems, etc will also reduce this competitive advantage. I strongly believe that the railways should first develop their Europe-Asia concepts in other areas: on inland-inland and inland-port routes, in regions where the competition from ocean carriers is more modest because of long sailing distance or in regions where the deep-sea carriers have to rely on feeder transport to reach the origin or destination. The TSR should be one of these priority routes. I know that the Russian railways are working very professionally to improve the services as well as organisations like CCTT. However their work and success not only depends on themselves but also on infrastructure investments and legal and administrative systems which can be  seldom directly affected by the railway business.

– What are the most promising Russian–UIC projects? 

– Russia is a promising country and there will always be several ongoing projects between Russia and other partners. RZD is one of the most important members of UIC and we have also signed a memorandum of cooperation with CCTT. The size of Russia places it in the front seat when it comes to almost all transport corridors between East and West. This is, of course, also a responsibility for Russia. 

From the UIC side, we have several projects in the pipeline and I would like to mention two of them. The ‘paperless’ project is a project involving RZD, UIC and the Japanese trading house Mitsui. In this project we are looking at opportunities for electronic paperless routines for some of the documents required for international transportation. We have tried to make this project as easy as possible by looking at a specific customer’s needs (Mitsui) and only involving two countries – Japan and Russia. If this project is successful, we will try to implement the concept on other routes, for instance to ports connected to TSR and the international market, like Murmansk.

This brings us to what is, in my opinion, one of the most promising long-term projects involving Russian ports. The N.E.W. concept, which is an intermodal transport corridor between Asia/Central Asia and North America, has now developed through the port of Murmansk. Russia does not have so many western ports and it will need them all and should support them all. Murmansk is Russia’s only real ice-free port located by the Atlantic (Barents Sea). There are tremendous opportunities in the Murmansk region and the development phase of many of the oil and gas projects will also create a regional demand for container transport carrying supplies and equipment. This demand can be supported by rail as well as sea transport. Murmansk is also favorably located on an East–West international trade lane. A traditional square map will not show these benefits when it comes to, for instance, distance but when we remember that the distance around the globe is shorter on the “top” and the “bottom”, compared with global transport around the centre of the globe, we will find interesting and important opportunities for Murmansk. The N.E.W. concept has gained international acclaim and, during the last few years, several organizations have tried to develop transport corridors based on this concept.  The idea was to create an intermodal (sea and rail) transport concept between Asia and North America through the port of Narvik, as well as to improve transport solutions for Northern parts of Finland, Sweden and Norway. 

The International Union of Railways (UIC) has been the “main engine” during the project period and, in 2005, the consultancy firm Transportutvikling AS completed their project work by establishing the limited company, “N.E.W. Corridor”. This company should continue the work and commercialise the conceptual ideas.  But since 2005, the plan of using the port of Narvik has not been followed up, the network built -up through the project period has disappeared and there is no strong commitment left. The situation today is that the N.E.W.solution will be developed through ports other than Narvik. 

The obvious choice for a long-term development of the future N.E.W. Corridor is by using the port of Murmansk in North West Russia. Murmansk has, like other ports, challenges but also obvious benefits compared with other ports, related to the development of the N.E.W. Corridor.

There are, of course, several challenges and some of them cannot usually be handled in a short time. However, if Russia wants to, I’m sure it can be in a position that proves a success where others are struggling. We need visions to improve the railway business, even visions that some may consider unrealistic. Robert Kennedy could have been a good ambassador for the Murmansk solution when, in 1968, he said: “Some people see things the way they are, and ask, why? I see things the way they could be, and ask, why not?”
So, why not Murmansk?
 
Biography
Stig Nerdal: UIC Project Director. Senior adviser Transportutvikling AS (operational consultancy and advisory company working within the primary sectors of transport and logistics, Norway). 
Education: Master of Science and Business (MSc) and supplementary education within political science
Work experience: Financial consultant Department of Transport Nordland County, manager/consultant Bedriftskompetanse AS Mo, financial manager Ofotens Dampskibsselskab AS, financial director OVDS ASA, deputy C.E.O. OVDS ASA
 
Our reference 
UIC (International Union of Railways)
Worldwide international organization of the railway sector.
180 members across all five continents. Most members are railway companies and infrastructure managers. UIC’s headquarters are located in Paris with regional organisations in Africa, the Middle East, Asia, Latin America and North America.
79 active members (including railways in Europe, Russia, the Middle East, North Africa, South Africa, India, Pakistan, China, Japan, Korea, Kazakhstan and companies operating worldwide such as Veolia Transport).
71 associate members (including railways in Asia, Africa, America and Australia),
30 affiliate members (related or ancillary rail transport businesses or services).
UIC members are integrated railway companies, infrastructure managers, Railway or combined transport operators, rolling stock and traction leasing companies and service providers (restaurant services, sleeping cars, public transport, maritime transport).

Activities:
• Developing intercontinental freight corridors (for instance, between Europe and Asia, e.g. the N.E.W. rail / sea corridor linking North America, Northern Europe and the Far East but also between China and India, between India and Russia);
• Experimenting with China-Europe and Europe-China rail corridors (development phase);
• Joint research projects bringing together the world’s leading railway research institutes and centres;
• International Railway Research Board (IRRB) bringing key research bodies to a unique common platform;
• International Railway Strategic Management Institute (IRSMI) involving leading business schools to develop future railway managers;
• The investment forum (bringing together railways, international finance institutions and private investors) to accelerate investment in the rail sector;
• Setting up UIC regional cooperation units (the regional assemblies for Asia, Europe, Africa, the Middle East and America) for a simpler management of projects addressing the specific requirements of members from the same region.
• Supporting Clean Development Mechanisms (CDM) in order to help our members find new resources;
• developing comparative tools to show the railways’ environmental assets;
• preparing a global communication campaign for the promotion of rail transport on a global level. 
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“EVEN THE BEST SYSTEM MAY BE HAMPERED BY ITS NEIGHBOUR’S TROUBLE”

– Mr Nerdal, which opportunities does UIC provide to RF transport companies?

– UIC has traditionally been a technical-focused organisation working primarily on a European level. UIC is today the only railway organisation on a world level and the focus is global. This positive global development has been strongly influenced by UIC’s Deputy Chief Executive, Mr Vipin C. Sharma. UIC has more than 180 members from all continents. In addition to UIC’s traditional, and very important, activities, UIC works actively on capturing opportunities for the railways. We are for instance developing transportation concepts and route characteristics, O-D matrix studies (market studies), developing market potential through demonstration runs and facilitating business processes in general. Our perspective is global and we emphasise the important role the railways have in international logistics chains. We have a strong focus on international corridors, where the President of RZD, Mr Yakunin chairs UIC’s work on a global level. 

– In your opinion, which factors restrict development of railway freight transportation between Europe and Asia? Is it possible to reduce the influence of these factors? How can it be done? Will volumes of railway freight transportation fall or increase in the coming years? 

– International railway transportation is a complex issue and there are several challenges to fight. There are “hard” impediments such as different gauges, lack of infrastructure or outmoded material. It is important to notice that the national railways are on different development levels. Some are ahead of technological development while others have to improve. When doing international transport, involving many countries and operators, we have to consider the transportation from origin to destination as a logistical chain consisting of several links. 

Regardless of where the chain breaks, the cargo will not arrive as desired and the customer will not be satisfied. If one country has an excellent system, but is surrounded by countries where the system is not functioning, even the best system will be hampered by its neighbor’s trouble when doing international transport. International cooperation is therefore very important.

In addition to the “hard” impediments we have the “softer” impediments, which often cause even more trouble than, for instance, gauge variations. These impediments are not always easy to see and customers may be disappointed because the challenge was not expected. The railway system has no common transport law, which creates difficulties when crossing borders as well as additional paperwork. 

However, important initiatives and work have improved the situation, like a common SMGS/CIM note. We also find challenges when it comes to information systems – tracing, tracking and electronic documentation. Freight rates are important – they should of course be lower but they should also be transparent. It is not good for the reputation of the railways when international railway rates fluctuate too much or changed by more or less random political decisions. Market-oriented customers avoid situations like this, and freight will be like water – it will find the path of least resistance.

The railways and the railway organisations are fully aware of these kinds of challenges and professional railway people and experts outside the railway organisations are working on these issues. I believe railway transport will grow and the railways will capture a larger share of the market because the professional work carried out will bear fruit but also because the environmental situation requires a stronger focus on railways transport. The global environment will not be saved by political resolutions but by practical contributions dedicated to the huge investments required and more market-oriented operations. Political authorities should not consider the railways as a target in itself but as an important means to support customer demand.

– Russia plans to extend the railway with the Russian width of gauge 1520mm to Europe. Does Europe need the Russian type of railway? Will that simplify the operations of European freight forwarders? 

– The conceptual idea is good because the ambition is to reduce the number of “discontinue” points in the logistical chain. The reloading operation between different gauges is costly, money-wise as well as in terms of time and other aspects. When we know that speed is one of the railway’s main advantages, a common gauge is of course a benefit. However, infrastructure investments are costly and only a concrete economic analysis will tell. We have several gauges around the world and in many regions we find the same thoughts and visions, like the idea of expanding the 1435mm gauge through Kazakhstan, linking China to the west.

A common gauge will of course to some extent simplify forwarding operations but I do not think this is the most important issue. It will simplify the technical reloading operation dramatically while the impact on the pure forwarding business, which is mainly paperwork, will be more modest. 

POSSIBILITIES AND OBSTACLES OF TRANSIT VIA RUSSIA

– Most European forwarders prefer to transport freight from Asia to Europe by sea. Why don’t they prefer Russian and CIS railway transfers? What must be done to raise the attractiveness of the RF transit routes, e.g. Transsib? 

– Deep-sea ocean transport has many advantages compared with railway transport. The obvious one is lower rates because large vessels have huge economies of scale when they are operating on full capacity. The largest vessels to day have a space capacity of 14-15,000 TEUs while their real capacity (limited by deadweight restrictions) is perhaps 11-12,000 TEUs. This is 75 to100 times more than a TSR train, which is one of the  largest-capacity trains in Europe/Asia. Sea transport does also have a common legal system and the ocean carriers have always been in a competitive market and they operate in a very professional manner when it comes to customer support. However, ships cannot operate onshore and, for many intermodal routes, the railways will be a natural partner for the shipping lines. I don’t believe that port-to-port services by rail between Asian ports and European ports can compete with the shipping lines when it comes to rates – definitely not today but perhaps in the future.  They can compete when it comes to transit time but the through time depends on effective railway operation. To many stops, border crossing challenges, different legal systems, etc will also reduce this competitive advantage. I strongly believe that the railways should first develop their Europe-Asia concepts in other areas: on inland-inland and inland-port routes, in regions where the competition from ocean carriers is more modest because of long sailing distance or in regions where the deep-sea carriers have to rely on feeder transport to reach the origin or destination. The TSR should be one of these priority routes. I know that the Russian railways are working very professionally to improve the services as well as organisations like CCTT. However their work and success not only depends on themselves but also on infrastructure investments and legal and administrative systems which can be  seldom directly affected by the railway business.

– What are the most promising Russian–UIC projects? 

– Russia is a promising country and there will always be several ongoing projects between Russia and other partners. RZD is one of the most important members of UIC and we have also signed a memorandum of cooperation with CCTT. The size of Russia places it in the front seat when it comes to almost all transport corridors between East and West. This is, of course, also a responsibility for Russia. 

From the UIC side, we have several projects in the pipeline and I would like to mention two of them. The ‘paperless’ project is a project involving RZD, UIC and the Japanese trading house Mitsui. In this project we are looking at opportunities for electronic paperless routines for some of the documents required for international transportation. We have tried to make this project as easy as possible by looking at a specific customer’s needs (Mitsui) and only involving two countries – Japan and Russia. If this project is successful, we will try to implement the concept on other routes, for instance to ports connected to TSR and the international market, like Murmansk.

This brings us to what is, in my opinion, one of the most promising long-term projects involving Russian ports. The N.E.W. concept, which is an intermodal transport corridor between Asia/Central Asia and North America, has now developed through the port of Murmansk. Russia does not have so many western ports and it will need them all and should support them all. Murmansk is Russia’s only real ice-free port located by the Atlantic (Barents Sea). There are tremendous opportunities in the Murmansk region and the development phase of many of the oil and gas projects will also create a regional demand for container transport carrying supplies and equipment. This demand can be supported by rail as well as sea transport. Murmansk is also favorably located on an East–West international trade lane. A traditional square map will not show these benefits when it comes to, for instance, distance but when we remember that the distance around the globe is shorter on the “top” and the “bottom”, compared with global transport around the centre of the globe, we will find interesting and important opportunities for Murmansk. The N.E.W. concept has gained international acclaim and, during the last few years, several organizations have tried to develop transport corridors based on this concept.  The idea was to create an intermodal (sea and rail) transport concept between Asia and North America through the port of Narvik, as well as to improve transport solutions for Northern parts of Finland, Sweden and Norway. 

The International Union of Railways (UIC) has been the “main engine” during the project period and, in 2005, the consultancy firm Transportutvikling AS completed their project work by establishing the limited company, “N.E.W. Corridor”. This company should continue the work and commercialise the conceptual ideas.  But since 2005, the plan of using the port of Narvik has not been followed up, the network built -up through the project period has disappeared and there is no strong commitment left. The situation today is that the N.E.W.solution will be developed through ports other than Narvik. 

The obvious choice for a long-term development of the future N.E.W. Corridor is by using the port of Murmansk in North West Russia. Murmansk has, like other ports, challenges but also obvious benefits compared with other ports, related to the development of the N.E.W. Corridor.

There are, of course, several challenges and some of them cannot usually be handled in a short time. However, if Russia wants to, I’m sure it can be in a position that proves a success where others are struggling. We need visions to improve the railway business, even visions that some may consider unrealistic. Robert Kennedy could have been a good ambassador for the Murmansk solution when, in 1968, he said: “Some people see things the way they are, and ask, why? I see things the way they could be, and ask, why not?”
So, why not Murmansk?
 
Biography
Stig Nerdal: UIC Project Director. Senior adviser Transportutvikling AS (operational consultancy and advisory company working within the primary sectors of transport and logistics, Norway). 
Education: Master of Science and Business (MSc) and supplementary education within political science
Work experience: Financial consultant Department of Transport Nordland County, manager/consultant Bedriftskompetanse AS Mo, financial manager Ofotens Dampskibsselskab AS, financial director OVDS ASA, deputy C.E.O. OVDS ASA
 
Our reference 
UIC (International Union of Railways)
Worldwide international organization of the railway sector.
180 members across all five continents. Most members are railway companies and infrastructure managers. UIC’s headquarters are located in Paris with regional organisations in Africa, the Middle East, Asia, Latin America and North America.
79 active members (including railways in Europe, Russia, the Middle East, North Africa, South Africa, India, Pakistan, China, Japan, Korea, Kazakhstan and companies operating worldwide such as Veolia Transport).
71 associate members (including railways in Asia, Africa, America and Australia),
30 affiliate members (related or ancillary rail transport businesses or services).
UIC members are integrated railway companies, infrastructure managers, Railway or combined transport operators, rolling stock and traction leasing companies and service providers (restaurant services, sleeping cars, public transport, maritime transport).

Activities:
• Developing intercontinental freight corridors (for instance, between Europe and Asia, e.g. the N.E.W. rail / sea corridor linking North America, Northern Europe and the Far East but also between China and India, between India and Russia);
• Experimenting with China-Europe and Europe-China rail corridors (development phase);
• Joint research projects bringing together the world’s leading railway research institutes and centres;
• International Railway Research Board (IRRB) bringing key research bodies to a unique common platform;
• International Railway Strategic Management Institute (IRSMI) involving leading business schools to develop future railway managers;
• The investment forum (bringing together railways, international finance institutions and private investors) to accelerate investment in the rail sector;
• Setting up UIC regional cooperation units (the regional assemblies for Asia, Europe, Africa, the Middle East and America) for a simpler management of projects addressing the specific requirements of members from the same region.
• Supporting Clean Development Mechanisms (CDM) in order to help our members find new resources;
• developing comparative tools to show the railways’ environmental assets;
• preparing a global communication campaign for the promotion of rail transport on a global level. 
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“EVEN THE BEST SYSTEM MAY BE HAMPERED BY ITS NEIGHBOUR’S TROUBLE”

– Mr Nerdal, which opportunities does UIC provide to RF transport companies?

– UIC has traditionally been a technical-focused organisation working primarily on a European level. UIC is today the only railway organisation on a world level and the focus is global. This positive global development has been strongly influenced by UIC’s Deputy Chief Executive, Mr Vipin C. Sharma. UIC has more than 180 members from all continents. In addition to UIC’s traditional, and very important, activities, UIC works actively on capturing opportunities for the railways. We are for instance developing transportation concepts and route characteristics, O-D matrix studies (market studies), developing market potential through demonstration runs and facilitating business processes in general. Our perspective is global and we emphasise the important role the railways have in international logistics chains. We have a strong focus on international corridors, where the President of RZD, Mr Yakunin chairs UIC’s work on a global level. 

– In your opinion, which factors restrict development of railway freight transportation between Europe and Asia? Is it possible to reduce the influence of these factors? How can it be done? Will volumes of railway freight transportation fall or increase in the coming years? 

– International railway transportation is a complex issue and there are several challenges to fight. There are “hard” impediments such as different gauges, lack of infrastructure or outmoded material. It is important to notice that the national railways are on different development levels. Some are ahead of technological development while others have to improve. When doing international transport, involving many countries and operators, we have to consider the transportation from origin to destination as a logistical chain consisting of several links. 

Regardless of where the chain breaks, the cargo will not arrive as desired and the customer will not be satisfied. If one country has an excellent system, but is surrounded by countries where the system is not functioning, even the best system will be hampered by its neighbor’s trouble when doing international transport. International cooperation is therefore very important.

In addition to the “hard” impediments we have the “softer” impediments, which often cause even more trouble than, for instance, gauge variations. These impediments are not always easy to see and customers may be disappointed because the challenge was not expected. The railway system has no common transport law, which creates difficulties when crossing borders as well as additional paperwork. 

However, important initiatives and work have improved the situation, like a common SMGS/CIM note. We also find challenges when it comes to information systems – tracing, tracking and electronic documentation. Freight rates are important – they should of course be lower but they should also be transparent. It is not good for the reputation of the railways when international railway rates fluctuate too much or changed by more or less random political decisions. Market-oriented customers avoid situations like this, and freight will be like water – it will find the path of least resistance.

The railways and the railway organisations are fully aware of these kinds of challenges and professional railway people and experts outside the railway organisations are working on these issues. I believe railway transport will grow and the railways will capture a larger share of the market because the professional work carried out will bear fruit but also because the environmental situation requires a stronger focus on railways transport. The global environment will not be saved by political resolutions but by practical contributions dedicated to the huge investments required and more market-oriented operations. Political authorities should not consider the railways as a target in itself but as an important means to support customer demand.

– Russia plans to extend the railway with the Russian width of gauge 1520mm to Europe. Does Europe need the Russian type of railway? Will that simplify the operations of European freight forwarders? 

– The conceptual idea is good because the ambition is to reduce the number of “discontinue” points in the logistical chain. The reloading operation between different gauges is costly, money-wise as well as in terms of time and other aspects. When we know that speed is one of the railway’s main advantages, a common gauge is of course a benefit. However, infrastructure investments are costly and only a concrete economic analysis will tell. We have several gauges around the world and in many regions we find the same thoughts and visions, like the idea of expanding the 1435mm gauge through Kazakhstan, linking China to the west.

A common gauge will of course to some extent simplify forwarding operations but I do not think this is the most important issue. It will simplify the technical reloading operation dramatically while the impact on the pure forwarding business, which is mainly paperwork, will be more modest. 

POSSIBILITIES AND OBSTACLES OF TRANSIT VIA RUSSIA

– Most European forwarders prefer to transport freight from Asia to Europe by sea. Why don’t they prefer Russian and CIS railway transfers? What must be done to raise the attractiveness of the RF transit routes, e.g. Transsib? 

– Deep-sea ocean transport has many advantages compared with railway transport. The obvious one is lower rates because large vessels have huge economies of scale when they are operating on full capacity. The largest vessels to day have a space capacity of 14-15,000 TEUs while their real capacity (limited by deadweight restrictions) is perhaps 11-12,000 TEUs. This is 75 to100 times more than a TSR train, which is one of the  largest-capacity trains in Europe/Asia. Sea transport does also have a common legal system and the ocean carriers have always been in a competitive market and they operate in a very professional manner when it comes to customer support. However, ships cannot operate onshore and, for many intermodal routes, the railways will be a natural partner for the shipping lines. I don’t believe that port-to-port services by rail between Asian ports and European ports can compete with the shipping lines when it comes to rates – definitely not today but perhaps in the future.  They can compete when it comes to transit time but the through time depends on effective railway operation. To many stops, border crossing challenges, different legal systems, etc will also reduce this competitive advantage. I strongly believe that the railways should first develop their Europe-Asia concepts in other areas: on inland-inland and inland-port routes, in regions where the competition from ocean carriers is more modest because of long sailing distance or in regions where the deep-sea carriers have to rely on feeder transport to reach the origin or destination. The TSR should be one of these priority routes. I know that the Russian railways are working very professionally to improve the services as well as organisations like CCTT. However their work and success not only depends on themselves but also on infrastructure investments and legal and administrative systems which can be  seldom directly affected by the railway business.

– What are the most promising Russian–UIC projects? 

– Russia is a promising country and there will always be several ongoing projects between Russia and other partners. RZD is one of the most important members of UIC and we have also signed a memorandum of cooperation with CCTT. The size of Russia places it in the front seat when it comes to almost all transport corridors between East and West. This is, of course, also a responsibility for Russia. 

From the UIC side, we have several projects in the pipeline and I would like to mention two of them. The ‘paperless’ project is a project involving RZD, UIC and the Japanese trading house Mitsui. In this project we are looking at opportunities for electronic paperless routines for some of the documents required for international transportation. We have tried to make this project as easy as possible by looking at a specific customer’s needs (Mitsui) and only involving two countries – Japan and Russia. If this project is successful, we will try to implement the concept on other routes, for instance to ports connected to TSR and the international market, like Murmansk.

This brings us to what is, in my opinion, one of the most promising long-term projects involving Russian ports. The N.E.W. concept, which is an intermodal transport corridor between Asia/Central Asia and North America, has now developed through the port of Murmansk. Russia does not have so many western ports and it will need them all and should support them all. Murmansk is Russia’s only real ice-free port located by the Atlantic (Barents Sea). There are tremendous opportunities in the Murmansk region and the development phase of many of the oil and gas projects will also create a regional demand for container transport carrying supplies and equipment. This demand can be supported by rail as well as sea transport. Murmansk is also favorably located on an East–West international trade lane. A traditional square map will not show these benefits when it comes to, for instance, distance but when we remember that the distance around the globe is shorter on the “top” and the “bottom”, compared with global transport around the centre of the globe, we will find interesting and important opportunities for Murmansk. The N.E.W. concept has gained international acclaim and, during the last few years, several organizations have tried to develop transport corridors based on this concept.  The idea was to create an intermodal (sea and rail) transport concept between Asia and North America through the port of Narvik, as well as to improve transport solutions for Northern parts of Finland, Sweden and Norway. 

The International Union of Railways (UIC) has been the “main engine” during the project period and, in 2005, the consultancy firm Transportutvikling AS completed their project work by establishing the limited company, “N.E.W. Corridor”. This company should continue the work and commercialise the conceptual ideas.  But since 2005, the plan of using the port of Narvik has not been followed up, the network built -up through the project period has disappeared and there is no strong commitment left. The situation today is that the N.E.W.solution will be developed through ports other than Narvik. 

The obvious choice for a long-term development of the future N.E.W. Corridor is by using the port of Murmansk in North West Russia. Murmansk has, like other ports, challenges but also obvious benefits compared with other ports, related to the development of the N.E.W. Corridor.

There are, of course, several challenges and some of them cannot usually be handled in a short time. However, if Russia wants to, I’m sure it can be in a position that proves a success where others are struggling. We need visions to improve the railway business, even visions that some may consider unrealistic. Robert Kennedy could have been a good ambassador for the Murmansk solution when, in 1968, he said: “Some people see things the way they are, and ask, why? I see things the way they could be, and ask, why not?”
So, why not Murmansk?
 
Biography
Stig Nerdal: UIC Project Director. Senior adviser Transportutvikling AS (operational consultancy and advisory company working within the primary sectors of transport and logistics, Norway). 
Education: Master of Science and Business (MSc) and supplementary education within political science
Work experience: Financial consultant Department of Transport Nordland County, manager/consultant Bedriftskompetanse AS Mo, financial manager Ofotens Dampskibsselskab AS, financial director OVDS ASA, deputy C.E.O. OVDS ASA
 
Our reference 
UIC (International Union of Railways)
Worldwide international organization of the railway sector.
180 members across all five continents. Most members are railway companies and infrastructure managers. UIC’s headquarters are located in Paris with regional organisations in Africa, the Middle East, Asia, Latin America and North America.
79 active members (including railways in Europe, Russia, the Middle East, North Africa, South Africa, India, Pakistan, China, Japan, Korea, Kazakhstan and companies operating worldwide such as Veolia Transport).
71 associate members (including railways in Asia, Africa, America and Australia),
30 affiliate members (related or ancillary rail transport businesses or services).
UIC members are integrated railway companies, infrastructure managers, Railway or combined transport operators, rolling stock and traction leasing companies and service providers (restaurant services, sleeping cars, public transport, maritime transport).

Activities:
• Developing intercontinental freight corridors (for instance, between Europe and Asia, e.g. the N.E.W. rail / sea corridor linking North America, Northern Europe and the Far East but also between China and India, between India and Russia);
• Experimenting with China-Europe and Europe-China rail corridors (development phase);
• Joint research projects bringing together the world’s leading railway research institutes and centres;
• International Railway Research Board (IRRB) bringing key research bodies to a unique common platform;
• International Railway Strategic Management Institute (IRSMI) involving leading business schools to develop future railway managers;
• The investment forum (bringing together railways, international finance institutions and private investors) to accelerate investment in the rail sector;
• Setting up UIC regional cooperation units (the regional assemblies for Asia, Europe, Africa, the Middle East and America) for a simpler management of projects addressing the specific requirements of members from the same region.
• Supporting Clean Development Mechanisms (CDM) in order to help our members find new resources;
• developing comparative tools to show the railways’ environmental assets;
• preparing a global communication campaign for the promotion of rail transport on a global level. 
    [~DETAIL_TEXT] => 
“EVEN THE BEST SYSTEM MAY BE HAMPERED BY ITS NEIGHBOUR’S TROUBLE”

– Mr Nerdal, which opportunities does UIC provide to RF transport companies?

– UIC has traditionally been a technical-focused organisation working primarily on a European level. UIC is today the only railway organisation on a world level and the focus is global. This positive global development has been strongly influenced by UIC’s Deputy Chief Executive, Mr Vipin C. Sharma. UIC has more than 180 members from all continents. In addition to UIC’s traditional, and very important, activities, UIC works actively on capturing opportunities for the railways. We are for instance developing transportation concepts and route characteristics, O-D matrix studies (market studies), developing market potential through demonstration runs and facilitating business processes in general. Our perspective is global and we emphasise the important role the railways have in international logistics chains. We have a strong focus on international corridors, where the President of RZD, Mr Yakunin chairs UIC’s work on a global level. 

– In your opinion, which factors restrict development of railway freight transportation between Europe and Asia? Is it possible to reduce the influence of these factors? How can it be done? Will volumes of railway freight transportation fall or increase in the coming years? 

– International railway transportation is a complex issue and there are several challenges to fight. There are “hard” impediments such as different gauges, lack of infrastructure or outmoded material. It is important to notice that the national railways are on different development levels. Some are ahead of technological development while others have to improve. When doing international transport, involving many countries and operators, we have to consider the transportation from origin to destination as a logistical chain consisting of several links. 

Regardless of where the chain breaks, the cargo will not arrive as desired and the customer will not be satisfied. If one country has an excellent system, but is surrounded by countries where the system is not functioning, even the best system will be hampered by its neighbor’s trouble when doing international transport. International cooperation is therefore very important.

In addition to the “hard” impediments we have the “softer” impediments, which often cause even more trouble than, for instance, gauge variations. These impediments are not always easy to see and customers may be disappointed because the challenge was not expected. The railway system has no common transport law, which creates difficulties when crossing borders as well as additional paperwork. 

However, important initiatives and work have improved the situation, like a common SMGS/CIM note. We also find challenges when it comes to information systems – tracing, tracking and electronic documentation. Freight rates are important – they should of course be lower but they should also be transparent. It is not good for the reputation of the railways when international railway rates fluctuate too much or changed by more or less random political decisions. Market-oriented customers avoid situations like this, and freight will be like water – it will find the path of least resistance.

The railways and the railway organisations are fully aware of these kinds of challenges and professional railway people and experts outside the railway organisations are working on these issues. I believe railway transport will grow and the railways will capture a larger share of the market because the professional work carried out will bear fruit but also because the environmental situation requires a stronger focus on railways transport. The global environment will not be saved by political resolutions but by practical contributions dedicated to the huge investments required and more market-oriented operations. Political authorities should not consider the railways as a target in itself but as an important means to support customer demand.

– Russia plans to extend the railway with the Russian width of gauge 1520mm to Europe. Does Europe need the Russian type of railway? Will that simplify the operations of European freight forwarders? 

– The conceptual idea is good because the ambition is to reduce the number of “discontinue” points in the logistical chain. The reloading operation between different gauges is costly, money-wise as well as in terms of time and other aspects. When we know that speed is one of the railway’s main advantages, a common gauge is of course a benefit. However, infrastructure investments are costly and only a concrete economic analysis will tell. We have several gauges around the world and in many regions we find the same thoughts and visions, like the idea of expanding the 1435mm gauge through Kazakhstan, linking China to the west.

A common gauge will of course to some extent simplify forwarding operations but I do not think this is the most important issue. It will simplify the technical reloading operation dramatically while the impact on the pure forwarding business, which is mainly paperwork, will be more modest. 

POSSIBILITIES AND OBSTACLES OF TRANSIT VIA RUSSIA

– Most European forwarders prefer to transport freight from Asia to Europe by sea. Why don’t they prefer Russian and CIS railway transfers? What must be done to raise the attractiveness of the RF transit routes, e.g. Transsib? 

– Deep-sea ocean transport has many advantages compared with railway transport. The obvious one is lower rates because large vessels have huge economies of scale when they are operating on full capacity. The largest vessels to day have a space capacity of 14-15,000 TEUs while their real capacity (limited by deadweight restrictions) is perhaps 11-12,000 TEUs. This is 75 to100 times more than a TSR train, which is one of the  largest-capacity trains in Europe/Asia. Sea transport does also have a common legal system and the ocean carriers have always been in a competitive market and they operate in a very professional manner when it comes to customer support. However, ships cannot operate onshore and, for many intermodal routes, the railways will be a natural partner for the shipping lines. I don’t believe that port-to-port services by rail between Asian ports and European ports can compete with the shipping lines when it comes to rates – definitely not today but perhaps in the future.  They can compete when it comes to transit time but the through time depends on effective railway operation. To many stops, border crossing challenges, different legal systems, etc will also reduce this competitive advantage. I strongly believe that the railways should first develop their Europe-Asia concepts in other areas: on inland-inland and inland-port routes, in regions where the competition from ocean carriers is more modest because of long sailing distance or in regions where the deep-sea carriers have to rely on feeder transport to reach the origin or destination. The TSR should be one of these priority routes. I know that the Russian railways are working very professionally to improve the services as well as organisations like CCTT. However their work and success not only depends on themselves but also on infrastructure investments and legal and administrative systems which can be  seldom directly affected by the railway business.

– What are the most promising Russian–UIC projects? 

– Russia is a promising country and there will always be several ongoing projects between Russia and other partners. RZD is one of the most important members of UIC and we have also signed a memorandum of cooperation with CCTT. The size of Russia places it in the front seat when it comes to almost all transport corridors between East and West. This is, of course, also a responsibility for Russia. 

From the UIC side, we have several projects in the pipeline and I would like to mention two of them. The ‘paperless’ project is a project involving RZD, UIC and the Japanese trading house Mitsui. In this project we are looking at opportunities for electronic paperless routines for some of the documents required for international transportation. We have tried to make this project as easy as possible by looking at a specific customer’s needs (Mitsui) and only involving two countries – Japan and Russia. If this project is successful, we will try to implement the concept on other routes, for instance to ports connected to TSR and the international market, like Murmansk.

This brings us to what is, in my opinion, one of the most promising long-term projects involving Russian ports. The N.E.W. concept, which is an intermodal transport corridor between Asia/Central Asia and North America, has now developed through the port of Murmansk. Russia does not have so many western ports and it will need them all and should support them all. Murmansk is Russia’s only real ice-free port located by the Atlantic (Barents Sea). There are tremendous opportunities in the Murmansk region and the development phase of many of the oil and gas projects will also create a regional demand for container transport carrying supplies and equipment. This demand can be supported by rail as well as sea transport. Murmansk is also favorably located on an East–West international trade lane. A traditional square map will not show these benefits when it comes to, for instance, distance but when we remember that the distance around the globe is shorter on the “top” and the “bottom”, compared with global transport around the centre of the globe, we will find interesting and important opportunities for Murmansk. The N.E.W. concept has gained international acclaim and, during the last few years, several organizations have tried to develop transport corridors based on this concept.  The idea was to create an intermodal (sea and rail) transport concept between Asia and North America through the port of Narvik, as well as to improve transport solutions for Northern parts of Finland, Sweden and Norway. 

The International Union of Railways (UIC) has been the “main engine” during the project period and, in 2005, the consultancy firm Transportutvikling AS completed their project work by establishing the limited company, “N.E.W. Corridor”. This company should continue the work and commercialise the conceptual ideas.  But since 2005, the plan of using the port of Narvik has not been followed up, the network built -up through the project period has disappeared and there is no strong commitment left. The situation today is that the N.E.W.solution will be developed through ports other than Narvik. 

The obvious choice for a long-term development of the future N.E.W. Corridor is by using the port of Murmansk in North West Russia. Murmansk has, like other ports, challenges but also obvious benefits compared with other ports, related to the development of the N.E.W. Corridor.

There are, of course, several challenges and some of them cannot usually be handled in a short time. However, if Russia wants to, I’m sure it can be in a position that proves a success where others are struggling. We need visions to improve the railway business, even visions that some may consider unrealistic. Robert Kennedy could have been a good ambassador for the Murmansk solution when, in 1968, he said: “Some people see things the way they are, and ask, why? I see things the way they could be, and ask, why not?”
So, why not Murmansk?
 
Biography
Stig Nerdal: UIC Project Director. Senior adviser Transportutvikling AS (operational consultancy and advisory company working within the primary sectors of transport and logistics, Norway). 
Education: Master of Science and Business (MSc) and supplementary education within political science
Work experience: Financial consultant Department of Transport Nordland County, manager/consultant Bedriftskompetanse AS Mo, financial manager Ofotens Dampskibsselskab AS, financial director OVDS ASA, deputy C.E.O. OVDS ASA
 
Our reference 
UIC (International Union of Railways)
Worldwide international organization of the railway sector.
180 members across all five continents. Most members are railway companies and infrastructure managers. UIC’s headquarters are located in Paris with regional organisations in Africa, the Middle East, Asia, Latin America and North America.
79 active members (including railways in Europe, Russia, the Middle East, North Africa, South Africa, India, Pakistan, China, Japan, Korea, Kazakhstan and companies operating worldwide such as Veolia Transport).
71 associate members (including railways in Asia, Africa, America and Australia),
30 affiliate members (related or ancillary rail transport businesses or services).
UIC members are integrated railway companies, infrastructure managers, Railway or combined transport operators, rolling stock and traction leasing companies and service providers (restaurant services, sleeping cars, public transport, maritime transport).

Activities:
• Developing intercontinental freight corridors (for instance, between Europe and Asia, e.g. the N.E.W. rail / sea corridor linking North America, Northern Europe and the Far East but also between China and India, between India and Russia);
• Experimenting with China-Europe and Europe-China rail corridors (development phase);
• Joint research projects bringing together the world’s leading railway research institutes and centres;
• International Railway Research Board (IRRB) bringing key research bodies to a unique common platform;
• International Railway Strategic Management Institute (IRSMI) involving leading business schools to develop future railway managers;
• The investment forum (bringing together railways, international finance institutions and private investors) to accelerate investment in the rail sector;
• Setting up UIC regional cooperation units (the regional assemblies for Asia, Europe, Africa, the Middle East and America) for a simpler management of projects addressing the specific requirements of members from the same region.
• Supporting Clean Development Mechanisms (CDM) in order to help our members find new resources;
• developing comparative tools to show the railways’ environmental assets;
• preparing a global communication campaign for the promotion of rail transport on a global level. 
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    [~PREVIEW_TEXT] => Russian railway companies are actively developing international activities: 1520 gauge will be extended to Europe and OAO RZD is creating joint ventures with the main European transport companies. Mr Stig Nerdal, UIC Project Director, talks about the opportunities for integrating the RF into the international transport system.
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    [DETAIL_TEXT] => Profitability Growing 

Three major categories took about 60% of the net cargo turnover, they were coal, oil bulk and mineral-construction cargoes. The latter showed the most intensive growth, having increased by 17.2% year-on-year. 

At the same time, low-profit cargo (first class cargo) gave way to the second and third class cargoes (high-profit cargoes). Commenting on the results achieved by corporation last year, Vladimir Yakunin, President of the company, put this trend down to “improvement of cargo transportation structure”.

Special attention is given to a positive trend in container transportation growth (+5% year-on-year). «For a second year we have been observing stable positive dynamics in container transportation growth, which is two-fold higher compared to average rates. However, from a strategic perspective we cannot feel satisfied with the achieved results since the container transportation market is developing dramatically worldwide», the head of the company reported. 

Analysing the market of container transportation, experts point out the tendency of cargo handling re-distribution between the ports of Ukraine, the North-West region and the Far East. 

In the words of Vladimir Savchuk, Head of the Railway Transport Research Department at the Institute of Natural Monopolies, Ukrainian ports increased their container-handling share from 22% in 2006 to 24% in 2007. South basin ports of Russia showed growth of 1% year-on-year (from 7% to 8%) but Baltic, Far East and North-West ports lost 1% each. Their share in container turnover amounted to 12%, 14% and 42% respectively. 

Vladimir Savchuk also noted that growth in container turnover rates is four times higher than that of general cargo turnover. 

In general, cargo owners show eager interest in cargo containerisation. Thus, according to experts from Nizhnekamskneftekhim, this model for transporting export goods has been used by the enterprise since 2004 and has proved its efficiency by saving on freight fares. “Last year we transported 28,600 tons of chemicals in tank-containers and 31,500 tons of caoutchouc and plastics in 40-ft boxes”, Albert Nezameyev says. 

A fundamental result noticed by OAO RZD’s Board is the significant growth of motor car transportation. Its growth hit 30% and a year plan was over-fulfilled with a result of 130%. 

Moreover, in the list of victories, oil bulk can be mentioned (+4.7 million tons). This result exceeded the planned volume by 2.8 million tons. 
In the opinion of Andrey Volkov, Deputy CEO and Director on railway transport of Unified Transport-Forwarding Company, the observed growth for these cargo types was quite expected. «Growth in car transportation can be explained by industry development as well as an increase in population wealth. Speaking of oil bulk, this is a very natural situation until an alternative fuel is discovered. The only factor that could impact on these results is development of pipeline systems», Mr Volkov added. 

Overall, the planned results were exceeded for 35 cargo types: timber (2.3 million tons over the plan) and metal scrap (1.9 million tons more than planned). Growth of grain transportation by 4.5 million tons can also be mentioned (+2.3 million tons over the amount planned). Such high results are explained by corn failure in traditional exporting countries and, consequently, a deficit on the global market. 

Moreover, ferrous metals and cement moved on, with volumes increasing by 3.3 and 3.2million tons respectively. 

But significant drops compared to last year were observed in the fields of coal and construction cargo transportation (-1.2 million tons of each cargo type) against a background of cargo turnover growth.

According to OAO RZD experts, the drop in thermal coal transportation in Russia resulted from a warm winter, a decrease in coal production by  VorkutaUgol JSC and limited load resources. In the future analysts expect coal transportation to increase as a result of development of potential coal deposits and growth of coal use in the national energy.

Lack of rail cars is a major problem 

A lack of rail cars is still a crucial problem for cargo owners. However, some market players believe the situation will change soon. Their beliefs are based on the arrival to the market of The First Cargo Company (OAO RZD’s newly launched daughter company). The young business structure will be interested in solving the problem of rail car deficit as well as rolling stock modernisation. 

“Since First Cargo Company’s assets are to be largest on the transport market, the newly formed structure will perform as a “locomotive” of market development,” predicts Sofia Katkova, Director of Association of Rolling stock owners. 

Currently, railwaymen are taking steps to speed up rail car turnover and increase the average weight of train units. Thus, last year they managed to break the record on average speed per day which amounted to 44.2 kilometres per hour and the highest results for general production – 176,279  rail cars. For instance, October railway (Oktyabrskaya railway) speeded up rail car turnover by 17.8 hours year-on-year, sectoral speed increased by 1.2 kilometres per hour, locomotive output by 42,000 tons per kilometere gross weight and the average weight of cargo train grew by 47 tons. 

South-Eastern railway achieved the following results: turnover speed grew by 2.9 hours year-on-year, sectoral speed by 0.3 kilometres per hour, locomotive output by 8,000 tons per kilometere gross weight and cargo train weight by 67 tons. Similar achievements were made by other railways. 

More cargo – more profit 

This quality level helped to create economic benefits worth RUR 900 million. Moreover, the company showed positive financial results for 2007 against a background of caps on increasing cargo tariffs to sub-inflation levels  (8% and 12% respectively). Transportation profit amounted to RUR 884.5 billion (+13%). Some RUR 6.9 billion more than planned. Transportation prime costs decreased by 1.8% compared to the planned rate and its growth falls behind price dynamics observed in industry. 

Another tendency of 2007 to mention is more intensive use of private park rail cars. Compared to 2006 results, transportation by OAO RZD’s park dropped 0.5% and, for private parks, it grew by 14.1%. Thus, 64.7% of cargo was transported by OAO RZD’s park and 35.3% by private units. At the same time, the net growth of private transportation in the general volume of OAO RZD transportation was 3.1% year-on-year. 

This phenomenon can be explained by private park development. According to statistics, in 2000 OAO RZD’s general park comprised 671,200 cargo rail cars, by October 2007 the number of OAO RZD rail cars dropped by 81,000 units (-12%) and amounted to 590, 200  rail cars. By January 1, 2008 OAO RZD’s park shrank again (586,000 units) from which 161,000 units were given to the First Cargo Company, according to Sergey Kaletin, First Deputy Head of Rail Car Department. At the same time, private parks were expanding. By November 1, 2007, they totalled 343,616 rail cars and this trend became the norm. In particular, last year private companies purchased 40,000 rail cars. 

For instance, Mechel operates 3,962 units of rolling stock. The company reports that last year they acquired 680 gondola-cars and further expansion of the park is to follow. OAO Kuzbassrazrezugol also plans to develop corporate assets. In addition to the 406 gondola cars purchased last year, this year will bring the company 300 additional units. In the next five years, the company plans to expand the corporate park by up to 9,000 gondola cars. 

“OAO SUEK rail car park now numbers 2,500 gondola cars and we are developing projects to expand the park further”, reports Igor Cheplanov, Head of the Railway Transport Economy Department. 

Private park growth is based on new rolling stock purchase. The activity of big cargo owners can be easily explained: when a significant batch of goods is to be transported, private rolling stock is the only way to escape conflicts about quality and quantity of OAO RZD rail cars. 
However, some market players have doubts about whether rolling stock parks should be expanded without track infrastructure improvement. «We are not able to increase load volumes now due to poor track development. Private business has to think about investment into railway equipment», believes Alexey Sannikov, Director on Transport Logistics of Mineral Group JSC. 

Export Has Left Domestic Transportation Far Behind  

In January – November 2007, compared to the same period in 2006, the volume of foreign trade railway transportation grew by 7.8% and amounted to 469 million tons. In 2007, ports of Russia received 175.2 million tons of export cargo, which shows growth of 6% year-on-year. The biggest increase, of 11%, was observed in North-Western ports, where 82.1 million tons of cargo was handled. Ports in the South and far eastern basins handled 2% more export cargo, or 54.8 million and 38.2 million tons respectively. Russian export-handling towards Ukrainian ports increased by 18%. At the same time, the volumes of the above-mentioned cargo via the Baltic ports fell by 2%. Growth in international transportation was observed for the following cargo types: coal grew by 3.6%, oil bulk by 7%, ferrous metals by 2.8%, iron ore by 12.4%, mineral fertilisers by 6%. Timber transportation dropped by 0.3%, which can be explained by an increase in customs dues on raw timber exports. 

Factors that prevent better results for railways and ports are lack of coordination and irregular service from the next link in the chain, which is unacceptable, especially against a background of growth in export cargo transportation. 

Every year, the winter period slows down the process of rail car preparation in the ports, which results in rail cars idling and, consequently, agreements being abandoned and financial losses for the railway sector and cargo consignors. Due to this, last year railwaymen suffered financial losses worth RUR 3 billion. 

by Tatyana Ovcharova
    [~DETAIL_TEXT] => Profitability Growing 

Three major categories took about 60% of the net cargo turnover, they were coal, oil bulk and mineral-construction cargoes. The latter showed the most intensive growth, having increased by 17.2% year-on-year. 

At the same time, low-profit cargo (first class cargo) gave way to the second and third class cargoes (high-profit cargoes). Commenting on the results achieved by corporation last year, Vladimir Yakunin, President of the company, put this trend down to “improvement of cargo transportation structure”.

Special attention is given to a positive trend in container transportation growth (+5% year-on-year). «For a second year we have been observing stable positive dynamics in container transportation growth, which is two-fold higher compared to average rates. However, from a strategic perspective we cannot feel satisfied with the achieved results since the container transportation market is developing dramatically worldwide», the head of the company reported. 

Analysing the market of container transportation, experts point out the tendency of cargo handling re-distribution between the ports of Ukraine, the North-West region and the Far East. 

In the words of Vladimir Savchuk, Head of the Railway Transport Research Department at the Institute of Natural Monopolies, Ukrainian ports increased their container-handling share from 22% in 2006 to 24% in 2007. South basin ports of Russia showed growth of 1% year-on-year (from 7% to 8%) but Baltic, Far East and North-West ports lost 1% each. Their share in container turnover amounted to 12%, 14% and 42% respectively. 

Vladimir Savchuk also noted that growth in container turnover rates is four times higher than that of general cargo turnover. 

In general, cargo owners show eager interest in cargo containerisation. Thus, according to experts from Nizhnekamskneftekhim, this model for transporting export goods has been used by the enterprise since 2004 and has proved its efficiency by saving on freight fares. “Last year we transported 28,600 tons of chemicals in tank-containers and 31,500 tons of caoutchouc and plastics in 40-ft boxes”, Albert Nezameyev says. 

A fundamental result noticed by OAO RZD’s Board is the significant growth of motor car transportation. Its growth hit 30% and a year plan was over-fulfilled with a result of 130%. 

Moreover, in the list of victories, oil bulk can be mentioned (+4.7 million tons). This result exceeded the planned volume by 2.8 million tons. 
In the opinion of Andrey Volkov, Deputy CEO and Director on railway transport of Unified Transport-Forwarding Company, the observed growth for these cargo types was quite expected. «Growth in car transportation can be explained by industry development as well as an increase in population wealth. Speaking of oil bulk, this is a very natural situation until an alternative fuel is discovered. The only factor that could impact on these results is development of pipeline systems», Mr Volkov added. 

Overall, the planned results were exceeded for 35 cargo types: timber (2.3 million tons over the plan) and metal scrap (1.9 million tons more than planned). Growth of grain transportation by 4.5 million tons can also be mentioned (+2.3 million tons over the amount planned). Such high results are explained by corn failure in traditional exporting countries and, consequently, a deficit on the global market. 

Moreover, ferrous metals and cement moved on, with volumes increasing by 3.3 and 3.2million tons respectively. 

But significant drops compared to last year were observed in the fields of coal and construction cargo transportation (-1.2 million tons of each cargo type) against a background of cargo turnover growth.

According to OAO RZD experts, the drop in thermal coal transportation in Russia resulted from a warm winter, a decrease in coal production by  VorkutaUgol JSC and limited load resources. In the future analysts expect coal transportation to increase as a result of development of potential coal deposits and growth of coal use in the national energy.

Lack of rail cars is a major problem 

A lack of rail cars is still a crucial problem for cargo owners. However, some market players believe the situation will change soon. Their beliefs are based on the arrival to the market of The First Cargo Company (OAO RZD’s newly launched daughter company). The young business structure will be interested in solving the problem of rail car deficit as well as rolling stock modernisation. 

“Since First Cargo Company’s assets are to be largest on the transport market, the newly formed structure will perform as a “locomotive” of market development,” predicts Sofia Katkova, Director of Association of Rolling stock owners. 

Currently, railwaymen are taking steps to speed up rail car turnover and increase the average weight of train units. Thus, last year they managed to break the record on average speed per day which amounted to 44.2 kilometres per hour and the highest results for general production – 176,279  rail cars. For instance, October railway (Oktyabrskaya railway) speeded up rail car turnover by 17.8 hours year-on-year, sectoral speed increased by 1.2 kilometres per hour, locomotive output by 42,000 tons per kilometere gross weight and the average weight of cargo train grew by 47 tons. 

South-Eastern railway achieved the following results: turnover speed grew by 2.9 hours year-on-year, sectoral speed by 0.3 kilometres per hour, locomotive output by 8,000 tons per kilometere gross weight and cargo train weight by 67 tons. Similar achievements were made by other railways. 

More cargo – more profit 

This quality level helped to create economic benefits worth RUR 900 million. Moreover, the company showed positive financial results for 2007 against a background of caps on increasing cargo tariffs to sub-inflation levels  (8% and 12% respectively). Transportation profit amounted to RUR 884.5 billion (+13%). Some RUR 6.9 billion more than planned. Transportation prime costs decreased by 1.8% compared to the planned rate and its growth falls behind price dynamics observed in industry. 

Another tendency of 2007 to mention is more intensive use of private park rail cars. Compared to 2006 results, transportation by OAO RZD’s park dropped 0.5% and, for private parks, it grew by 14.1%. Thus, 64.7% of cargo was transported by OAO RZD’s park and 35.3% by private units. At the same time, the net growth of private transportation in the general volume of OAO RZD transportation was 3.1% year-on-year. 

This phenomenon can be explained by private park development. According to statistics, in 2000 OAO RZD’s general park comprised 671,200 cargo rail cars, by October 2007 the number of OAO RZD rail cars dropped by 81,000 units (-12%) and amounted to 590, 200  rail cars. By January 1, 2008 OAO RZD’s park shrank again (586,000 units) from which 161,000 units were given to the First Cargo Company, according to Sergey Kaletin, First Deputy Head of Rail Car Department. At the same time, private parks were expanding. By November 1, 2007, they totalled 343,616 rail cars and this trend became the norm. In particular, last year private companies purchased 40,000 rail cars. 

For instance, Mechel operates 3,962 units of rolling stock. The company reports that last year they acquired 680 gondola-cars and further expansion of the park is to follow. OAO Kuzbassrazrezugol also plans to develop corporate assets. In addition to the 406 gondola cars purchased last year, this year will bring the company 300 additional units. In the next five years, the company plans to expand the corporate park by up to 9,000 gondola cars. 

“OAO SUEK rail car park now numbers 2,500 gondola cars and we are developing projects to expand the park further”, reports Igor Cheplanov, Head of the Railway Transport Economy Department. 

Private park growth is based on new rolling stock purchase. The activity of big cargo owners can be easily explained: when a significant batch of goods is to be transported, private rolling stock is the only way to escape conflicts about quality and quantity of OAO RZD rail cars. 
However, some market players have doubts about whether rolling stock parks should be expanded without track infrastructure improvement. «We are not able to increase load volumes now due to poor track development. Private business has to think about investment into railway equipment», believes Alexey Sannikov, Director on Transport Logistics of Mineral Group JSC. 

Export Has Left Domestic Transportation Far Behind  

In January – November 2007, compared to the same period in 2006, the volume of foreign trade railway transportation grew by 7.8% and amounted to 469 million tons. In 2007, ports of Russia received 175.2 million tons of export cargo, which shows growth of 6% year-on-year. The biggest increase, of 11%, was observed in North-Western ports, where 82.1 million tons of cargo was handled. Ports in the South and far eastern basins handled 2% more export cargo, or 54.8 million and 38.2 million tons respectively. Russian export-handling towards Ukrainian ports increased by 18%. At the same time, the volumes of the above-mentioned cargo via the Baltic ports fell by 2%. Growth in international transportation was observed for the following cargo types: coal grew by 3.6%, oil bulk by 7%, ferrous metals by 2.8%, iron ore by 12.4%, mineral fertilisers by 6%. Timber transportation dropped by 0.3%, which can be explained by an increase in customs dues on raw timber exports. 

Factors that prevent better results for railways and ports are lack of coordination and irregular service from the next link in the chain, which is unacceptable, especially against a background of growth in export cargo transportation. 

Every year, the winter period slows down the process of rail car preparation in the ports, which results in rail cars idling and, consequently, agreements being abandoned and financial losses for the railway sector and cargo consignors. Due to this, last year railwaymen suffered financial losses worth RUR 3 billion. 

by Tatyana Ovcharova
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    [DETAIL_TEXT] => Profitability Growing 

Three major categories took about 60% of the net cargo turnover, they were coal, oil bulk and mineral-construction cargoes. The latter showed the most intensive growth, having increased by 17.2% year-on-year. 

At the same time, low-profit cargo (first class cargo) gave way to the second and third class cargoes (high-profit cargoes). Commenting on the results achieved by corporation last year, Vladimir Yakunin, President of the company, put this trend down to “improvement of cargo transportation structure”.

Special attention is given to a positive trend in container transportation growth (+5% year-on-year). «For a second year we have been observing stable positive dynamics in container transportation growth, which is two-fold higher compared to average rates. However, from a strategic perspective we cannot feel satisfied with the achieved results since the container transportation market is developing dramatically worldwide», the head of the company reported. 

Analysing the market of container transportation, experts point out the tendency of cargo handling re-distribution between the ports of Ukraine, the North-West region and the Far East. 

In the words of Vladimir Savchuk, Head of the Railway Transport Research Department at the Institute of Natural Monopolies, Ukrainian ports increased their container-handling share from 22% in 2006 to 24% in 2007. South basin ports of Russia showed growth of 1% year-on-year (from 7% to 8%) but Baltic, Far East and North-West ports lost 1% each. Their share in container turnover amounted to 12%, 14% and 42% respectively. 

Vladimir Savchuk also noted that growth in container turnover rates is four times higher than that of general cargo turnover. 

In general, cargo owners show eager interest in cargo containerisation. Thus, according to experts from Nizhnekamskneftekhim, this model for transporting export goods has been used by the enterprise since 2004 and has proved its efficiency by saving on freight fares. “Last year we transported 28,600 tons of chemicals in tank-containers and 31,500 tons of caoutchouc and plastics in 40-ft boxes”, Albert Nezameyev says. 

A fundamental result noticed by OAO RZD’s Board is the significant growth of motor car transportation. Its growth hit 30% and a year plan was over-fulfilled with a result of 130%. 

Moreover, in the list of victories, oil bulk can be mentioned (+4.7 million tons). This result exceeded the planned volume by 2.8 million tons. 
In the opinion of Andrey Volkov, Deputy CEO and Director on railway transport of Unified Transport-Forwarding Company, the observed growth for these cargo types was quite expected. «Growth in car transportation can be explained by industry development as well as an increase in population wealth. Speaking of oil bulk, this is a very natural situation until an alternative fuel is discovered. The only factor that could impact on these results is development of pipeline systems», Mr Volkov added. 

Overall, the planned results were exceeded for 35 cargo types: timber (2.3 million tons over the plan) and metal scrap (1.9 million tons more than planned). Growth of grain transportation by 4.5 million tons can also be mentioned (+2.3 million tons over the amount planned). Such high results are explained by corn failure in traditional exporting countries and, consequently, a deficit on the global market. 

Moreover, ferrous metals and cement moved on, with volumes increasing by 3.3 and 3.2million tons respectively. 

But significant drops compared to last year were observed in the fields of coal and construction cargo transportation (-1.2 million tons of each cargo type) against a background of cargo turnover growth.

According to OAO RZD experts, the drop in thermal coal transportation in Russia resulted from a warm winter, a decrease in coal production by  VorkutaUgol JSC and limited load resources. In the future analysts expect coal transportation to increase as a result of development of potential coal deposits and growth of coal use in the national energy.

Lack of rail cars is a major problem 

A lack of rail cars is still a crucial problem for cargo owners. However, some market players believe the situation will change soon. Their beliefs are based on the arrival to the market of The First Cargo Company (OAO RZD’s newly launched daughter company). The young business structure will be interested in solving the problem of rail car deficit as well as rolling stock modernisation. 

“Since First Cargo Company’s assets are to be largest on the transport market, the newly formed structure will perform as a “locomotive” of market development,” predicts Sofia Katkova, Director of Association of Rolling stock owners. 

Currently, railwaymen are taking steps to speed up rail car turnover and increase the average weight of train units. Thus, last year they managed to break the record on average speed per day which amounted to 44.2 kilometres per hour and the highest results for general production – 176,279  rail cars. For instance, October railway (Oktyabrskaya railway) speeded up rail car turnover by 17.8 hours year-on-year, sectoral speed increased by 1.2 kilometres per hour, locomotive output by 42,000 tons per kilometere gross weight and the average weight of cargo train grew by 47 tons. 

South-Eastern railway achieved the following results: turnover speed grew by 2.9 hours year-on-year, sectoral speed by 0.3 kilometres per hour, locomotive output by 8,000 tons per kilometere gross weight and cargo train weight by 67 tons. Similar achievements were made by other railways. 

More cargo – more profit 

This quality level helped to create economic benefits worth RUR 900 million. Moreover, the company showed positive financial results for 2007 against a background of caps on increasing cargo tariffs to sub-inflation levels  (8% and 12% respectively). Transportation profit amounted to RUR 884.5 billion (+13%). Some RUR 6.9 billion more than planned. Transportation prime costs decreased by 1.8% compared to the planned rate and its growth falls behind price dynamics observed in industry. 

Another tendency of 2007 to mention is more intensive use of private park rail cars. Compared to 2006 results, transportation by OAO RZD’s park dropped 0.5% and, for private parks, it grew by 14.1%. Thus, 64.7% of cargo was transported by OAO RZD’s park and 35.3% by private units. At the same time, the net growth of private transportation in the general volume of OAO RZD transportation was 3.1% year-on-year. 

This phenomenon can be explained by private park development. According to statistics, in 2000 OAO RZD’s general park comprised 671,200 cargo rail cars, by October 2007 the number of OAO RZD rail cars dropped by 81,000 units (-12%) and amounted to 590, 200  rail cars. By January 1, 2008 OAO RZD’s park shrank again (586,000 units) from which 161,000 units were given to the First Cargo Company, according to Sergey Kaletin, First Deputy Head of Rail Car Department. At the same time, private parks were expanding. By November 1, 2007, they totalled 343,616 rail cars and this trend became the norm. In particular, last year private companies purchased 40,000 rail cars. 

For instance, Mechel operates 3,962 units of rolling stock. The company reports that last year they acquired 680 gondola-cars and further expansion of the park is to follow. OAO Kuzbassrazrezugol also plans to develop corporate assets. In addition to the 406 gondola cars purchased last year, this year will bring the company 300 additional units. In the next five years, the company plans to expand the corporate park by up to 9,000 gondola cars. 

“OAO SUEK rail car park now numbers 2,500 gondola cars and we are developing projects to expand the park further”, reports Igor Cheplanov, Head of the Railway Transport Economy Department. 

Private park growth is based on new rolling stock purchase. The activity of big cargo owners can be easily explained: when a significant batch of goods is to be transported, private rolling stock is the only way to escape conflicts about quality and quantity of OAO RZD rail cars. 
However, some market players have doubts about whether rolling stock parks should be expanded without track infrastructure improvement. «We are not able to increase load volumes now due to poor track development. Private business has to think about investment into railway equipment», believes Alexey Sannikov, Director on Transport Logistics of Mineral Group JSC. 

Export Has Left Domestic Transportation Far Behind  

In January – November 2007, compared to the same period in 2006, the volume of foreign trade railway transportation grew by 7.8% and amounted to 469 million tons. In 2007, ports of Russia received 175.2 million tons of export cargo, which shows growth of 6% year-on-year. The biggest increase, of 11%, was observed in North-Western ports, where 82.1 million tons of cargo was handled. Ports in the South and far eastern basins handled 2% more export cargo, or 54.8 million and 38.2 million tons respectively. Russian export-handling towards Ukrainian ports increased by 18%. At the same time, the volumes of the above-mentioned cargo via the Baltic ports fell by 2%. Growth in international transportation was observed for the following cargo types: coal grew by 3.6%, oil bulk by 7%, ferrous metals by 2.8%, iron ore by 12.4%, mineral fertilisers by 6%. Timber transportation dropped by 0.3%, which can be explained by an increase in customs dues on raw timber exports. 

Factors that prevent better results for railways and ports are lack of coordination and irregular service from the next link in the chain, which is unacceptable, especially against a background of growth in export cargo transportation. 

Every year, the winter period slows down the process of rail car preparation in the ports, which results in rail cars idling and, consequently, agreements being abandoned and financial losses for the railway sector and cargo consignors. Due to this, last year railwaymen suffered financial losses worth RUR 3 billion. 

by Tatyana Ovcharova
    [~DETAIL_TEXT] => Profitability Growing 

Three major categories took about 60% of the net cargo turnover, they were coal, oil bulk and mineral-construction cargoes. The latter showed the most intensive growth, having increased by 17.2% year-on-year. 

At the same time, low-profit cargo (first class cargo) gave way to the second and third class cargoes (high-profit cargoes). Commenting on the results achieved by corporation last year, Vladimir Yakunin, President of the company, put this trend down to “improvement of cargo transportation structure”.

Special attention is given to a positive trend in container transportation growth (+5% year-on-year). «For a second year we have been observing stable positive dynamics in container transportation growth, which is two-fold higher compared to average rates. However, from a strategic perspective we cannot feel satisfied with the achieved results since the container transportation market is developing dramatically worldwide», the head of the company reported. 

Analysing the market of container transportation, experts point out the tendency of cargo handling re-distribution between the ports of Ukraine, the North-West region and the Far East. 

In the words of Vladimir Savchuk, Head of the Railway Transport Research Department at the Institute of Natural Monopolies, Ukrainian ports increased their container-handling share from 22% in 2006 to 24% in 2007. South basin ports of Russia showed growth of 1% year-on-year (from 7% to 8%) but Baltic, Far East and North-West ports lost 1% each. Their share in container turnover amounted to 12%, 14% and 42% respectively. 

Vladimir Savchuk also noted that growth in container turnover rates is four times higher than that of general cargo turnover. 

In general, cargo owners show eager interest in cargo containerisation. Thus, according to experts from Nizhnekamskneftekhim, this model for transporting export goods has been used by the enterprise since 2004 and has proved its efficiency by saving on freight fares. “Last year we transported 28,600 tons of chemicals in tank-containers and 31,500 tons of caoutchouc and plastics in 40-ft boxes”, Albert Nezameyev says. 

A fundamental result noticed by OAO RZD’s Board is the significant growth of motor car transportation. Its growth hit 30% and a year plan was over-fulfilled with a result of 130%. 

Moreover, in the list of victories, oil bulk can be mentioned (+4.7 million tons). This result exceeded the planned volume by 2.8 million tons. 
In the opinion of Andrey Volkov, Deputy CEO and Director on railway transport of Unified Transport-Forwarding Company, the observed growth for these cargo types was quite expected. «Growth in car transportation can be explained by industry development as well as an increase in population wealth. Speaking of oil bulk, this is a very natural situation until an alternative fuel is discovered. The only factor that could impact on these results is development of pipeline systems», Mr Volkov added. 

Overall, the planned results were exceeded for 35 cargo types: timber (2.3 million tons over the plan) and metal scrap (1.9 million tons more than planned). Growth of grain transportation by 4.5 million tons can also be mentioned (+2.3 million tons over the amount planned). Such high results are explained by corn failure in traditional exporting countries and, consequently, a deficit on the global market. 

Moreover, ferrous metals and cement moved on, with volumes increasing by 3.3 and 3.2million tons respectively. 

But significant drops compared to last year were observed in the fields of coal and construction cargo transportation (-1.2 million tons of each cargo type) against a background of cargo turnover growth.

According to OAO RZD experts, the drop in thermal coal transportation in Russia resulted from a warm winter, a decrease in coal production by  VorkutaUgol JSC and limited load resources. In the future analysts expect coal transportation to increase as a result of development of potential coal deposits and growth of coal use in the national energy.

Lack of rail cars is a major problem 

A lack of rail cars is still a crucial problem for cargo owners. However, some market players believe the situation will change soon. Their beliefs are based on the arrival to the market of The First Cargo Company (OAO RZD’s newly launched daughter company). The young business structure will be interested in solving the problem of rail car deficit as well as rolling stock modernisation. 

“Since First Cargo Company’s assets are to be largest on the transport market, the newly formed structure will perform as a “locomotive” of market development,” predicts Sofia Katkova, Director of Association of Rolling stock owners. 

Currently, railwaymen are taking steps to speed up rail car turnover and increase the average weight of train units. Thus, last year they managed to break the record on average speed per day which amounted to 44.2 kilometres per hour and the highest results for general production – 176,279  rail cars. For instance, October railway (Oktyabrskaya railway) speeded up rail car turnover by 17.8 hours year-on-year, sectoral speed increased by 1.2 kilometres per hour, locomotive output by 42,000 tons per kilometere gross weight and the average weight of cargo train grew by 47 tons. 

South-Eastern railway achieved the following results: turnover speed grew by 2.9 hours year-on-year, sectoral speed by 0.3 kilometres per hour, locomotive output by 8,000 tons per kilometere gross weight and cargo train weight by 67 tons. Similar achievements were made by other railways. 

More cargo – more profit 

This quality level helped to create economic benefits worth RUR 900 million. Moreover, the company showed positive financial results for 2007 against a background of caps on increasing cargo tariffs to sub-inflation levels  (8% and 12% respectively). Transportation profit amounted to RUR 884.5 billion (+13%). Some RUR 6.9 billion more than planned. Transportation prime costs decreased by 1.8% compared to the planned rate and its growth falls behind price dynamics observed in industry. 

Another tendency of 2007 to mention is more intensive use of private park rail cars. Compared to 2006 results, transportation by OAO RZD’s park dropped 0.5% and, for private parks, it grew by 14.1%. Thus, 64.7% of cargo was transported by OAO RZD’s park and 35.3% by private units. At the same time, the net growth of private transportation in the general volume of OAO RZD transportation was 3.1% year-on-year. 

This phenomenon can be explained by private park development. According to statistics, in 2000 OAO RZD’s general park comprised 671,200 cargo rail cars, by October 2007 the number of OAO RZD rail cars dropped by 81,000 units (-12%) and amounted to 590, 200  rail cars. By January 1, 2008 OAO RZD’s park shrank again (586,000 units) from which 161,000 units were given to the First Cargo Company, according to Sergey Kaletin, First Deputy Head of Rail Car Department. At the same time, private parks were expanding. By November 1, 2007, they totalled 343,616 rail cars and this trend became the norm. In particular, last year private companies purchased 40,000 rail cars. 

For instance, Mechel operates 3,962 units of rolling stock. The company reports that last year they acquired 680 gondola-cars and further expansion of the park is to follow. OAO Kuzbassrazrezugol also plans to develop corporate assets. In addition to the 406 gondola cars purchased last year, this year will bring the company 300 additional units. In the next five years, the company plans to expand the corporate park by up to 9,000 gondola cars. 

“OAO SUEK rail car park now numbers 2,500 gondola cars and we are developing projects to expand the park further”, reports Igor Cheplanov, Head of the Railway Transport Economy Department. 

Private park growth is based on new rolling stock purchase. The activity of big cargo owners can be easily explained: when a significant batch of goods is to be transported, private rolling stock is the only way to escape conflicts about quality and quantity of OAO RZD rail cars. 
However, some market players have doubts about whether rolling stock parks should be expanded without track infrastructure improvement. «We are not able to increase load volumes now due to poor track development. Private business has to think about investment into railway equipment», believes Alexey Sannikov, Director on Transport Logistics of Mineral Group JSC. 

Export Has Left Domestic Transportation Far Behind  

In January – November 2007, compared to the same period in 2006, the volume of foreign trade railway transportation grew by 7.8% and amounted to 469 million tons. In 2007, ports of Russia received 175.2 million tons of export cargo, which shows growth of 6% year-on-year. The biggest increase, of 11%, was observed in North-Western ports, where 82.1 million tons of cargo was handled. Ports in the South and far eastern basins handled 2% more export cargo, or 54.8 million and 38.2 million tons respectively. Russian export-handling towards Ukrainian ports increased by 18%. At the same time, the volumes of the above-mentioned cargo via the Baltic ports fell by 2%. Growth in international transportation was observed for the following cargo types: coal grew by 3.6%, oil bulk by 7%, ferrous metals by 2.8%, iron ore by 12.4%, mineral fertilisers by 6%. Timber transportation dropped by 0.3%, which can be explained by an increase in customs dues on raw timber exports. 

Factors that prevent better results for railways and ports are lack of coordination and irregular service from the next link in the chain, which is unacceptable, especially against a background of growth in export cargo transportation. 

Every year, the winter period slows down the process of rail car preparation in the ports, which results in rail cars idling and, consequently, agreements being abandoned and financial losses for the railway sector and cargo consignors. Due to this, last year railwaymen suffered financial losses worth RUR 3 billion. 

by Tatyana Ovcharova
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Selling Stakes in Subsidiaries for Common Benefit
According to Mikhail Akulov, Vice-President of Russian Railways, OAO RZD intends to attract USD 6 billion by 2010 by selling stakes in subsidiaries.
During his speech at the “The Reform and Strategic Development of Railways in the Context of Economic Growth” forum in Singapore, Mr Akulov said that OAO RZD now includes over 130 subsidiaries and affiliated companies working in various areas of the rail sector. Mr Akulov said that their turnover in 2008 will exceed USD 9.4 billion, or over 17% of the Company’s total turnover. 
Russian Railways is currently preparing to sell shares in a number of subsidiaries, including on the stock exchange. A “pilot project” was the private placement of a 15% stake in OAO TransContainer, a subsidiary of Russian Railways, for about USD 320 million. Market reaction to the placement has exceeded expectations and demonstrated a high level of interest from private investors in the rail business, said Mr Akulov.
Vostochnaya Stevedoring Company: Throughput Grew by 16%
In January-March, 2008, Vostochnaya Stevedoring Company handled 92,756 TEU (+16%, year-on-year). 
In March 2008, the company’s throughput totaled 34,436 TEU (+23%, year-on-year).
In the 3-month period, transshipment of export cargo amounted to 35,357 TEU (+31%, year-on-year), import grew by 13%, year-on-year, to 54,428 TEU. In March 2008, export and import totaled 12,538 TEU (+19%) and 20,725 TEU (+28%) respectively. Transshipment of transit containers fell by 78% to 288 TEU, coastal trade containers – by 16% to 2,683 TEU. Thus, import accounts for 58.7% of total turnover, export – 38.1%, contract – 2.9%, transit – 0.3%.
In March, the average daily loading on the railway was 223.4 wagons (against norm of 200 wagons) with a record 382 wagons on March 28.
According to John Skurtis, Director General of Vostochnaya Stevedoring Company OJSC, the company demonstrated a record-high result in the first quarter of 2008.
Vostochnaya Stevedoring Company OJSC is the largest container terminal in the Far East of Russia. It operates at Vostochny port and is co-managed by N-Trans Group and port operator Dubai Port World.
NCC's Throughput Amounted to 423,103 TEU
In January-March all the terminals of the National Container Company (NCC) demonstrated stable throughput growth. The aggregated throughput in January-March 2008 amounted to 423,103 TEU which is an increase of 21.1% compared to January-March 2007. Container growth at NCC's terminals was due to a strong organic increase from existing customers and the benefit of the new development program implemented at the terminals.
The throughput of First Container Terminal (FCT, St.Petersburg) in January-March 2008 came to 256,399 TEU which exceeds the results of the same period in 2007 by 17%. In March, FCT handled 91,062 TEU, which is an increase of 8.4% compared to March 2007.
The throughput of NUTEP (Novorossiysk) in January-March 2008 increased by 16.8% year-on-year and reached 37,100 TEU. In March NUTEP handled 13,605 TEU, which is an increase of 3% year-on-year.
The throughput of Ukrtranscontainer (UTC, Illichivsk, Ukraine) in January-March 2008 increased by 32.1% year-on-year to 129,604 TEU. In March, UTC handled 47,587 TEU, which is an increase of 37.2% compared to March 2007. 
TransContainer Demonstrated Its Abilities
On  March 18, the ad hoc working group met to discuss the results of the pilot shipment delivered from Japan to Moscow for Panasonic. 
The goods (Panasonic household appliances) left the Japanese port of Kobe on February 25 and arrived at the Kuntsevo-2 Station in Moscow on March 16. Thus, the total delivery time was 20 days. 
As TransContainer's General Director Peter Baskakov noted after the meeting, the run was deemed highly successful. “We demonstrated to Panasonic the capabilities of JSC TransContainer's comprehensives services for transporting goods from Japan to European Russia with transshipment at the Korean port of Pusan and with the use of the Trans-Siberian Railway. The goods were delivered in the shortest possible time; in particular, the rail transportation took only 10 days. Special thanks go to the customs authorities who worked as fast as possible”, he said. 
According to Peter Baskakov, it is too early to talk about signing a contract, but TransContainer is ready to begin shipments on this route at any time. “We can provide Panasonic with any transportation and forwarding services in any amount, as this run has shown very clearly”, he emphasised. 
Taganrog Port Accounts for Containers
This year OAO Taganrog Commercial Sea Port is going to invest about RUR 80 million in technical re-equipment and development. 
This year, the reconstruction of Berth №4 is to be completed. That will improve the technical abilities of the port in container cargo handling.
After reconstruction, the volume of containerised cargo is supposed to grow to 90,000 TEU. The port is going to take RUR 60 million from its own funds to carry out this project.
To continue the work of the oil bulk terminal, it is planned to purchase and install four black oil unloading rigs and to buy new handling equipment and facilities.
When carrying out its investment plans, OAO Taganrog Commercial Sea Port considers the capacities of the existing port railway infrastructure and its compliance with the prospects for the port’s throughput growth.
After complex analysis, the possible construction of several universal berths at the Northern pier will be examined.
Sovcomflot reaches a co-operation agreement with Gazflot
On 17 March 2008, Sovcomflot and Gazflot (a wholly-owned shipping arm of Gazprom) concluded a co-operation agreement to service Gazprom's current and future offshore projects and for the transportation of hydrocarbons. The agreement was signed by Mr Sergey Frank, Sovcomflot President and CEO, and Mr Yury Shamalov, Gazflot General Director. 
The parties will work closely to develop logistics solutions for the transportation of oil and gas in the Arctic region. Sovcomflot will also assist Gazflot in procuring offshore drilling and production equipment and tonnage for the future development of the project.
Mr Sergey Frank said: “The scale and magnitude of Gazprom's offshore development programme is significant. It requires close co-ordination amongst all the parties involved. In this respect, we welcome this agreement with Gazflot and we are sure that it will bring effective solutions”.
Sovcomflot Group of Companies is one of Russia's largest infrastructure enterprises. Its fleet comprises 124 vessels with a total deadweight of 8.7 million tons. The Group has an order book of 31 vessels with an aggregate deadweight (DWT) of 2.8 million tons. The average age of the tanker fleet is six years and all tankers are double-hulled. The Sovcomflot Group is the global leader in MR product carriers, the second largest in the Aframax segment and it owns the biggest ice-class fleet. These market segments are the most in demand for Russia's foreign trade and Russian oil and gas companies. The Group's gas fleet comprises 4 LNG carriers of enhanced ice-class. 
Rail Agreement
Mechel signed an agreement on a long–term, mutually beneficial partnership with Russian Railways (OAO RZD). Mechel will provide OAO RZD with rolling stock products for transportation purposes, which will be manufactured by Mechel’s subsidiaries.
Under the agreement, Mechel will construct a modern rail and structural steel mill at Chelyabinsk Metallurgical Plant in the next two years with an annual capacity of over 1million tons of high-value-added products. The new equipment will enable Mechel to manufacture, among other products, railroad rails up to 100 metres in length using state-of-the-art technologies for steel melting, rolling, tempering, straightening, finishing, and rail quality control. Technical solutions will enable manufacturing products that surpass their world counterparts in a number of key parameters, which are determined by the climate conditions of the rail service in Russia.
The rail manufacturing volume for OAO RZD will be up to 400,000 tons annually and includes products specifically designed for high-speed operation, enhanced durability and contact wear resistance, and for operation in a low temperature environment.
Mechel will obtain the necessary certificates for safe use of the rails in the railway system and will carry out work systematically under the programs, which will be aimed at enhancing rail production technology.
OAO RZD will construct a complex rail-welding train and an approach track following the legal completion of its land agreement with Chelyabinsk Metallurgical Plant in 2008. The complex will be commissioned in 2010.
To ensure a smooth production process at Mechel’s Chelyabinsk Metallurgical Plant, OAO RZD undertakes to continuously deliver the rolling stock, including its own rail-carrying cars, to be used for shipping finished products.
New Nuclear Ice-breaker to Be Built in Russia
A next-generation nuclear ice-breaker will be constructed in Russia by 2015. Its target will be to provide year-round navigation of the North Sea Route. 
The assessed value of the project is RUR 15 billion. The draft development of a universal vessel with a nuclear generating plant is completed already. RUR 190 million and RUR 264 million was invested into the project from the federal budget in 2006 and 2007 respectively. In 2008-2009, investments in the technical project development are to amount to RUR 918 million.  
Some experts believe that a part of the revenue from exploitation of the North Sea Route must be spent on construction of more next-generation ice-breakers.
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Selling Stakes in Subsidiaries for Common Benefit
According to Mikhail Akulov, Vice-President of Russian Railways, OAO RZD intends to attract USD 6 billion by 2010 by selling stakes in subsidiaries.
During his speech at the “The Reform and Strategic Development of Railways in the Context of Economic Growth” forum in Singapore, Mr Akulov said that OAO RZD now includes over 130 subsidiaries and affiliated companies working in various areas of the rail sector. Mr Akulov said that their turnover in 2008 will exceed USD 9.4 billion, or over 17% of the Company’s total turnover. 
Russian Railways is currently preparing to sell shares in a number of subsidiaries, including on the stock exchange. A “pilot project” was the private placement of a 15% stake in OAO TransContainer, a subsidiary of Russian Railways, for about USD 320 million. Market reaction to the placement has exceeded expectations and demonstrated a high level of interest from private investors in the rail business, said Mr Akulov.
Vostochnaya Stevedoring Company: Throughput Grew by 16%
In January-March, 2008, Vostochnaya Stevedoring Company handled 92,756 TEU (+16%, year-on-year). 
In March 2008, the company’s throughput totaled 34,436 TEU (+23%, year-on-year).
In the 3-month period, transshipment of export cargo amounted to 35,357 TEU (+31%, year-on-year), import grew by 13%, year-on-year, to 54,428 TEU. In March 2008, export and import totaled 12,538 TEU (+19%) and 20,725 TEU (+28%) respectively. Transshipment of transit containers fell by 78% to 288 TEU, coastal trade containers – by 16% to 2,683 TEU. Thus, import accounts for 58.7% of total turnover, export – 38.1%, contract – 2.9%, transit – 0.3%.
In March, the average daily loading on the railway was 223.4 wagons (against norm of 200 wagons) with a record 382 wagons on March 28.
According to John Skurtis, Director General of Vostochnaya Stevedoring Company OJSC, the company demonstrated a record-high result in the first quarter of 2008.
Vostochnaya Stevedoring Company OJSC is the largest container terminal in the Far East of Russia. It operates at Vostochny port and is co-managed by N-Trans Group and port operator Dubai Port World.
NCC's Throughput Amounted to 423,103 TEU
In January-March all the terminals of the National Container Company (NCC) demonstrated stable throughput growth. The aggregated throughput in January-March 2008 amounted to 423,103 TEU which is an increase of 21.1% compared to January-March 2007. Container growth at NCC's terminals was due to a strong organic increase from existing customers and the benefit of the new development program implemented at the terminals.
The throughput of First Container Terminal (FCT, St.Petersburg) in January-March 2008 came to 256,399 TEU which exceeds the results of the same period in 2007 by 17%. In March, FCT handled 91,062 TEU, which is an increase of 8.4% compared to March 2007.
The throughput of NUTEP (Novorossiysk) in January-March 2008 increased by 16.8% year-on-year and reached 37,100 TEU. In March NUTEP handled 13,605 TEU, which is an increase of 3% year-on-year.
The throughput of Ukrtranscontainer (UTC, Illichivsk, Ukraine) in January-March 2008 increased by 32.1% year-on-year to 129,604 TEU. In March, UTC handled 47,587 TEU, which is an increase of 37.2% compared to March 2007. 
TransContainer Demonstrated Its Abilities
On  March 18, the ad hoc working group met to discuss the results of the pilot shipment delivered from Japan to Moscow for Panasonic. 
The goods (Panasonic household appliances) left the Japanese port of Kobe on February 25 and arrived at the Kuntsevo-2 Station in Moscow on March 16. Thus, the total delivery time was 20 days. 
As TransContainer's General Director Peter Baskakov noted after the meeting, the run was deemed highly successful. “We demonstrated to Panasonic the capabilities of JSC TransContainer's comprehensives services for transporting goods from Japan to European Russia with transshipment at the Korean port of Pusan and with the use of the Trans-Siberian Railway. The goods were delivered in the shortest possible time; in particular, the rail transportation took only 10 days. Special thanks go to the customs authorities who worked as fast as possible”, he said. 
According to Peter Baskakov, it is too early to talk about signing a contract, but TransContainer is ready to begin shipments on this route at any time. “We can provide Panasonic with any transportation and forwarding services in any amount, as this run has shown very clearly”, he emphasised. 
Taganrog Port Accounts for Containers
This year OAO Taganrog Commercial Sea Port is going to invest about RUR 80 million in technical re-equipment and development. 
This year, the reconstruction of Berth №4 is to be completed. That will improve the technical abilities of the port in container cargo handling.
After reconstruction, the volume of containerised cargo is supposed to grow to 90,000 TEU. The port is going to take RUR 60 million from its own funds to carry out this project.
To continue the work of the oil bulk terminal, it is planned to purchase and install four black oil unloading rigs and to buy new handling equipment and facilities.
When carrying out its investment plans, OAO Taganrog Commercial Sea Port considers the capacities of the existing port railway infrastructure and its compliance with the prospects for the port’s throughput growth.
After complex analysis, the possible construction of several universal berths at the Northern pier will be examined.
Sovcomflot reaches a co-operation agreement with Gazflot
On 17 March 2008, Sovcomflot and Gazflot (a wholly-owned shipping arm of Gazprom) concluded a co-operation agreement to service Gazprom's current and future offshore projects and for the transportation of hydrocarbons. The agreement was signed by Mr Sergey Frank, Sovcomflot President and CEO, and Mr Yury Shamalov, Gazflot General Director. 
The parties will work closely to develop logistics solutions for the transportation of oil and gas in the Arctic region. Sovcomflot will also assist Gazflot in procuring offshore drilling and production equipment and tonnage for the future development of the project.
Mr Sergey Frank said: “The scale and magnitude of Gazprom's offshore development programme is significant. It requires close co-ordination amongst all the parties involved. In this respect, we welcome this agreement with Gazflot and we are sure that it will bring effective solutions”.
Sovcomflot Group of Companies is one of Russia's largest infrastructure enterprises. Its fleet comprises 124 vessels with a total deadweight of 8.7 million tons. The Group has an order book of 31 vessels with an aggregate deadweight (DWT) of 2.8 million tons. The average age of the tanker fleet is six years and all tankers are double-hulled. The Sovcomflot Group is the global leader in MR product carriers, the second largest in the Aframax segment and it owns the biggest ice-class fleet. These market segments are the most in demand for Russia's foreign trade and Russian oil and gas companies. The Group's gas fleet comprises 4 LNG carriers of enhanced ice-class. 
Rail Agreement
Mechel signed an agreement on a long–term, mutually beneficial partnership with Russian Railways (OAO RZD). Mechel will provide OAO RZD with rolling stock products for transportation purposes, which will be manufactured by Mechel’s subsidiaries.
Under the agreement, Mechel will construct a modern rail and structural steel mill at Chelyabinsk Metallurgical Plant in the next two years with an annual capacity of over 1million tons of high-value-added products. The new equipment will enable Mechel to manufacture, among other products, railroad rails up to 100 metres in length using state-of-the-art technologies for steel melting, rolling, tempering, straightening, finishing, and rail quality control. Technical solutions will enable manufacturing products that surpass their world counterparts in a number of key parameters, which are determined by the climate conditions of the rail service in Russia.
The rail manufacturing volume for OAO RZD will be up to 400,000 tons annually and includes products specifically designed for high-speed operation, enhanced durability and contact wear resistance, and for operation in a low temperature environment.
Mechel will obtain the necessary certificates for safe use of the rails in the railway system and will carry out work systematically under the programs, which will be aimed at enhancing rail production technology.
OAO RZD will construct a complex rail-welding train and an approach track following the legal completion of its land agreement with Chelyabinsk Metallurgical Plant in 2008. The complex will be commissioned in 2010.
To ensure a smooth production process at Mechel’s Chelyabinsk Metallurgical Plant, OAO RZD undertakes to continuously deliver the rolling stock, including its own rail-carrying cars, to be used for shipping finished products.
New Nuclear Ice-breaker to Be Built in Russia
A next-generation nuclear ice-breaker will be constructed in Russia by 2015. Its target will be to provide year-round navigation of the North Sea Route. 
The assessed value of the project is RUR 15 billion. The draft development of a universal vessel with a nuclear generating plant is completed already. RUR 190 million and RUR 264 million was invested into the project from the federal budget in 2006 and 2007 respectively. In 2008-2009, investments in the technical project development are to amount to RUR 918 million.  
Some experts believe that a part of the revenue from exploitation of the North Sea Route must be spent on construction of more next-generation ice-breakers.
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Selling Stakes in Subsidiaries for Common Benefit
According to Mikhail Akulov, Vice-President of Russian Railways, OAO RZD intends to attract USD 6 billion by 2010 by selling stakes in subsidiaries.
During his speech at the “The Reform and Strategic Development of Railways in the Context of Economic Growth” forum in Singapore, Mr Akulov said that OAO RZD now includes over 130 subsidiaries and affiliated companies working in various areas of the rail sector. Mr Akulov said that their turnover in 2008 will exceed USD 9.4 billion, or over 17% of the Company’s total turnover. 
Russian Railways is currently preparing to sell shares in a number of subsidiaries, including on the stock exchange. A “pilot project” was the private placement of a 15% stake in OAO TransContainer, a subsidiary of Russian Railways, for about USD 320 million. Market reaction to the placement has exceeded expectations and demonstrated a high level of interest from private investors in the rail business, said Mr Akulov.
Vostochnaya Stevedoring Company: Throughput Grew by 16%
In January-March, 2008, Vostochnaya Stevedoring Company handled 92,756 TEU (+16%, year-on-year). 
In March 2008, the company’s throughput totaled 34,436 TEU (+23%, year-on-year).
In the 3-month period, transshipment of export cargo amounted to 35,357 TEU (+31%, year-on-year), import grew by 13%, year-on-year, to 54,428 TEU. In March 2008, export and import totaled 12,538 TEU (+19%) and 20,725 TEU (+28%) respectively. Transshipment of transit containers fell by 78% to 288 TEU, coastal trade containers – by 16% to 2,683 TEU. Thus, import accounts for 58.7% of total turnover, export – 38.1%, contract – 2.9%, transit – 0.3%.
In March, the average daily loading on the railway was 223.4 wagons (against norm of 200 wagons) with a record 382 wagons on March 28.
According to John Skurtis, Director General of Vostochnaya Stevedoring Company OJSC, the company demonstrated a record-high result in the first quarter of 2008.
Vostochnaya Stevedoring Company OJSC is the largest container terminal in the Far East of Russia. It operates at Vostochny port and is co-managed by N-Trans Group and port operator Dubai Port World.
NCC's Throughput Amounted to 423,103 TEU
In January-March all the terminals of the National Container Company (NCC) demonstrated stable throughput growth. The aggregated throughput in January-March 2008 amounted to 423,103 TEU which is an increase of 21.1% compared to January-March 2007. Container growth at NCC's terminals was due to a strong organic increase from existing customers and the benefit of the new development program implemented at the terminals.
The throughput of First Container Terminal (FCT, St.Petersburg) in January-March 2008 came to 256,399 TEU which exceeds the results of the same period in 2007 by 17%. In March, FCT handled 91,062 TEU, which is an increase of 8.4% compared to March 2007.
The throughput of NUTEP (Novorossiysk) in January-March 2008 increased by 16.8% year-on-year and reached 37,100 TEU. In March NUTEP handled 13,605 TEU, which is an increase of 3% year-on-year.
The throughput of Ukrtranscontainer (UTC, Illichivsk, Ukraine) in January-March 2008 increased by 32.1% year-on-year to 129,604 TEU. In March, UTC handled 47,587 TEU, which is an increase of 37.2% compared to March 2007. 
TransContainer Demonstrated Its Abilities
On  March 18, the ad hoc working group met to discuss the results of the pilot shipment delivered from Japan to Moscow for Panasonic. 
The goods (Panasonic household appliances) left the Japanese port of Kobe on February 25 and arrived at the Kuntsevo-2 Station in Moscow on March 16. Thus, the total delivery time was 20 days. 
As TransContainer's General Director Peter Baskakov noted after the meeting, the run was deemed highly successful. “We demonstrated to Panasonic the capabilities of JSC TransContainer's comprehensives services for transporting goods from Japan to European Russia with transshipment at the Korean port of Pusan and with the use of the Trans-Siberian Railway. The goods were delivered in the shortest possible time; in particular, the rail transportation took only 10 days. Special thanks go to the customs authorities who worked as fast as possible”, he said. 
According to Peter Baskakov, it is too early to talk about signing a contract, but TransContainer is ready to begin shipments on this route at any time. “We can provide Panasonic with any transportation and forwarding services in any amount, as this run has shown very clearly”, he emphasised. 
Taganrog Port Accounts for Containers
This year OAO Taganrog Commercial Sea Port is going to invest about RUR 80 million in technical re-equipment and development. 
This year, the reconstruction of Berth №4 is to be completed. That will improve the technical abilities of the port in container cargo handling.
After reconstruction, the volume of containerised cargo is supposed to grow to 90,000 TEU. The port is going to take RUR 60 million from its own funds to carry out this project.
To continue the work of the oil bulk terminal, it is planned to purchase and install four black oil unloading rigs and to buy new handling equipment and facilities.
When carrying out its investment plans, OAO Taganrog Commercial Sea Port considers the capacities of the existing port railway infrastructure and its compliance with the prospects for the port’s throughput growth.
After complex analysis, the possible construction of several universal berths at the Northern pier will be examined.
Sovcomflot reaches a co-operation agreement with Gazflot
On 17 March 2008, Sovcomflot and Gazflot (a wholly-owned shipping arm of Gazprom) concluded a co-operation agreement to service Gazprom's current and future offshore projects and for the transportation of hydrocarbons. The agreement was signed by Mr Sergey Frank, Sovcomflot President and CEO, and Mr Yury Shamalov, Gazflot General Director. 
The parties will work closely to develop logistics solutions for the transportation of oil and gas in the Arctic region. Sovcomflot will also assist Gazflot in procuring offshore drilling and production equipment and tonnage for the future development of the project.
Mr Sergey Frank said: “The scale and magnitude of Gazprom's offshore development programme is significant. It requires close co-ordination amongst all the parties involved. In this respect, we welcome this agreement with Gazflot and we are sure that it will bring effective solutions”.
Sovcomflot Group of Companies is one of Russia's largest infrastructure enterprises. Its fleet comprises 124 vessels with a total deadweight of 8.7 million tons. The Group has an order book of 31 vessels with an aggregate deadweight (DWT) of 2.8 million tons. The average age of the tanker fleet is six years and all tankers are double-hulled. The Sovcomflot Group is the global leader in MR product carriers, the second largest in the Aframax segment and it owns the biggest ice-class fleet. These market segments are the most in demand for Russia's foreign trade and Russian oil and gas companies. The Group's gas fleet comprises 4 LNG carriers of enhanced ice-class. 
Rail Agreement
Mechel signed an agreement on a long–term, mutually beneficial partnership with Russian Railways (OAO RZD). Mechel will provide OAO RZD with rolling stock products for transportation purposes, which will be manufactured by Mechel’s subsidiaries.
Under the agreement, Mechel will construct a modern rail and structural steel mill at Chelyabinsk Metallurgical Plant in the next two years with an annual capacity of over 1million tons of high-value-added products. The new equipment will enable Mechel to manufacture, among other products, railroad rails up to 100 metres in length using state-of-the-art technologies for steel melting, rolling, tempering, straightening, finishing, and rail quality control. Technical solutions will enable manufacturing products that surpass their world counterparts in a number of key parameters, which are determined by the climate conditions of the rail service in Russia.
The rail manufacturing volume for OAO RZD will be up to 400,000 tons annually and includes products specifically designed for high-speed operation, enhanced durability and contact wear resistance, and for operation in a low temperature environment.
Mechel will obtain the necessary certificates for safe use of the rails in the railway system and will carry out work systematically under the programs, which will be aimed at enhancing rail production technology.
OAO RZD will construct a complex rail-welding train and an approach track following the legal completion of its land agreement with Chelyabinsk Metallurgical Plant in 2008. The complex will be commissioned in 2010.
To ensure a smooth production process at Mechel’s Chelyabinsk Metallurgical Plant, OAO RZD undertakes to continuously deliver the rolling stock, including its own rail-carrying cars, to be used for shipping finished products.
New Nuclear Ice-breaker to Be Built in Russia
A next-generation nuclear ice-breaker will be constructed in Russia by 2015. Its target will be to provide year-round navigation of the North Sea Route. 
The assessed value of the project is RUR 15 billion. The draft development of a universal vessel with a nuclear generating plant is completed already. RUR 190 million and RUR 264 million was invested into the project from the federal budget in 2006 and 2007 respectively. In 2008-2009, investments in the technical project development are to amount to RUR 918 million.  
Some experts believe that a part of the revenue from exploitation of the North Sea Route must be spent on construction of more next-generation ice-breakers.
    [~DETAIL_TEXT] => 
Selling Stakes in Subsidiaries for Common Benefit
According to Mikhail Akulov, Vice-President of Russian Railways, OAO RZD intends to attract USD 6 billion by 2010 by selling stakes in subsidiaries.
During his speech at the “The Reform and Strategic Development of Railways in the Context of Economic Growth” forum in Singapore, Mr Akulov said that OAO RZD now includes over 130 subsidiaries and affiliated companies working in various areas of the rail sector. Mr Akulov said that their turnover in 2008 will exceed USD 9.4 billion, or over 17% of the Company’s total turnover. 
Russian Railways is currently preparing to sell shares in a number of subsidiaries, including on the stock exchange. A “pilot project” was the private placement of a 15% stake in OAO TransContainer, a subsidiary of Russian Railways, for about USD 320 million. Market reaction to the placement has exceeded expectations and demonstrated a high level of interest from private investors in the rail business, said Mr Akulov.
Vostochnaya Stevedoring Company: Throughput Grew by 16%
In January-March, 2008, Vostochnaya Stevedoring Company handled 92,756 TEU (+16%, year-on-year). 
In March 2008, the company’s throughput totaled 34,436 TEU (+23%, year-on-year).
In the 3-month period, transshipment of export cargo amounted to 35,357 TEU (+31%, year-on-year), import grew by 13%, year-on-year, to 54,428 TEU. In March 2008, export and import totaled 12,538 TEU (+19%) and 20,725 TEU (+28%) respectively. Transshipment of transit containers fell by 78% to 288 TEU, coastal trade containers – by 16% to 2,683 TEU. Thus, import accounts for 58.7% of total turnover, export – 38.1%, contract – 2.9%, transit – 0.3%.
In March, the average daily loading on the railway was 223.4 wagons (against norm of 200 wagons) with a record 382 wagons on March 28.
According to John Skurtis, Director General of Vostochnaya Stevedoring Company OJSC, the company demonstrated a record-high result in the first quarter of 2008.
Vostochnaya Stevedoring Company OJSC is the largest container terminal in the Far East of Russia. It operates at Vostochny port and is co-managed by N-Trans Group and port operator Dubai Port World.
NCC's Throughput Amounted to 423,103 TEU
In January-March all the terminals of the National Container Company (NCC) demonstrated stable throughput growth. The aggregated throughput in January-March 2008 amounted to 423,103 TEU which is an increase of 21.1% compared to January-March 2007. Container growth at NCC's terminals was due to a strong organic increase from existing customers and the benefit of the new development program implemented at the terminals.
The throughput of First Container Terminal (FCT, St.Petersburg) in January-March 2008 came to 256,399 TEU which exceeds the results of the same period in 2007 by 17%. In March, FCT handled 91,062 TEU, which is an increase of 8.4% compared to March 2007.
The throughput of NUTEP (Novorossiysk) in January-March 2008 increased by 16.8% year-on-year and reached 37,100 TEU. In March NUTEP handled 13,605 TEU, which is an increase of 3% year-on-year.
The throughput of Ukrtranscontainer (UTC, Illichivsk, Ukraine) in January-March 2008 increased by 32.1% year-on-year to 129,604 TEU. In March, UTC handled 47,587 TEU, which is an increase of 37.2% compared to March 2007. 
TransContainer Demonstrated Its Abilities
On  March 18, the ad hoc working group met to discuss the results of the pilot shipment delivered from Japan to Moscow for Panasonic. 
The goods (Panasonic household appliances) left the Japanese port of Kobe on February 25 and arrived at the Kuntsevo-2 Station in Moscow on March 16. Thus, the total delivery time was 20 days. 
As TransContainer's General Director Peter Baskakov noted after the meeting, the run was deemed highly successful. “We demonstrated to Panasonic the capabilities of JSC TransContainer's comprehensives services for transporting goods from Japan to European Russia with transshipment at the Korean port of Pusan and with the use of the Trans-Siberian Railway. The goods were delivered in the shortest possible time; in particular, the rail transportation took only 10 days. Special thanks go to the customs authorities who worked as fast as possible”, he said. 
According to Peter Baskakov, it is too early to talk about signing a contract, but TransContainer is ready to begin shipments on this route at any time. “We can provide Panasonic with any transportation and forwarding services in any amount, as this run has shown very clearly”, he emphasised. 
Taganrog Port Accounts for Containers
This year OAO Taganrog Commercial Sea Port is going to invest about RUR 80 million in technical re-equipment and development. 
This year, the reconstruction of Berth №4 is to be completed. That will improve the technical abilities of the port in container cargo handling.
After reconstruction, the volume of containerised cargo is supposed to grow to 90,000 TEU. The port is going to take RUR 60 million from its own funds to carry out this project.
To continue the work of the oil bulk terminal, it is planned to purchase and install four black oil unloading rigs and to buy new handling equipment and facilities.
When carrying out its investment plans, OAO Taganrog Commercial Sea Port considers the capacities of the existing port railway infrastructure and its compliance with the prospects for the port’s throughput growth.
After complex analysis, the possible construction of several universal berths at the Northern pier will be examined.
Sovcomflot reaches a co-operation agreement with Gazflot
On 17 March 2008, Sovcomflot and Gazflot (a wholly-owned shipping arm of Gazprom) concluded a co-operation agreement to service Gazprom's current and future offshore projects and for the transportation of hydrocarbons. The agreement was signed by Mr Sergey Frank, Sovcomflot President and CEO, and Mr Yury Shamalov, Gazflot General Director. 
The parties will work closely to develop logistics solutions for the transportation of oil and gas in the Arctic region. Sovcomflot will also assist Gazflot in procuring offshore drilling and production equipment and tonnage for the future development of the project.
Mr Sergey Frank said: “The scale and magnitude of Gazprom's offshore development programme is significant. It requires close co-ordination amongst all the parties involved. In this respect, we welcome this agreement with Gazflot and we are sure that it will bring effective solutions”.
Sovcomflot Group of Companies is one of Russia's largest infrastructure enterprises. Its fleet comprises 124 vessels with a total deadweight of 8.7 million tons. The Group has an order book of 31 vessels with an aggregate deadweight (DWT) of 2.8 million tons. The average age of the tanker fleet is six years and all tankers are double-hulled. The Sovcomflot Group is the global leader in MR product carriers, the second largest in the Aframax segment and it owns the biggest ice-class fleet. These market segments are the most in demand for Russia's foreign trade and Russian oil and gas companies. The Group's gas fleet comprises 4 LNG carriers of enhanced ice-class. 
Rail Agreement
Mechel signed an agreement on a long–term, mutually beneficial partnership with Russian Railways (OAO RZD). Mechel will provide OAO RZD with rolling stock products for transportation purposes, which will be manufactured by Mechel’s subsidiaries.
Under the agreement, Mechel will construct a modern rail and structural steel mill at Chelyabinsk Metallurgical Plant in the next two years with an annual capacity of over 1million tons of high-value-added products. The new equipment will enable Mechel to manufacture, among other products, railroad rails up to 100 metres in length using state-of-the-art technologies for steel melting, rolling, tempering, straightening, finishing, and rail quality control. Technical solutions will enable manufacturing products that surpass their world counterparts in a number of key parameters, which are determined by the climate conditions of the rail service in Russia.
The rail manufacturing volume for OAO RZD will be up to 400,000 tons annually and includes products specifically designed for high-speed operation, enhanced durability and contact wear resistance, and for operation in a low temperature environment.
Mechel will obtain the necessary certificates for safe use of the rails in the railway system and will carry out work systematically under the programs, which will be aimed at enhancing rail production technology.
OAO RZD will construct a complex rail-welding train and an approach track following the legal completion of its land agreement with Chelyabinsk Metallurgical Plant in 2008. The complex will be commissioned in 2010.
To ensure a smooth production process at Mechel’s Chelyabinsk Metallurgical Plant, OAO RZD undertakes to continuously deliver the rolling stock, including its own rail-carrying cars, to be used for shipping finished products.
New Nuclear Ice-breaker to Be Built in Russia
A next-generation nuclear ice-breaker will be constructed in Russia by 2015. Its target will be to provide year-round navigation of the North Sea Route. 
The assessed value of the project is RUR 15 billion. The draft development of a universal vessel with a nuclear generating plant is completed already. RUR 190 million and RUR 264 million was invested into the project from the federal budget in 2006 and 2007 respectively. In 2008-2009, investments in the technical project development are to amount to RUR 918 million.  
Some experts believe that a part of the revenue from exploitation of the North Sea Route must be spent on construction of more next-generation ice-breakers.
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“Smaller” Does Not Mean “Worse”
The port sector in the Azov and the Black sea water area is formed by several dozen sea ports, which have a wide range of opportunities for cargo handling. Most of them are in Ukraine, i.e. 20 sea ports and a lot of private sea terminals, fish and river ports. Their total capacity is about 176 million tons. But specialists consider this an approximate figure, especially if the ageing basic assets are taken into account.
In the region, Russia has less ports than Ukraine but, according to throughput, the RF ports are leaders. Mainly, it is due to oil bulk. Crude oil makes up over 70% of the throughput. It is delivered to the ports by pipelines. But the situation is completely different in the dry cargo sector. Russian ports have less capacity for handling dry cargo, and since the demand for export increases, there even appears to be a shortage of them. At the same time, the Ukrainian port sector, which is owned mainly by the state, has a significant, almost 40%, reserve of handling capacity.
Today, in the Russian sector of the Azov and the Black Sea basin, there are eight sea ports. According to the Federal Agency of Sea and River Transport (Rosmorrechflot), they handled 152.6 million tons of cargo in 2007, representing one third of the total throughput of Russian ports. Statistics shows that, since 2000, the volume of cargo services in Russia’s southern ports has almost doubled. But take a closer look, and the situation is not so rosy.
Sea Gate Needs Railway Approach 
Let’s start from the main sea gates in the south of Russia – the Novorossiysk Commercial Sea Port (NMTP). According to the handling volume, it is one of the largest Russian ports. In the last five years, the throughput of NMTP grew from 80 to 113 million tons, in spite of the fact that the port has almost the same area as a decade ago. Portmen say it has been possible due to implementation of advanced technologies, reloading equipment renewal, and modernisation of the handling facilities. In particular, at the end of 2007, the first stage of a grain terminal was put into operation. Its capacity is 5 million tons. The reconstruction of the berth for loading oil products into bunkering vessels, as well as that of the capacities for handling diesel fuel and carbamide and ammoniac mixture, is already completed. Special terminals are being built to service chemicals and metals. All the terminals are all-weather, i.e. they handle cargo 24 hours a day and in any conditions.
Nevertheless, in the opinion of Alexander Davydenko, Head of Rosmorrechflot, the container handling capacities must be increased in the port of Novorossiysk. Today, there is a lack of such capacities in the Azov and the Black Sea basin. According to some data, about 3 million TEU is carried via Russian ports (while the annual throughput of port container terminals in the world amounts to about 500 million TEU) and the RF southern ports handle only 300,000 TEU (10%) of the volume. Meanwhile, in the words of Grigory Minaev, Head of the Transport and Communication Department of the Krasnodarsky Krai, the demand for handling containerised cargo drawn to the Black Sea ports exceeds 1million TEU, and the figure will grow to 2 million TEU by 2015.
“A terminal must be constructed in Novorossiysk. Its minimal capacity needs to be 1.5 million TEU. However, I would rather it was 3 million TEU since the volume of containerisation is growing. And if we do not build it, the cargo will be destined to Ukraine and other states, as is happening today”, considers Mr Davydenko. But this is a plan for the long term– after 2015. Now, NMTP requires dredging to service large ocean container vessels. For example, one of its main competitors – the Ukrainian port of Ilyichevsk – can already service vessels with a capacity of up to 5,000 TEU.  
Experts note that all the projects aimed at increasing the handling capacities of NMTP may be slowed down if the main problem – the railway approach to the port – remains unsolved. Without developing these approaches, the forecasted throughput of 152 million tons will hardly be reached to 2010.   
Meanwhile, the project to develop the infrastructure in the direction of the Azov and the Black Sea ports is a priority for OAO RZD. The company will invest approximately RUR 16.7 billion to enlarge the capacity of this transport corridor. Still, according to some estimations, this sum will not be enough. That is why a number of projects aimed at developing the approaches to the southern ports are supposed to be carried out at the expense of the federal budget or using public-private partnerships.

For Now, There Are Just Plans 
The problem of strengthening the railway approaches to the port of Taman must also be solved. This port may become second in the region (after NMTP) according to the throughput.
The constructed port will specialise in handling oil bulk, liquefied hydrocarbon gases, and ammonia. At the end of 2008, the first stage of the terminal handling liquefied hydrocarbon gases is to be put into operation. Its capacity is 1.5 million tons.
The programme of port construction envisages that the design capacity of the Taman port will grow to 30 million tons of liquid bulk and 3.5 million tons of solid bulk by 2015, and later the port will handle up to 70 million tons annually. But now, the investors worry about other problems: administrative barriers, delays, a complicated adjustment procedure, high rent rates.
Experts believe that the dynamics at other ports in the Azov and the Black Sea basin are rather slow. For example, the reloading capacities have not been enlarged in the port of Tuapse in years. However, today, preliminary works have started there to construct a bulk terminal that will handle 3 million tons of mineral fertilisers annually. Besides, a grain terminal is planned for the port. Its capacity will amount to 2 million tons annually. A berth to service 80,000 ton dwt tankers will also be constructed. In future, coal will be redirected to the new port on the Taman peninsula. The released capacities will be used to service other cargoes, in particular rolled metal. Meanwhile, the throughput of the Tuapse amounted to 19.6 million tons in 2007. According to forecasts, it must increase to 35 and 41 million tons by 2010 and 2015 respectively. 
The throughput of the Kavkaz port is to grow to 12 million tons by 2015. Last year, the figure was 6.38 million tons. One of the directions of port development is a ferry that includes car-passenger and railway complexes and services the lines connecting the port with Ukraine and Georgia. Also, the offer of OAO Azov Transport Company to develop the North-Western district of the port has been approved. It is targeted at receiving and servicing universal dry cargo vessels and ro-ro ferries, and to service ground storage general and bulked cargo.
The throughput of the largest Russian port in the Azov Sea, Taganrog, slightly exceeded 3 million tons last year. Its distinguishing feature is that it handles black oil. The Northern pier is to be reconstructed in the port and three universal berths are to be built there. With this, the capacity of the port is expected to rise to 4 million tons by 2015.
Another Russian southern port, Temryuk, is also carrying out a number of investment projects to increase its capacity from 1.7 million tons to 4.5 million tons annually. It is planned to construct terminals there for handling oil gas (capacity is 300,000 tons), chemicals (capacity is 300,000 tons) and diesel fuel (capacity is 300,000 tons). Last year, the port handled 1.4 million tons, including 400,000 tons of oil bulk.
The port of Eysk is also developing actively. In 2007, it handled 4.3 million tons. The port’s development plans envisage construction of four new berths to handle grain, general cargoes and containers.

Olympic Chances
The port of Sochi will develop in a special way that was defined by the Olympic Games to be held in the city in 2014. With this event in mind, a scaled development of transport infrastructure objects is planned. According to preliminary estimations, in the next four years, about RUR 316 billion will be invested in constructing them. This will be supported by funds from the federal budget as well as private investments. 
According to plans, the freight district will be transferred outside the territory of the existing port of Sochi. In future, the port is to turn into an international centre for passenger and cruise transportation. The project envisages construction of a protected water area to harbour sea yachts and to receive local passenger liners as well as cruise ships.
Two freight districts of the port will be located in the mouths of two nearby rivers. The construction materials for Olympic facilities in Sochi will be carried via them. Their construction becomes even more important if we consider the limited carrying capacity of railways and motorways in the region. And the transportation volume will be significant. According to experts, approximately 35 million tons of cargo is to be delivered to the city annually to build Olympic infrastructure. 
To recommence the local passenger sea lines, 15 passenger terminals will be reconstructed and built on the Black Sea coast. In 2008, the passenger terminals in Adler, Kurgorodok, Hosta and Loo are to be reconstructed, and they will then service passengers.

All Hopes Rest on a Port Hub
In the near future there may appear one more port in the Russian south. A decision was made to build a new deep-water port in the Black Sea. It will handle dry cargoes – coal, iron ore concentrate, containers, ro-ro, and mineral fertilisers. In the words of Alexander Davydenko, there is a shortage of capacity to handle these cargoes in the Azov and the Black Sea basin. The urgency of the new port construction is explained by the realisation of the largest infrastructure project aimed at developing the Volga-Don waterway. The waterway connects the Caspian Sea, the Azov and Black Sea basins, and the whole of central Russia.
Besides, in the new port there is supposed to be ferry communication with the ports of Turkey and other Black Sea states. The water area is supposed to be used as a port-shelter for vessels sailing via the Kerch Strait. The new port will lie 4 km away from the port of Taman, to the East of the Zhelezny Rog cape, in the waters of Solenoye lake. According to ambitious plans by the Ministry of Transport, its location (considering the Volga-Don waterway) will allow creationg of a large port hub between the states of the Black Sea and the Caspian basins.
On the whole, the RF Ministry of Transport is pinning its hopes on the ports of the Azov and the Black Sea basin. Thus, according to the Federal target programme “The Development of the RF Transport System (2010-2015)”, which is being developed now, their annual capacity is to exceed 250 million tons of cargo in the next decade. 
Viewpoint
Alexander Davydenko, 
Head of the Federal Agency of Sea and River Transport:          
– The successful development of Russian ports in the Azov and the Black Sea basin will allow fulfillment of the RF economy’s prospective demand for foreign trade cargo handling in the south of the country (at the same time, 15% of reserve capacity will be created). Simultaneously, it will make Russia less dependent on neighboring states and help it realise its transit potential.

Grigory Minaev, 
Head of the Transport and Communication Department of Krasnodarsky Krai:
– Russia is one of the leading states exporting oil and oil products. For example, about 270 million tons of oil was exported last year. In the south region, the stevedoring companies handled 52 million tons of oil and 15 million tons of oil products. Also, the Caspian pipeline consortium loaded more than 32 million tons of oil.
About 15 million tons of Russian oil and oil products were handled in Ukrainian ports.
According to the Energy Strategy of the Russian Federation and the forecasts made by the Federal Agency of Energy (Rosenergo), the RF Ministry of Economic development and Trade and basic oil extracting companies, the volume of oil and oil product exports will amount to 300 million tons by 2010, and 110 million tons of that volume will be transported via the ports of Krasnodarsky Krai. 
The existing capacities of oil bulk terminals cannot fulfil the demands of the market. So, new ones are to be built to provide additional handling of more than 30 million tons of oil and oil products annually.

Laslo Sabov, 
CEO of BSSS Group:
– Russia won the right to hold the Olympic Games in Sochi in 2014. It seems that the Russian Government and society has not realised this yet. Unfortunately, the chance to solve several very important problems for the future development of the Russian south and in particular the port of Novorossiysk is not being used.
It is expected that when the term of the rent contract with Ukraine is over, 150 warships will leave Sevastopol. It has been decided that the naval base will be placed in Tsemesskaya Bay (Novorossiysk). The construction of berths has already started. But the naval fleet will limit the work of the freight terminals in Novorossiysk, if there is place for them there at all. 
I believe it would be more logical to build deep-water berths near Adler. It will allow delivery of construction materials for the Olympics by sea. And, after the Olympic Games, the berths could be given to the Navy.
The cargo port near Sochi, as a competitor to Novorossiysk and Tuapse, is unpromising, because of its transport “dead end” locations and undeveloped road and railway infrastructure. But it alone has the “Olympic-military” option that can suit all the parties interested.
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“Smaller” Does Not Mean “Worse”
The port sector in the Azov and the Black sea water area is formed by several dozen sea ports, which have a wide range of opportunities for cargo handling. Most of them are in Ukraine, i.e. 20 sea ports and a lot of private sea terminals, fish and river ports. Their total capacity is about 176 million tons. But specialists consider this an approximate figure, especially if the ageing basic assets are taken into account.
In the region, Russia has less ports than Ukraine but, according to throughput, the RF ports are leaders. Mainly, it is due to oil bulk. Crude oil makes up over 70% of the throughput. It is delivered to the ports by pipelines. But the situation is completely different in the dry cargo sector. Russian ports have less capacity for handling dry cargo, and since the demand for export increases, there even appears to be a shortage of them. At the same time, the Ukrainian port sector, which is owned mainly by the state, has a significant, almost 40%, reserve of handling capacity.
Today, in the Russian sector of the Azov and the Black Sea basin, there are eight sea ports. According to the Federal Agency of Sea and River Transport (Rosmorrechflot), they handled 152.6 million tons of cargo in 2007, representing one third of the total throughput of Russian ports. Statistics shows that, since 2000, the volume of cargo services in Russia’s southern ports has almost doubled. But take a closer look, and the situation is not so rosy.
Sea Gate Needs Railway Approach 
Let’s start from the main sea gates in the south of Russia – the Novorossiysk Commercial Sea Port (NMTP). According to the handling volume, it is one of the largest Russian ports. In the last five years, the throughput of NMTP grew from 80 to 113 million tons, in spite of the fact that the port has almost the same area as a decade ago. Portmen say it has been possible due to implementation of advanced technologies, reloading equipment renewal, and modernisation of the handling facilities. In particular, at the end of 2007, the first stage of a grain terminal was put into operation. Its capacity is 5 million tons. The reconstruction of the berth for loading oil products into bunkering vessels, as well as that of the capacities for handling diesel fuel and carbamide and ammoniac mixture, is already completed. Special terminals are being built to service chemicals and metals. All the terminals are all-weather, i.e. they handle cargo 24 hours a day and in any conditions.
Nevertheless, in the opinion of Alexander Davydenko, Head of Rosmorrechflot, the container handling capacities must be increased in the port of Novorossiysk. Today, there is a lack of such capacities in the Azov and the Black Sea basin. According to some data, about 3 million TEU is carried via Russian ports (while the annual throughput of port container terminals in the world amounts to about 500 million TEU) and the RF southern ports handle only 300,000 TEU (10%) of the volume. Meanwhile, in the words of Grigory Minaev, Head of the Transport and Communication Department of the Krasnodarsky Krai, the demand for handling containerised cargo drawn to the Black Sea ports exceeds 1million TEU, and the figure will grow to 2 million TEU by 2015.
“A terminal must be constructed in Novorossiysk. Its minimal capacity needs to be 1.5 million TEU. However, I would rather it was 3 million TEU since the volume of containerisation is growing. And if we do not build it, the cargo will be destined to Ukraine and other states, as is happening today”, considers Mr Davydenko. But this is a plan for the long term– after 2015. Now, NMTP requires dredging to service large ocean container vessels. For example, one of its main competitors – the Ukrainian port of Ilyichevsk – can already service vessels with a capacity of up to 5,000 TEU.  
Experts note that all the projects aimed at increasing the handling capacities of NMTP may be slowed down if the main problem – the railway approach to the port – remains unsolved. Without developing these approaches, the forecasted throughput of 152 million tons will hardly be reached to 2010.   
Meanwhile, the project to develop the infrastructure in the direction of the Azov and the Black Sea ports is a priority for OAO RZD. The company will invest approximately RUR 16.7 billion to enlarge the capacity of this transport corridor. Still, according to some estimations, this sum will not be enough. That is why a number of projects aimed at developing the approaches to the southern ports are supposed to be carried out at the expense of the federal budget or using public-private partnerships.

For Now, There Are Just Plans 
The problem of strengthening the railway approaches to the port of Taman must also be solved. This port may become second in the region (after NMTP) according to the throughput.
The constructed port will specialise in handling oil bulk, liquefied hydrocarbon gases, and ammonia. At the end of 2008, the first stage of the terminal handling liquefied hydrocarbon gases is to be put into operation. Its capacity is 1.5 million tons.
The programme of port construction envisages that the design capacity of the Taman port will grow to 30 million tons of liquid bulk and 3.5 million tons of solid bulk by 2015, and later the port will handle up to 70 million tons annually. But now, the investors worry about other problems: administrative barriers, delays, a complicated adjustment procedure, high rent rates.
Experts believe that the dynamics at other ports in the Azov and the Black Sea basin are rather slow. For example, the reloading capacities have not been enlarged in the port of Tuapse in years. However, today, preliminary works have started there to construct a bulk terminal that will handle 3 million tons of mineral fertilisers annually. Besides, a grain terminal is planned for the port. Its capacity will amount to 2 million tons annually. A berth to service 80,000 ton dwt tankers will also be constructed. In future, coal will be redirected to the new port on the Taman peninsula. The released capacities will be used to service other cargoes, in particular rolled metal. Meanwhile, the throughput of the Tuapse amounted to 19.6 million tons in 2007. According to forecasts, it must increase to 35 and 41 million tons by 2010 and 2015 respectively. 
The throughput of the Kavkaz port is to grow to 12 million tons by 2015. Last year, the figure was 6.38 million tons. One of the directions of port development is a ferry that includes car-passenger and railway complexes and services the lines connecting the port with Ukraine and Georgia. Also, the offer of OAO Azov Transport Company to develop the North-Western district of the port has been approved. It is targeted at receiving and servicing universal dry cargo vessels and ro-ro ferries, and to service ground storage general and bulked cargo.
The throughput of the largest Russian port in the Azov Sea, Taganrog, slightly exceeded 3 million tons last year. Its distinguishing feature is that it handles black oil. The Northern pier is to be reconstructed in the port and three universal berths are to be built there. With this, the capacity of the port is expected to rise to 4 million tons by 2015.
Another Russian southern port, Temryuk, is also carrying out a number of investment projects to increase its capacity from 1.7 million tons to 4.5 million tons annually. It is planned to construct terminals there for handling oil gas (capacity is 300,000 tons), chemicals (capacity is 300,000 tons) and diesel fuel (capacity is 300,000 tons). Last year, the port handled 1.4 million tons, including 400,000 tons of oil bulk.
The port of Eysk is also developing actively. In 2007, it handled 4.3 million tons. The port’s development plans envisage construction of four new berths to handle grain, general cargoes and containers.

Olympic Chances
The port of Sochi will develop in a special way that was defined by the Olympic Games to be held in the city in 2014. With this event in mind, a scaled development of transport infrastructure objects is planned. According to preliminary estimations, in the next four years, about RUR 316 billion will be invested in constructing them. This will be supported by funds from the federal budget as well as private investments. 
According to plans, the freight district will be transferred outside the territory of the existing port of Sochi. In future, the port is to turn into an international centre for passenger and cruise transportation. The project envisages construction of a protected water area to harbour sea yachts and to receive local passenger liners as well as cruise ships.
Two freight districts of the port will be located in the mouths of two nearby rivers. The construction materials for Olympic facilities in Sochi will be carried via them. Their construction becomes even more important if we consider the limited carrying capacity of railways and motorways in the region. And the transportation volume will be significant. According to experts, approximately 35 million tons of cargo is to be delivered to the city annually to build Olympic infrastructure. 
To recommence the local passenger sea lines, 15 passenger terminals will be reconstructed and built on the Black Sea coast. In 2008, the passenger terminals in Adler, Kurgorodok, Hosta and Loo are to be reconstructed, and they will then service passengers.

All Hopes Rest on a Port Hub
In the near future there may appear one more port in the Russian south. A decision was made to build a new deep-water port in the Black Sea. It will handle dry cargoes – coal, iron ore concentrate, containers, ro-ro, and mineral fertilisers. In the words of Alexander Davydenko, there is a shortage of capacity to handle these cargoes in the Azov and the Black Sea basin. The urgency of the new port construction is explained by the realisation of the largest infrastructure project aimed at developing the Volga-Don waterway. The waterway connects the Caspian Sea, the Azov and Black Sea basins, and the whole of central Russia.
Besides, in the new port there is supposed to be ferry communication with the ports of Turkey and other Black Sea states. The water area is supposed to be used as a port-shelter for vessels sailing via the Kerch Strait. The new port will lie 4 km away from the port of Taman, to the East of the Zhelezny Rog cape, in the waters of Solenoye lake. According to ambitious plans by the Ministry of Transport, its location (considering the Volga-Don waterway) will allow creationg of a large port hub between the states of the Black Sea and the Caspian basins.
On the whole, the RF Ministry of Transport is pinning its hopes on the ports of the Azov and the Black Sea basin. Thus, according to the Federal target programme “The Development of the RF Transport System (2010-2015)”, which is being developed now, their annual capacity is to exceed 250 million tons of cargo in the next decade. 
Viewpoint
Alexander Davydenko, 
Head of the Federal Agency of Sea and River Transport:          
– The successful development of Russian ports in the Azov and the Black Sea basin will allow fulfillment of the RF economy’s prospective demand for foreign trade cargo handling in the south of the country (at the same time, 15% of reserve capacity will be created). Simultaneously, it will make Russia less dependent on neighboring states and help it realise its transit potential.

Grigory Minaev, 
Head of the Transport and Communication Department of Krasnodarsky Krai:
– Russia is one of the leading states exporting oil and oil products. For example, about 270 million tons of oil was exported last year. In the south region, the stevedoring companies handled 52 million tons of oil and 15 million tons of oil products. Also, the Caspian pipeline consortium loaded more than 32 million tons of oil.
About 15 million tons of Russian oil and oil products were handled in Ukrainian ports.
According to the Energy Strategy of the Russian Federation and the forecasts made by the Federal Agency of Energy (Rosenergo), the RF Ministry of Economic development and Trade and basic oil extracting companies, the volume of oil and oil product exports will amount to 300 million tons by 2010, and 110 million tons of that volume will be transported via the ports of Krasnodarsky Krai. 
The existing capacities of oil bulk terminals cannot fulfil the demands of the market. So, new ones are to be built to provide additional handling of more than 30 million tons of oil and oil products annually.

Laslo Sabov, 
CEO of BSSS Group:
– Russia won the right to hold the Olympic Games in Sochi in 2014. It seems that the Russian Government and society has not realised this yet. Unfortunately, the chance to solve several very important problems for the future development of the Russian south and in particular the port of Novorossiysk is not being used.
It is expected that when the term of the rent contract with Ukraine is over, 150 warships will leave Sevastopol. It has been decided that the naval base will be placed in Tsemesskaya Bay (Novorossiysk). The construction of berths has already started. But the naval fleet will limit the work of the freight terminals in Novorossiysk, if there is place for them there at all. 
I believe it would be more logical to build deep-water berths near Adler. It will allow delivery of construction materials for the Olympics by sea. And, after the Olympic Games, the berths could be given to the Navy.
The cargo port near Sochi, as a competitor to Novorossiysk and Tuapse, is unpromising, because of its transport “dead end” locations and undeveloped road and railway infrastructure. But it alone has the “Olympic-military” option that can suit all the parties interested.
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“Smaller” Does Not Mean “Worse”
The port sector in the Azov and the Black sea water area is formed by several dozen sea ports, which have a wide range of opportunities for cargo handling. Most of them are in Ukraine, i.e. 20 sea ports and a lot of private sea terminals, fish and river ports. Their total capacity is about 176 million tons. But specialists consider this an approximate figure, especially if the ageing basic assets are taken into account.
In the region, Russia has less ports than Ukraine but, according to throughput, the RF ports are leaders. Mainly, it is due to oil bulk. Crude oil makes up over 70% of the throughput. It is delivered to the ports by pipelines. But the situation is completely different in the dry cargo sector. Russian ports have less capacity for handling dry cargo, and since the demand for export increases, there even appears to be a shortage of them. At the same time, the Ukrainian port sector, which is owned mainly by the state, has a significant, almost 40%, reserve of handling capacity.
Today, in the Russian sector of the Azov and the Black Sea basin, there are eight sea ports. According to the Federal Agency of Sea and River Transport (Rosmorrechflot), they handled 152.6 million tons of cargo in 2007, representing one third of the total throughput of Russian ports. Statistics shows that, since 2000, the volume of cargo services in Russia’s southern ports has almost doubled. But take a closer look, and the situation is not so rosy.
Sea Gate Needs Railway Approach 
Let’s start from the main sea gates in the south of Russia – the Novorossiysk Commercial Sea Port (NMTP). According to the handling volume, it is one of the largest Russian ports. In the last five years, the throughput of NMTP grew from 80 to 113 million tons, in spite of the fact that the port has almost the same area as a decade ago. Portmen say it has been possible due to implementation of advanced technologies, reloading equipment renewal, and modernisation of the handling facilities. In particular, at the end of 2007, the first stage of a grain terminal was put into operation. Its capacity is 5 million tons. The reconstruction of the berth for loading oil products into bunkering vessels, as well as that of the capacities for handling diesel fuel and carbamide and ammoniac mixture, is already completed. Special terminals are being built to service chemicals and metals. All the terminals are all-weather, i.e. they handle cargo 24 hours a day and in any conditions.
Nevertheless, in the opinion of Alexander Davydenko, Head of Rosmorrechflot, the container handling capacities must be increased in the port of Novorossiysk. Today, there is a lack of such capacities in the Azov and the Black Sea basin. According to some data, about 3 million TEU is carried via Russian ports (while the annual throughput of port container terminals in the world amounts to about 500 million TEU) and the RF southern ports handle only 300,000 TEU (10%) of the volume. Meanwhile, in the words of Grigory Minaev, Head of the Transport and Communication Department of the Krasnodarsky Krai, the demand for handling containerised cargo drawn to the Black Sea ports exceeds 1million TEU, and the figure will grow to 2 million TEU by 2015.
“A terminal must be constructed in Novorossiysk. Its minimal capacity needs to be 1.5 million TEU. However, I would rather it was 3 million TEU since the volume of containerisation is growing. And if we do not build it, the cargo will be destined to Ukraine and other states, as is happening today”, considers Mr Davydenko. But this is a plan for the long term– after 2015. Now, NMTP requires dredging to service large ocean container vessels. For example, one of its main competitors – the Ukrainian port of Ilyichevsk – can already service vessels with a capacity of up to 5,000 TEU.  
Experts note that all the projects aimed at increasing the handling capacities of NMTP may be slowed down if the main problem – the railway approach to the port – remains unsolved. Without developing these approaches, the forecasted throughput of 152 million tons will hardly be reached to 2010.   
Meanwhile, the project to develop the infrastructure in the direction of the Azov and the Black Sea ports is a priority for OAO RZD. The company will invest approximately RUR 16.7 billion to enlarge the capacity of this transport corridor. Still, according to some estimations, this sum will not be enough. That is why a number of projects aimed at developing the approaches to the southern ports are supposed to be carried out at the expense of the federal budget or using public-private partnerships.

For Now, There Are Just Plans 
The problem of strengthening the railway approaches to the port of Taman must also be solved. This port may become second in the region (after NMTP) according to the throughput.
The constructed port will specialise in handling oil bulk, liquefied hydrocarbon gases, and ammonia. At the end of 2008, the first stage of the terminal handling liquefied hydrocarbon gases is to be put into operation. Its capacity is 1.5 million tons.
The programme of port construction envisages that the design capacity of the Taman port will grow to 30 million tons of liquid bulk and 3.5 million tons of solid bulk by 2015, and later the port will handle up to 70 million tons annually. But now, the investors worry about other problems: administrative barriers, delays, a complicated adjustment procedure, high rent rates.
Experts believe that the dynamics at other ports in the Azov and the Black Sea basin are rather slow. For example, the reloading capacities have not been enlarged in the port of Tuapse in years. However, today, preliminary works have started there to construct a bulk terminal that will handle 3 million tons of mineral fertilisers annually. Besides, a grain terminal is planned for the port. Its capacity will amount to 2 million tons annually. A berth to service 80,000 ton dwt tankers will also be constructed. In future, coal will be redirected to the new port on the Taman peninsula. The released capacities will be used to service other cargoes, in particular rolled metal. Meanwhile, the throughput of the Tuapse amounted to 19.6 million tons in 2007. According to forecasts, it must increase to 35 and 41 million tons by 2010 and 2015 respectively. 
The throughput of the Kavkaz port is to grow to 12 million tons by 2015. Last year, the figure was 6.38 million tons. One of the directions of port development is a ferry that includes car-passenger and railway complexes and services the lines connecting the port with Ukraine and Georgia. Also, the offer of OAO Azov Transport Company to develop the North-Western district of the port has been approved. It is targeted at receiving and servicing universal dry cargo vessels and ro-ro ferries, and to service ground storage general and bulked cargo.
The throughput of the largest Russian port in the Azov Sea, Taganrog, slightly exceeded 3 million tons last year. Its distinguishing feature is that it handles black oil. The Northern pier is to be reconstructed in the port and three universal berths are to be built there. With this, the capacity of the port is expected to rise to 4 million tons by 2015.
Another Russian southern port, Temryuk, is also carrying out a number of investment projects to increase its capacity from 1.7 million tons to 4.5 million tons annually. It is planned to construct terminals there for handling oil gas (capacity is 300,000 tons), chemicals (capacity is 300,000 tons) and diesel fuel (capacity is 300,000 tons). Last year, the port handled 1.4 million tons, including 400,000 tons of oil bulk.
The port of Eysk is also developing actively. In 2007, it handled 4.3 million tons. The port’s development plans envisage construction of four new berths to handle grain, general cargoes and containers.

Olympic Chances
The port of Sochi will develop in a special way that was defined by the Olympic Games to be held in the city in 2014. With this event in mind, a scaled development of transport infrastructure objects is planned. According to preliminary estimations, in the next four years, about RUR 316 billion will be invested in constructing them. This will be supported by funds from the federal budget as well as private investments. 
According to plans, the freight district will be transferred outside the territory of the existing port of Sochi. In future, the port is to turn into an international centre for passenger and cruise transportation. The project envisages construction of a protected water area to harbour sea yachts and to receive local passenger liners as well as cruise ships.
Two freight districts of the port will be located in the mouths of two nearby rivers. The construction materials for Olympic facilities in Sochi will be carried via them. Their construction becomes even more important if we consider the limited carrying capacity of railways and motorways in the region. And the transportation volume will be significant. According to experts, approximately 35 million tons of cargo is to be delivered to the city annually to build Olympic infrastructure. 
To recommence the local passenger sea lines, 15 passenger terminals will be reconstructed and built on the Black Sea coast. In 2008, the passenger terminals in Adler, Kurgorodok, Hosta and Loo are to be reconstructed, and they will then service passengers.

All Hopes Rest on a Port Hub
In the near future there may appear one more port in the Russian south. A decision was made to build a new deep-water port in the Black Sea. It will handle dry cargoes – coal, iron ore concentrate, containers, ro-ro, and mineral fertilisers. In the words of Alexander Davydenko, there is a shortage of capacity to handle these cargoes in the Azov and the Black Sea basin. The urgency of the new port construction is explained by the realisation of the largest infrastructure project aimed at developing the Volga-Don waterway. The waterway connects the Caspian Sea, the Azov and Black Sea basins, and the whole of central Russia.
Besides, in the new port there is supposed to be ferry communication with the ports of Turkey and other Black Sea states. The water area is supposed to be used as a port-shelter for vessels sailing via the Kerch Strait. The new port will lie 4 km away from the port of Taman, to the East of the Zhelezny Rog cape, in the waters of Solenoye lake. According to ambitious plans by the Ministry of Transport, its location (considering the Volga-Don waterway) will allow creationg of a large port hub between the states of the Black Sea and the Caspian basins.
On the whole, the RF Ministry of Transport is pinning its hopes on the ports of the Azov and the Black Sea basin. Thus, according to the Federal target programme “The Development of the RF Transport System (2010-2015)”, which is being developed now, their annual capacity is to exceed 250 million tons of cargo in the next decade. 
Viewpoint
Alexander Davydenko, 
Head of the Federal Agency of Sea and River Transport:          
– The successful development of Russian ports in the Azov and the Black Sea basin will allow fulfillment of the RF economy’s prospective demand for foreign trade cargo handling in the south of the country (at the same time, 15% of reserve capacity will be created). Simultaneously, it will make Russia less dependent on neighboring states and help it realise its transit potential.

Grigory Minaev, 
Head of the Transport and Communication Department of Krasnodarsky Krai:
– Russia is one of the leading states exporting oil and oil products. For example, about 270 million tons of oil was exported last year. In the south region, the stevedoring companies handled 52 million tons of oil and 15 million tons of oil products. Also, the Caspian pipeline consortium loaded more than 32 million tons of oil.
About 15 million tons of Russian oil and oil products were handled in Ukrainian ports.
According to the Energy Strategy of the Russian Federation and the forecasts made by the Federal Agency of Energy (Rosenergo), the RF Ministry of Economic development and Trade and basic oil extracting companies, the volume of oil and oil product exports will amount to 300 million tons by 2010, and 110 million tons of that volume will be transported via the ports of Krasnodarsky Krai. 
The existing capacities of oil bulk terminals cannot fulfil the demands of the market. So, new ones are to be built to provide additional handling of more than 30 million tons of oil and oil products annually.

Laslo Sabov, 
CEO of BSSS Group:
– Russia won the right to hold the Olympic Games in Sochi in 2014. It seems that the Russian Government and society has not realised this yet. Unfortunately, the chance to solve several very important problems for the future development of the Russian south and in particular the port of Novorossiysk is not being used.
It is expected that when the term of the rent contract with Ukraine is over, 150 warships will leave Sevastopol. It has been decided that the naval base will be placed in Tsemesskaya Bay (Novorossiysk). The construction of berths has already started. But the naval fleet will limit the work of the freight terminals in Novorossiysk, if there is place for them there at all. 
I believe it would be more logical to build deep-water berths near Adler. It will allow delivery of construction materials for the Olympics by sea. And, after the Olympic Games, the berths could be given to the Navy.
The cargo port near Sochi, as a competitor to Novorossiysk and Tuapse, is unpromising, because of its transport “dead end” locations and undeveloped road and railway infrastructure. But it alone has the “Olympic-military” option that can suit all the parties interested.
    [~DETAIL_TEXT] => 
“Smaller” Does Not Mean “Worse”
The port sector in the Azov and the Black sea water area is formed by several dozen sea ports, which have a wide range of opportunities for cargo handling. Most of them are in Ukraine, i.e. 20 sea ports and a lot of private sea terminals, fish and river ports. Their total capacity is about 176 million tons. But specialists consider this an approximate figure, especially if the ageing basic assets are taken into account.
In the region, Russia has less ports than Ukraine but, according to throughput, the RF ports are leaders. Mainly, it is due to oil bulk. Crude oil makes up over 70% of the throughput. It is delivered to the ports by pipelines. But the situation is completely different in the dry cargo sector. Russian ports have less capacity for handling dry cargo, and since the demand for export increases, there even appears to be a shortage of them. At the same time, the Ukrainian port sector, which is owned mainly by the state, has a significant, almost 40%, reserve of handling capacity.
Today, in the Russian sector of the Azov and the Black Sea basin, there are eight sea ports. According to the Federal Agency of Sea and River Transport (Rosmorrechflot), they handled 152.6 million tons of cargo in 2007, representing one third of the total throughput of Russian ports. Statistics shows that, since 2000, the volume of cargo services in Russia’s southern ports has almost doubled. But take a closer look, and the situation is not so rosy.
Sea Gate Needs Railway Approach 
Let’s start from the main sea gates in the south of Russia – the Novorossiysk Commercial Sea Port (NMTP). According to the handling volume, it is one of the largest Russian ports. In the last five years, the throughput of NMTP grew from 80 to 113 million tons, in spite of the fact that the port has almost the same area as a decade ago. Portmen say it has been possible due to implementation of advanced technologies, reloading equipment renewal, and modernisation of the handling facilities. In particular, at the end of 2007, the first stage of a grain terminal was put into operation. Its capacity is 5 million tons. The reconstruction of the berth for loading oil products into bunkering vessels, as well as that of the capacities for handling diesel fuel and carbamide and ammoniac mixture, is already completed. Special terminals are being built to service chemicals and metals. All the terminals are all-weather, i.e. they handle cargo 24 hours a day and in any conditions.
Nevertheless, in the opinion of Alexander Davydenko, Head of Rosmorrechflot, the container handling capacities must be increased in the port of Novorossiysk. Today, there is a lack of such capacities in the Azov and the Black Sea basin. According to some data, about 3 million TEU is carried via Russian ports (while the annual throughput of port container terminals in the world amounts to about 500 million TEU) and the RF southern ports handle only 300,000 TEU (10%) of the volume. Meanwhile, in the words of Grigory Minaev, Head of the Transport and Communication Department of the Krasnodarsky Krai, the demand for handling containerised cargo drawn to the Black Sea ports exceeds 1million TEU, and the figure will grow to 2 million TEU by 2015.
“A terminal must be constructed in Novorossiysk. Its minimal capacity needs to be 1.5 million TEU. However, I would rather it was 3 million TEU since the volume of containerisation is growing. And if we do not build it, the cargo will be destined to Ukraine and other states, as is happening today”, considers Mr Davydenko. But this is a plan for the long term– after 2015. Now, NMTP requires dredging to service large ocean container vessels. For example, one of its main competitors – the Ukrainian port of Ilyichevsk – can already service vessels with a capacity of up to 5,000 TEU.  
Experts note that all the projects aimed at increasing the handling capacities of NMTP may be slowed down if the main problem – the railway approach to the port – remains unsolved. Without developing these approaches, the forecasted throughput of 152 million tons will hardly be reached to 2010.   
Meanwhile, the project to develop the infrastructure in the direction of the Azov and the Black Sea ports is a priority for OAO RZD. The company will invest approximately RUR 16.7 billion to enlarge the capacity of this transport corridor. Still, according to some estimations, this sum will not be enough. That is why a number of projects aimed at developing the approaches to the southern ports are supposed to be carried out at the expense of the federal budget or using public-private partnerships.

For Now, There Are Just Plans 
The problem of strengthening the railway approaches to the port of Taman must also be solved. This port may become second in the region (after NMTP) according to the throughput.
The constructed port will specialise in handling oil bulk, liquefied hydrocarbon gases, and ammonia. At the end of 2008, the first stage of the terminal handling liquefied hydrocarbon gases is to be put into operation. Its capacity is 1.5 million tons.
The programme of port construction envisages that the design capacity of the Taman port will grow to 30 million tons of liquid bulk and 3.5 million tons of solid bulk by 2015, and later the port will handle up to 70 million tons annually. But now, the investors worry about other problems: administrative barriers, delays, a complicated adjustment procedure, high rent rates.
Experts believe that the dynamics at other ports in the Azov and the Black Sea basin are rather slow. For example, the reloading capacities have not been enlarged in the port of Tuapse in years. However, today, preliminary works have started there to construct a bulk terminal that will handle 3 million tons of mineral fertilisers annually. Besides, a grain terminal is planned for the port. Its capacity will amount to 2 million tons annually. A berth to service 80,000 ton dwt tankers will also be constructed. In future, coal will be redirected to the new port on the Taman peninsula. The released capacities will be used to service other cargoes, in particular rolled metal. Meanwhile, the throughput of the Tuapse amounted to 19.6 million tons in 2007. According to forecasts, it must increase to 35 and 41 million tons by 2010 and 2015 respectively. 
The throughput of the Kavkaz port is to grow to 12 million tons by 2015. Last year, the figure was 6.38 million tons. One of the directions of port development is a ferry that includes car-passenger and railway complexes and services the lines connecting the port with Ukraine and Georgia. Also, the offer of OAO Azov Transport Company to develop the North-Western district of the port has been approved. It is targeted at receiving and servicing universal dry cargo vessels and ro-ro ferries, and to service ground storage general and bulked cargo.
The throughput of the largest Russian port in the Azov Sea, Taganrog, slightly exceeded 3 million tons last year. Its distinguishing feature is that it handles black oil. The Northern pier is to be reconstructed in the port and three universal berths are to be built there. With this, the capacity of the port is expected to rise to 4 million tons by 2015.
Another Russian southern port, Temryuk, is also carrying out a number of investment projects to increase its capacity from 1.7 million tons to 4.5 million tons annually. It is planned to construct terminals there for handling oil gas (capacity is 300,000 tons), chemicals (capacity is 300,000 tons) and diesel fuel (capacity is 300,000 tons). Last year, the port handled 1.4 million tons, including 400,000 tons of oil bulk.
The port of Eysk is also developing actively. In 2007, it handled 4.3 million tons. The port’s development plans envisage construction of four new berths to handle grain, general cargoes and containers.

Olympic Chances
The port of Sochi will develop in a special way that was defined by the Olympic Games to be held in the city in 2014. With this event in mind, a scaled development of transport infrastructure objects is planned. According to preliminary estimations, in the next four years, about RUR 316 billion will be invested in constructing them. This will be supported by funds from the federal budget as well as private investments. 
According to plans, the freight district will be transferred outside the territory of the existing port of Sochi. In future, the port is to turn into an international centre for passenger and cruise transportation. The project envisages construction of a protected water area to harbour sea yachts and to receive local passenger liners as well as cruise ships.
Two freight districts of the port will be located in the mouths of two nearby rivers. The construction materials for Olympic facilities in Sochi will be carried via them. Their construction becomes even more important if we consider the limited carrying capacity of railways and motorways in the region. And the transportation volume will be significant. According to experts, approximately 35 million tons of cargo is to be delivered to the city annually to build Olympic infrastructure. 
To recommence the local passenger sea lines, 15 passenger terminals will be reconstructed and built on the Black Sea coast. In 2008, the passenger terminals in Adler, Kurgorodok, Hosta and Loo are to be reconstructed, and they will then service passengers.

All Hopes Rest on a Port Hub
In the near future there may appear one more port in the Russian south. A decision was made to build a new deep-water port in the Black Sea. It will handle dry cargoes – coal, iron ore concentrate, containers, ro-ro, and mineral fertilisers. In the words of Alexander Davydenko, there is a shortage of capacity to handle these cargoes in the Azov and the Black Sea basin. The urgency of the new port construction is explained by the realisation of the largest infrastructure project aimed at developing the Volga-Don waterway. The waterway connects the Caspian Sea, the Azov and Black Sea basins, and the whole of central Russia.
Besides, in the new port there is supposed to be ferry communication with the ports of Turkey and other Black Sea states. The water area is supposed to be used as a port-shelter for vessels sailing via the Kerch Strait. The new port will lie 4 km away from the port of Taman, to the East of the Zhelezny Rog cape, in the waters of Solenoye lake. According to ambitious plans by the Ministry of Transport, its location (considering the Volga-Don waterway) will allow creationg of a large port hub between the states of the Black Sea and the Caspian basins.
On the whole, the RF Ministry of Transport is pinning its hopes on the ports of the Azov and the Black Sea basin. Thus, according to the Federal target programme “The Development of the RF Transport System (2010-2015)”, which is being developed now, their annual capacity is to exceed 250 million tons of cargo in the next decade. 
Viewpoint
Alexander Davydenko, 
Head of the Federal Agency of Sea and River Transport:          
– The successful development of Russian ports in the Azov and the Black Sea basin will allow fulfillment of the RF economy’s prospective demand for foreign trade cargo handling in the south of the country (at the same time, 15% of reserve capacity will be created). Simultaneously, it will make Russia less dependent on neighboring states and help it realise its transit potential.

Grigory Minaev, 
Head of the Transport and Communication Department of Krasnodarsky Krai:
– Russia is one of the leading states exporting oil and oil products. For example, about 270 million tons of oil was exported last year. In the south region, the stevedoring companies handled 52 million tons of oil and 15 million tons of oil products. Also, the Caspian pipeline consortium loaded more than 32 million tons of oil.
About 15 million tons of Russian oil and oil products were handled in Ukrainian ports.
According to the Energy Strategy of the Russian Federation and the forecasts made by the Federal Agency of Energy (Rosenergo), the RF Ministry of Economic development and Trade and basic oil extracting companies, the volume of oil and oil product exports will amount to 300 million tons by 2010, and 110 million tons of that volume will be transported via the ports of Krasnodarsky Krai. 
The existing capacities of oil bulk terminals cannot fulfil the demands of the market. So, new ones are to be built to provide additional handling of more than 30 million tons of oil and oil products annually.

Laslo Sabov, 
CEO of BSSS Group:
– Russia won the right to hold the Olympic Games in Sochi in 2014. It seems that the Russian Government and society has not realised this yet. Unfortunately, the chance to solve several very important problems for the future development of the Russian south and in particular the port of Novorossiysk is not being used.
It is expected that when the term of the rent contract with Ukraine is over, 150 warships will leave Sevastopol. It has been decided that the naval base will be placed in Tsemesskaya Bay (Novorossiysk). The construction of berths has already started. But the naval fleet will limit the work of the freight terminals in Novorossiysk, if there is place for them there at all. 
I believe it would be more logical to build deep-water berths near Adler. It will allow delivery of construction materials for the Olympics by sea. And, after the Olympic Games, the berths could be given to the Navy.
The cargo port near Sochi, as a competitor to Novorossiysk and Tuapse, is unpromising, because of its transport “dead end” locations and undeveloped road and railway infrastructure. But it alone has the “Olympic-military” option that can suit all the parties interested.
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    [~PREVIEW_TEXT] => The reserves of the handling capacity of two basic Russian ports on the Black Sea shore – Novorossiysk and Tuapse – are almost exhausted. Meanwhile, in the Azov and the Black Sea basin, the cargo flow grows and the demand of cargo owners for freight transportation to the Mediterranean countries increases. Will Russian southern port accept the challenge?
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What a Lawyer and Investor Must Bear in Mind
– Mr Klyavin, much happened in the sea transport sector in 2007. What events do you consider most important for the RF Transport Ministry?
– Last November, Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” was adopted. And I can’t but mention that last year the commercial Russian-German railway ferry Baltiysk-Sassnitz was put into operation. It was in 2007 that nuclear-powered icebreaker “50 Let Pobedy” started work. 
A number of scaled agreements were signed. It is worth noting that the first bilateral agreement on transport cooperation in the Caspian Sea was concluded by the Governments of the Russian Federation and Kazakhstan in October 2007. In December, the RF Ministry of Transport and Lloyd’s Register signed the first agreement delegating powers to hold examinations and give certificates to vessels registered in the Russian International Vessel Register.
I would like to expand on the most important legislative acts developed either by the Ministry of Transport or with its help. Last year, several Federal Laws were adopted: “On Transport Safety”, “On Ratification of the Convention on Social and Consumer Servicing Sailors in Sea and Port (Convention № 163 International Labour Organisation)”, “On Ratification of the Convention (reviewed) of the Year 2003 on Identity Cards for Sailors (Convention № 185 International Labour Organisation)”, “On Russia’s Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways”.
Developed by the Transport Ministry, the Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” came in force. The law confirms the targets of state regulation of activities in the sea ports, regulates formation of project documents for development and construction of sea terminals, defines the procedure for setting and changing the borders of water areas and the territory of a sea port, etc.
– Is there any demand for adopting any Governmental acts to carry out the Federal Law?
– Yes, there is. The law envisages as the need to adopt a number of acts by the Government. For example, ones that will regulate issues of implementing the new form of information registration in sea ports (the List of Sea Ports), setting to rights in the ports, providing control in the sea border check-points, etc. 
Eight draft regulations are to be developed before the end of 2008. 
Coming back to the previous question, I would like to mention that the following important changes refer to the execution of the Federal Law “On Amendments to Separate Legislative Acts of the RF Due to Creation of Russian International Vessel Registration”. The Government issued necessary legislative acts to put the second Register in force and to make it attractive for Russian ship owners. 
In particular, in 2007 the Decree “On the Order of Giving Tariff Preferences in the Form of Remission of Import Customs Duty on Vessels Registered in Russian International Vessel Register”, developed by Russian Transport Ministry, was adopted. So, the second Register has its own advantages for ship owners. Besides, the Governmental Decree “On Amendments to Some Decrees of the RF Government on the Issues of Sea and River Transport” was approved last year. It was developed to settle the cases and the order of providing coastal trade transportation and towage by vessels registered in the Russian International Vessel Register.
One more important law came in force. It envisages that owners of ships included in the Russian International Vessel Register can insure their property interest at either a Russian or foreign insurer. 
By the way, 200 vessels have now been registered in the Register. Creation of the Register became an important step to returning the Russian fleet under the RF flag. However, the step was not the only one. Measures will be taken to improve national legislation to remove all obstacles preventing fleets being attracted to come under the RF flag.

Ports: Privileges and Transparency
– What are the basic measures taken today to improve the competitiveness of Russian port complexes in the international market? 
– A substantial factor to increase the competitiveness of Russian sea ports is creation of special economic port zones. Such zones will attract additional investment to develop high-tech port infrastructure and carry out the logistic principles of cargo delivery organisation. Tax preferences used in the zones will increase the competitiveness of Russian ports. 
But for the normative and legislative regulation of the ports’ activities, the Ministry pays much attention to development of their infrastructure. Today the Federal Target Programme “Modernisation of Russian Transport System (2002-2010)” is being corrected to prolong it to 2015. Elaboration of investment programmes to develop Russian terminals has been organised: the means from the federal budget will be invested in speeding up development of ports that provide the major growth in handling export, import and transit cargoes. At the same time, we plan not only to enlarge the current infrastructure capacities, but to reduce the investment constituent in port dues.
Creation of such objects will attract private investment into development of infrastructure and handling capacities, and the volume of the investment will exceed the budget expenses. Special attention is paid to container terminal construction. Today, the level of containerisation is much lower in Russia than in other countries, and we have to reduce the gap in the shortest time possible. The container handling capacities in the following ports are to increase: Ust-Luga – to 3.5 million TEU, Baltiysk – to 3.5 million TEU, Novorossiysk – to 2 million TEU, and Vostochny – to 5 million TEU.
– Has the system of port dues been reviewed already?
– Russian Federal Tariff Service approved new rates of port dues on December 20, 2007. They were set to compensate for the expenses of safe navigation in the RF sea ports and at the approaches to them. The rates that used to be in force before were set for the administration of the sea ports, and they had not been reviewed since 1995.
A number of principal innovations were used to set the new rates of port dues. Firstly, in line with world practice, we transferred to a new unit of account (gross register tonnage). Now, data from the metering certificate of a vessel – a legal document containing its characteristics – will be used to define the due.
Also, the rates of port dues will now be in roubles, which balances the interests of ship owners and the organisations that specialise in provision of safe navigation in ports and at the approaches to them. For example, due to the dollar dropping in price from RUR 29 in 2004 to RUR 24.5 in 2007, the losses of FGUP Rosmorport (federal state unitary enterprise) amounted to RUR 800 million. Administrations of sea ports and FGUP Rosmorport tested the application of the new port dues. According to them, their share in the total cost of a call at the RF sea ports is less than 10%.
– What problems exist in the Arctic and the Antarctic? What will be done to solve them?
– The Northern Sea Route is a major national waterway, playing an important role in developing the manufacturing capacities in the Russian North. And development of the Route as a constituent of the Arctic transport system is one of our priorities now. It is clear that it is impossible to exploit the Northern Sea Route without icebreaker support. The Arctic ice-breaking fleet is owned by the state. There are 7 active nuclear-powered ice-breakers and 5 linear diesel and electric ice-breakers. According to an estimation of the necessary ice-breaking support for cargo transportation by sea to 2020 (taking into account prolonging the life-time of acting nuclear-powered and diesel icebreakers), it is necessary to build 10 icebreakers of various types. Also, the organisational and legal system of managing the Northern Sea Route is to be improved, especially in terms of reforming management of the nuclear-powered ice-breaker fleet and strengthening shipping regulation in the region.     

Consortium for Volga-Don Canal and Money for Volga-Baltic Waterway
– Could you comment on the current state of the inner waterways infrastructure? What are the measures to be taken to improve it?
– Today, the factor restraining the carrying capacity of inner waterways is the presence of limiting sections in the Single deep-water system in the European part of Russia, including the Volgo-Don Canal and the Volga-Baltic waterway and the Volga (near Nizhny Novgorod). To reach the first two targets, it is planned to carry out the projects aimed at developing Volgo-Don Canal and the Volga-Baltic waterway. The feasibility study of the infrastructure project on the Volga-Don waterway is to be completed in 2009. In accordance with the order of the RF President, an international consortium will be created to carry out the project.
The investment project “Development of the infrastructure of Volga-Baltic waterway for its stable functioning and increasing the carrying capacity after construction of the second line of the lock of Nizhne-Svirsky waterworks facility” is to be carried out using a public-private partnership and attracting the means from the RF Investment fund. The business plan of the project was approved last October by the Investment Committee and recommended for reading in the RF Government.
In 2008-2010, RUR 26.15 billion is to be spent on the maintenance of the inner waterways and shipping hydrotechnical facilities, including RUR 8.29 billion that will be invested in 2008. The volume of investments will enlarge the navigable passes to the necessary guaranteed size in specific sectors of the inner waterways and increase efficiency and safety when using shipping hydrotechnical facilities.
– How are the problems of international integration solved at the inland water transport?
– One of the priority factors influencing the further economic development of the RF is creation of the conditions necessary for free trade. Due to historical and geographical factors, the basic constituent of the process is development of relations, including economic ones, between Russia and the EU.
Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways is of much importance for harmonising Russian and international rules of freight transportation. For Russian participants in foreign trade, fulfilment of the requirements of the Convention will be the most important part of the commercial support for river-sea freight transportation, starting with the Danube and the Rhine ports.   
Nowadays, Russian inner waterways are still not open to vessels flying a foreign flag but it is possible by Government decision. For example, 22 and 33 vessels under foreign flags were permitted to sail along Russian rivers in 2006 and 2007 respectively. 
– What is, in your opinion, the future of Russian river transport? Will there be any changes in 2008?
– Now the RF Transport Ministry and the Federal Agency of Sea and River Transport are developing the concept of reforming the system of Russian inner waterways management. It will make the activities of the state waterways and shipping basin departments (GBUVPiS) meet the current legislation in terms of separating the functions of state bodies and business activities. The concept of the reform envisages that reorganised GBUVPiS will have the function of state regulation, and a new federal state unitary enterprise will hold for business activities on the inner waterways.  Being state enterprises, GBUVPiS will have administrative powers to provide safe navigation and function as budget manager. It also will be in charge of operative management of shipping hydrotechnical facilities. 
by Nadezhda Vtorushina 
    [~DETAIL_TEXT] => 
What a Lawyer and Investor Must Bear in Mind
– Mr Klyavin, much happened in the sea transport sector in 2007. What events do you consider most important for the RF Transport Ministry?
– Last November, Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” was adopted. And I can’t but mention that last year the commercial Russian-German railway ferry Baltiysk-Sassnitz was put into operation. It was in 2007 that nuclear-powered icebreaker “50 Let Pobedy” started work. 
A number of scaled agreements were signed. It is worth noting that the first bilateral agreement on transport cooperation in the Caspian Sea was concluded by the Governments of the Russian Federation and Kazakhstan in October 2007. In December, the RF Ministry of Transport and Lloyd’s Register signed the first agreement delegating powers to hold examinations and give certificates to vessels registered in the Russian International Vessel Register.
I would like to expand on the most important legislative acts developed either by the Ministry of Transport or with its help. Last year, several Federal Laws were adopted: “On Transport Safety”, “On Ratification of the Convention on Social and Consumer Servicing Sailors in Sea and Port (Convention № 163 International Labour Organisation)”, “On Ratification of the Convention (reviewed) of the Year 2003 on Identity Cards for Sailors (Convention № 185 International Labour Organisation)”, “On Russia’s Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways”.
Developed by the Transport Ministry, the Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” came in force. The law confirms the targets of state regulation of activities in the sea ports, regulates formation of project documents for development and construction of sea terminals, defines the procedure for setting and changing the borders of water areas and the territory of a sea port, etc.
– Is there any demand for adopting any Governmental acts to carry out the Federal Law?
– Yes, there is. The law envisages as the need to adopt a number of acts by the Government. For example, ones that will regulate issues of implementing the new form of information registration in sea ports (the List of Sea Ports), setting to rights in the ports, providing control in the sea border check-points, etc. 
Eight draft regulations are to be developed before the end of 2008. 
Coming back to the previous question, I would like to mention that the following important changes refer to the execution of the Federal Law “On Amendments to Separate Legislative Acts of the RF Due to Creation of Russian International Vessel Registration”. The Government issued necessary legislative acts to put the second Register in force and to make it attractive for Russian ship owners. 
In particular, in 2007 the Decree “On the Order of Giving Tariff Preferences in the Form of Remission of Import Customs Duty on Vessels Registered in Russian International Vessel Register”, developed by Russian Transport Ministry, was adopted. So, the second Register has its own advantages for ship owners. Besides, the Governmental Decree “On Amendments to Some Decrees of the RF Government on the Issues of Sea and River Transport” was approved last year. It was developed to settle the cases and the order of providing coastal trade transportation and towage by vessels registered in the Russian International Vessel Register.
One more important law came in force. It envisages that owners of ships included in the Russian International Vessel Register can insure their property interest at either a Russian or foreign insurer. 
By the way, 200 vessels have now been registered in the Register. Creation of the Register became an important step to returning the Russian fleet under the RF flag. However, the step was not the only one. Measures will be taken to improve national legislation to remove all obstacles preventing fleets being attracted to come under the RF flag.

Ports: Privileges and Transparency
– What are the basic measures taken today to improve the competitiveness of Russian port complexes in the international market? 
– A substantial factor to increase the competitiveness of Russian sea ports is creation of special economic port zones. Such zones will attract additional investment to develop high-tech port infrastructure and carry out the logistic principles of cargo delivery organisation. Tax preferences used in the zones will increase the competitiveness of Russian ports. 
But for the normative and legislative regulation of the ports’ activities, the Ministry pays much attention to development of their infrastructure. Today the Federal Target Programme “Modernisation of Russian Transport System (2002-2010)” is being corrected to prolong it to 2015. Elaboration of investment programmes to develop Russian terminals has been organised: the means from the federal budget will be invested in speeding up development of ports that provide the major growth in handling export, import and transit cargoes. At the same time, we plan not only to enlarge the current infrastructure capacities, but to reduce the investment constituent in port dues.
Creation of such objects will attract private investment into development of infrastructure and handling capacities, and the volume of the investment will exceed the budget expenses. Special attention is paid to container terminal construction. Today, the level of containerisation is much lower in Russia than in other countries, and we have to reduce the gap in the shortest time possible. The container handling capacities in the following ports are to increase: Ust-Luga – to 3.5 million TEU, Baltiysk – to 3.5 million TEU, Novorossiysk – to 2 million TEU, and Vostochny – to 5 million TEU.
– Has the system of port dues been reviewed already?
– Russian Federal Tariff Service approved new rates of port dues on December 20, 2007. They were set to compensate for the expenses of safe navigation in the RF sea ports and at the approaches to them. The rates that used to be in force before were set for the administration of the sea ports, and they had not been reviewed since 1995.
A number of principal innovations were used to set the new rates of port dues. Firstly, in line with world practice, we transferred to a new unit of account (gross register tonnage). Now, data from the metering certificate of a vessel – a legal document containing its characteristics – will be used to define the due.
Also, the rates of port dues will now be in roubles, which balances the interests of ship owners and the organisations that specialise in provision of safe navigation in ports and at the approaches to them. For example, due to the dollar dropping in price from RUR 29 in 2004 to RUR 24.5 in 2007, the losses of FGUP Rosmorport (federal state unitary enterprise) amounted to RUR 800 million. Administrations of sea ports and FGUP Rosmorport tested the application of the new port dues. According to them, their share in the total cost of a call at the RF sea ports is less than 10%.
– What problems exist in the Arctic and the Antarctic? What will be done to solve them?
– The Northern Sea Route is a major national waterway, playing an important role in developing the manufacturing capacities in the Russian North. And development of the Route as a constituent of the Arctic transport system is one of our priorities now. It is clear that it is impossible to exploit the Northern Sea Route without icebreaker support. The Arctic ice-breaking fleet is owned by the state. There are 7 active nuclear-powered ice-breakers and 5 linear diesel and electric ice-breakers. According to an estimation of the necessary ice-breaking support for cargo transportation by sea to 2020 (taking into account prolonging the life-time of acting nuclear-powered and diesel icebreakers), it is necessary to build 10 icebreakers of various types. Also, the organisational and legal system of managing the Northern Sea Route is to be improved, especially in terms of reforming management of the nuclear-powered ice-breaker fleet and strengthening shipping regulation in the region.     

Consortium for Volga-Don Canal and Money for Volga-Baltic Waterway
– Could you comment on the current state of the inner waterways infrastructure? What are the measures to be taken to improve it?
– Today, the factor restraining the carrying capacity of inner waterways is the presence of limiting sections in the Single deep-water system in the European part of Russia, including the Volgo-Don Canal and the Volga-Baltic waterway and the Volga (near Nizhny Novgorod). To reach the first two targets, it is planned to carry out the projects aimed at developing Volgo-Don Canal and the Volga-Baltic waterway. The feasibility study of the infrastructure project on the Volga-Don waterway is to be completed in 2009. In accordance with the order of the RF President, an international consortium will be created to carry out the project.
The investment project “Development of the infrastructure of Volga-Baltic waterway for its stable functioning and increasing the carrying capacity after construction of the second line of the lock of Nizhne-Svirsky waterworks facility” is to be carried out using a public-private partnership and attracting the means from the RF Investment fund. The business plan of the project was approved last October by the Investment Committee and recommended for reading in the RF Government.
In 2008-2010, RUR 26.15 billion is to be spent on the maintenance of the inner waterways and shipping hydrotechnical facilities, including RUR 8.29 billion that will be invested in 2008. The volume of investments will enlarge the navigable passes to the necessary guaranteed size in specific sectors of the inner waterways and increase efficiency and safety when using shipping hydrotechnical facilities.
– How are the problems of international integration solved at the inland water transport?
– One of the priority factors influencing the further economic development of the RF is creation of the conditions necessary for free trade. Due to historical and geographical factors, the basic constituent of the process is development of relations, including economic ones, between Russia and the EU.
Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways is of much importance for harmonising Russian and international rules of freight transportation. For Russian participants in foreign trade, fulfilment of the requirements of the Convention will be the most important part of the commercial support for river-sea freight transportation, starting with the Danube and the Rhine ports.   
Nowadays, Russian inner waterways are still not open to vessels flying a foreign flag but it is possible by Government decision. For example, 22 and 33 vessels under foreign flags were permitted to sail along Russian rivers in 2006 and 2007 respectively. 
– What is, in your opinion, the future of Russian river transport? Will there be any changes in 2008?
– Now the RF Transport Ministry and the Federal Agency of Sea and River Transport are developing the concept of reforming the system of Russian inner waterways management. It will make the activities of the state waterways and shipping basin departments (GBUVPiS) meet the current legislation in terms of separating the functions of state bodies and business activities. The concept of the reform envisages that reorganised GBUVPiS will have the function of state regulation, and a new federal state unitary enterprise will hold for business activities on the inner waterways.  Being state enterprises, GBUVPiS will have administrative powers to provide safe navigation and function as budget manager. It also will be in charge of operative management of shipping hydrotechnical facilities. 
by Nadezhda Vtorushina 
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    [~PREVIEW_TEXT] => Last year, the RF Ministry of Transport renewed the current normative and legislative base for several key sectors of the transport market. Alexey Klyavin, Director of State Policy for Sea and River Transport Department, Russian Ministry of Transport, told a correspondent of The RZD-Partner International about the changes in legislation and their consequences for the market.
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What a Lawyer and Investor Must Bear in Mind
– Mr Klyavin, much happened in the sea transport sector in 2007. What events do you consider most important for the RF Transport Ministry?
– Last November, Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” was adopted. And I can’t but mention that last year the commercial Russian-German railway ferry Baltiysk-Sassnitz was put into operation. It was in 2007 that nuclear-powered icebreaker “50 Let Pobedy” started work. 
A number of scaled agreements were signed. It is worth noting that the first bilateral agreement on transport cooperation in the Caspian Sea was concluded by the Governments of the Russian Federation and Kazakhstan in October 2007. In December, the RF Ministry of Transport and Lloyd’s Register signed the first agreement delegating powers to hold examinations and give certificates to vessels registered in the Russian International Vessel Register.
I would like to expand on the most important legislative acts developed either by the Ministry of Transport or with its help. Last year, several Federal Laws were adopted: “On Transport Safety”, “On Ratification of the Convention on Social and Consumer Servicing Sailors in Sea and Port (Convention № 163 International Labour Organisation)”, “On Ratification of the Convention (reviewed) of the Year 2003 on Identity Cards for Sailors (Convention № 185 International Labour Organisation)”, “On Russia’s Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways”.
Developed by the Transport Ministry, the Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” came in force. The law confirms the targets of state regulation of activities in the sea ports, regulates formation of project documents for development and construction of sea terminals, defines the procedure for setting and changing the borders of water areas and the territory of a sea port, etc.
– Is there any demand for adopting any Governmental acts to carry out the Federal Law?
– Yes, there is. The law envisages as the need to adopt a number of acts by the Government. For example, ones that will regulate issues of implementing the new form of information registration in sea ports (the List of Sea Ports), setting to rights in the ports, providing control in the sea border check-points, etc. 
Eight draft regulations are to be developed before the end of 2008. 
Coming back to the previous question, I would like to mention that the following important changes refer to the execution of the Federal Law “On Amendments to Separate Legislative Acts of the RF Due to Creation of Russian International Vessel Registration”. The Government issued necessary legislative acts to put the second Register in force and to make it attractive for Russian ship owners. 
In particular, in 2007 the Decree “On the Order of Giving Tariff Preferences in the Form of Remission of Import Customs Duty on Vessels Registered in Russian International Vessel Register”, developed by Russian Transport Ministry, was adopted. So, the second Register has its own advantages for ship owners. Besides, the Governmental Decree “On Amendments to Some Decrees of the RF Government on the Issues of Sea and River Transport” was approved last year. It was developed to settle the cases and the order of providing coastal trade transportation and towage by vessels registered in the Russian International Vessel Register.
One more important law came in force. It envisages that owners of ships included in the Russian International Vessel Register can insure their property interest at either a Russian or foreign insurer. 
By the way, 200 vessels have now been registered in the Register. Creation of the Register became an important step to returning the Russian fleet under the RF flag. However, the step was not the only one. Measures will be taken to improve national legislation to remove all obstacles preventing fleets being attracted to come under the RF flag.

Ports: Privileges and Transparency
– What are the basic measures taken today to improve the competitiveness of Russian port complexes in the international market? 
– A substantial factor to increase the competitiveness of Russian sea ports is creation of special economic port zones. Such zones will attract additional investment to develop high-tech port infrastructure and carry out the logistic principles of cargo delivery organisation. Tax preferences used in the zones will increase the competitiveness of Russian ports. 
But for the normative and legislative regulation of the ports’ activities, the Ministry pays much attention to development of their infrastructure. Today the Federal Target Programme “Modernisation of Russian Transport System (2002-2010)” is being corrected to prolong it to 2015. Elaboration of investment programmes to develop Russian terminals has been organised: the means from the federal budget will be invested in speeding up development of ports that provide the major growth in handling export, import and transit cargoes. At the same time, we plan not only to enlarge the current infrastructure capacities, but to reduce the investment constituent in port dues.
Creation of such objects will attract private investment into development of infrastructure and handling capacities, and the volume of the investment will exceed the budget expenses. Special attention is paid to container terminal construction. Today, the level of containerisation is much lower in Russia than in other countries, and we have to reduce the gap in the shortest time possible. The container handling capacities in the following ports are to increase: Ust-Luga – to 3.5 million TEU, Baltiysk – to 3.5 million TEU, Novorossiysk – to 2 million TEU, and Vostochny – to 5 million TEU.
– Has the system of port dues been reviewed already?
– Russian Federal Tariff Service approved new rates of port dues on December 20, 2007. They were set to compensate for the expenses of safe navigation in the RF sea ports and at the approaches to them. The rates that used to be in force before were set for the administration of the sea ports, and they had not been reviewed since 1995.
A number of principal innovations were used to set the new rates of port dues. Firstly, in line with world practice, we transferred to a new unit of account (gross register tonnage). Now, data from the metering certificate of a vessel – a legal document containing its characteristics – will be used to define the due.
Also, the rates of port dues will now be in roubles, which balances the interests of ship owners and the organisations that specialise in provision of safe navigation in ports and at the approaches to them. For example, due to the dollar dropping in price from RUR 29 in 2004 to RUR 24.5 in 2007, the losses of FGUP Rosmorport (federal state unitary enterprise) amounted to RUR 800 million. Administrations of sea ports and FGUP Rosmorport tested the application of the new port dues. According to them, their share in the total cost of a call at the RF sea ports is less than 10%.
– What problems exist in the Arctic and the Antarctic? What will be done to solve them?
– The Northern Sea Route is a major national waterway, playing an important role in developing the manufacturing capacities in the Russian North. And development of the Route as a constituent of the Arctic transport system is one of our priorities now. It is clear that it is impossible to exploit the Northern Sea Route without icebreaker support. The Arctic ice-breaking fleet is owned by the state. There are 7 active nuclear-powered ice-breakers and 5 linear diesel and electric ice-breakers. According to an estimation of the necessary ice-breaking support for cargo transportation by sea to 2020 (taking into account prolonging the life-time of acting nuclear-powered and diesel icebreakers), it is necessary to build 10 icebreakers of various types. Also, the organisational and legal system of managing the Northern Sea Route is to be improved, especially in terms of reforming management of the nuclear-powered ice-breaker fleet and strengthening shipping regulation in the region.     

Consortium for Volga-Don Canal and Money for Volga-Baltic Waterway
– Could you comment on the current state of the inner waterways infrastructure? What are the measures to be taken to improve it?
– Today, the factor restraining the carrying capacity of inner waterways is the presence of limiting sections in the Single deep-water system in the European part of Russia, including the Volgo-Don Canal and the Volga-Baltic waterway and the Volga (near Nizhny Novgorod). To reach the first two targets, it is planned to carry out the projects aimed at developing Volgo-Don Canal and the Volga-Baltic waterway. The feasibility study of the infrastructure project on the Volga-Don waterway is to be completed in 2009. In accordance with the order of the RF President, an international consortium will be created to carry out the project.
The investment project “Development of the infrastructure of Volga-Baltic waterway for its stable functioning and increasing the carrying capacity after construction of the second line of the lock of Nizhne-Svirsky waterworks facility” is to be carried out using a public-private partnership and attracting the means from the RF Investment fund. The business plan of the project was approved last October by the Investment Committee and recommended for reading in the RF Government.
In 2008-2010, RUR 26.15 billion is to be spent on the maintenance of the inner waterways and shipping hydrotechnical facilities, including RUR 8.29 billion that will be invested in 2008. The volume of investments will enlarge the navigable passes to the necessary guaranteed size in specific sectors of the inner waterways and increase efficiency and safety when using shipping hydrotechnical facilities.
– How are the problems of international integration solved at the inland water transport?
– One of the priority factors influencing the further economic development of the RF is creation of the conditions necessary for free trade. Due to historical and geographical factors, the basic constituent of the process is development of relations, including economic ones, between Russia and the EU.
Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways is of much importance for harmonising Russian and international rules of freight transportation. For Russian participants in foreign trade, fulfilment of the requirements of the Convention will be the most important part of the commercial support for river-sea freight transportation, starting with the Danube and the Rhine ports.   
Nowadays, Russian inner waterways are still not open to vessels flying a foreign flag but it is possible by Government decision. For example, 22 and 33 vessels under foreign flags were permitted to sail along Russian rivers in 2006 and 2007 respectively. 
– What is, in your opinion, the future of Russian river transport? Will there be any changes in 2008?
– Now the RF Transport Ministry and the Federal Agency of Sea and River Transport are developing the concept of reforming the system of Russian inner waterways management. It will make the activities of the state waterways and shipping basin departments (GBUVPiS) meet the current legislation in terms of separating the functions of state bodies and business activities. The concept of the reform envisages that reorganised GBUVPiS will have the function of state regulation, and a new federal state unitary enterprise will hold for business activities on the inner waterways.  Being state enterprises, GBUVPiS will have administrative powers to provide safe navigation and function as budget manager. It also will be in charge of operative management of shipping hydrotechnical facilities. 
by Nadezhda Vtorushina 
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What a Lawyer and Investor Must Bear in Mind
– Mr Klyavin, much happened in the sea transport sector in 2007. What events do you consider most important for the RF Transport Ministry?
– Last November, Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” was adopted. And I can’t but mention that last year the commercial Russian-German railway ferry Baltiysk-Sassnitz was put into operation. It was in 2007 that nuclear-powered icebreaker “50 Let Pobedy” started work. 
A number of scaled agreements were signed. It is worth noting that the first bilateral agreement on transport cooperation in the Caspian Sea was concluded by the Governments of the Russian Federation and Kazakhstan in October 2007. In December, the RF Ministry of Transport and Lloyd’s Register signed the first agreement delegating powers to hold examinations and give certificates to vessels registered in the Russian International Vessel Register.
I would like to expand on the most important legislative acts developed either by the Ministry of Transport or with its help. Last year, several Federal Laws were adopted: “On Transport Safety”, “On Ratification of the Convention on Social and Consumer Servicing Sailors in Sea and Port (Convention № 163 International Labour Organisation)”, “On Ratification of the Convention (reviewed) of the Year 2003 on Identity Cards for Sailors (Convention № 185 International Labour Organisation)”, “On Russia’s Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways”.
Developed by the Transport Ministry, the Federal Law “On Sea Ports of the Russian Federation and Amendments to Separate Legislative Acts of the RF” came in force. The law confirms the targets of state regulation of activities in the sea ports, regulates formation of project documents for development and construction of sea terminals, defines the procedure for setting and changing the borders of water areas and the territory of a sea port, etc.
– Is there any demand for adopting any Governmental acts to carry out the Federal Law?
– Yes, there is. The law envisages as the need to adopt a number of acts by the Government. For example, ones that will regulate issues of implementing the new form of information registration in sea ports (the List of Sea Ports), setting to rights in the ports, providing control in the sea border check-points, etc. 
Eight draft regulations are to be developed before the end of 2008. 
Coming back to the previous question, I would like to mention that the following important changes refer to the execution of the Federal Law “On Amendments to Separate Legislative Acts of the RF Due to Creation of Russian International Vessel Registration”. The Government issued necessary legislative acts to put the second Register in force and to make it attractive for Russian ship owners. 
In particular, in 2007 the Decree “On the Order of Giving Tariff Preferences in the Form of Remission of Import Customs Duty on Vessels Registered in Russian International Vessel Register”, developed by Russian Transport Ministry, was adopted. So, the second Register has its own advantages for ship owners. Besides, the Governmental Decree “On Amendments to Some Decrees of the RF Government on the Issues of Sea and River Transport” was approved last year. It was developed to settle the cases and the order of providing coastal trade transportation and towage by vessels registered in the Russian International Vessel Register.
One more important law came in force. It envisages that owners of ships included in the Russian International Vessel Register can insure their property interest at either a Russian or foreign insurer. 
By the way, 200 vessels have now been registered in the Register. Creation of the Register became an important step to returning the Russian fleet under the RF flag. However, the step was not the only one. Measures will be taken to improve national legislation to remove all obstacles preventing fleets being attracted to come under the RF flag.

Ports: Privileges and Transparency
– What are the basic measures taken today to improve the competitiveness of Russian port complexes in the international market? 
– A substantial factor to increase the competitiveness of Russian sea ports is creation of special economic port zones. Such zones will attract additional investment to develop high-tech port infrastructure and carry out the logistic principles of cargo delivery organisation. Tax preferences used in the zones will increase the competitiveness of Russian ports. 
But for the normative and legislative regulation of the ports’ activities, the Ministry pays much attention to development of their infrastructure. Today the Federal Target Programme “Modernisation of Russian Transport System (2002-2010)” is being corrected to prolong it to 2015. Elaboration of investment programmes to develop Russian terminals has been organised: the means from the federal budget will be invested in speeding up development of ports that provide the major growth in handling export, import and transit cargoes. At the same time, we plan not only to enlarge the current infrastructure capacities, but to reduce the investment constituent in port dues.
Creation of such objects will attract private investment into development of infrastructure and handling capacities, and the volume of the investment will exceed the budget expenses. Special attention is paid to container terminal construction. Today, the level of containerisation is much lower in Russia than in other countries, and we have to reduce the gap in the shortest time possible. The container handling capacities in the following ports are to increase: Ust-Luga – to 3.5 million TEU, Baltiysk – to 3.5 million TEU, Novorossiysk – to 2 million TEU, and Vostochny – to 5 million TEU.
– Has the system of port dues been reviewed already?
– Russian Federal Tariff Service approved new rates of port dues on December 20, 2007. They were set to compensate for the expenses of safe navigation in the RF sea ports and at the approaches to them. The rates that used to be in force before were set for the administration of the sea ports, and they had not been reviewed since 1995.
A number of principal innovations were used to set the new rates of port dues. Firstly, in line with world practice, we transferred to a new unit of account (gross register tonnage). Now, data from the metering certificate of a vessel – a legal document containing its characteristics – will be used to define the due.
Also, the rates of port dues will now be in roubles, which balances the interests of ship owners and the organisations that specialise in provision of safe navigation in ports and at the approaches to them. For example, due to the dollar dropping in price from RUR 29 in 2004 to RUR 24.5 in 2007, the losses of FGUP Rosmorport (federal state unitary enterprise) amounted to RUR 800 million. Administrations of sea ports and FGUP Rosmorport tested the application of the new port dues. According to them, their share in the total cost of a call at the RF sea ports is less than 10%.
– What problems exist in the Arctic and the Antarctic? What will be done to solve them?
– The Northern Sea Route is a major national waterway, playing an important role in developing the manufacturing capacities in the Russian North. And development of the Route as a constituent of the Arctic transport system is one of our priorities now. It is clear that it is impossible to exploit the Northern Sea Route without icebreaker support. The Arctic ice-breaking fleet is owned by the state. There are 7 active nuclear-powered ice-breakers and 5 linear diesel and electric ice-breakers. According to an estimation of the necessary ice-breaking support for cargo transportation by sea to 2020 (taking into account prolonging the life-time of acting nuclear-powered and diesel icebreakers), it is necessary to build 10 icebreakers of various types. Also, the organisational and legal system of managing the Northern Sea Route is to be improved, especially in terms of reforming management of the nuclear-powered ice-breaker fleet and strengthening shipping regulation in the region.     

Consortium for Volga-Don Canal and Money for Volga-Baltic Waterway
– Could you comment on the current state of the inner waterways infrastructure? What are the measures to be taken to improve it?
– Today, the factor restraining the carrying capacity of inner waterways is the presence of limiting sections in the Single deep-water system in the European part of Russia, including the Volgo-Don Canal and the Volga-Baltic waterway and the Volga (near Nizhny Novgorod). To reach the first two targets, it is planned to carry out the projects aimed at developing Volgo-Don Canal and the Volga-Baltic waterway. The feasibility study of the infrastructure project on the Volga-Don waterway is to be completed in 2009. In accordance with the order of the RF President, an international consortium will be created to carry out the project.
The investment project “Development of the infrastructure of Volga-Baltic waterway for its stable functioning and increasing the carrying capacity after construction of the second line of the lock of Nizhne-Svirsky waterworks facility” is to be carried out using a public-private partnership and attracting the means from the RF Investment fund. The business plan of the project was approved last October by the Investment Committee and recommended for reading in the RF Government.
In 2008-2010, RUR 26.15 billion is to be spent on the maintenance of the inner waterways and shipping hydrotechnical facilities, including RUR 8.29 billion that will be invested in 2008. The volume of investments will enlarge the navigable passes to the necessary guaranteed size in specific sectors of the inner waterways and increase efficiency and safety when using shipping hydrotechnical facilities.
– How are the problems of international integration solved at the inland water transport?
– One of the priority factors influencing the further economic development of the RF is creation of the conditions necessary for free trade. Due to historical and geographical factors, the basic constituent of the process is development of relations, including economic ones, between Russia and the EU.
Joining the Budapest Convention of the Agreement on Freight Transportation on Inland Waterways is of much importance for harmonising Russian and international rules of freight transportation. For Russian participants in foreign trade, fulfilment of the requirements of the Convention will be the most important part of the commercial support for river-sea freight transportation, starting with the Danube and the Rhine ports.   
Nowadays, Russian inner waterways are still not open to vessels flying a foreign flag but it is possible by Government decision. For example, 22 and 33 vessels under foreign flags were permitted to sail along Russian rivers in 2006 and 2007 respectively. 
– What is, in your opinion, the future of Russian river transport? Will there be any changes in 2008?
– Now the RF Transport Ministry and the Federal Agency of Sea and River Transport are developing the concept of reforming the system of Russian inner waterways management. It will make the activities of the state waterways and shipping basin departments (GBUVPiS) meet the current legislation in terms of separating the functions of state bodies and business activities. The concept of the reform envisages that reorganised GBUVPiS will have the function of state regulation, and a new federal state unitary enterprise will hold for business activities on the inner waterways.  Being state enterprises, GBUVPiS will have administrative powers to provide safe navigation and function as budget manager. It also will be in charge of operative management of shipping hydrotechnical facilities. 
by Nadezhda Vtorushina 
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    [PREVIEW_TEXT] => Last year, the RF Ministry of Transport renewed the current normative and legislative base for several key sectors of the transport market. Alexey Klyavin, Director of State Policy for Sea and River Transport Department, Russian Ministry of Transport, told a correspondent of The RZD-Partner International about the changes in legislation and their consequences for the market.
    [~PREVIEW_TEXT] => Last year, the RF Ministry of Transport renewed the current normative and legislative base for several key sectors of the transport market. Alexey Klyavin, Director of State Policy for Sea and River Transport Department, Russian Ministry of Transport, told a correspondent of The RZD-Partner International about the changes in legislation and their consequences for the market.
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