III КВАРТАЛ 2022Г. - 55 баллов
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[DETAIL_TEXT] => Growing 41% per year
“In the next 20 years, the annual growth of air cargo transportation in the Russian Federation will stay at 6% and this is the reason why market will triple,” believes Thomas Crabtree, Regional Marketing Director responsible for cargo transportation at Boeing.
According to Rosaviation data, in 2005 the volume of international air cargo transportation amounted to 363,990 tons and made 384,650 tons in 2006. In the opinion of market players, in 2007 this result exceeded 400,000 tons. For example, Volga-Dnepr Airline alone transported 212,900 tons around the world, having improved on its 2006 results by 41%.
Airports Needed Badly
Andrey Goryashko, CEO of Aeroflot-Cargo Airline, believes that the basic factor that stops the market’s rapid development in Russia is insufficient integration of Russian air carriers into the global system. This situation is a result of poor air park development, an undeveloped route system as well as outdated flight control and land infrastructure. In particular, this has to do with outdated airports, a lack of modern services for cargo handling as well as a lack of electronic document systems, etc. Moreover, some Russian airlines engaged in cargo transportation suffer from asymmetrical cargo flow i.e. export and import shares are unbalanced, which impacts on financial results. «Currently we suffer from lack of cargo terminals; especially concerning large-tonnage transportation. We will manage to achieve growth only if we have new cargo terminals», reports Yaroslavna Kramarenko, CEO of Baltic Shark logistics company.
Nowadays, Moscow air junction, being the most developed, is showing positive dynamics and rapid growth in terms of cargo transportation. At the same time Saint Petersburg does not attract big cargo since there is no specialised cargo airline in the city which is out of competition with Moscow, despite the fact that part of cargo is bound to Moscow. Saint Petersburg’s terminal, Pulkovo, cannot boast either high results in cargo handling or a quality cargo terminal. The terminal project is only now being planned and is to be built on an area of 200 hectares. As a result, Saint Petersburg handles ten times less cargo compared with Moscow.
The launch of a developed logistics air centre in Saint Petersburg may attract big global logistics operators: Moscow airports are feeling the lack of warehousing capacities, especially at Sheremetyevo airport. There are three times less civilian airports than there were in the 1990s and some airports functioning nowadays do not meet international standards. The RF Government decided to construct a network of hubs across the country. Nine air junctions of this sort will be constructed based on airports at Moscow, Saint Petersburg, Samara, Yekaternburg, Khabarovsk and Kaliningrad. In the south, a hub will be constructed either in Rostov or in Krasnodar. Moscow will host the biggest hub. It will be constructed on the basis of its three largest airports i.e. Domodedovo, Sheremetyevo and Vnukovo. However, the hubs are not built yet and, while Russian airlines are slowly recovering, Western companies are gaining most advantages. Western airlines operating in Russia own a modern fleet and use a branched route network and cargo transportation technology.
During the past seven years, over thirty foreign companies have begun operating regular flights to Russia. Singapore Airlines, Thai Airways, Iberia, China Eastern, Emirates, Qatar Airways and others are among them. Continental Airlines and Cathay Pacific will join them soon. After giants of air industry, smaller players arrived in Russia: Germania Express, AirBerlin, Germanwings, Norwegian AirShuttle, WindJet and Niki function successfully in the country.
… More clear rules
In 2004, Deutsche Lufthansa AG and Russian International Transport Company Vezem.ru concluded an agreement on mutually beneficial cooperation in air transportation of cargo carried from RF territory.
An additional allowance for the Russian agent on the global reservation system and cargo exchange implemented by 15 key global companies of Star Alliance made it possible to transport goods to any destination with any terms. Nevertheless, despite its strong position the German company had on the Russian market in late 2007 it conflicted with the Russian authorities. They laid a claim for taxes to be paid, froze the bank accounts of Lufthansa’s transport department and forbade passage of the company’s cargo fleet over Russian territory. Only in March 2008 were the company’s cargo vessels allowed to fly over Russia again.
This example demonstrates clearly how difficult it is for Western air cargo carriers to run a business in the face of economic and sometimes political resistance and how much the Russian air cargo sector has to develop.
by Alexey Strigin
[~DETAIL_TEXT] => Growing 41% per year
“In the next 20 years, the annual growth of air cargo transportation in the Russian Federation will stay at 6% and this is the reason why market will triple,” believes Thomas Crabtree, Regional Marketing Director responsible for cargo transportation at Boeing.
According to Rosaviation data, in 2005 the volume of international air cargo transportation amounted to 363,990 tons and made 384,650 tons in 2006. In the opinion of market players, in 2007 this result exceeded 400,000 tons. For example, Volga-Dnepr Airline alone transported 212,900 tons around the world, having improved on its 2006 results by 41%.
Airports Needed Badly
Andrey Goryashko, CEO of Aeroflot-Cargo Airline, believes that the basic factor that stops the market’s rapid development in Russia is insufficient integration of Russian air carriers into the global system. This situation is a result of poor air park development, an undeveloped route system as well as outdated flight control and land infrastructure. In particular, this has to do with outdated airports, a lack of modern services for cargo handling as well as a lack of electronic document systems, etc. Moreover, some Russian airlines engaged in cargo transportation suffer from asymmetrical cargo flow i.e. export and import shares are unbalanced, which impacts on financial results. «Currently we suffer from lack of cargo terminals; especially concerning large-tonnage transportation. We will manage to achieve growth only if we have new cargo terminals», reports Yaroslavna Kramarenko, CEO of Baltic Shark logistics company.
Nowadays, Moscow air junction, being the most developed, is showing positive dynamics and rapid growth in terms of cargo transportation. At the same time Saint Petersburg does not attract big cargo since there is no specialised cargo airline in the city which is out of competition with Moscow, despite the fact that part of cargo is bound to Moscow. Saint Petersburg’s terminal, Pulkovo, cannot boast either high results in cargo handling or a quality cargo terminal. The terminal project is only now being planned and is to be built on an area of 200 hectares. As a result, Saint Petersburg handles ten times less cargo compared with Moscow.
The launch of a developed logistics air centre in Saint Petersburg may attract big global logistics operators: Moscow airports are feeling the lack of warehousing capacities, especially at Sheremetyevo airport. There are three times less civilian airports than there were in the 1990s and some airports functioning nowadays do not meet international standards. The RF Government decided to construct a network of hubs across the country. Nine air junctions of this sort will be constructed based on airports at Moscow, Saint Petersburg, Samara, Yekaternburg, Khabarovsk and Kaliningrad. In the south, a hub will be constructed either in Rostov or in Krasnodar. Moscow will host the biggest hub. It will be constructed on the basis of its three largest airports i.e. Domodedovo, Sheremetyevo and Vnukovo. However, the hubs are not built yet and, while Russian airlines are slowly recovering, Western companies are gaining most advantages. Western airlines operating in Russia own a modern fleet and use a branched route network and cargo transportation technology.
During the past seven years, over thirty foreign companies have begun operating regular flights to Russia. Singapore Airlines, Thai Airways, Iberia, China Eastern, Emirates, Qatar Airways and others are among them. Continental Airlines and Cathay Pacific will join them soon. After giants of air industry, smaller players arrived in Russia: Germania Express, AirBerlin, Germanwings, Norwegian AirShuttle, WindJet and Niki function successfully in the country.
… More clear rules
In 2004, Deutsche Lufthansa AG and Russian International Transport Company Vezem.ru concluded an agreement on mutually beneficial cooperation in air transportation of cargo carried from RF territory.
An additional allowance for the Russian agent on the global reservation system and cargo exchange implemented by 15 key global companies of Star Alliance made it possible to transport goods to any destination with any terms. Nevertheless, despite its strong position the German company had on the Russian market in late 2007 it conflicted with the Russian authorities. They laid a claim for taxes to be paid, froze the bank accounts of Lufthansa’s transport department and forbade passage of the company’s cargo fleet over Russian territory. Only in March 2008 were the company’s cargo vessels allowed to fly over Russia again.
This example demonstrates clearly how difficult it is for Western air cargo carriers to run a business in the face of economic and sometimes political resistance and how much the Russian air cargo sector has to develop.
by Alexey Strigin
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[DETAIL_TEXT] => Growing 41% per year
“In the next 20 years, the annual growth of air cargo transportation in the Russian Federation will stay at 6% and this is the reason why market will triple,” believes Thomas Crabtree, Regional Marketing Director responsible for cargo transportation at Boeing.
According to Rosaviation data, in 2005 the volume of international air cargo transportation amounted to 363,990 tons and made 384,650 tons in 2006. In the opinion of market players, in 2007 this result exceeded 400,000 tons. For example, Volga-Dnepr Airline alone transported 212,900 tons around the world, having improved on its 2006 results by 41%.
Airports Needed Badly
Andrey Goryashko, CEO of Aeroflot-Cargo Airline, believes that the basic factor that stops the market’s rapid development in Russia is insufficient integration of Russian air carriers into the global system. This situation is a result of poor air park development, an undeveloped route system as well as outdated flight control and land infrastructure. In particular, this has to do with outdated airports, a lack of modern services for cargo handling as well as a lack of electronic document systems, etc. Moreover, some Russian airlines engaged in cargo transportation suffer from asymmetrical cargo flow i.e. export and import shares are unbalanced, which impacts on financial results. «Currently we suffer from lack of cargo terminals; especially concerning large-tonnage transportation. We will manage to achieve growth only if we have new cargo terminals», reports Yaroslavna Kramarenko, CEO of Baltic Shark logistics company.
Nowadays, Moscow air junction, being the most developed, is showing positive dynamics and rapid growth in terms of cargo transportation. At the same time Saint Petersburg does not attract big cargo since there is no specialised cargo airline in the city which is out of competition with Moscow, despite the fact that part of cargo is bound to Moscow. Saint Petersburg’s terminal, Pulkovo, cannot boast either high results in cargo handling or a quality cargo terminal. The terminal project is only now being planned and is to be built on an area of 200 hectares. As a result, Saint Petersburg handles ten times less cargo compared with Moscow.
The launch of a developed logistics air centre in Saint Petersburg may attract big global logistics operators: Moscow airports are feeling the lack of warehousing capacities, especially at Sheremetyevo airport. There are three times less civilian airports than there were in the 1990s and some airports functioning nowadays do not meet international standards. The RF Government decided to construct a network of hubs across the country. Nine air junctions of this sort will be constructed based on airports at Moscow, Saint Petersburg, Samara, Yekaternburg, Khabarovsk and Kaliningrad. In the south, a hub will be constructed either in Rostov or in Krasnodar. Moscow will host the biggest hub. It will be constructed on the basis of its three largest airports i.e. Domodedovo, Sheremetyevo and Vnukovo. However, the hubs are not built yet and, while Russian airlines are slowly recovering, Western companies are gaining most advantages. Western airlines operating in Russia own a modern fleet and use a branched route network and cargo transportation technology.
During the past seven years, over thirty foreign companies have begun operating regular flights to Russia. Singapore Airlines, Thai Airways, Iberia, China Eastern, Emirates, Qatar Airways and others are among them. Continental Airlines and Cathay Pacific will join them soon. After giants of air industry, smaller players arrived in Russia: Germania Express, AirBerlin, Germanwings, Norwegian AirShuttle, WindJet and Niki function successfully in the country.
… More clear rules
In 2004, Deutsche Lufthansa AG and Russian International Transport Company Vezem.ru concluded an agreement on mutually beneficial cooperation in air transportation of cargo carried from RF territory.
An additional allowance for the Russian agent on the global reservation system and cargo exchange implemented by 15 key global companies of Star Alliance made it possible to transport goods to any destination with any terms. Nevertheless, despite its strong position the German company had on the Russian market in late 2007 it conflicted with the Russian authorities. They laid a claim for taxes to be paid, froze the bank accounts of Lufthansa’s transport department and forbade passage of the company’s cargo fleet over Russian territory. Only in March 2008 were the company’s cargo vessels allowed to fly over Russia again.
This example demonstrates clearly how difficult it is for Western air cargo carriers to run a business in the face of economic and sometimes political resistance and how much the Russian air cargo sector has to develop.
by Alexey Strigin
[~DETAIL_TEXT] => Growing 41% per year
“In the next 20 years, the annual growth of air cargo transportation in the Russian Federation will stay at 6% and this is the reason why market will triple,” believes Thomas Crabtree, Regional Marketing Director responsible for cargo transportation at Boeing.
According to Rosaviation data, in 2005 the volume of international air cargo transportation amounted to 363,990 tons and made 384,650 tons in 2006. In the opinion of market players, in 2007 this result exceeded 400,000 tons. For example, Volga-Dnepr Airline alone transported 212,900 tons around the world, having improved on its 2006 results by 41%.
Airports Needed Badly
Andrey Goryashko, CEO of Aeroflot-Cargo Airline, believes that the basic factor that stops the market’s rapid development in Russia is insufficient integration of Russian air carriers into the global system. This situation is a result of poor air park development, an undeveloped route system as well as outdated flight control and land infrastructure. In particular, this has to do with outdated airports, a lack of modern services for cargo handling as well as a lack of electronic document systems, etc. Moreover, some Russian airlines engaged in cargo transportation suffer from asymmetrical cargo flow i.e. export and import shares are unbalanced, which impacts on financial results. «Currently we suffer from lack of cargo terminals; especially concerning large-tonnage transportation. We will manage to achieve growth only if we have new cargo terminals», reports Yaroslavna Kramarenko, CEO of Baltic Shark logistics company.
Nowadays, Moscow air junction, being the most developed, is showing positive dynamics and rapid growth in terms of cargo transportation. At the same time Saint Petersburg does not attract big cargo since there is no specialised cargo airline in the city which is out of competition with Moscow, despite the fact that part of cargo is bound to Moscow. Saint Petersburg’s terminal, Pulkovo, cannot boast either high results in cargo handling or a quality cargo terminal. The terminal project is only now being planned and is to be built on an area of 200 hectares. As a result, Saint Petersburg handles ten times less cargo compared with Moscow.
The launch of a developed logistics air centre in Saint Petersburg may attract big global logistics operators: Moscow airports are feeling the lack of warehousing capacities, especially at Sheremetyevo airport. There are three times less civilian airports than there were in the 1990s and some airports functioning nowadays do not meet international standards. The RF Government decided to construct a network of hubs across the country. Nine air junctions of this sort will be constructed based on airports at Moscow, Saint Petersburg, Samara, Yekaternburg, Khabarovsk and Kaliningrad. In the south, a hub will be constructed either in Rostov or in Krasnodar. Moscow will host the biggest hub. It will be constructed on the basis of its three largest airports i.e. Domodedovo, Sheremetyevo and Vnukovo. However, the hubs are not built yet and, while Russian airlines are slowly recovering, Western companies are gaining most advantages. Western airlines operating in Russia own a modern fleet and use a branched route network and cargo transportation technology.
During the past seven years, over thirty foreign companies have begun operating regular flights to Russia. Singapore Airlines, Thai Airways, Iberia, China Eastern, Emirates, Qatar Airways and others are among them. Continental Airlines and Cathay Pacific will join them soon. After giants of air industry, smaller players arrived in Russia: Germania Express, AirBerlin, Germanwings, Norwegian AirShuttle, WindJet and Niki function successfully in the country.
… More clear rules
In 2004, Deutsche Lufthansa AG and Russian International Transport Company Vezem.ru concluded an agreement on mutually beneficial cooperation in air transportation of cargo carried from RF territory.
An additional allowance for the Russian agent on the global reservation system and cargo exchange implemented by 15 key global companies of Star Alliance made it possible to transport goods to any destination with any terms. Nevertheless, despite its strong position the German company had on the Russian market in late 2007 it conflicted with the Russian authorities. They laid a claim for taxes to be paid, froze the bank accounts of Lufthansa’s transport department and forbade passage of the company’s cargo fleet over Russian territory. Only in March 2008 were the company’s cargo vessels allowed to fly over Russia again.
This example demonstrates clearly how difficult it is for Western air cargo carriers to run a business in the face of economic and sometimes political resistance and how much the Russian air cargo sector has to develop.
by Alexey Strigin
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[DETAIL_TEXT] => Laws Are Ready. Executors Required
Today, over 40% of Russian federal motorways are overloaded. By 2010, the car park will grow by more than 50%. One of the ways to increase the carrying capacity of the existing road network is creation of toll roads using public-private partnerships. Such motorways are expected to relieve the current problems on routes between Moscow and Saint Petersburg, for example.
The principal decision on the possible commercial exploitation of toll roads was approved at the end of 1992. Nevertheless, the practice was not widely spread until the law “On Concession Agreements” was adopted and the bill “On Toll Roads” was approved last year. It regulates their construction and exploitation. “According to the bill, toll roads cannot be private. The decision on federal motorway construction is taken by the Government; for regional or local road-building, it is made by the authorities serving the Federation and the local autonomous bodies respectively. An existing road may become a toll road only if it is reconstructed. According to plans, roads will be built and maintained by concessionary agreements”, say specialists at the Federal State Institution (FGU) Roads of Russia according to the law.
But, there may be different schemes. For example, if a concessionaire builds a road at his expense, then the state will pay the company money for every car running along the motorway. In this case, drivers pay no fee. Another scheme envisages that the fee is taken by the concessionaire, and it is he who sets it.
Besides, every toll road must have a free alternative motorway. And the investor is obliged to construct and maintain it. The length of the free road may increase that of the toll road by not more than half. So, drivers who do not want to use the toll road will always have a choice – to pay or not. The public and toll roads must not differ in the quality of the roadway or the provided services. A toll road must be a motorway where cars may run at a high speed, while a public road crosses built-up areas and the transportation speed there is strictly limited.
According to the data of Rosavtodor (the Federal Road Agency), there is only one official toll road in Russia. The 20 km-long motorway that bypasses Hlevnoye settlement in the Lipetsk region (on the federal road “Don”). Annual revenue from the fee (RUR 10 per car, and RUR 30 per freight vehicle) compensates for all the losses on the road’s exploitation, and the rest is given to the federal budget. There is only one such project in Russia because, on the rest of the roads, the traffic is not so intensive. Taking into account the specific features of Russian roads, construction of toll roads has potential on the most loaded parts of motorways on the approaches to cities, where daily traffic exceeds 25,000 vehicles daily.
Saint Petersburg Will Be the First
In 2006, the RF Government announced concession tenders on the four largest and most important toll roads. It was also decided to appropriate funds to design two toll motorways.
"Several projects to organise motorway construction have started and all of them are at different stages. A concession tender was announced for “High-speed motorway Moscow – Saint Petersburg on the section 15th km – 58th km” and “New Way Out to Moscow Ring Road from the Federal Motorway M1 “Belarus”. The first stage has already been completed. The projects M-4 “Don”, “Krasnodar – Abinsk – Kabardinka”, “High-speed motorway Moscow – Saint Petersburg on the section 58th km – 684th km” and “Central Ring Road” were examined by the Governmental Committee. A decree to confirm the registration certificates of the investment projects was issued. A decree on the state support will be issued for the last project, “Central Ring Road”, says Oleg Shakhov, Director General of FGU Roads of Russia.
In the words of Igor Levitin, the Russian Transport Minister, the construction of the toll road “Western High-Speed Diameter” (WHSD) is to be completed by 2013. It will connect the southern regions of Saint Petersburg with “Scandinavia” motorway. The project started in 2006, but its realisation has dragged on. At first, the Governmental Committee approved an appropriation of RUR 28 billion from the Investment Fund for this project (a private investor must invest half of the cost). In November 2006, when the tender was announced, the price of WHSD was RUR 82.7 billion. In March 2007, the committee held pre-qualification selection. As a result, four players were admitted to participate in the tender.
The results of the tender were to be made in July but the committee postponed it till November, and then to May 2008. Maxim Sokolov, representative of the Committee for Investments and Strategic Projects of Saint Petersburg, said the postponement was due to a change in the project cost. At the end of 2007, Yury Molchanov, Vice-Governor of the city, estimated WHSD at RUR 155 billion. The road will be built over five years and the project will pay for itself in 25 years after construction is completed. 30 years later, the road will become the property of Saint Petersburg.
It is planned that WHSD will have 6-8 traffic lanes, 15 transport junctions, and the designated traffic speed will be 120 kph. The fee is supposed to be RUR 100 per car, and RUR 150-300 for a freight vehicle.
Motorway Connecting Two Capitals
The second large project in the sector is a high-speed motorway Moscow – Saint Petersburg “Stolitsa” (Capital), the first sections of which may appear by 2010. The length of the new road is 650 km. The designated speed of traffic will amount to 150kph. In Saint Petersburg, the “Stolitsa” motorway will be connected by a road being constructed to Finland. Thus, the motorway will be a part of the Moscow-Helsinki transport corridor.
The motorway will have from four to ten traffic lanes. In the first stage, construction and commercial exploitation of the Moscow Ring-Road (MKAD) – Sheremetyevo airport – the 58th km (crossing the existing motorway M-10 “Russia”) will be realised. The total cost of the project is RUR 210-220 billion. The motorway will bypass settlements and towns, so it will be a high-speed one.
This project, as well as similar ones, faces the problem of constantly increasing cost. For example, when designing the motorway in 2006, officials planned that a driver will pay less than one rouble per kilometre. But when the concession tender was held, it became clear that the fee for using the road will be at least RUR 1.5-4 in the Moscow region, and RUR 1.2-3.09 in the Leningrad region. If the project cost continues to grow, there will be few drivers wishing to use it. If the fee is RUR 4 per kilometre, a motor trip from Moscow to Saint Petersburg will cost RUR 2,500 (about USD 100). Private car owners will decide to go by train or use the old free motorway. Nowadays, a trip to Saint Petersburg in a rail compartment car costs RUR 1,700.
Freight companies will either use the old road, or include the fee for the new motorway in the cost of carried goods. “The decision on whether the new motorway will be included on the itinerary of our road-trains has not been made yet. It will be clear after the project is put into operation and the cost of using the road is set. In particular, it is hard to forecast, whether our clients will agree to pay more for our company’s services, if the cost of using the Moscow – Saint Petersburg road exceeds USD 100-200”, say specialists at Sovtransauto company.
Experts note that, while European experience is being taken into account, one should not forget that in Italy, to use a 700 km-long toll road Milan-Naples, one must pay only EUR 40. In the USA, travelling along the 200 km-long toll road New Jersey Turnpike costs USD 6.45 (RUR 170) in cash (if one pays by EZ-Pass card, it costs USD 4.85 if the road is empty, and USD 5.45 in rush hour or at weekends).
Bridge Under the Neva
Another large project in Saint Petersburg is the Orlovsky tunnel (under the Neva). It has its own peculiar features. The length of the tunnel is 1,000 metres; its capacity is up to 60,000 cars daily. The target of the project is to develop Russian transport infrastructure to increase the carrying capacity of the Volga-Baltic waterway and to connect the centre of Saint Petersburg with the main external roads. As a result of the tunnel construction, the shores of the Neva will be connected by a road 24 hours a day by 2011 (now, during the summer navigation period, the bridges across the Neva are drawn apart for several hours at night, and transport between the two parts of the city is halted). It will allow an increased period when the bridges are drawn apart to satisfy the growing demand for international transportation along the Volga-Baltic waterway.
The approved budget of the investment project was RUR 26 billion on January 1, 2006. A concessionaire is to pay more than one third of the sum and the rest will be taken from the federal investment fund and the budget of the city. The payback period of the investment project is 26 years after it is carried out, and the term of the concession agreement is 30 years from the date it was concluded. Under the terms of the concession agreement, the concessionaire provides design, construction, financing and commercial exploitation of the tunnel.
The fee is still unclear. It is planned that it will amount to RUR 23 per car and RUR 45 per lorry.
Moscow Projects
Two more large projects in the sector are to start in the Moscow region in the near future. The first is construction of the Central ring-road (CKAD) with a length of 520 km and the route round Moscow. According to the project, the design traffic speed will be 100-150 kph. The road will have 6-8 traffic lanes in both directions. It must be built by 2015. The project is estimated at RUR 200-210 billion. The basis of the CKAD will be reconstructed and enlarged roads in the Moscow region: a larger part of the Smaller ring-road, and the western sector of the Big ring-road will connect to the federal motorways “Russia” and “Byelorussia”, crossing them. It is planned that later there will appear customs terminals, warehouses, and container stations along the motorway. Some of the vehicles will be redirected to the southern destinations, to Byelorussia and Ukraine, which will make traffic less intensive on the Moscow ring-road and the radial roads leading to the Russian capital.
The second project in the Moscow region envisages construction of a road bypassing Odintsovo (a town in the Moscow region). The planned motorway starts at the junction of the Moscow ring-road and Molodogvardeyskaya street, before bypassing Odintsovo, crossing Podushkinskoye and Mozhaiskoye roads, and then connecting with the acting motorway M-1 Moscow-Minsk. The total length of the new road will be 19.5 km, the investment volume is RUR 18.4 billion (the figure is calculated using inflation forecasts). The motorway is supposed to have 6 traffic lanes, and the designated traffic speed is 120 kph. The road will be commercial, and there will be two toll stations where the fee will be taken.
Resume
Experts say that today it is possible to construct a toll road in every region of Russia. “Such motorways may be built where the traffic is intensive. It must be reasonable and able to pay for itself, and there must be a free alternative road (in accordance with legislation). When a decision on toll road construction is being taken, an important factor is that the project is relevant to the social and economic plans of the region’s development. The project must be efficient for the state, the concessionaire and for consumers”, emphasises Mr Shakhov.
by Maria Shevchenko
[~DETAIL_TEXT] => Laws Are Ready. Executors Required
Today, over 40% of Russian federal motorways are overloaded. By 2010, the car park will grow by more than 50%. One of the ways to increase the carrying capacity of the existing road network is creation of toll roads using public-private partnerships. Such motorways are expected to relieve the current problems on routes between Moscow and Saint Petersburg, for example.
The principal decision on the possible commercial exploitation of toll roads was approved at the end of 1992. Nevertheless, the practice was not widely spread until the law “On Concession Agreements” was adopted and the bill “On Toll Roads” was approved last year. It regulates their construction and exploitation. “According to the bill, toll roads cannot be private. The decision on federal motorway construction is taken by the Government; for regional or local road-building, it is made by the authorities serving the Federation and the local autonomous bodies respectively. An existing road may become a toll road only if it is reconstructed. According to plans, roads will be built and maintained by concessionary agreements”, say specialists at the Federal State Institution (FGU) Roads of Russia according to the law.
But, there may be different schemes. For example, if a concessionaire builds a road at his expense, then the state will pay the company money for every car running along the motorway. In this case, drivers pay no fee. Another scheme envisages that the fee is taken by the concessionaire, and it is he who sets it.
Besides, every toll road must have a free alternative motorway. And the investor is obliged to construct and maintain it. The length of the free road may increase that of the toll road by not more than half. So, drivers who do not want to use the toll road will always have a choice – to pay or not. The public and toll roads must not differ in the quality of the roadway or the provided services. A toll road must be a motorway where cars may run at a high speed, while a public road crosses built-up areas and the transportation speed there is strictly limited.
According to the data of Rosavtodor (the Federal Road Agency), there is only one official toll road in Russia. The 20 km-long motorway that bypasses Hlevnoye settlement in the Lipetsk region (on the federal road “Don”). Annual revenue from the fee (RUR 10 per car, and RUR 30 per freight vehicle) compensates for all the losses on the road’s exploitation, and the rest is given to the federal budget. There is only one such project in Russia because, on the rest of the roads, the traffic is not so intensive. Taking into account the specific features of Russian roads, construction of toll roads has potential on the most loaded parts of motorways on the approaches to cities, where daily traffic exceeds 25,000 vehicles daily.
Saint Petersburg Will Be the First
In 2006, the RF Government announced concession tenders on the four largest and most important toll roads. It was also decided to appropriate funds to design two toll motorways.
"Several projects to organise motorway construction have started and all of them are at different stages. A concession tender was announced for “High-speed motorway Moscow – Saint Petersburg on the section 15th km – 58th km” and “New Way Out to Moscow Ring Road from the Federal Motorway M1 “Belarus”. The first stage has already been completed. The projects M-4 “Don”, “Krasnodar – Abinsk – Kabardinka”, “High-speed motorway Moscow – Saint Petersburg on the section 58th km – 684th km” and “Central Ring Road” were examined by the Governmental Committee. A decree to confirm the registration certificates of the investment projects was issued. A decree on the state support will be issued for the last project, “Central Ring Road”, says Oleg Shakhov, Director General of FGU Roads of Russia.
In the words of Igor Levitin, the Russian Transport Minister, the construction of the toll road “Western High-Speed Diameter” (WHSD) is to be completed by 2013. It will connect the southern regions of Saint Petersburg with “Scandinavia” motorway. The project started in 2006, but its realisation has dragged on. At first, the Governmental Committee approved an appropriation of RUR 28 billion from the Investment Fund for this project (a private investor must invest half of the cost). In November 2006, when the tender was announced, the price of WHSD was RUR 82.7 billion. In March 2007, the committee held pre-qualification selection. As a result, four players were admitted to participate in the tender.
The results of the tender were to be made in July but the committee postponed it till November, and then to May 2008. Maxim Sokolov, representative of the Committee for Investments and Strategic Projects of Saint Petersburg, said the postponement was due to a change in the project cost. At the end of 2007, Yury Molchanov, Vice-Governor of the city, estimated WHSD at RUR 155 billion. The road will be built over five years and the project will pay for itself in 25 years after construction is completed. 30 years later, the road will become the property of Saint Petersburg.
It is planned that WHSD will have 6-8 traffic lanes, 15 transport junctions, and the designated traffic speed will be 120 kph. The fee is supposed to be RUR 100 per car, and RUR 150-300 for a freight vehicle.
Motorway Connecting Two Capitals
The second large project in the sector is a high-speed motorway Moscow – Saint Petersburg “Stolitsa” (Capital), the first sections of which may appear by 2010. The length of the new road is 650 km. The designated speed of traffic will amount to 150kph. In Saint Petersburg, the “Stolitsa” motorway will be connected by a road being constructed to Finland. Thus, the motorway will be a part of the Moscow-Helsinki transport corridor.
The motorway will have from four to ten traffic lanes. In the first stage, construction and commercial exploitation of the Moscow Ring-Road (MKAD) – Sheremetyevo airport – the 58th km (crossing the existing motorway M-10 “Russia”) will be realised. The total cost of the project is RUR 210-220 billion. The motorway will bypass settlements and towns, so it will be a high-speed one.
This project, as well as similar ones, faces the problem of constantly increasing cost. For example, when designing the motorway in 2006, officials planned that a driver will pay less than one rouble per kilometre. But when the concession tender was held, it became clear that the fee for using the road will be at least RUR 1.5-4 in the Moscow region, and RUR 1.2-3.09 in the Leningrad region. If the project cost continues to grow, there will be few drivers wishing to use it. If the fee is RUR 4 per kilometre, a motor trip from Moscow to Saint Petersburg will cost RUR 2,500 (about USD 100). Private car owners will decide to go by train or use the old free motorway. Nowadays, a trip to Saint Petersburg in a rail compartment car costs RUR 1,700.
Freight companies will either use the old road, or include the fee for the new motorway in the cost of carried goods. “The decision on whether the new motorway will be included on the itinerary of our road-trains has not been made yet. It will be clear after the project is put into operation and the cost of using the road is set. In particular, it is hard to forecast, whether our clients will agree to pay more for our company’s services, if the cost of using the Moscow – Saint Petersburg road exceeds USD 100-200”, say specialists at Sovtransauto company.
Experts note that, while European experience is being taken into account, one should not forget that in Italy, to use a 700 km-long toll road Milan-Naples, one must pay only EUR 40. In the USA, travelling along the 200 km-long toll road New Jersey Turnpike costs USD 6.45 (RUR 170) in cash (if one pays by EZ-Pass card, it costs USD 4.85 if the road is empty, and USD 5.45 in rush hour or at weekends).
Bridge Under the Neva
Another large project in Saint Petersburg is the Orlovsky tunnel (under the Neva). It has its own peculiar features. The length of the tunnel is 1,000 metres; its capacity is up to 60,000 cars daily. The target of the project is to develop Russian transport infrastructure to increase the carrying capacity of the Volga-Baltic waterway and to connect the centre of Saint Petersburg with the main external roads. As a result of the tunnel construction, the shores of the Neva will be connected by a road 24 hours a day by 2011 (now, during the summer navigation period, the bridges across the Neva are drawn apart for several hours at night, and transport between the two parts of the city is halted). It will allow an increased period when the bridges are drawn apart to satisfy the growing demand for international transportation along the Volga-Baltic waterway.
The approved budget of the investment project was RUR 26 billion on January 1, 2006. A concessionaire is to pay more than one third of the sum and the rest will be taken from the federal investment fund and the budget of the city. The payback period of the investment project is 26 years after it is carried out, and the term of the concession agreement is 30 years from the date it was concluded. Under the terms of the concession agreement, the concessionaire provides design, construction, financing and commercial exploitation of the tunnel.
The fee is still unclear. It is planned that it will amount to RUR 23 per car and RUR 45 per lorry.
Moscow Projects
Two more large projects in the sector are to start in the Moscow region in the near future. The first is construction of the Central ring-road (CKAD) with a length of 520 km and the route round Moscow. According to the project, the design traffic speed will be 100-150 kph. The road will have 6-8 traffic lanes in both directions. It must be built by 2015. The project is estimated at RUR 200-210 billion. The basis of the CKAD will be reconstructed and enlarged roads in the Moscow region: a larger part of the Smaller ring-road, and the western sector of the Big ring-road will connect to the federal motorways “Russia” and “Byelorussia”, crossing them. It is planned that later there will appear customs terminals, warehouses, and container stations along the motorway. Some of the vehicles will be redirected to the southern destinations, to Byelorussia and Ukraine, which will make traffic less intensive on the Moscow ring-road and the radial roads leading to the Russian capital.
The second project in the Moscow region envisages construction of a road bypassing Odintsovo (a town in the Moscow region). The planned motorway starts at the junction of the Moscow ring-road and Molodogvardeyskaya street, before bypassing Odintsovo, crossing Podushkinskoye and Mozhaiskoye roads, and then connecting with the acting motorway M-1 Moscow-Minsk. The total length of the new road will be 19.5 km, the investment volume is RUR 18.4 billion (the figure is calculated using inflation forecasts). The motorway is supposed to have 6 traffic lanes, and the designated traffic speed is 120 kph. The road will be commercial, and there will be two toll stations where the fee will be taken.
Resume
Experts say that today it is possible to construct a toll road in every region of Russia. “Such motorways may be built where the traffic is intensive. It must be reasonable and able to pay for itself, and there must be a free alternative road (in accordance with legislation). When a decision on toll road construction is being taken, an important factor is that the project is relevant to the social and economic plans of the region’s development. The project must be efficient for the state, the concessionaire and for consumers”, emphasises Mr Shakhov.
by Maria Shevchenko
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[DETAIL_TEXT] => Laws Are Ready. Executors Required
Today, over 40% of Russian federal motorways are overloaded. By 2010, the car park will grow by more than 50%. One of the ways to increase the carrying capacity of the existing road network is creation of toll roads using public-private partnerships. Such motorways are expected to relieve the current problems on routes between Moscow and Saint Petersburg, for example.
The principal decision on the possible commercial exploitation of toll roads was approved at the end of 1992. Nevertheless, the practice was not widely spread until the law “On Concession Agreements” was adopted and the bill “On Toll Roads” was approved last year. It regulates their construction and exploitation. “According to the bill, toll roads cannot be private. The decision on federal motorway construction is taken by the Government; for regional or local road-building, it is made by the authorities serving the Federation and the local autonomous bodies respectively. An existing road may become a toll road only if it is reconstructed. According to plans, roads will be built and maintained by concessionary agreements”, say specialists at the Federal State Institution (FGU) Roads of Russia according to the law.
But, there may be different schemes. For example, if a concessionaire builds a road at his expense, then the state will pay the company money for every car running along the motorway. In this case, drivers pay no fee. Another scheme envisages that the fee is taken by the concessionaire, and it is he who sets it.
Besides, every toll road must have a free alternative motorway. And the investor is obliged to construct and maintain it. The length of the free road may increase that of the toll road by not more than half. So, drivers who do not want to use the toll road will always have a choice – to pay or not. The public and toll roads must not differ in the quality of the roadway or the provided services. A toll road must be a motorway where cars may run at a high speed, while a public road crosses built-up areas and the transportation speed there is strictly limited.
According to the data of Rosavtodor (the Federal Road Agency), there is only one official toll road in Russia. The 20 km-long motorway that bypasses Hlevnoye settlement in the Lipetsk region (on the federal road “Don”). Annual revenue from the fee (RUR 10 per car, and RUR 30 per freight vehicle) compensates for all the losses on the road’s exploitation, and the rest is given to the federal budget. There is only one such project in Russia because, on the rest of the roads, the traffic is not so intensive. Taking into account the specific features of Russian roads, construction of toll roads has potential on the most loaded parts of motorways on the approaches to cities, where daily traffic exceeds 25,000 vehicles daily.
Saint Petersburg Will Be the First
In 2006, the RF Government announced concession tenders on the four largest and most important toll roads. It was also decided to appropriate funds to design two toll motorways.
"Several projects to organise motorway construction have started and all of them are at different stages. A concession tender was announced for “High-speed motorway Moscow – Saint Petersburg on the section 15th km – 58th km” and “New Way Out to Moscow Ring Road from the Federal Motorway M1 “Belarus”. The first stage has already been completed. The projects M-4 “Don”, “Krasnodar – Abinsk – Kabardinka”, “High-speed motorway Moscow – Saint Petersburg on the section 58th km – 684th km” and “Central Ring Road” were examined by the Governmental Committee. A decree to confirm the registration certificates of the investment projects was issued. A decree on the state support will be issued for the last project, “Central Ring Road”, says Oleg Shakhov, Director General of FGU Roads of Russia.
In the words of Igor Levitin, the Russian Transport Minister, the construction of the toll road “Western High-Speed Diameter” (WHSD) is to be completed by 2013. It will connect the southern regions of Saint Petersburg with “Scandinavia” motorway. The project started in 2006, but its realisation has dragged on. At first, the Governmental Committee approved an appropriation of RUR 28 billion from the Investment Fund for this project (a private investor must invest half of the cost). In November 2006, when the tender was announced, the price of WHSD was RUR 82.7 billion. In March 2007, the committee held pre-qualification selection. As a result, four players were admitted to participate in the tender.
The results of the tender were to be made in July but the committee postponed it till November, and then to May 2008. Maxim Sokolov, representative of the Committee for Investments and Strategic Projects of Saint Petersburg, said the postponement was due to a change in the project cost. At the end of 2007, Yury Molchanov, Vice-Governor of the city, estimated WHSD at RUR 155 billion. The road will be built over five years and the project will pay for itself in 25 years after construction is completed. 30 years later, the road will become the property of Saint Petersburg.
It is planned that WHSD will have 6-8 traffic lanes, 15 transport junctions, and the designated traffic speed will be 120 kph. The fee is supposed to be RUR 100 per car, and RUR 150-300 for a freight vehicle.
Motorway Connecting Two Capitals
The second large project in the sector is a high-speed motorway Moscow – Saint Petersburg “Stolitsa” (Capital), the first sections of which may appear by 2010. The length of the new road is 650 km. The designated speed of traffic will amount to 150kph. In Saint Petersburg, the “Stolitsa” motorway will be connected by a road being constructed to Finland. Thus, the motorway will be a part of the Moscow-Helsinki transport corridor.
The motorway will have from four to ten traffic lanes. In the first stage, construction and commercial exploitation of the Moscow Ring-Road (MKAD) – Sheremetyevo airport – the 58th km (crossing the existing motorway M-10 “Russia”) will be realised. The total cost of the project is RUR 210-220 billion. The motorway will bypass settlements and towns, so it will be a high-speed one.
This project, as well as similar ones, faces the problem of constantly increasing cost. For example, when designing the motorway in 2006, officials planned that a driver will pay less than one rouble per kilometre. But when the concession tender was held, it became clear that the fee for using the road will be at least RUR 1.5-4 in the Moscow region, and RUR 1.2-3.09 in the Leningrad region. If the project cost continues to grow, there will be few drivers wishing to use it. If the fee is RUR 4 per kilometre, a motor trip from Moscow to Saint Petersburg will cost RUR 2,500 (about USD 100). Private car owners will decide to go by train or use the old free motorway. Nowadays, a trip to Saint Petersburg in a rail compartment car costs RUR 1,700.
Freight companies will either use the old road, or include the fee for the new motorway in the cost of carried goods. “The decision on whether the new motorway will be included on the itinerary of our road-trains has not been made yet. It will be clear after the project is put into operation and the cost of using the road is set. In particular, it is hard to forecast, whether our clients will agree to pay more for our company’s services, if the cost of using the Moscow – Saint Petersburg road exceeds USD 100-200”, say specialists at Sovtransauto company.
Experts note that, while European experience is being taken into account, one should not forget that in Italy, to use a 700 km-long toll road Milan-Naples, one must pay only EUR 40. In the USA, travelling along the 200 km-long toll road New Jersey Turnpike costs USD 6.45 (RUR 170) in cash (if one pays by EZ-Pass card, it costs USD 4.85 if the road is empty, and USD 5.45 in rush hour or at weekends).
Bridge Under the Neva
Another large project in Saint Petersburg is the Orlovsky tunnel (under the Neva). It has its own peculiar features. The length of the tunnel is 1,000 metres; its capacity is up to 60,000 cars daily. The target of the project is to develop Russian transport infrastructure to increase the carrying capacity of the Volga-Baltic waterway and to connect the centre of Saint Petersburg with the main external roads. As a result of the tunnel construction, the shores of the Neva will be connected by a road 24 hours a day by 2011 (now, during the summer navigation period, the bridges across the Neva are drawn apart for several hours at night, and transport between the two parts of the city is halted). It will allow an increased period when the bridges are drawn apart to satisfy the growing demand for international transportation along the Volga-Baltic waterway.
The approved budget of the investment project was RUR 26 billion on January 1, 2006. A concessionaire is to pay more than one third of the sum and the rest will be taken from the federal investment fund and the budget of the city. The payback period of the investment project is 26 years after it is carried out, and the term of the concession agreement is 30 years from the date it was concluded. Under the terms of the concession agreement, the concessionaire provides design, construction, financing and commercial exploitation of the tunnel.
The fee is still unclear. It is planned that it will amount to RUR 23 per car and RUR 45 per lorry.
Moscow Projects
Two more large projects in the sector are to start in the Moscow region in the near future. The first is construction of the Central ring-road (CKAD) with a length of 520 km and the route round Moscow. According to the project, the design traffic speed will be 100-150 kph. The road will have 6-8 traffic lanes in both directions. It must be built by 2015. The project is estimated at RUR 200-210 billion. The basis of the CKAD will be reconstructed and enlarged roads in the Moscow region: a larger part of the Smaller ring-road, and the western sector of the Big ring-road will connect to the federal motorways “Russia” and “Byelorussia”, crossing them. It is planned that later there will appear customs terminals, warehouses, and container stations along the motorway. Some of the vehicles will be redirected to the southern destinations, to Byelorussia and Ukraine, which will make traffic less intensive on the Moscow ring-road and the radial roads leading to the Russian capital.
The second project in the Moscow region envisages construction of a road bypassing Odintsovo (a town in the Moscow region). The planned motorway starts at the junction of the Moscow ring-road and Molodogvardeyskaya street, before bypassing Odintsovo, crossing Podushkinskoye and Mozhaiskoye roads, and then connecting with the acting motorway M-1 Moscow-Minsk. The total length of the new road will be 19.5 km, the investment volume is RUR 18.4 billion (the figure is calculated using inflation forecasts). The motorway is supposed to have 6 traffic lanes, and the designated traffic speed is 120 kph. The road will be commercial, and there will be two toll stations where the fee will be taken.
Resume
Experts say that today it is possible to construct a toll road in every region of Russia. “Such motorways may be built where the traffic is intensive. It must be reasonable and able to pay for itself, and there must be a free alternative road (in accordance with legislation). When a decision on toll road construction is being taken, an important factor is that the project is relevant to the social and economic plans of the region’s development. The project must be efficient for the state, the concessionaire and for consumers”, emphasises Mr Shakhov.
by Maria Shevchenko
[~DETAIL_TEXT] => Laws Are Ready. Executors Required
Today, over 40% of Russian federal motorways are overloaded. By 2010, the car park will grow by more than 50%. One of the ways to increase the carrying capacity of the existing road network is creation of toll roads using public-private partnerships. Such motorways are expected to relieve the current problems on routes between Moscow and Saint Petersburg, for example.
The principal decision on the possible commercial exploitation of toll roads was approved at the end of 1992. Nevertheless, the practice was not widely spread until the law “On Concession Agreements” was adopted and the bill “On Toll Roads” was approved last year. It regulates their construction and exploitation. “According to the bill, toll roads cannot be private. The decision on federal motorway construction is taken by the Government; for regional or local road-building, it is made by the authorities serving the Federation and the local autonomous bodies respectively. An existing road may become a toll road only if it is reconstructed. According to plans, roads will be built and maintained by concessionary agreements”, say specialists at the Federal State Institution (FGU) Roads of Russia according to the law.
But, there may be different schemes. For example, if a concessionaire builds a road at his expense, then the state will pay the company money for every car running along the motorway. In this case, drivers pay no fee. Another scheme envisages that the fee is taken by the concessionaire, and it is he who sets it.
Besides, every toll road must have a free alternative motorway. And the investor is obliged to construct and maintain it. The length of the free road may increase that of the toll road by not more than half. So, drivers who do not want to use the toll road will always have a choice – to pay or not. The public and toll roads must not differ in the quality of the roadway or the provided services. A toll road must be a motorway where cars may run at a high speed, while a public road crosses built-up areas and the transportation speed there is strictly limited.
According to the data of Rosavtodor (the Federal Road Agency), there is only one official toll road in Russia. The 20 km-long motorway that bypasses Hlevnoye settlement in the Lipetsk region (on the federal road “Don”). Annual revenue from the fee (RUR 10 per car, and RUR 30 per freight vehicle) compensates for all the losses on the road’s exploitation, and the rest is given to the federal budget. There is only one such project in Russia because, on the rest of the roads, the traffic is not so intensive. Taking into account the specific features of Russian roads, construction of toll roads has potential on the most loaded parts of motorways on the approaches to cities, where daily traffic exceeds 25,000 vehicles daily.
Saint Petersburg Will Be the First
In 2006, the RF Government announced concession tenders on the four largest and most important toll roads. It was also decided to appropriate funds to design two toll motorways.
"Several projects to organise motorway construction have started and all of them are at different stages. A concession tender was announced for “High-speed motorway Moscow – Saint Petersburg on the section 15th km – 58th km” and “New Way Out to Moscow Ring Road from the Federal Motorway M1 “Belarus”. The first stage has already been completed. The projects M-4 “Don”, “Krasnodar – Abinsk – Kabardinka”, “High-speed motorway Moscow – Saint Petersburg on the section 58th km – 684th km” and “Central Ring Road” were examined by the Governmental Committee. A decree to confirm the registration certificates of the investment projects was issued. A decree on the state support will be issued for the last project, “Central Ring Road”, says Oleg Shakhov, Director General of FGU Roads of Russia.
In the words of Igor Levitin, the Russian Transport Minister, the construction of the toll road “Western High-Speed Diameter” (WHSD) is to be completed by 2013. It will connect the southern regions of Saint Petersburg with “Scandinavia” motorway. The project started in 2006, but its realisation has dragged on. At first, the Governmental Committee approved an appropriation of RUR 28 billion from the Investment Fund for this project (a private investor must invest half of the cost). In November 2006, when the tender was announced, the price of WHSD was RUR 82.7 billion. In March 2007, the committee held pre-qualification selection. As a result, four players were admitted to participate in the tender.
The results of the tender were to be made in July but the committee postponed it till November, and then to May 2008. Maxim Sokolov, representative of the Committee for Investments and Strategic Projects of Saint Petersburg, said the postponement was due to a change in the project cost. At the end of 2007, Yury Molchanov, Vice-Governor of the city, estimated WHSD at RUR 155 billion. The road will be built over five years and the project will pay for itself in 25 years after construction is completed. 30 years later, the road will become the property of Saint Petersburg.
It is planned that WHSD will have 6-8 traffic lanes, 15 transport junctions, and the designated traffic speed will be 120 kph. The fee is supposed to be RUR 100 per car, and RUR 150-300 for a freight vehicle.
Motorway Connecting Two Capitals
The second large project in the sector is a high-speed motorway Moscow – Saint Petersburg “Stolitsa” (Capital), the first sections of which may appear by 2010. The length of the new road is 650 km. The designated speed of traffic will amount to 150kph. In Saint Petersburg, the “Stolitsa” motorway will be connected by a road being constructed to Finland. Thus, the motorway will be a part of the Moscow-Helsinki transport corridor.
The motorway will have from four to ten traffic lanes. In the first stage, construction and commercial exploitation of the Moscow Ring-Road (MKAD) – Sheremetyevo airport – the 58th km (crossing the existing motorway M-10 “Russia”) will be realised. The total cost of the project is RUR 210-220 billion. The motorway will bypass settlements and towns, so it will be a high-speed one.
This project, as well as similar ones, faces the problem of constantly increasing cost. For example, when designing the motorway in 2006, officials planned that a driver will pay less than one rouble per kilometre. But when the concession tender was held, it became clear that the fee for using the road will be at least RUR 1.5-4 in the Moscow region, and RUR 1.2-3.09 in the Leningrad region. If the project cost continues to grow, there will be few drivers wishing to use it. If the fee is RUR 4 per kilometre, a motor trip from Moscow to Saint Petersburg will cost RUR 2,500 (about USD 100). Private car owners will decide to go by train or use the old free motorway. Nowadays, a trip to Saint Petersburg in a rail compartment car costs RUR 1,700.
Freight companies will either use the old road, or include the fee for the new motorway in the cost of carried goods. “The decision on whether the new motorway will be included on the itinerary of our road-trains has not been made yet. It will be clear after the project is put into operation and the cost of using the road is set. In particular, it is hard to forecast, whether our clients will agree to pay more for our company’s services, if the cost of using the Moscow – Saint Petersburg road exceeds USD 100-200”, say specialists at Sovtransauto company.
Experts note that, while European experience is being taken into account, one should not forget that in Italy, to use a 700 km-long toll road Milan-Naples, one must pay only EUR 40. In the USA, travelling along the 200 km-long toll road New Jersey Turnpike costs USD 6.45 (RUR 170) in cash (if one pays by EZ-Pass card, it costs USD 4.85 if the road is empty, and USD 5.45 in rush hour or at weekends).
Bridge Under the Neva
Another large project in Saint Petersburg is the Orlovsky tunnel (under the Neva). It has its own peculiar features. The length of the tunnel is 1,000 metres; its capacity is up to 60,000 cars daily. The target of the project is to develop Russian transport infrastructure to increase the carrying capacity of the Volga-Baltic waterway and to connect the centre of Saint Petersburg with the main external roads. As a result of the tunnel construction, the shores of the Neva will be connected by a road 24 hours a day by 2011 (now, during the summer navigation period, the bridges across the Neva are drawn apart for several hours at night, and transport between the two parts of the city is halted). It will allow an increased period when the bridges are drawn apart to satisfy the growing demand for international transportation along the Volga-Baltic waterway.
The approved budget of the investment project was RUR 26 billion on January 1, 2006. A concessionaire is to pay more than one third of the sum and the rest will be taken from the federal investment fund and the budget of the city. The payback period of the investment project is 26 years after it is carried out, and the term of the concession agreement is 30 years from the date it was concluded. Under the terms of the concession agreement, the concessionaire provides design, construction, financing and commercial exploitation of the tunnel.
The fee is still unclear. It is planned that it will amount to RUR 23 per car and RUR 45 per lorry.
Moscow Projects
Two more large projects in the sector are to start in the Moscow region in the near future. The first is construction of the Central ring-road (CKAD) with a length of 520 km and the route round Moscow. According to the project, the design traffic speed will be 100-150 kph. The road will have 6-8 traffic lanes in both directions. It must be built by 2015. The project is estimated at RUR 200-210 billion. The basis of the CKAD will be reconstructed and enlarged roads in the Moscow region: a larger part of the Smaller ring-road, and the western sector of the Big ring-road will connect to the federal motorways “Russia” and “Byelorussia”, crossing them. It is planned that later there will appear customs terminals, warehouses, and container stations along the motorway. Some of the vehicles will be redirected to the southern destinations, to Byelorussia and Ukraine, which will make traffic less intensive on the Moscow ring-road and the radial roads leading to the Russian capital.
The second project in the Moscow region envisages construction of a road bypassing Odintsovo (a town in the Moscow region). The planned motorway starts at the junction of the Moscow ring-road and Molodogvardeyskaya street, before bypassing Odintsovo, crossing Podushkinskoye and Mozhaiskoye roads, and then connecting with the acting motorway M-1 Moscow-Minsk. The total length of the new road will be 19.5 km, the investment volume is RUR 18.4 billion (the figure is calculated using inflation forecasts). The motorway is supposed to have 6 traffic lanes, and the designated traffic speed is 120 kph. The road will be commercial, and there will be two toll stations where the fee will be taken.
Resume
Experts say that today it is possible to construct a toll road in every region of Russia. “Such motorways may be built where the traffic is intensive. It must be reasonable and able to pay for itself, and there must be a free alternative road (in accordance with legislation). When a decision on toll road construction is being taken, an important factor is that the project is relevant to the social and economic plans of the region’s development. The project must be efficient for the state, the concessionaire and for consumers”, emphasises Mr Shakhov.
by Maria Shevchenko
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Nowadays, the volume of container transportation via the Transsib is growing by 50% a year, and yet the potential of the railway has not been fulfilled. Gennady Bessonov, General Secretary of the Coordinating Council on Transsiberian Transportation (CCTT), talks about the development of the Transsiberian railway.Array
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[DETAIL_TEXT] => Price or Speed?
– Mr Bessonov, could you comment on the development of transportation along the Transsib in 2007?
– Last year, exports to the Republic of Korea and import from China increased significantly. It’s a pity but transit is still at a rather low level.
Only 13 trains ran on the route Nakhodka-Vostochnaya – Buslovskaya (Russian-Finnish border) and back in 2007, they carried 1,525 TEU, a 76% fall year-on-year. The volume of container transportation between Russia and the Baltic states (in particular Lithuania) increased greatly. For example, transportation from Russia to Lithuania and back grew by 230% to 15,753 TEU, with imports to the RF making up 10,662 TEU of the volume (+358% year-on-year).
Unfortunately, a large volume of freight had been redirected from the Transsiberian railway to the sea transportation. And it was our fault. Nowadays, sea transport is the leader in the sector of transportation between European and Asian countries, it services 98% of the total transportation volume between the states.
Taking into account the annual 25-30% growth of goods turnover between the Asian Pacific Region and the European states, containerised cargo transportation to and from China plays a very important role in the further development of the Transsib.
– What prevents the increase of transit volume on RF territory nowadays?
– First of all, it is the non-competitive through rate on transit cargo transportation along the whole route. Set by the Russian Ministry of Transport in February 2007, privileged tariffs on transit container transportation from third party states through to others are in force only on the Russian Railways infrastructure. But railway infrastructure is only one element of the transport chain, and to increase the demand for transportation, the through tariff rate must be made competitive. It is necessary to coordinate the interests, resources and technologies of different players in the transport market.
Other factors restraining the realisation of Transsib’s transit potential are a shortage of rolling stock and large capacity containers, technological and customs problems with the organisation of transit container flow, imbalance and heterogeneity of the freight flows (for example, of cargo imported via Far Eastern ports and carried to railway stations in the Moscow transport junction, 65% is transported in 20-foot containers and 35% in 40-foot containers; but in the opposite direction, the share of transportation in 20-foot containers grows to 91%, with 40-foot ones accounting for just 9%).
Nevertheless, there is an assurance that transit cargo transportation by railway will develop actively because the short delivery term is an important factor for many consignors.
– What then is the real and the potential freight base of the Transsib? There are, after all, cargoes in which price will always be the most important factor. These freights will always be carried by sea transport only.
– The base comprises those producers for whom a short delivery term is most important. Fast delivery allows an increase in turnover due to a reduced cycle of operation. Sometimes, every day of delay in payment is a critical factor. And then, choosing either a low price of transportation or a short delivery term, a cargo owner selects the latter.
Though the port works are perfectly organised in the Shanghai district today, the opportunities for Chinese ports are limited. And the port infrastructure may fail to service the constantly growing cargo volume.
In my opinion, the goods produced to the south of Shanghai will be carried by sea; it is just unprofitable to transport them overland through the whole country. Freight from the north-western part of the People’s Republic of China will for sure be transported by railway. Besides, there are a number of cargoes, for example bearings, which can be carried by sea only in special expensive packages to protect them from the impact of moist air.
– Is the short delivery term the only advantage of the Transsiberian railway in comparison with sea carriers?
– It is the fundamental one. Direct railway communication reduces the distance for freight transportation from China to Europe several times over. Faster delivery means extrication of colossal financial resources, which are practically “frozen” during the period of cargo transportation. Regular transportation is provided by thoroughly following the schedule of the vessels’ calls at the sea part of the Transsib as well as the route block trains. IT implementation at the Transsiberian railway allows freight and wagons along the whole route to be controlled online.
To provide high-speed cargo carrying along the Transsib, the whole transport chain must be optimised. From the standpoint of the technology of railway freight transportation, there are no problems. The average speed of cargo transportation is from 900 km per day, with faster block trains running at a speed of 1,200 km per day. Most time is spent in ports, at the approaches to them and at border crossings. These are the “bottle-necks” to be enlarged.
A key target of the Transsib is optimisation of the whole transport chain, including implementation of modern management methods, creation of logistics centres, simplification of customs and border procedures, etc.
If that happens, the option of reliable cargo delivery from “door-to-door” at minimal terms and expenses will appear.
A good example of solving the task is organisation of an international block train on the route Beijing-Hamburg by OAO TransContainer. The train left the Beijing station Dahongmen on January 9, and arrived to Hamburg on January 24. The total length of the route is 9,780 km. Travel time is 15 days. The train arrived at Hamburg 20 hours earlier than was envisaged by the schedule. To reduce the transit time the customs were informed about the cargo in advance. E-copies of the documents necessary for customs registration of cargoes being carried into Russia were given in advance to the customs office at the Naushki border crossing.
Problems and Solutions
– What are Russian authorities, OAO RZD and CCTT doing to improve the quality of transportation in Russian areas?
– Nowadays, the problems of rolling stock shortage are being solved, OAO TransContainer, ZAO Russkaya Troyka and other large forwarding companies are enlarging their wagon and container parks.
In 2006, OAO RZD and the RF Federal Customs Service signed a Memorandum of Understanding. It envisages organisation of regular joint conferences and consultations to solve current problems, joint development and realisation of technological schemes and technical terms for cooperation between OAO RZD and the Federal Customs Service for international railway freight transportation. It also envisages implementation of e-document information systems to inform customs bodies in advance about the goods and transport facilities. The RF Federal Customs Service plans to optimise the carrying of goods and transport facilities via state borders by implementing a new system of customs registration and control in the framework of the system’s modernisation to 2010.
The mode of operation of adjoining Russian and Chinese border crossings is synchronised. A channel for fast data exchange will be put into operation between the border crossings. So-called “green” corridors will operate at some of them.
Today, ZAO Company TransTeleCom is developing a special information portal. It provides a legally viable e-document turnover and data exchange between freight transport partners who use e-signature at Transsib.
The CCTT is developing the concept of the Programme of the Strategy of International Container Transportation along the Transsiberian Railway Development to 2030.
– Some market players believe the Russian market can take the whole cargo volume carried via the Transsib and the Baikal-Amur Mainline, and efforts should be taken to develop export and import transportation.
– I think the question that has been discussed so often lately – whether transit is necessary if export and import transportation is actively developed – is not correct. Transit development is of large geopolitical importance for the state, which must use its advantages for its safety, economic development and the improvement of its people’s living standards. Russia positions itself as a transit country and so it must use its natural geographical advantage. Today, a number of the largest producers are transferring their manufacturing capacities to the People’s Republic of China and other South Asian states. That is what has stimulated transit transportation of raw materials and goods from Europe to Asia and back. If it does not travel via Russia, it will be via some other state, for example, Kazakhstan that is actively developing the carrying capacity of the Dostyk border crossing (at the Chinese and Kazakhstan border).
Besides, transit transportation is a stimulus for railway development. In terms of rough competition, a railway has to solve the issue of implementing advanced technologies.
– How does the CCTT cooperate with producers?
– For a cargo owner we are a source of the most detailed and objective information about the possible cargo delivery along the Transsiberian route, including its sea and railway sectors. We often invite large consignors and organise meetings with operators for the clients to have a choice. We used to work with such companies as Volkswagen, Ikea, Volvo, etc.
– What is being done to harmonise the legislative base?
– The RF Ministry of Transport is developing the law “On Transit” that will contain the normative base, regulated now by hundreds of normative documents from different departments. Today different norms either contradict each other or may be interpreted for the benefit of this or that department.
The main part of the law has been formed already. It has been discussed for more than two years and it has its own supporters and opponents. The latter claim it is not necessary to put the adopted legislative statements into a separate normative act. The current Russian legal system gives unlimited opportunities for interpreting any statements by different officials. And this causes a lot of problems in the transport sector as well as in others. We do everything possible to prevent the law allowing any opportunity for two kinds of interpretation.
It is worth noting the efforts taken by the Organisation for Railways Cooperation to bring together the two legislative systems COTIF and SMGS. The first step is realisation of a project aimed at creating a single, unified CIM/SMGS invoice.
– What technical measures are being taken to develop information cooperation?
– In 2002, two very important projects were completed at the Transsib: not only was the Transsib fully electrified, but a fibre-optic communication line was installed along the railway from Moscow to Vladivostok. The latest information technologies are now used at the Russian main railway. Today the Transsib meets all global speed and safety standards.
Nevertheless, the experience of forwarders operating at the Transsib shows that the schedule of transit through delivery is often broken because partners in the process (a sea carrier, stevedores and a railway operator) lack a single IT management standard. To solve the problem, it is necessary to unite all the participants in a single information space. So, the most important activities of the CCTT are increasing the efficiency of freight transportation by block trains and provision of a new quality of service on the Transsiberian route by developing a single information space for all participants in the transport process.
– What tariff measures should be taken to develop transit transportation in Russia?
– I believe we should avoid state regulation in the tariff formation sector, it is the transporter who must set tariffs – it is an obligatory condition of a civilised market.
To prevent the current disproportionate tariff rates on container transportation along the sea and railway sectors of the Transsiberian route, the level of profit of every carrier must be levelled and coincide with the transport expenses he suffers.
Welcome!
– What will be the tariffs applied at the Transsib in 2008?
– To recommence the transit transportation, the RF Ministry of Transport decided to reduce the tariffs on transit cargo transportation in 2006 (by about 30% for a round-trip). In 2008, special rates on transit transportation along Russian railways are being kept the same as in 2007. Indexation is possible but it will not exceed inflation. The set tariffs consider the imbalance of freight flows on routes going East-West (USD 900 per loaded 40 TEU container), and West-East (USD 800 per loaded 40 TEU container and USD 400 per empty 40 TEU container).
– What is to be done to develop the capacity of border crossings?
– At the east end of the Transsib, the port railway stations are being redeveloped (the first in line is the railway junction servicing the largest Russian ports on the Pacific – Vostochny and Nakhodka).
Border railway stations Zabaikalsk and Grodekovo are being modernised. Due to the planned restoration of the Transkorean railway and its connection with the Transsib, the Hasan railway station and the approach to it are being redeveloped.
The Ministry of Transport and OAO RZD are taking measures to develop the infrastructure of Zabaikalsk railway station, so that it can receive up to 1 million TEU along a 1,435 mm-wide gauge line every year.
by Anna Nezhinskaya
[~DETAIL_TEXT] => Price or Speed?
– Mr Bessonov, could you comment on the development of transportation along the Transsib in 2007?
– Last year, exports to the Republic of Korea and import from China increased significantly. It’s a pity but transit is still at a rather low level.
Only 13 trains ran on the route Nakhodka-Vostochnaya – Buslovskaya (Russian-Finnish border) and back in 2007, they carried 1,525 TEU, a 76% fall year-on-year. The volume of container transportation between Russia and the Baltic states (in particular Lithuania) increased greatly. For example, transportation from Russia to Lithuania and back grew by 230% to 15,753 TEU, with imports to the RF making up 10,662 TEU of the volume (+358% year-on-year).
Unfortunately, a large volume of freight had been redirected from the Transsiberian railway to the sea transportation. And it was our fault. Nowadays, sea transport is the leader in the sector of transportation between European and Asian countries, it services 98% of the total transportation volume between the states.
Taking into account the annual 25-30% growth of goods turnover between the Asian Pacific Region and the European states, containerised cargo transportation to and from China plays a very important role in the further development of the Transsib.
– What prevents the increase of transit volume on RF territory nowadays?
– First of all, it is the non-competitive through rate on transit cargo transportation along the whole route. Set by the Russian Ministry of Transport in February 2007, privileged tariffs on transit container transportation from third party states through to others are in force only on the Russian Railways infrastructure. But railway infrastructure is only one element of the transport chain, and to increase the demand for transportation, the through tariff rate must be made competitive. It is necessary to coordinate the interests, resources and technologies of different players in the transport market.
Other factors restraining the realisation of Transsib’s transit potential are a shortage of rolling stock and large capacity containers, technological and customs problems with the organisation of transit container flow, imbalance and heterogeneity of the freight flows (for example, of cargo imported via Far Eastern ports and carried to railway stations in the Moscow transport junction, 65% is transported in 20-foot containers and 35% in 40-foot containers; but in the opposite direction, the share of transportation in 20-foot containers grows to 91%, with 40-foot ones accounting for just 9%).
Nevertheless, there is an assurance that transit cargo transportation by railway will develop actively because the short delivery term is an important factor for many consignors.
– What then is the real and the potential freight base of the Transsib? There are, after all, cargoes in which price will always be the most important factor. These freights will always be carried by sea transport only.
– The base comprises those producers for whom a short delivery term is most important. Fast delivery allows an increase in turnover due to a reduced cycle of operation. Sometimes, every day of delay in payment is a critical factor. And then, choosing either a low price of transportation or a short delivery term, a cargo owner selects the latter.
Though the port works are perfectly organised in the Shanghai district today, the opportunities for Chinese ports are limited. And the port infrastructure may fail to service the constantly growing cargo volume.
In my opinion, the goods produced to the south of Shanghai will be carried by sea; it is just unprofitable to transport them overland through the whole country. Freight from the north-western part of the People’s Republic of China will for sure be transported by railway. Besides, there are a number of cargoes, for example bearings, which can be carried by sea only in special expensive packages to protect them from the impact of moist air.
– Is the short delivery term the only advantage of the Transsiberian railway in comparison with sea carriers?
– It is the fundamental one. Direct railway communication reduces the distance for freight transportation from China to Europe several times over. Faster delivery means extrication of colossal financial resources, which are practically “frozen” during the period of cargo transportation. Regular transportation is provided by thoroughly following the schedule of the vessels’ calls at the sea part of the Transsib as well as the route block trains. IT implementation at the Transsiberian railway allows freight and wagons along the whole route to be controlled online.
To provide high-speed cargo carrying along the Transsib, the whole transport chain must be optimised. From the standpoint of the technology of railway freight transportation, there are no problems. The average speed of cargo transportation is from 900 km per day, with faster block trains running at a speed of 1,200 km per day. Most time is spent in ports, at the approaches to them and at border crossings. These are the “bottle-necks” to be enlarged.
A key target of the Transsib is optimisation of the whole transport chain, including implementation of modern management methods, creation of logistics centres, simplification of customs and border procedures, etc.
If that happens, the option of reliable cargo delivery from “door-to-door” at minimal terms and expenses will appear.
A good example of solving the task is organisation of an international block train on the route Beijing-Hamburg by OAO TransContainer. The train left the Beijing station Dahongmen on January 9, and arrived to Hamburg on January 24. The total length of the route is 9,780 km. Travel time is 15 days. The train arrived at Hamburg 20 hours earlier than was envisaged by the schedule. To reduce the transit time the customs were informed about the cargo in advance. E-copies of the documents necessary for customs registration of cargoes being carried into Russia were given in advance to the customs office at the Naushki border crossing.
Problems and Solutions
– What are Russian authorities, OAO RZD and CCTT doing to improve the quality of transportation in Russian areas?
– Nowadays, the problems of rolling stock shortage are being solved, OAO TransContainer, ZAO Russkaya Troyka and other large forwarding companies are enlarging their wagon and container parks.
In 2006, OAO RZD and the RF Federal Customs Service signed a Memorandum of Understanding. It envisages organisation of regular joint conferences and consultations to solve current problems, joint development and realisation of technological schemes and technical terms for cooperation between OAO RZD and the Federal Customs Service for international railway freight transportation. It also envisages implementation of e-document information systems to inform customs bodies in advance about the goods and transport facilities. The RF Federal Customs Service plans to optimise the carrying of goods and transport facilities via state borders by implementing a new system of customs registration and control in the framework of the system’s modernisation to 2010.
The mode of operation of adjoining Russian and Chinese border crossings is synchronised. A channel for fast data exchange will be put into operation between the border crossings. So-called “green” corridors will operate at some of them.
Today, ZAO Company TransTeleCom is developing a special information portal. It provides a legally viable e-document turnover and data exchange between freight transport partners who use e-signature at Transsib.
The CCTT is developing the concept of the Programme of the Strategy of International Container Transportation along the Transsiberian Railway Development to 2030.
– Some market players believe the Russian market can take the whole cargo volume carried via the Transsib and the Baikal-Amur Mainline, and efforts should be taken to develop export and import transportation.
– I think the question that has been discussed so often lately – whether transit is necessary if export and import transportation is actively developed – is not correct. Transit development is of large geopolitical importance for the state, which must use its advantages for its safety, economic development and the improvement of its people’s living standards. Russia positions itself as a transit country and so it must use its natural geographical advantage. Today, a number of the largest producers are transferring their manufacturing capacities to the People’s Republic of China and other South Asian states. That is what has stimulated transit transportation of raw materials and goods from Europe to Asia and back. If it does not travel via Russia, it will be via some other state, for example, Kazakhstan that is actively developing the carrying capacity of the Dostyk border crossing (at the Chinese and Kazakhstan border).
Besides, transit transportation is a stimulus for railway development. In terms of rough competition, a railway has to solve the issue of implementing advanced technologies.
– How does the CCTT cooperate with producers?
– For a cargo owner we are a source of the most detailed and objective information about the possible cargo delivery along the Transsiberian route, including its sea and railway sectors. We often invite large consignors and organise meetings with operators for the clients to have a choice. We used to work with such companies as Volkswagen, Ikea, Volvo, etc.
– What is being done to harmonise the legislative base?
– The RF Ministry of Transport is developing the law “On Transit” that will contain the normative base, regulated now by hundreds of normative documents from different departments. Today different norms either contradict each other or may be interpreted for the benefit of this or that department.
The main part of the law has been formed already. It has been discussed for more than two years and it has its own supporters and opponents. The latter claim it is not necessary to put the adopted legislative statements into a separate normative act. The current Russian legal system gives unlimited opportunities for interpreting any statements by different officials. And this causes a lot of problems in the transport sector as well as in others. We do everything possible to prevent the law allowing any opportunity for two kinds of interpretation.
It is worth noting the efforts taken by the Organisation for Railways Cooperation to bring together the two legislative systems COTIF and SMGS. The first step is realisation of a project aimed at creating a single, unified CIM/SMGS invoice.
– What technical measures are being taken to develop information cooperation?
– In 2002, two very important projects were completed at the Transsib: not only was the Transsib fully electrified, but a fibre-optic communication line was installed along the railway from Moscow to Vladivostok. The latest information technologies are now used at the Russian main railway. Today the Transsib meets all global speed and safety standards.
Nevertheless, the experience of forwarders operating at the Transsib shows that the schedule of transit through delivery is often broken because partners in the process (a sea carrier, stevedores and a railway operator) lack a single IT management standard. To solve the problem, it is necessary to unite all the participants in a single information space. So, the most important activities of the CCTT are increasing the efficiency of freight transportation by block trains and provision of a new quality of service on the Transsiberian route by developing a single information space for all participants in the transport process.
– What tariff measures should be taken to develop transit transportation in Russia?
– I believe we should avoid state regulation in the tariff formation sector, it is the transporter who must set tariffs – it is an obligatory condition of a civilised market.
To prevent the current disproportionate tariff rates on container transportation along the sea and railway sectors of the Transsiberian route, the level of profit of every carrier must be levelled and coincide with the transport expenses he suffers.
Welcome!
– What will be the tariffs applied at the Transsib in 2008?
– To recommence the transit transportation, the RF Ministry of Transport decided to reduce the tariffs on transit cargo transportation in 2006 (by about 30% for a round-trip). In 2008, special rates on transit transportation along Russian railways are being kept the same as in 2007. Indexation is possible but it will not exceed inflation. The set tariffs consider the imbalance of freight flows on routes going East-West (USD 900 per loaded 40 TEU container), and West-East (USD 800 per loaded 40 TEU container and USD 400 per empty 40 TEU container).
– What is to be done to develop the capacity of border crossings?
– At the east end of the Transsib, the port railway stations are being redeveloped (the first in line is the railway junction servicing the largest Russian ports on the Pacific – Vostochny and Nakhodka).
Border railway stations Zabaikalsk and Grodekovo are being modernised. Due to the planned restoration of the Transkorean railway and its connection with the Transsib, the Hasan railway station and the approach to it are being redeveloped.
The Ministry of Transport and OAO RZD are taking measures to develop the infrastructure of Zabaikalsk railway station, so that it can receive up to 1 million TEU along a 1,435 mm-wide gauge line every year.
by Anna Nezhinskaya
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[DETAIL_TEXT] => Price or Speed?
– Mr Bessonov, could you comment on the development of transportation along the Transsib in 2007?
– Last year, exports to the Republic of Korea and import from China increased significantly. It’s a pity but transit is still at a rather low level.
Only 13 trains ran on the route Nakhodka-Vostochnaya – Buslovskaya (Russian-Finnish border) and back in 2007, they carried 1,525 TEU, a 76% fall year-on-year. The volume of container transportation between Russia and the Baltic states (in particular Lithuania) increased greatly. For example, transportation from Russia to Lithuania and back grew by 230% to 15,753 TEU, with imports to the RF making up 10,662 TEU of the volume (+358% year-on-year).
Unfortunately, a large volume of freight had been redirected from the Transsiberian railway to the sea transportation. And it was our fault. Nowadays, sea transport is the leader in the sector of transportation between European and Asian countries, it services 98% of the total transportation volume between the states.
Taking into account the annual 25-30% growth of goods turnover between the Asian Pacific Region and the European states, containerised cargo transportation to and from China plays a very important role in the further development of the Transsib.
– What prevents the increase of transit volume on RF territory nowadays?
– First of all, it is the non-competitive through rate on transit cargo transportation along the whole route. Set by the Russian Ministry of Transport in February 2007, privileged tariffs on transit container transportation from third party states through to others are in force only on the Russian Railways infrastructure. But railway infrastructure is only one element of the transport chain, and to increase the demand for transportation, the through tariff rate must be made competitive. It is necessary to coordinate the interests, resources and technologies of different players in the transport market.
Other factors restraining the realisation of Transsib’s transit potential are a shortage of rolling stock and large capacity containers, technological and customs problems with the organisation of transit container flow, imbalance and heterogeneity of the freight flows (for example, of cargo imported via Far Eastern ports and carried to railway stations in the Moscow transport junction, 65% is transported in 20-foot containers and 35% in 40-foot containers; but in the opposite direction, the share of transportation in 20-foot containers grows to 91%, with 40-foot ones accounting for just 9%).
Nevertheless, there is an assurance that transit cargo transportation by railway will develop actively because the short delivery term is an important factor for many consignors.
– What then is the real and the potential freight base of the Transsib? There are, after all, cargoes in which price will always be the most important factor. These freights will always be carried by sea transport only.
– The base comprises those producers for whom a short delivery term is most important. Fast delivery allows an increase in turnover due to a reduced cycle of operation. Sometimes, every day of delay in payment is a critical factor. And then, choosing either a low price of transportation or a short delivery term, a cargo owner selects the latter.
Though the port works are perfectly organised in the Shanghai district today, the opportunities for Chinese ports are limited. And the port infrastructure may fail to service the constantly growing cargo volume.
In my opinion, the goods produced to the south of Shanghai will be carried by sea; it is just unprofitable to transport them overland through the whole country. Freight from the north-western part of the People’s Republic of China will for sure be transported by railway. Besides, there are a number of cargoes, for example bearings, which can be carried by sea only in special expensive packages to protect them from the impact of moist air.
– Is the short delivery term the only advantage of the Transsiberian railway in comparison with sea carriers?
– It is the fundamental one. Direct railway communication reduces the distance for freight transportation from China to Europe several times over. Faster delivery means extrication of colossal financial resources, which are practically “frozen” during the period of cargo transportation. Regular transportation is provided by thoroughly following the schedule of the vessels’ calls at the sea part of the Transsib as well as the route block trains. IT implementation at the Transsiberian railway allows freight and wagons along the whole route to be controlled online.
To provide high-speed cargo carrying along the Transsib, the whole transport chain must be optimised. From the standpoint of the technology of railway freight transportation, there are no problems. The average speed of cargo transportation is from 900 km per day, with faster block trains running at a speed of 1,200 km per day. Most time is spent in ports, at the approaches to them and at border crossings. These are the “bottle-necks” to be enlarged.
A key target of the Transsib is optimisation of the whole transport chain, including implementation of modern management methods, creation of logistics centres, simplification of customs and border procedures, etc.
If that happens, the option of reliable cargo delivery from “door-to-door” at minimal terms and expenses will appear.
A good example of solving the task is organisation of an international block train on the route Beijing-Hamburg by OAO TransContainer. The train left the Beijing station Dahongmen on January 9, and arrived to Hamburg on January 24. The total length of the route is 9,780 km. Travel time is 15 days. The train arrived at Hamburg 20 hours earlier than was envisaged by the schedule. To reduce the transit time the customs were informed about the cargo in advance. E-copies of the documents necessary for customs registration of cargoes being carried into Russia were given in advance to the customs office at the Naushki border crossing.
Problems and Solutions
– What are Russian authorities, OAO RZD and CCTT doing to improve the quality of transportation in Russian areas?
– Nowadays, the problems of rolling stock shortage are being solved, OAO TransContainer, ZAO Russkaya Troyka and other large forwarding companies are enlarging their wagon and container parks.
In 2006, OAO RZD and the RF Federal Customs Service signed a Memorandum of Understanding. It envisages organisation of regular joint conferences and consultations to solve current problems, joint development and realisation of technological schemes and technical terms for cooperation between OAO RZD and the Federal Customs Service for international railway freight transportation. It also envisages implementation of e-document information systems to inform customs bodies in advance about the goods and transport facilities. The RF Federal Customs Service plans to optimise the carrying of goods and transport facilities via state borders by implementing a new system of customs registration and control in the framework of the system’s modernisation to 2010.
The mode of operation of adjoining Russian and Chinese border crossings is synchronised. A channel for fast data exchange will be put into operation between the border crossings. So-called “green” corridors will operate at some of them.
Today, ZAO Company TransTeleCom is developing a special information portal. It provides a legally viable e-document turnover and data exchange between freight transport partners who use e-signature at Transsib.
The CCTT is developing the concept of the Programme of the Strategy of International Container Transportation along the Transsiberian Railway Development to 2030.
– Some market players believe the Russian market can take the whole cargo volume carried via the Transsib and the Baikal-Amur Mainline, and efforts should be taken to develop export and import transportation.
– I think the question that has been discussed so often lately – whether transit is necessary if export and import transportation is actively developed – is not correct. Transit development is of large geopolitical importance for the state, which must use its advantages for its safety, economic development and the improvement of its people’s living standards. Russia positions itself as a transit country and so it must use its natural geographical advantage. Today, a number of the largest producers are transferring their manufacturing capacities to the People’s Republic of China and other South Asian states. That is what has stimulated transit transportation of raw materials and goods from Europe to Asia and back. If it does not travel via Russia, it will be via some other state, for example, Kazakhstan that is actively developing the carrying capacity of the Dostyk border crossing (at the Chinese and Kazakhstan border).
Besides, transit transportation is a stimulus for railway development. In terms of rough competition, a railway has to solve the issue of implementing advanced technologies.
– How does the CCTT cooperate with producers?
– For a cargo owner we are a source of the most detailed and objective information about the possible cargo delivery along the Transsiberian route, including its sea and railway sectors. We often invite large consignors and organise meetings with operators for the clients to have a choice. We used to work with such companies as Volkswagen, Ikea, Volvo, etc.
– What is being done to harmonise the legislative base?
– The RF Ministry of Transport is developing the law “On Transit” that will contain the normative base, regulated now by hundreds of normative documents from different departments. Today different norms either contradict each other or may be interpreted for the benefit of this or that department.
The main part of the law has been formed already. It has been discussed for more than two years and it has its own supporters and opponents. The latter claim it is not necessary to put the adopted legislative statements into a separate normative act. The current Russian legal system gives unlimited opportunities for interpreting any statements by different officials. And this causes a lot of problems in the transport sector as well as in others. We do everything possible to prevent the law allowing any opportunity for two kinds of interpretation.
It is worth noting the efforts taken by the Organisation for Railways Cooperation to bring together the two legislative systems COTIF and SMGS. The first step is realisation of a project aimed at creating a single, unified CIM/SMGS invoice.
– What technical measures are being taken to develop information cooperation?
– In 2002, two very important projects were completed at the Transsib: not only was the Transsib fully electrified, but a fibre-optic communication line was installed along the railway from Moscow to Vladivostok. The latest information technologies are now used at the Russian main railway. Today the Transsib meets all global speed and safety standards.
Nevertheless, the experience of forwarders operating at the Transsib shows that the schedule of transit through delivery is often broken because partners in the process (a sea carrier, stevedores and a railway operator) lack a single IT management standard. To solve the problem, it is necessary to unite all the participants in a single information space. So, the most important activities of the CCTT are increasing the efficiency of freight transportation by block trains and provision of a new quality of service on the Transsiberian route by developing a single information space for all participants in the transport process.
– What tariff measures should be taken to develop transit transportation in Russia?
– I believe we should avoid state regulation in the tariff formation sector, it is the transporter who must set tariffs – it is an obligatory condition of a civilised market.
To prevent the current disproportionate tariff rates on container transportation along the sea and railway sectors of the Transsiberian route, the level of profit of every carrier must be levelled and coincide with the transport expenses he suffers.
Welcome!
– What will be the tariffs applied at the Transsib in 2008?
– To recommence the transit transportation, the RF Ministry of Transport decided to reduce the tariffs on transit cargo transportation in 2006 (by about 30% for a round-trip). In 2008, special rates on transit transportation along Russian railways are being kept the same as in 2007. Indexation is possible but it will not exceed inflation. The set tariffs consider the imbalance of freight flows on routes going East-West (USD 900 per loaded 40 TEU container), and West-East (USD 800 per loaded 40 TEU container and USD 400 per empty 40 TEU container).
– What is to be done to develop the capacity of border crossings?
– At the east end of the Transsib, the port railway stations are being redeveloped (the first in line is the railway junction servicing the largest Russian ports on the Pacific – Vostochny and Nakhodka).
Border railway stations Zabaikalsk and Grodekovo are being modernised. Due to the planned restoration of the Transkorean railway and its connection with the Transsib, the Hasan railway station and the approach to it are being redeveloped.
The Ministry of Transport and OAO RZD are taking measures to develop the infrastructure of Zabaikalsk railway station, so that it can receive up to 1 million TEU along a 1,435 mm-wide gauge line every year.
by Anna Nezhinskaya
[~DETAIL_TEXT] => Price or Speed?
– Mr Bessonov, could you comment on the development of transportation along the Transsib in 2007?
– Last year, exports to the Republic of Korea and import from China increased significantly. It’s a pity but transit is still at a rather low level.
Only 13 trains ran on the route Nakhodka-Vostochnaya – Buslovskaya (Russian-Finnish border) and back in 2007, they carried 1,525 TEU, a 76% fall year-on-year. The volume of container transportation between Russia and the Baltic states (in particular Lithuania) increased greatly. For example, transportation from Russia to Lithuania and back grew by 230% to 15,753 TEU, with imports to the RF making up 10,662 TEU of the volume (+358% year-on-year).
Unfortunately, a large volume of freight had been redirected from the Transsiberian railway to the sea transportation. And it was our fault. Nowadays, sea transport is the leader in the sector of transportation between European and Asian countries, it services 98% of the total transportation volume between the states.
Taking into account the annual 25-30% growth of goods turnover between the Asian Pacific Region and the European states, containerised cargo transportation to and from China plays a very important role in the further development of the Transsib.
– What prevents the increase of transit volume on RF territory nowadays?
– First of all, it is the non-competitive through rate on transit cargo transportation along the whole route. Set by the Russian Ministry of Transport in February 2007, privileged tariffs on transit container transportation from third party states through to others are in force only on the Russian Railways infrastructure. But railway infrastructure is only one element of the transport chain, and to increase the demand for transportation, the through tariff rate must be made competitive. It is necessary to coordinate the interests, resources and technologies of different players in the transport market.
Other factors restraining the realisation of Transsib’s transit potential are a shortage of rolling stock and large capacity containers, technological and customs problems with the organisation of transit container flow, imbalance and heterogeneity of the freight flows (for example, of cargo imported via Far Eastern ports and carried to railway stations in the Moscow transport junction, 65% is transported in 20-foot containers and 35% in 40-foot containers; but in the opposite direction, the share of transportation in 20-foot containers grows to 91%, with 40-foot ones accounting for just 9%).
Nevertheless, there is an assurance that transit cargo transportation by railway will develop actively because the short delivery term is an important factor for many consignors.
– What then is the real and the potential freight base of the Transsib? There are, after all, cargoes in which price will always be the most important factor. These freights will always be carried by sea transport only.
– The base comprises those producers for whom a short delivery term is most important. Fast delivery allows an increase in turnover due to a reduced cycle of operation. Sometimes, every day of delay in payment is a critical factor. And then, choosing either a low price of transportation or a short delivery term, a cargo owner selects the latter.
Though the port works are perfectly organised in the Shanghai district today, the opportunities for Chinese ports are limited. And the port infrastructure may fail to service the constantly growing cargo volume.
In my opinion, the goods produced to the south of Shanghai will be carried by sea; it is just unprofitable to transport them overland through the whole country. Freight from the north-western part of the People’s Republic of China will for sure be transported by railway. Besides, there are a number of cargoes, for example bearings, which can be carried by sea only in special expensive packages to protect them from the impact of moist air.
– Is the short delivery term the only advantage of the Transsiberian railway in comparison with sea carriers?
– It is the fundamental one. Direct railway communication reduces the distance for freight transportation from China to Europe several times over. Faster delivery means extrication of colossal financial resources, which are practically “frozen” during the period of cargo transportation. Regular transportation is provided by thoroughly following the schedule of the vessels’ calls at the sea part of the Transsib as well as the route block trains. IT implementation at the Transsiberian railway allows freight and wagons along the whole route to be controlled online.
To provide high-speed cargo carrying along the Transsib, the whole transport chain must be optimised. From the standpoint of the technology of railway freight transportation, there are no problems. The average speed of cargo transportation is from 900 km per day, with faster block trains running at a speed of 1,200 km per day. Most time is spent in ports, at the approaches to them and at border crossings. These are the “bottle-necks” to be enlarged.
A key target of the Transsib is optimisation of the whole transport chain, including implementation of modern management methods, creation of logistics centres, simplification of customs and border procedures, etc.
If that happens, the option of reliable cargo delivery from “door-to-door” at minimal terms and expenses will appear.
A good example of solving the task is organisation of an international block train on the route Beijing-Hamburg by OAO TransContainer. The train left the Beijing station Dahongmen on January 9, and arrived to Hamburg on January 24. The total length of the route is 9,780 km. Travel time is 15 days. The train arrived at Hamburg 20 hours earlier than was envisaged by the schedule. To reduce the transit time the customs were informed about the cargo in advance. E-copies of the documents necessary for customs registration of cargoes being carried into Russia were given in advance to the customs office at the Naushki border crossing.
Problems and Solutions
– What are Russian authorities, OAO RZD and CCTT doing to improve the quality of transportation in Russian areas?
– Nowadays, the problems of rolling stock shortage are being solved, OAO TransContainer, ZAO Russkaya Troyka and other large forwarding companies are enlarging their wagon and container parks.
In 2006, OAO RZD and the RF Federal Customs Service signed a Memorandum of Understanding. It envisages organisation of regular joint conferences and consultations to solve current problems, joint development and realisation of technological schemes and technical terms for cooperation between OAO RZD and the Federal Customs Service for international railway freight transportation. It also envisages implementation of e-document information systems to inform customs bodies in advance about the goods and transport facilities. The RF Federal Customs Service plans to optimise the carrying of goods and transport facilities via state borders by implementing a new system of customs registration and control in the framework of the system’s modernisation to 2010.
The mode of operation of adjoining Russian and Chinese border crossings is synchronised. A channel for fast data exchange will be put into operation between the border crossings. So-called “green” corridors will operate at some of them.
Today, ZAO Company TransTeleCom is developing a special information portal. It provides a legally viable e-document turnover and data exchange between freight transport partners who use e-signature at Transsib.
The CCTT is developing the concept of the Programme of the Strategy of International Container Transportation along the Transsiberian Railway Development to 2030.
– Some market players believe the Russian market can take the whole cargo volume carried via the Transsib and the Baikal-Amur Mainline, and efforts should be taken to develop export and import transportation.
– I think the question that has been discussed so often lately – whether transit is necessary if export and import transportation is actively developed – is not correct. Transit development is of large geopolitical importance for the state, which must use its advantages for its safety, economic development and the improvement of its people’s living standards. Russia positions itself as a transit country and so it must use its natural geographical advantage. Today, a number of the largest producers are transferring their manufacturing capacities to the People’s Republic of China and other South Asian states. That is what has stimulated transit transportation of raw materials and goods from Europe to Asia and back. If it does not travel via Russia, it will be via some other state, for example, Kazakhstan that is actively developing the carrying capacity of the Dostyk border crossing (at the Chinese and Kazakhstan border).
Besides, transit transportation is a stimulus for railway development. In terms of rough competition, a railway has to solve the issue of implementing advanced technologies.
– How does the CCTT cooperate with producers?
– For a cargo owner we are a source of the most detailed and objective information about the possible cargo delivery along the Transsiberian route, including its sea and railway sectors. We often invite large consignors and organise meetings with operators for the clients to have a choice. We used to work with such companies as Volkswagen, Ikea, Volvo, etc.
– What is being done to harmonise the legislative base?
– The RF Ministry of Transport is developing the law “On Transit” that will contain the normative base, regulated now by hundreds of normative documents from different departments. Today different norms either contradict each other or may be interpreted for the benefit of this or that department.
The main part of the law has been formed already. It has been discussed for more than two years and it has its own supporters and opponents. The latter claim it is not necessary to put the adopted legislative statements into a separate normative act. The current Russian legal system gives unlimited opportunities for interpreting any statements by different officials. And this causes a lot of problems in the transport sector as well as in others. We do everything possible to prevent the law allowing any opportunity for two kinds of interpretation.
It is worth noting the efforts taken by the Organisation for Railways Cooperation to bring together the two legislative systems COTIF and SMGS. The first step is realisation of a project aimed at creating a single, unified CIM/SMGS invoice.
– What technical measures are being taken to develop information cooperation?
– In 2002, two very important projects were completed at the Transsib: not only was the Transsib fully electrified, but a fibre-optic communication line was installed along the railway from Moscow to Vladivostok. The latest information technologies are now used at the Russian main railway. Today the Transsib meets all global speed and safety standards.
Nevertheless, the experience of forwarders operating at the Transsib shows that the schedule of transit through delivery is often broken because partners in the process (a sea carrier, stevedores and a railway operator) lack a single IT management standard. To solve the problem, it is necessary to unite all the participants in a single information space. So, the most important activities of the CCTT are increasing the efficiency of freight transportation by block trains and provision of a new quality of service on the Transsiberian route by developing a single information space for all participants in the transport process.
– What tariff measures should be taken to develop transit transportation in Russia?
– I believe we should avoid state regulation in the tariff formation sector, it is the transporter who must set tariffs – it is an obligatory condition of a civilised market.
To prevent the current disproportionate tariff rates on container transportation along the sea and railway sectors of the Transsiberian route, the level of profit of every carrier must be levelled and coincide with the transport expenses he suffers.
Welcome!
– What will be the tariffs applied at the Transsib in 2008?
– To recommence the transit transportation, the RF Ministry of Transport decided to reduce the tariffs on transit cargo transportation in 2006 (by about 30% for a round-trip). In 2008, special rates on transit transportation along Russian railways are being kept the same as in 2007. Indexation is possible but it will not exceed inflation. The set tariffs consider the imbalance of freight flows on routes going East-West (USD 900 per loaded 40 TEU container), and West-East (USD 800 per loaded 40 TEU container and USD 400 per empty 40 TEU container).
– What is to be done to develop the capacity of border crossings?
– At the east end of the Transsib, the port railway stations are being redeveloped (the first in line is the railway junction servicing the largest Russian ports on the Pacific – Vostochny and Nakhodka).
Border railway stations Zabaikalsk and Grodekovo are being modernised. Due to the planned restoration of the Transkorean railway and its connection with the Transsib, the Hasan railway station and the approach to it are being redeveloped.
The Ministry of Transport and OAO RZD are taking measures to develop the infrastructure of Zabaikalsk railway station, so that it can receive up to 1 million TEU along a 1,435 mm-wide gauge line every year.
by Anna Nezhinskaya
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[~PREVIEW_TEXT] => Nowadays, the volume of container transportation via the Transsib is growing by 50% a year, and yet the potential of the railway has not been fulfilled. Gennady Bessonov, General Secretary of the Coordinating Council on Transsiberian Transportation (CCTT), talks about the development of the Transsiberian railway.
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The stage-by-stage increase of Russian export duties on logs is making for the liquidation of the export of this cargo and stimulation of the domestic timber-processing industry. In a year after the rates started to rise, timber processing grew in Russia. So, Russia will have to review the directions of export flow as well as transport capacities.Array
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[DETAIL_TEXT] => Larger Duties, Better Timber Processing
Export duties on logs in Russia started to grow in May 2006. They are to become prohibitive (80%) by 2011. This has been done to reduce the export of non-processed timber and to stimulate development of the timber-processing industry.
“Due to the lack of timber processing, the losses of Russian enterprises amount to USD 8 billion annually”, states Andrey Belousov, Deputy Minister of Economic Development and Trade. He says Russia exported timber and sawn wood worth USD 8.3 billion last year, including USD 4 billion of non-processed timber. According to the assessments of the Ministry of Economic Development and Trade, the cost of the goods made of timber after deep processing is USD 12 billion, i.e. the country is losing USD 8 billion of surplus value.
According to the Federal Agency of Forestry, duties increases have caused changes already. In mid-2007, Viktor Stepov, the Head of the Oktyabrskaya railway (an affiliate of OAO RZD), noted that export transportation of sawn timber grew, while the volume of log-loading fell. Valery Roschupkin, Head of the RF Federal Agency of Forestry, has spoken of the future plans of the Government. In his words, log exports from Russia are to stop by 2015; it is to be replaced by deep-processed products. But Igor Ryvkin, a consultant of the North-Western Timber Industrial Confederation, said: “One must understand that logs exports cannot be fully replaced.The programme seems to be a fiction because of the volume of required investment. But after an adequate estimation of timber resources in Russia, the fiction may turn into reality”. According to the Agency of Forestry, USD 48 billion is to be invested to carry out the plan to re-orientate the timber industry, which exceeds the current investment volume by approximately 50 times.
Is it really possible to attract such a large volume of financial assets to the Russian timber-processing market? Maybe. In 2007, the volume of investment into the timber industry grew by 25%. Besides, considering the future increases in duties, foreign companies, which used to go in for timber export from the RF, may enlarge their presence in the Russian market. For example, a project for logging and timber processing activity called “Forest” was presented in the Krasnoyarsk region. It is carried out by Austrian company Makarios Group (MG) Holdings GmbH. In the first stage, they will produce carving wood, however, the management of the company announces that the company is going to organise manufacturing of the final product. Swedish-Finnish corporation Stora Enso announced it is going to build a new pulp and paper mill in the Nizhegorodskaya oblast. It will cost EUR 1.5 billion, and its capacity is 1 million tons of pulp.
According to the Ministry of Industry and Energy, in 2007, the production growth in the sector of timber-processing and making goods out of timber amounted to 106.2% year-on-year. Export of timber and paper products made USD 11.2 billion in January-November 2007 (+130.1% year-on-year). During that period, the physical volume of exported, non-processed timber fell by 2.8% year-on-year, while processed timber grew by 12.2%. In that time, the import of timber and pup and paper increased by 33.8% year-on-year to USD 4.8 billion.
What Route Will Goods From New Enterprises Use?
Taking all the above-mentioned changes into account, there appears the question how the logistics of timber transportation will change. Two directions are to be noted. Firstly, is the export to international clients that located their production on the territory of the Russian Federation. Secondly, specialists forecast the growth of domestic markets. In particular, experts noted the increase of the wooden house-building market. The timber-processing holding company, separated from Ilim Pulp Enterprise after its merger with International Paper, was established in anticipation of development of the wooden house-building sector. “Our enterprises producing sawn timber have always worked for export.In fact, they were built for that”, says Nikita Leonov, administrator of the mechanical timber-processing business, Ilim Pulp.
“For example, the boards were delivered to the Mediterranean countries, England, and Germany. Until recently, sawn timber of such quality was not popular in the still-forming Russian market in wooden house construction. The situation is changing, however. As soon as we have an opportunity, we will re-orient goods flows to the domestic market. And we aim to produce a range of boards such as veneers and fibreboard”.
But these are just plans. Now, initial timber processing is being developed in the country. “Nowadays, demand on the Russian market makes construction of pulp and paper enterprises with a capacity of more than 800,000 tons unreasonable. And such enterprise requires investment of at least USD 1.5 billion”, says Viktor Loginov, senior analyst of Bumprom company. It is another reason for which most investment goes into production of initially-processed timber. Also, there are changes in foreign trade, and Russia has to establish relations with the largest importers in a new way.
Russia Waiting for Investors, Not Customers
After Russian duties increased, the Finns discussed the opportunities presented by their own forest resources. On the other hand, Finnish companies are constructing processing enterprises in Russia. Meanwhile, the authorities of Suomi are trying to come to an agreement with Russia. Simultaneously, Sweden brought an action to the EU court because of the problem with the increase in duties.
At the same time, Russian authorities are doing their best to solve the problem of illegal log export to China. “A whole criminal sector has formed in the border regions of the Far East. It goes in for logging, storing, transportation and sale of stolen wood. According to our estimations, last year illegal logging amounted to 7 million cubic metres of timber in the Far Eastern region. It is at least one third of the total volume of the illegal logging volume in Russia”, Yury Trutnev, the RF Minister of Natural Resources, recently stated.
In the words of German Zverev, Director of International Cooperation and Tourism Department, Administration of the Primorsk region, today China is developing a system of processing enterprises and warehouses near the border. Thus, the strategy of cost-cutting created by the Russian legislation is being carried out. Most timber processing enterprises, in the launch of which Chinese companies participate, provide only initial processing. China is going to create, on Russian territory not far from the border, plants that will make the primary processing of timber, which will then be exported to China for deeper processing.
There Are Goods But Little Experience in Transportation
The rolling stock used now in Russia is mainly meant for log transportation. On the threshold of changes on the market, Russian forwarders are starting to think about transporting new cargoes for export. “Nowadays, we have already learned how to transport sawn timber in bulk, without bunching”, says Sergey Krivov, Director General of OOO TransLes, a daughter company of OAO RZD, specialising in timber transportation. “Our company plans a test transportation of bunched sawn timber on usual platforms without re-equipping them. And there are all the necessary technical prerequisites for that. On the whole, forecasting the share of the sawn timber growth, we plan to adapt them to carry carving wood. Also, we would like to develop a principally new type of rolling stock in cooperation with the consumers of our services. OOO TransLes is ready to invest into development of the respective projects and tests. Now we are open to the wishes and offers of our consumers”. A specific feature of special flat wagons for timber transportation is that they can hardly be used for transportation of other cargoes. Nevertheless, specialists of OOO TransLes believe they will find a way to adapt the rolling stock for transportation of other cargoes, in particular metals.
But there is a difficult situation in the paper product transportation sector. A lot of Russian enterprises do not have much opportunity to load paper into containers, which is why Russian forwarders prefer to use covered gondola cars to carry the freight. Forwarding companies in cooperation with wagon building enterprises are developing special rolling stock – covered wagons for paper transportation. Only those companies, which work mainly for export, have experience of paper transportation in containers. “A special restraint system was developed for loading, in which office paper is loaded on pallets”, says L.Markov, Deputy CEO of OOO Module. “Now in our park there are about 550 fitting platforms and we will use containers of large shipping companies”, he says. 40-foot containers are used for such transportation mainly. Paper rolls are large, and if the cargo is loaded into 20-foot containers, the carrying capacity is not used to the full, i.e. only half of a container is used.
If paper is carried in containers in Russia, there will be problems because of “insufficient containerisation” in the Russian transport market. First of all, there are few special terminals for container handling in the regions. “As a rule, pulp and paper enterprises have relative loading capacities, but consignors have got used to receiving the cargo in gondola cars”, claims Mr Markov.
If new pulp and paper mills are built in Russia in the near future, they will be equipped with container areas. So, Russian operators will have to use 40-foot containers and build container terminals to deliver the cargo to consumers.
by Anna Nezhinskaya
[~DETAIL_TEXT] => Larger Duties, Better Timber Processing
Export duties on logs in Russia started to grow in May 2006. They are to become prohibitive (80%) by 2011. This has been done to reduce the export of non-processed timber and to stimulate development of the timber-processing industry.
“Due to the lack of timber processing, the losses of Russian enterprises amount to USD 8 billion annually”, states Andrey Belousov, Deputy Minister of Economic Development and Trade. He says Russia exported timber and sawn wood worth USD 8.3 billion last year, including USD 4 billion of non-processed timber. According to the assessments of the Ministry of Economic Development and Trade, the cost of the goods made of timber after deep processing is USD 12 billion, i.e. the country is losing USD 8 billion of surplus value.
According to the Federal Agency of Forestry, duties increases have caused changes already. In mid-2007, Viktor Stepov, the Head of the Oktyabrskaya railway (an affiliate of OAO RZD), noted that export transportation of sawn timber grew, while the volume of log-loading fell. Valery Roschupkin, Head of the RF Federal Agency of Forestry, has spoken of the future plans of the Government. In his words, log exports from Russia are to stop by 2015; it is to be replaced by deep-processed products. But Igor Ryvkin, a consultant of the North-Western Timber Industrial Confederation, said: “One must understand that logs exports cannot be fully replaced.The programme seems to be a fiction because of the volume of required investment. But after an adequate estimation of timber resources in Russia, the fiction may turn into reality”. According to the Agency of Forestry, USD 48 billion is to be invested to carry out the plan to re-orientate the timber industry, which exceeds the current investment volume by approximately 50 times.
Is it really possible to attract such a large volume of financial assets to the Russian timber-processing market? Maybe. In 2007, the volume of investment into the timber industry grew by 25%. Besides, considering the future increases in duties, foreign companies, which used to go in for timber export from the RF, may enlarge their presence in the Russian market. For example, a project for logging and timber processing activity called “Forest” was presented in the Krasnoyarsk region. It is carried out by Austrian company Makarios Group (MG) Holdings GmbH. In the first stage, they will produce carving wood, however, the management of the company announces that the company is going to organise manufacturing of the final product. Swedish-Finnish corporation Stora Enso announced it is going to build a new pulp and paper mill in the Nizhegorodskaya oblast. It will cost EUR 1.5 billion, and its capacity is 1 million tons of pulp.
According to the Ministry of Industry and Energy, in 2007, the production growth in the sector of timber-processing and making goods out of timber amounted to 106.2% year-on-year. Export of timber and paper products made USD 11.2 billion in January-November 2007 (+130.1% year-on-year). During that period, the physical volume of exported, non-processed timber fell by 2.8% year-on-year, while processed timber grew by 12.2%. In that time, the import of timber and pup and paper increased by 33.8% year-on-year to USD 4.8 billion.
What Route Will Goods From New Enterprises Use?
Taking all the above-mentioned changes into account, there appears the question how the logistics of timber transportation will change. Two directions are to be noted. Firstly, is the export to international clients that located their production on the territory of the Russian Federation. Secondly, specialists forecast the growth of domestic markets. In particular, experts noted the increase of the wooden house-building market. The timber-processing holding company, separated from Ilim Pulp Enterprise after its merger with International Paper, was established in anticipation of development of the wooden house-building sector. “Our enterprises producing sawn timber have always worked for export.In fact, they were built for that”, says Nikita Leonov, administrator of the mechanical timber-processing business, Ilim Pulp.
“For example, the boards were delivered to the Mediterranean countries, England, and Germany. Until recently, sawn timber of such quality was not popular in the still-forming Russian market in wooden house construction. The situation is changing, however. As soon as we have an opportunity, we will re-orient goods flows to the domestic market. And we aim to produce a range of boards such as veneers and fibreboard”.
But these are just plans. Now, initial timber processing is being developed in the country. “Nowadays, demand on the Russian market makes construction of pulp and paper enterprises with a capacity of more than 800,000 tons unreasonable. And such enterprise requires investment of at least USD 1.5 billion”, says Viktor Loginov, senior analyst of Bumprom company. It is another reason for which most investment goes into production of initially-processed timber. Also, there are changes in foreign trade, and Russia has to establish relations with the largest importers in a new way.
Russia Waiting for Investors, Not Customers
After Russian duties increased, the Finns discussed the opportunities presented by their own forest resources. On the other hand, Finnish companies are constructing processing enterprises in Russia. Meanwhile, the authorities of Suomi are trying to come to an agreement with Russia. Simultaneously, Sweden brought an action to the EU court because of the problem with the increase in duties.
At the same time, Russian authorities are doing their best to solve the problem of illegal log export to China. “A whole criminal sector has formed in the border regions of the Far East. It goes in for logging, storing, transportation and sale of stolen wood. According to our estimations, last year illegal logging amounted to 7 million cubic metres of timber in the Far Eastern region. It is at least one third of the total volume of the illegal logging volume in Russia”, Yury Trutnev, the RF Minister of Natural Resources, recently stated.
In the words of German Zverev, Director of International Cooperation and Tourism Department, Administration of the Primorsk region, today China is developing a system of processing enterprises and warehouses near the border. Thus, the strategy of cost-cutting created by the Russian legislation is being carried out. Most timber processing enterprises, in the launch of which Chinese companies participate, provide only initial processing. China is going to create, on Russian territory not far from the border, plants that will make the primary processing of timber, which will then be exported to China for deeper processing.
There Are Goods But Little Experience in Transportation
The rolling stock used now in Russia is mainly meant for log transportation. On the threshold of changes on the market, Russian forwarders are starting to think about transporting new cargoes for export. “Nowadays, we have already learned how to transport sawn timber in bulk, without bunching”, says Sergey Krivov, Director General of OOO TransLes, a daughter company of OAO RZD, specialising in timber transportation. “Our company plans a test transportation of bunched sawn timber on usual platforms without re-equipping them. And there are all the necessary technical prerequisites for that. On the whole, forecasting the share of the sawn timber growth, we plan to adapt them to carry carving wood. Also, we would like to develop a principally new type of rolling stock in cooperation with the consumers of our services. OOO TransLes is ready to invest into development of the respective projects and tests. Now we are open to the wishes and offers of our consumers”. A specific feature of special flat wagons for timber transportation is that they can hardly be used for transportation of other cargoes. Nevertheless, specialists of OOO TransLes believe they will find a way to adapt the rolling stock for transportation of other cargoes, in particular metals.
But there is a difficult situation in the paper product transportation sector. A lot of Russian enterprises do not have much opportunity to load paper into containers, which is why Russian forwarders prefer to use covered gondola cars to carry the freight. Forwarding companies in cooperation with wagon building enterprises are developing special rolling stock – covered wagons for paper transportation. Only those companies, which work mainly for export, have experience of paper transportation in containers. “A special restraint system was developed for loading, in which office paper is loaded on pallets”, says L.Markov, Deputy CEO of OOO Module. “Now in our park there are about 550 fitting platforms and we will use containers of large shipping companies”, he says. 40-foot containers are used for such transportation mainly. Paper rolls are large, and if the cargo is loaded into 20-foot containers, the carrying capacity is not used to the full, i.e. only half of a container is used.
If paper is carried in containers in Russia, there will be problems because of “insufficient containerisation” in the Russian transport market. First of all, there are few special terminals for container handling in the regions. “As a rule, pulp and paper enterprises have relative loading capacities, but consignors have got used to receiving the cargo in gondola cars”, claims Mr Markov.
If new pulp and paper mills are built in Russia in the near future, they will be equipped with container areas. So, Russian operators will have to use 40-foot containers and build container terminals to deliver the cargo to consumers.
by Anna Nezhinskaya
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2008/2/8.jpg" border="1" alt=" " hspace="3" vspace="3" width="140" height="110" align="left" />The stage-by-stage increase of Russian export duties on logs is making for the liquidation of the export of this cargo and stimulation of the domestic timber-processing industry. In a year after the rates started to rise, timber processing grew in Russia. So, Russia will have to review the directions of export flow as well as transport capacities.
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[ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2008/2/8.jpg" border="1" alt=" " hspace="3" vspace="3" width="140" height="110" align="left" />The stage-by-stage increase of Russian export duties on logs is making for the liquidation of the export of this cargo and stimulation of the domestic timber-processing industry. In a year after the rates started to rise, timber processing grew in Russia. So, Russia will have to review the directions of export flow as well as transport capacities.
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[DETAIL_TEXT] => Larger Duties, Better Timber Processing
Export duties on logs in Russia started to grow in May 2006. They are to become prohibitive (80%) by 2011. This has been done to reduce the export of non-processed timber and to stimulate development of the timber-processing industry.
“Due to the lack of timber processing, the losses of Russian enterprises amount to USD 8 billion annually”, states Andrey Belousov, Deputy Minister of Economic Development and Trade. He says Russia exported timber and sawn wood worth USD 8.3 billion last year, including USD 4 billion of non-processed timber. According to the assessments of the Ministry of Economic Development and Trade, the cost of the goods made of timber after deep processing is USD 12 billion, i.e. the country is losing USD 8 billion of surplus value.
According to the Federal Agency of Forestry, duties increases have caused changes already. In mid-2007, Viktor Stepov, the Head of the Oktyabrskaya railway (an affiliate of OAO RZD), noted that export transportation of sawn timber grew, while the volume of log-loading fell. Valery Roschupkin, Head of the RF Federal Agency of Forestry, has spoken of the future plans of the Government. In his words, log exports from Russia are to stop by 2015; it is to be replaced by deep-processed products. But Igor Ryvkin, a consultant of the North-Western Timber Industrial Confederation, said: “One must understand that logs exports cannot be fully replaced.The programme seems to be a fiction because of the volume of required investment. But after an adequate estimation of timber resources in Russia, the fiction may turn into reality”. According to the Agency of Forestry, USD 48 billion is to be invested to carry out the plan to re-orientate the timber industry, which exceeds the current investment volume by approximately 50 times.
Is it really possible to attract such a large volume of financial assets to the Russian timber-processing market? Maybe. In 2007, the volume of investment into the timber industry grew by 25%. Besides, considering the future increases in duties, foreign companies, which used to go in for timber export from the RF, may enlarge their presence in the Russian market. For example, a project for logging and timber processing activity called “Forest” was presented in the Krasnoyarsk region. It is carried out by Austrian company Makarios Group (MG) Holdings GmbH. In the first stage, they will produce carving wood, however, the management of the company announces that the company is going to organise manufacturing of the final product. Swedish-Finnish corporation Stora Enso announced it is going to build a new pulp and paper mill in the Nizhegorodskaya oblast. It will cost EUR 1.5 billion, and its capacity is 1 million tons of pulp.
According to the Ministry of Industry and Energy, in 2007, the production growth in the sector of timber-processing and making goods out of timber amounted to 106.2% year-on-year. Export of timber and paper products made USD 11.2 billion in January-November 2007 (+130.1% year-on-year). During that period, the physical volume of exported, non-processed timber fell by 2.8% year-on-year, while processed timber grew by 12.2%. In that time, the import of timber and pup and paper increased by 33.8% year-on-year to USD 4.8 billion.
What Route Will Goods From New Enterprises Use?
Taking all the above-mentioned changes into account, there appears the question how the logistics of timber transportation will change. Two directions are to be noted. Firstly, is the export to international clients that located their production on the territory of the Russian Federation. Secondly, specialists forecast the growth of domestic markets. In particular, experts noted the increase of the wooden house-building market. The timber-processing holding company, separated from Ilim Pulp Enterprise after its merger with International Paper, was established in anticipation of development of the wooden house-building sector. “Our enterprises producing sawn timber have always worked for export.In fact, they were built for that”, says Nikita Leonov, administrator of the mechanical timber-processing business, Ilim Pulp.
“For example, the boards were delivered to the Mediterranean countries, England, and Germany. Until recently, sawn timber of such quality was not popular in the still-forming Russian market in wooden house construction. The situation is changing, however. As soon as we have an opportunity, we will re-orient goods flows to the domestic market. And we aim to produce a range of boards such as veneers and fibreboard”.
But these are just plans. Now, initial timber processing is being developed in the country. “Nowadays, demand on the Russian market makes construction of pulp and paper enterprises with a capacity of more than 800,000 tons unreasonable. And such enterprise requires investment of at least USD 1.5 billion”, says Viktor Loginov, senior analyst of Bumprom company. It is another reason for which most investment goes into production of initially-processed timber. Also, there are changes in foreign trade, and Russia has to establish relations with the largest importers in a new way.
Russia Waiting for Investors, Not Customers
After Russian duties increased, the Finns discussed the opportunities presented by their own forest resources. On the other hand, Finnish companies are constructing processing enterprises in Russia. Meanwhile, the authorities of Suomi are trying to come to an agreement with Russia. Simultaneously, Sweden brought an action to the EU court because of the problem with the increase in duties.
At the same time, Russian authorities are doing their best to solve the problem of illegal log export to China. “A whole criminal sector has formed in the border regions of the Far East. It goes in for logging, storing, transportation and sale of stolen wood. According to our estimations, last year illegal logging amounted to 7 million cubic metres of timber in the Far Eastern region. It is at least one third of the total volume of the illegal logging volume in Russia”, Yury Trutnev, the RF Minister of Natural Resources, recently stated.
In the words of German Zverev, Director of International Cooperation and Tourism Department, Administration of the Primorsk region, today China is developing a system of processing enterprises and warehouses near the border. Thus, the strategy of cost-cutting created by the Russian legislation is being carried out. Most timber processing enterprises, in the launch of which Chinese companies participate, provide only initial processing. China is going to create, on Russian territory not far from the border, plants that will make the primary processing of timber, which will then be exported to China for deeper processing.
There Are Goods But Little Experience in Transportation
The rolling stock used now in Russia is mainly meant for log transportation. On the threshold of changes on the market, Russian forwarders are starting to think about transporting new cargoes for export. “Nowadays, we have already learned how to transport sawn timber in bulk, without bunching”, says Sergey Krivov, Director General of OOO TransLes, a daughter company of OAO RZD, specialising in timber transportation. “Our company plans a test transportation of bunched sawn timber on usual platforms without re-equipping them. And there are all the necessary technical prerequisites for that. On the whole, forecasting the share of the sawn timber growth, we plan to adapt them to carry carving wood. Also, we would like to develop a principally new type of rolling stock in cooperation with the consumers of our services. OOO TransLes is ready to invest into development of the respective projects and tests. Now we are open to the wishes and offers of our consumers”. A specific feature of special flat wagons for timber transportation is that they can hardly be used for transportation of other cargoes. Nevertheless, specialists of OOO TransLes believe they will find a way to adapt the rolling stock for transportation of other cargoes, in particular metals.
But there is a difficult situation in the paper product transportation sector. A lot of Russian enterprises do not have much opportunity to load paper into containers, which is why Russian forwarders prefer to use covered gondola cars to carry the freight. Forwarding companies in cooperation with wagon building enterprises are developing special rolling stock – covered wagons for paper transportation. Only those companies, which work mainly for export, have experience of paper transportation in containers. “A special restraint system was developed for loading, in which office paper is loaded on pallets”, says L.Markov, Deputy CEO of OOO Module. “Now in our park there are about 550 fitting platforms and we will use containers of large shipping companies”, he says. 40-foot containers are used for such transportation mainly. Paper rolls are large, and if the cargo is loaded into 20-foot containers, the carrying capacity is not used to the full, i.e. only half of a container is used.
If paper is carried in containers in Russia, there will be problems because of “insufficient containerisation” in the Russian transport market. First of all, there are few special terminals for container handling in the regions. “As a rule, pulp and paper enterprises have relative loading capacities, but consignors have got used to receiving the cargo in gondola cars”, claims Mr Markov.
If new pulp and paper mills are built in Russia in the near future, they will be equipped with container areas. So, Russian operators will have to use 40-foot containers and build container terminals to deliver the cargo to consumers.
by Anna Nezhinskaya
[~DETAIL_TEXT] => Larger Duties, Better Timber Processing
Export duties on logs in Russia started to grow in May 2006. They are to become prohibitive (80%) by 2011. This has been done to reduce the export of non-processed timber and to stimulate development of the timber-processing industry.
“Due to the lack of timber processing, the losses of Russian enterprises amount to USD 8 billion annually”, states Andrey Belousov, Deputy Minister of Economic Development and Trade. He says Russia exported timber and sawn wood worth USD 8.3 billion last year, including USD 4 billion of non-processed timber. According to the assessments of the Ministry of Economic Development and Trade, the cost of the goods made of timber after deep processing is USD 12 billion, i.e. the country is losing USD 8 billion of surplus value.
According to the Federal Agency of Forestry, duties increases have caused changes already. In mid-2007, Viktor Stepov, the Head of the Oktyabrskaya railway (an affiliate of OAO RZD), noted that export transportation of sawn timber grew, while the volume of log-loading fell. Valery Roschupkin, Head of the RF Federal Agency of Forestry, has spoken of the future plans of the Government. In his words, log exports from Russia are to stop by 2015; it is to be replaced by deep-processed products. But Igor Ryvkin, a consultant of the North-Western Timber Industrial Confederation, said: “One must understand that logs exports cannot be fully replaced.The programme seems to be a fiction because of the volume of required investment. But after an adequate estimation of timber resources in Russia, the fiction may turn into reality”. According to the Agency of Forestry, USD 48 billion is to be invested to carry out the plan to re-orientate the timber industry, which exceeds the current investment volume by approximately 50 times.
Is it really possible to attract such a large volume of financial assets to the Russian timber-processing market? Maybe. In 2007, the volume of investment into the timber industry grew by 25%. Besides, considering the future increases in duties, foreign companies, which used to go in for timber export from the RF, may enlarge their presence in the Russian market. For example, a project for logging and timber processing activity called “Forest” was presented in the Krasnoyarsk region. It is carried out by Austrian company Makarios Group (MG) Holdings GmbH. In the first stage, they will produce carving wood, however, the management of the company announces that the company is going to organise manufacturing of the final product. Swedish-Finnish corporation Stora Enso announced it is going to build a new pulp and paper mill in the Nizhegorodskaya oblast. It will cost EUR 1.5 billion, and its capacity is 1 million tons of pulp.
According to the Ministry of Industry and Energy, in 2007, the production growth in the sector of timber-processing and making goods out of timber amounted to 106.2% year-on-year. Export of timber and paper products made USD 11.2 billion in January-November 2007 (+130.1% year-on-year). During that period, the physical volume of exported, non-processed timber fell by 2.8% year-on-year, while processed timber grew by 12.2%. In that time, the import of timber and pup and paper increased by 33.8% year-on-year to USD 4.8 billion.
What Route Will Goods From New Enterprises Use?
Taking all the above-mentioned changes into account, there appears the question how the logistics of timber transportation will change. Two directions are to be noted. Firstly, is the export to international clients that located their production on the territory of the Russian Federation. Secondly, specialists forecast the growth of domestic markets. In particular, experts noted the increase of the wooden house-building market. The timber-processing holding company, separated from Ilim Pulp Enterprise after its merger with International Paper, was established in anticipation of development of the wooden house-building sector. “Our enterprises producing sawn timber have always worked for export.In fact, they were built for that”, says Nikita Leonov, administrator of the mechanical timber-processing business, Ilim Pulp.
“For example, the boards were delivered to the Mediterranean countries, England, and Germany. Until recently, sawn timber of such quality was not popular in the still-forming Russian market in wooden house construction. The situation is changing, however. As soon as we have an opportunity, we will re-orient goods flows to the domestic market. And we aim to produce a range of boards such as veneers and fibreboard”.
But these are just plans. Now, initial timber processing is being developed in the country. “Nowadays, demand on the Russian market makes construction of pulp and paper enterprises with a capacity of more than 800,000 tons unreasonable. And such enterprise requires investment of at least USD 1.5 billion”, says Viktor Loginov, senior analyst of Bumprom company. It is another reason for which most investment goes into production of initially-processed timber. Also, there are changes in foreign trade, and Russia has to establish relations with the largest importers in a new way.
Russia Waiting for Investors, Not Customers
After Russian duties increased, the Finns discussed the opportunities presented by their own forest resources. On the other hand, Finnish companies are constructing processing enterprises in Russia. Meanwhile, the authorities of Suomi are trying to come to an agreement with Russia. Simultaneously, Sweden brought an action to the EU court because of the problem with the increase in duties.
At the same time, Russian authorities are doing their best to solve the problem of illegal log export to China. “A whole criminal sector has formed in the border regions of the Far East. It goes in for logging, storing, transportation and sale of stolen wood. According to our estimations, last year illegal logging amounted to 7 million cubic metres of timber in the Far Eastern region. It is at least one third of the total volume of the illegal logging volume in Russia”, Yury Trutnev, the RF Minister of Natural Resources, recently stated.
In the words of German Zverev, Director of International Cooperation and Tourism Department, Administration of the Primorsk region, today China is developing a system of processing enterprises and warehouses near the border. Thus, the strategy of cost-cutting created by the Russian legislation is being carried out. Most timber processing enterprises, in the launch of which Chinese companies participate, provide only initial processing. China is going to create, on Russian territory not far from the border, plants that will make the primary processing of timber, which will then be exported to China for deeper processing.
There Are Goods But Little Experience in Transportation
The rolling stock used now in Russia is mainly meant for log transportation. On the threshold of changes on the market, Russian forwarders are starting to think about transporting new cargoes for export. “Nowadays, we have already learned how to transport sawn timber in bulk, without bunching”, says Sergey Krivov, Director General of OOO TransLes, a daughter company of OAO RZD, specialising in timber transportation. “Our company plans a test transportation of bunched sawn timber on usual platforms without re-equipping them. And there are all the necessary technical prerequisites for that. On the whole, forecasting the share of the sawn timber growth, we plan to adapt them to carry carving wood. Also, we would like to develop a principally new type of rolling stock in cooperation with the consumers of our services. OOO TransLes is ready to invest into development of the respective projects and tests. Now we are open to the wishes and offers of our consumers”. A specific feature of special flat wagons for timber transportation is that they can hardly be used for transportation of other cargoes. Nevertheless, specialists of OOO TransLes believe they will find a way to adapt the rolling stock for transportation of other cargoes, in particular metals.
But there is a difficult situation in the paper product transportation sector. A lot of Russian enterprises do not have much opportunity to load paper into containers, which is why Russian forwarders prefer to use covered gondola cars to carry the freight. Forwarding companies in cooperation with wagon building enterprises are developing special rolling stock – covered wagons for paper transportation. Only those companies, which work mainly for export, have experience of paper transportation in containers. “A special restraint system was developed for loading, in which office paper is loaded on pallets”, says L.Markov, Deputy CEO of OOO Module. “Now in our park there are about 550 fitting platforms and we will use containers of large shipping companies”, he says. 40-foot containers are used for such transportation mainly. Paper rolls are large, and if the cargo is loaded into 20-foot containers, the carrying capacity is not used to the full, i.e. only half of a container is used.
If paper is carried in containers in Russia, there will be problems because of “insufficient containerisation” in the Russian transport market. First of all, there are few special terminals for container handling in the regions. “As a rule, pulp and paper enterprises have relative loading capacities, but consignors have got used to receiving the cargo in gondola cars”, claims Mr Markov.
If new pulp and paper mills are built in Russia in the near future, they will be equipped with container areas. So, Russian operators will have to use 40-foot containers and build container terminals to deliver the cargo to consumers.
by Anna Nezhinskaya
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[DETAIL_TEXT] => OAO RZD in Q1: Results and Trends
As a rule, the first quarter of the year struck the keynote of activities at Russian railways. This year the Q1 results of OAO RZD were rather promising. Practically all targets set in the freight work plan were reached. A daily loading record was set and there were even less idling trains than usual.
According to the Railway Center of Transport Services, the volume of loaded cargo exceeded the amount planned by 3.2 million tons. More than half of the planned freight is profitable – ferrous metals, containerised cargo, and oil bulk. Loading of chemicals, cement, iron ore and grain increased.
Loaded volume grew by 5.3% year-on-year, or by 17 million tons.
In Q1, 2008, the revenue from freight transportation was 3% more than had been planned.
During this period, net throughput rose by 8.5% in comparison with Q1 of 2007. The average distance of transportation increased by 62 km. Also, cargo exports via port stations grew significantly.
Meanwhile, one should take into account the factors negatively influencing the profitability of the company. First of all, there are the conventional problems. Annually, bad weather, lack of vessels, irregular delivery of wagons to ports, and a lack of coordination between portmen and railwaymen not only eat away at profits but also slow down the whole transportation process. Thus, in Q1 of 2008, almost 260 delays were reported (for the trains destined for port stations, border crossings and inside the country). Russian railways underloaded by 2.4 million tons. Although the financial losses fell by RUR 22 million year-on-year, the figure is still huge.
Unadjusted volumes of export cargo transportation remain a headache for OAO RZD. Unfortunately, this situation arises annually, and impacts the work of clients.
Only in March, during the adjustment, the reception of 4 million tons of export cargo was not confirmed at its transportation via the ports of Russia, the CIS, and the Baltic States. Out of this volume, transportation of 967,000 tons was declined by ports, 442,000 tons by port oil bases, 1,798 thousand tons by foreign railways and 366,000tons by cargo owners.
As a result, OAO RZD had to refuse cargo transportation to cargo owners. The losses from unreceived cargo transportation in March amounted to RUR 2,721.5 million.
OAO RZD will hardly succeed in improving the situation in April. But by the end of H1 of 2008, these figures must improve – this is the demand of the market.
Oil Flows Away… Into Pipelines
In January 2008, the volume of oil and oil products transported along Russian railways grew by 2.3% year-on-year.
According to the Center of Transport Services at OAO RZD, such a figure became possible due to the growth in exports of 9.7% and imports by 22.3%. Meanwhile, the inland transportation volume fell by 4.9%.
In the first month of 2008, the distribution of oil bulk according to the type of transportation was as follows: 50.9% was carried for export, 46.7% was transported inside Russia, and transit and import made 2.1% and 0.3% respectively.
Of the transportation volume carried by Russian Railways last January, the share of oil bulk made 17.2%, down 0.5% year-on-year. Specialists believe, the main reason for the reduction is redirection to pipelines.
Harbin – Vanino May Become a Corridor
The Economic Council, led by the Governor of the Khabarovsk Krai, discussed the plan for a transport route “Harbin – Bolshoi Ussuriysky Island – Vanino” at the end of March.
The new transport route may boost the export-oriented Heilongjiang province and Russian businesses. According to the estimates of the project’s designers, shipping of container cargoes from Heilongjiang to Japan would require only 4 days and only a week to reach the Pacific coast of the United States. Supply routes to South Korea, Southeast Asia and Southern China would be expedited as well.
The project is more opportune, taking into account the workload of Chinese seaports, which are unable to master transshipment of cargoes: trains and sea vessels wait in queues for 15-20 days.
The Russian government and companies have already started to develop the Vanino trade-industrial hub. Significant sums of money are being invested in construction of moorings, enlarging the capacity of the Transsiberian and Baikal-Amur railways.
The project envisages construction of two container terminals – one on each side of the state border on Bolshoi Ussuriysky Island. According to the document, the terminal handling capacity is up to 550 containers daily. A high-speed motorway will connect the terminal with the Chernorechenskoye high road, and the carrying capacity of Khabarovsk – Lidoga – Vanino will increase.
According to the forecast of Vadim Zausaev, Director of the Far Eastern Research Institute, the fast economic development of Heilongjiang province will cause a shortage of capacities at the existing border crossings in the Khabarovsk region and Primorsk region. It will increase to 10 million tons by 2015, and 25 million tons by 2020, including at least 9 million tons of containerised cargo (450,000 TEU).
“If the project of an international container corridor launch is carried out, the deficit of carrying capacities may fall, since in the first stage 1.6 million containerised cargo units (80,000 TEU) may be transported there, and then the volume may reach 4million tons (200,000 TEU)”, considers Vadim Zusaev. He also noted that the investment into the corridor launched is estimated at RUR 7 billion. The project has already been supported by the authorities of the Khabarovsk region.
LDz Cargo Improves Results
LDz Cargo, a subsidiary of Latvijas dzelzcels, transported 14.374 million tons of freight in Q1 of 2008, 18.6% up year-on-year.
The company transported 5.759 million tons of oil and oil products, 4.394 million tons of coal, and 1.275 million tons of mineral fertilisers.
According to Eduards Cernavskis, Head of LDz PR Department, in Q1 of 2008, the volume of mineral fertilisers carried fell by 23.7%, since the transportation of potash fertiliser to Ventspils had been stopped. The company carried more oil products, coal, grain and chemicals than in January-March 2007. Grain is mainly transported from Kazakhstan, Russia, Lithuania and Ukraine.
Russian Ports Will Increase Throughput by 7.5% This Year
The throughput of Russian sea ports is expected to amount 485 million tons in 2008, said Oleg Kovalchuk, Deputy Head of the federal state unitary enterprise Rosmorport at a conference in March.
In 2007, the throughput of Russian ports was 451 million tons. Thus, according to estimates, it may grow by 7.5% this year.
In the words of Mr Kovalchuk, the throughput of the RF sea ports is forecasted to amount to 510 million tons in 2009, and to 583 million tons in 2010.
He also said that Rosmorport spent RUR 15.7 billion between September 2002 (when Rosmorport was launched) and 2007. Over RUR 12.2billion of the sum was invested in reconstruction and building hydro-technical facilities, and RUR 3.4 billion in construction of linear ice-breakers at OAO Baltiysky Zavod.
This year Rosmorport is going to invest RUR 8 billion.
RF Transport Sector: Throughput Up 4.7%
In January – February of 2008, the throughput of the RF transport sector grew by 4.7% year-on-year to 823 billion t/km, said the RF Federal Statistics Service.
Railways increased throughput to 356.6 billion t/km (+9%), motor transport to 29.9 billion t/km (+3.6%). That of sea transport rose to 10.4 billion t/km, while river transport throughput fell by 72.8% to 0.9 billion t/km. The throughput of air transport and pipelines grew to 0.5 billion t/km (+36.4%) and 424.7 billion t/km (+1.5%).
RF Transport Throughput in February 2008
| Transport mode | February, billion t/km | % year-on-year | % month-on-month |
| Railways | 174.4 | 111.8 | 95.8 |
| Motor transport | 15.8 | 102.1 | 112.1 |
| Sea transport | 5.1 | 126.1 | 95.5 |
| River transport | 0.5 | 30.1 | 121.5 |
| Air transport | 0.3 | 131.2 | 104.5 |
| Pipelines. | 204.2 | 101.8 | 92.6 |
| Total | 400.3 | 105.9 | 94.7 |
Last February, Eesti Raudtee (Estonian Railway) transported 2.39 million tons of cargo, 40% down year-on-year.
According to the company’s data, in January-February 2008, it transported 5 million tons, which is also 40% less in comparison with the volume carried in the first two months of 2007.
Meanwhile, the share of oil and oil products amounted to 71% of the total transportation volume. During the period, Eesti Raudtee carried 1.69 million tons of oil and oil products, 28% down year-on-year.
The volume of transported mineral fertilisers fell by 37% to 0.11 million tons. The volume of transit transportation fell by 45% to 1.78 million tons
At the same time, the volume of domestic and export transportation grew. In particular, 0.38 million tons of freight, mainly slate, was carried inside the country.
Container transportation volume doubled and amounted to 2,102 container units. In the first two months of 2008, container transportation volume grew by 76% to 3,781 units.
Eesti Raudtee used to be the leader in transportation volume among the Baltic states. This year, the figures in neighbouring states are better. Just in January 2008, Latvia and Lithunia carried 5 million tons each.
In Ukraine the transportation volume grew by 42.7% year-on-year in Q1 of 2008. 167.74 million tons of freight was transported. The share of railways was about 70% of the volume.
In March 2008, the transportation volume amounted to 61.34 million tons in Ukraine, 11.4% up year-on-year. Transit by railways grew by 8.2% in comparison with the figure in March 2007.
According to Vadim Morozov, First Vice-President of Russian Railways, a high-speed service between Moscow and Nizhny Novgorod is to begin in September 2009.
Mr Morozov said the total cost of high-speed services on this route was estimated at RUR 15.9 billion, of which RUR 12.9 billion had been allocated to developing the necessary infrastructure and reconstructing and upgrading stations, while RUR 3 billion will go on purchasing rolling stock.
Last year, Russian Railways spent RUR 4.4 billion on the project and this year will invest a further RUR 6.2 billion and more than RUR 2 billion in 2009.
Passenger trains between Moscow and Nizhny Novgorod will travel at 160 kph, which will reduce the journey to just 3 hours 30 minutes.
[~DETAIL_TEXT] =>
As a rule, the first quarter of the year struck the keynote of activities at Russian railways. This year the Q1 results of OAO RZD were rather promising. Practically all targets set in the freight work plan were reached. A daily loading record was set and there were even less idling trains than usual.
According to the Railway Center of Transport Services, the volume of loaded cargo exceeded the amount planned by 3.2 million tons. More than half of the planned freight is profitable – ferrous metals, containerised cargo, and oil bulk. Loading of chemicals, cement, iron ore and grain increased.
Loaded volume grew by 5.3% year-on-year, or by 17 million tons.
In Q1, 2008, the revenue from freight transportation was 3% more than had been planned.
During this period, net throughput rose by 8.5% in comparison with Q1 of 2007. The average distance of transportation increased by 62 km. Also, cargo exports via port stations grew significantly.
Meanwhile, one should take into account the factors negatively influencing the profitability of the company. First of all, there are the conventional problems. Annually, bad weather, lack of vessels, irregular delivery of wagons to ports, and a lack of coordination between portmen and railwaymen not only eat away at profits but also slow down the whole transportation process. Thus, in Q1 of 2008, almost 260 delays were reported (for the trains destined for port stations, border crossings and inside the country). Russian railways underloaded by 2.4 million tons. Although the financial losses fell by RUR 22 million year-on-year, the figure is still huge.
Unadjusted volumes of export cargo transportation remain a headache for OAO RZD. Unfortunately, this situation arises annually, and impacts the work of clients.
Only in March, during the adjustment, the reception of 4 million tons of export cargo was not confirmed at its transportation via the ports of Russia, the CIS, and the Baltic States. Out of this volume, transportation of 967,000 tons was declined by ports, 442,000 tons by port oil bases, 1,798 thousand tons by foreign railways and 366,000tons by cargo owners.
As a result, OAO RZD had to refuse cargo transportation to cargo owners. The losses from unreceived cargo transportation in March amounted to RUR 2,721.5 million.
OAO RZD will hardly succeed in improving the situation in April. But by the end of H1 of 2008, these figures must improve – this is the demand of the market.
In January 2008, the volume of oil and oil products transported along Russian railways grew by 2.3% year-on-year.
According to the Center of Transport Services at OAO RZD, such a figure became possible due to the growth in exports of 9.7% and imports by 22.3%. Meanwhile, the inland transportation volume fell by 4.9%.
In the first month of 2008, the distribution of oil bulk according to the type of transportation was as follows: 50.9% was carried for export, 46.7% was transported inside Russia, and transit and import made 2.1% and 0.3% respectively.
Of the transportation volume carried by Russian Railways last January, the share of oil bulk made 17.2%, down 0.5% year-on-year. Specialists believe, the main reason for the reduction is redirection to pipelines.
The Economic Council, led by the Governor of the Khabarovsk Krai, discussed the plan for a transport route “Harbin – Bolshoi Ussuriysky Island – Vanino” at the end of March.
The new transport route may boost the export-oriented Heilongjiang province and Russian businesses. According to the estimates of the project’s designers, shipping of container cargoes from Heilongjiang to Japan would require only 4 days and only a week to reach the Pacific coast of the United States. Supply routes to South Korea, Southeast Asia and Southern China would be expedited as well.
The project is more opportune, taking into account the workload of Chinese seaports, which are unable to master transshipment of cargoes: trains and sea vessels wait in queues for 15-20 days.
The Russian government and companies have already started to develop the Vanino trade-industrial hub. Significant sums of money are being invested in construction of moorings, enlarging the capacity of the Transsiberian and Baikal-Amur railways.
The project envisages construction of two container terminals – one on each side of the state border on Bolshoi Ussuriysky Island. According to the document, the terminal handling capacity is up to 550 containers daily. A high-speed motorway will connect the terminal with the Chernorechenskoye high road, and the carrying capacity of Khabarovsk – Lidoga – Vanino will increase.
According to the forecast of Vadim Zausaev, Director of the Far Eastern Research Institute, the fast economic development of Heilongjiang province will cause a shortage of capacities at the existing border crossings in the Khabarovsk region and Primorsk region. It will increase to 10 million tons by 2015, and 25 million tons by 2020, including at least 9 million tons of containerised cargo (450,000 TEU).
“If the project of an international container corridor launch is carried out, the deficit of carrying capacities may fall, since in the first stage 1.6 million containerised cargo units (80,000 TEU) may be transported there, and then the volume may reach 4million tons (200,000 TEU)”, considers Vadim Zusaev. He also noted that the investment into the corridor launched is estimated at RUR 7 billion. The project has already been supported by the authorities of the Khabarovsk region.
LDz Cargo, a subsidiary of Latvijas dzelzcels, transported 14.374 million tons of freight in Q1 of 2008, 18.6% up year-on-year.
The company transported 5.759 million tons of oil and oil products, 4.394 million tons of coal, and 1.275 million tons of mineral fertilisers.
According to Eduards Cernavskis, Head of LDz PR Department, in Q1 of 2008, the volume of mineral fertilisers carried fell by 23.7%, since the transportation of potash fertiliser to Ventspils had been stopped. The company carried more oil products, coal, grain and chemicals than in January-March 2007. Grain is mainly transported from Kazakhstan, Russia, Lithuania and Ukraine.
The throughput of Russian sea ports is expected to amount 485 million tons in 2008, said Oleg Kovalchuk, Deputy Head of the federal state unitary enterprise Rosmorport at a conference in March.
In 2007, the throughput of Russian ports was 451 million tons. Thus, according to estimates, it may grow by 7.5% this year.
In the words of Mr Kovalchuk, the throughput of the RF sea ports is forecasted to amount to 510 million tons in 2009, and to 583 million tons in 2010.
He also said that Rosmorport spent RUR 15.7 billion between September 2002 (when Rosmorport was launched) and 2007. Over RUR 12.2billion of the sum was invested in reconstruction and building hydro-technical facilities, and RUR 3.4 billion in construction of linear ice-breakers at OAO Baltiysky Zavod.
This year Rosmorport is going to invest RUR 8 billion.
In January – February of 2008, the throughput of the RF transport sector grew by 4.7% year-on-year to 823 billion t/km, said the RF Federal Statistics Service.
Railways increased throughput to 356.6 billion t/km (+9%), motor transport to 29.9 billion t/km (+3.6%). That of sea transport rose to 10.4 billion t/km, while river transport throughput fell by 72.8% to 0.9 billion t/km. The throughput of air transport and pipelines grew to 0.5 billion t/km (+36.4%) and 424.7 billion t/km (+1.5%).
RF Transport Throughput in February 2008
| Transport mode | February, billion t/km | % year-on-year | % month-on-month |
| Railways | 174.4 | 111.8 | 95.8 |
| Motor transport | 15.8 | 102.1 | 112.1 |
| Sea transport | 5.1 | 126.1 | 95.5 |
| River transport | 0.5 | 30.1 | 121.5 |
| Air transport | 0.3 | 131.2 | 104.5 |
| Pipelines. | 204.2 | 101.8 | 92.6 |
| Total | 400.3 | 105.9 | 94.7 |
Last February, Eesti Raudtee (Estonian Railway) transported 2.39 million tons of cargo, 40% down year-on-year.
According to the company’s data, in January-February 2008, it transported 5 million tons, which is also 40% less in comparison with the volume carried in the first two months of 2007.
Meanwhile, the share of oil and oil products amounted to 71% of the total transportation volume. During the period, Eesti Raudtee carried 1.69 million tons of oil and oil products, 28% down year-on-year.
The volume of transported mineral fertilisers fell by 37% to 0.11 million tons. The volume of transit transportation fell by 45% to 1.78 million tons
At the same time, the volume of domestic and export transportation grew. In particular, 0.38 million tons of freight, mainly slate, was carried inside the country.
Container transportation volume doubled and amounted to 2,102 container units. In the first two months of 2008, container transportation volume grew by 76% to 3,781 units.
Eesti Raudtee used to be the leader in transportation volume among the Baltic states. This year, the figures in neighbouring states are better. Just in January 2008, Latvia and Lithunia carried 5 million tons each.
In Ukraine the transportation volume grew by 42.7% year-on-year in Q1 of 2008. 167.74 million tons of freight was transported. The share of railways was about 70% of the volume.
In March 2008, the transportation volume amounted to 61.34 million tons in Ukraine, 11.4% up year-on-year. Transit by railways grew by 8.2% in comparison with the figure in March 2007.
According to Vadim Morozov, First Vice-President of Russian Railways, a high-speed service between Moscow and Nizhny Novgorod is to begin in September 2009.
Mr Morozov said the total cost of high-speed services on this route was estimated at RUR 15.9 billion, of which RUR 12.9 billion had been allocated to developing the necessary infrastructure and reconstructing and upgrading stations, while RUR 3 billion will go on purchasing rolling stock.
Last year, Russian Railways spent RUR 4.4 billion on the project and this year will invest a further RUR 6.2 billion and more than RUR 2 billion in 2009.
Passenger trains between Moscow and Nizhny Novgorod will travel at 160 kph, which will reduce the journey to just 3 hours 30 minutes.
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[DETAIL_TEXT] => OAO RZD in Q1: Results and Trends
As a rule, the first quarter of the year struck the keynote of activities at Russian railways. This year the Q1 results of OAO RZD were rather promising. Practically all targets set in the freight work plan were reached. A daily loading record was set and there were even less idling trains than usual.
According to the Railway Center of Transport Services, the volume of loaded cargo exceeded the amount planned by 3.2 million tons. More than half of the planned freight is profitable – ferrous metals, containerised cargo, and oil bulk. Loading of chemicals, cement, iron ore and grain increased.
Loaded volume grew by 5.3% year-on-year, or by 17 million tons.
In Q1, 2008, the revenue from freight transportation was 3% more than had been planned.
During this period, net throughput rose by 8.5% in comparison with Q1 of 2007. The average distance of transportation increased by 62 km. Also, cargo exports via port stations grew significantly.
Meanwhile, one should take into account the factors negatively influencing the profitability of the company. First of all, there are the conventional problems. Annually, bad weather, lack of vessels, irregular delivery of wagons to ports, and a lack of coordination between portmen and railwaymen not only eat away at profits but also slow down the whole transportation process. Thus, in Q1 of 2008, almost 260 delays were reported (for the trains destined for port stations, border crossings and inside the country). Russian railways underloaded by 2.4 million tons. Although the financial losses fell by RUR 22 million year-on-year, the figure is still huge.
Unadjusted volumes of export cargo transportation remain a headache for OAO RZD. Unfortunately, this situation arises annually, and impacts the work of clients.
Only in March, during the adjustment, the reception of 4 million tons of export cargo was not confirmed at its transportation via the ports of Russia, the CIS, and the Baltic States. Out of this volume, transportation of 967,000 tons was declined by ports, 442,000 tons by port oil bases, 1,798 thousand tons by foreign railways and 366,000tons by cargo owners.
As a result, OAO RZD had to refuse cargo transportation to cargo owners. The losses from unreceived cargo transportation in March amounted to RUR 2,721.5 million.
OAO RZD will hardly succeed in improving the situation in April. But by the end of H1 of 2008, these figures must improve – this is the demand of the market.
Oil Flows Away… Into Pipelines
In January 2008, the volume of oil and oil products transported along Russian railways grew by 2.3% year-on-year.
According to the Center of Transport Services at OAO RZD, such a figure became possible due to the growth in exports of 9.7% and imports by 22.3%. Meanwhile, the inland transportation volume fell by 4.9%.
In the first month of 2008, the distribution of oil bulk according to the type of transportation was as follows: 50.9% was carried for export, 46.7% was transported inside Russia, and transit and import made 2.1% and 0.3% respectively.
Of the transportation volume carried by Russian Railways last January, the share of oil bulk made 17.2%, down 0.5% year-on-year. Specialists believe, the main reason for the reduction is redirection to pipelines.
Harbin – Vanino May Become a Corridor
The Economic Council, led by the Governor of the Khabarovsk Krai, discussed the plan for a transport route “Harbin – Bolshoi Ussuriysky Island – Vanino” at the end of March.
The new transport route may boost the export-oriented Heilongjiang province and Russian businesses. According to the estimates of the project’s designers, shipping of container cargoes from Heilongjiang to Japan would require only 4 days and only a week to reach the Pacific coast of the United States. Supply routes to South Korea, Southeast Asia and Southern China would be expedited as well.
The project is more opportune, taking into account the workload of Chinese seaports, which are unable to master transshipment of cargoes: trains and sea vessels wait in queues for 15-20 days.
The Russian government and companies have already started to develop the Vanino trade-industrial hub. Significant sums of money are being invested in construction of moorings, enlarging the capacity of the Transsiberian and Baikal-Amur railways.
The project envisages construction of two container terminals – one on each side of the state border on Bolshoi Ussuriysky Island. According to the document, the terminal handling capacity is up to 550 containers daily. A high-speed motorway will connect the terminal with the Chernorechenskoye high road, and the carrying capacity of Khabarovsk – Lidoga – Vanino will increase.
According to the forecast of Vadim Zausaev, Director of the Far Eastern Research Institute, the fast economic development of Heilongjiang province will cause a shortage of capacities at the existing border crossings in the Khabarovsk region and Primorsk region. It will increase to 10 million tons by 2015, and 25 million tons by 2020, including at least 9 million tons of containerised cargo (450,000 TEU).
“If the project of an international container corridor launch is carried out, the deficit of carrying capacities may fall, since in the first stage 1.6 million containerised cargo units (80,000 TEU) may be transported there, and then the volume may reach 4million tons (200,000 TEU)”, considers Vadim Zusaev. He also noted that the investment into the corridor launched is estimated at RUR 7 billion. The project has already been supported by the authorities of the Khabarovsk region.
LDz Cargo Improves Results
LDz Cargo, a subsidiary of Latvijas dzelzcels, transported 14.374 million tons of freight in Q1 of 2008, 18.6% up year-on-year.
The company transported 5.759 million tons of oil and oil products, 4.394 million tons of coal, and 1.275 million tons of mineral fertilisers.
According to Eduards Cernavskis, Head of LDz PR Department, in Q1 of 2008, the volume of mineral fertilisers carried fell by 23.7%, since the transportation of potash fertiliser to Ventspils had been stopped. The company carried more oil products, coal, grain and chemicals than in January-March 2007. Grain is mainly transported from Kazakhstan, Russia, Lithuania and Ukraine.
Russian Ports Will Increase Throughput by 7.5% This Year
The throughput of Russian sea ports is expected to amount 485 million tons in 2008, said Oleg Kovalchuk, Deputy Head of the federal state unitary enterprise Rosmorport at a conference in March.
In 2007, the throughput of Russian ports was 451 million tons. Thus, according to estimates, it may grow by 7.5% this year.
In the words of Mr Kovalchuk, the throughput of the RF sea ports is forecasted to amount to 510 million tons in 2009, and to 583 million tons in 2010.
He also said that Rosmorport spent RUR 15.7 billion between September 2002 (when Rosmorport was launched) and 2007. Over RUR 12.2billion of the sum was invested in reconstruction and building hydro-technical facilities, and RUR 3.4 billion in construction of linear ice-breakers at OAO Baltiysky Zavod.
This year Rosmorport is going to invest RUR 8 billion.
RF Transport Sector: Throughput Up 4.7%
In January – February of 2008, the throughput of the RF transport sector grew by 4.7% year-on-year to 823 billion t/km, said the RF Federal Statistics Service.
Railways increased throughput to 356.6 billion t/km (+9%), motor transport to 29.9 billion t/km (+3.6%). That of sea transport rose to 10.4 billion t/km, while river transport throughput fell by 72.8% to 0.9 billion t/km. The throughput of air transport and pipelines grew to 0.5 billion t/km (+36.4%) and 424.7 billion t/km (+1.5%).
RF Transport Throughput in February 2008
| Transport mode | February, billion t/km | % year-on-year | % month-on-month |
| Railways | 174.4 | 111.8 | 95.8 |
| Motor transport | 15.8 | 102.1 | 112.1 |
| Sea transport | 5.1 | 126.1 | 95.5 |
| River transport | 0.5 | 30.1 | 121.5 |
| Air transport | 0.3 | 131.2 | 104.5 |
| Pipelines. | 204.2 | 101.8 | 92.6 |
| Total | 400.3 | 105.9 | 94.7 |
Last February, Eesti Raudtee (Estonian Railway) transported 2.39 million tons of cargo, 40% down year-on-year.
According to the company’s data, in January-February 2008, it transported 5 million tons, which is also 40% less in comparison with the volume carried in the first two months of 2007.
Meanwhile, the share of oil and oil products amounted to 71% of the total transportation volume. During the period, Eesti Raudtee carried 1.69 million tons of oil and oil products, 28% down year-on-year.
The volume of transported mineral fertilisers fell by 37% to 0.11 million tons. The volume of transit transportation fell by 45% to 1.78 million tons
At the same time, the volume of domestic and export transportation grew. In particular, 0.38 million tons of freight, mainly slate, was carried inside the country.
Container transportation volume doubled and amounted to 2,102 container units. In the first two months of 2008, container transportation volume grew by 76% to 3,781 units.
Eesti Raudtee used to be the leader in transportation volume among the Baltic states. This year, the figures in neighbouring states are better. Just in January 2008, Latvia and Lithunia carried 5 million tons each.
In Ukraine the transportation volume grew by 42.7% year-on-year in Q1 of 2008. 167.74 million tons of freight was transported. The share of railways was about 70% of the volume.
In March 2008, the transportation volume amounted to 61.34 million tons in Ukraine, 11.4% up year-on-year. Transit by railways grew by 8.2% in comparison with the figure in March 2007.
According to Vadim Morozov, First Vice-President of Russian Railways, a high-speed service between Moscow and Nizhny Novgorod is to begin in September 2009.
Mr Morozov said the total cost of high-speed services on this route was estimated at RUR 15.9 billion, of which RUR 12.9 billion had been allocated to developing the necessary infrastructure and reconstructing and upgrading stations, while RUR 3 billion will go on purchasing rolling stock.
Last year, Russian Railways spent RUR 4.4 billion on the project and this year will invest a further RUR 6.2 billion and more than RUR 2 billion in 2009.
Passenger trains between Moscow and Nizhny Novgorod will travel at 160 kph, which will reduce the journey to just 3 hours 30 minutes.
[~DETAIL_TEXT] =>
As a rule, the first quarter of the year struck the keynote of activities at Russian railways. This year the Q1 results of OAO RZD were rather promising. Practically all targets set in the freight work plan were reached. A daily loading record was set and there were even less idling trains than usual.
According to the Railway Center of Transport Services, the volume of loaded cargo exceeded the amount planned by 3.2 million tons. More than half of the planned freight is profitable – ferrous metals, containerised cargo, and oil bulk. Loading of chemicals, cement, iron ore and grain increased.
Loaded volume grew by 5.3% year-on-year, or by 17 million tons.
In Q1, 2008, the revenue from freight transportation was 3% more than had been planned.
During this period, net throughput rose by 8.5% in comparison with Q1 of 2007. The average distance of transportation increased by 62 km. Also, cargo exports via port stations grew significantly.
Meanwhile, one should take into account the factors negatively influencing the profitability of the company. First of all, there are the conventional problems. Annually, bad weather, lack of vessels, irregular delivery of wagons to ports, and a lack of coordination between portmen and railwaymen not only eat away at profits but also slow down the whole transportation process. Thus, in Q1 of 2008, almost 260 delays were reported (for the trains destined for port stations, border crossings and inside the country). Russian railways underloaded by 2.4 million tons. Although the financial losses fell by RUR 22 million year-on-year, the figure is still huge.
Unadjusted volumes of export cargo transportation remain a headache for OAO RZD. Unfortunately, this situation arises annually, and impacts the work of clients.
Only in March, during the adjustment, the reception of 4 million tons of export cargo was not confirmed at its transportation via the ports of Russia, the CIS, and the Baltic States. Out of this volume, transportation of 967,000 tons was declined by ports, 442,000 tons by port oil bases, 1,798 thousand tons by foreign railways and 366,000tons by cargo owners.
As a result, OAO RZD had to refuse cargo transportation to cargo owners. The losses from unreceived cargo transportation in March amounted to RUR 2,721.5 million.
OAO RZD will hardly succeed in improving the situation in April. But by the end of H1 of 2008, these figures must improve – this is the demand of the market.
In January 2008, the volume of oil and oil products transported along Russian railways grew by 2.3% year-on-year.
According to the Center of Transport Services at OAO RZD, such a figure became possible due to the growth in exports of 9.7% and imports by 22.3%. Meanwhile, the inland transportation volume fell by 4.9%.
In the first month of 2008, the distribution of oil bulk according to the type of transportation was as follows: 50.9% was carried for export, 46.7% was transported inside Russia, and transit and import made 2.1% and 0.3% respectively.
Of the transportation volume carried by Russian Railways last January, the share of oil bulk made 17.2%, down 0.5% year-on-year. Specialists believe, the main reason for the reduction is redirection to pipelines.
The Economic Council, led by the Governor of the Khabarovsk Krai, discussed the plan for a transport route “Harbin – Bolshoi Ussuriysky Island – Vanino” at the end of March.
The new transport route may boost the export-oriented Heilongjiang province and Russian businesses. According to the estimates of the project’s designers, shipping of container cargoes from Heilongjiang to Japan would require only 4 days and only a week to reach the Pacific coast of the United States. Supply routes to South Korea, Southeast Asia and Southern China would be expedited as well.
The project is more opportune, taking into account the workload of Chinese seaports, which are unable to master transshipment of cargoes: trains and sea vessels wait in queues for 15-20 days.
The Russian government and companies have already started to develop the Vanino trade-industrial hub. Significant sums of money are being invested in construction of moorings, enlarging the capacity of the Transsiberian and Baikal-Amur railways.
The project envisages construction of two container terminals – one on each side of the state border on Bolshoi Ussuriysky Island. According to the document, the terminal handling capacity is up to 550 containers daily. A high-speed motorway will connect the terminal with the Chernorechenskoye high road, and the carrying capacity of Khabarovsk – Lidoga – Vanino will increase.
According to the forecast of Vadim Zausaev, Director of the Far Eastern Research Institute, the fast economic development of Heilongjiang province will cause a shortage of capacities at the existing border crossings in the Khabarovsk region and Primorsk region. It will increase to 10 million tons by 2015, and 25 million tons by 2020, including at least 9 million tons of containerised cargo (450,000 TEU).
“If the project of an international container corridor launch is carried out, the deficit of carrying capacities may fall, since in the first stage 1.6 million containerised cargo units (80,000 TEU) may be transported there, and then the volume may reach 4million tons (200,000 TEU)”, considers Vadim Zusaev. He also noted that the investment into the corridor launched is estimated at RUR 7 billion. The project has already been supported by the authorities of the Khabarovsk region.
LDz Cargo, a subsidiary of Latvijas dzelzcels, transported 14.374 million tons of freight in Q1 of 2008, 18.6% up year-on-year.
The company transported 5.759 million tons of oil and oil products, 4.394 million tons of coal, and 1.275 million tons of mineral fertilisers.
According to Eduards Cernavskis, Head of LDz PR Department, in Q1 of 2008, the volume of mineral fertilisers carried fell by 23.7%, since the transportation of potash fertiliser to Ventspils had been stopped. The company carried more oil products, coal, grain and chemicals than in January-March 2007. Grain is mainly transported from Kazakhstan, Russia, Lithuania and Ukraine.
The throughput of Russian sea ports is expected to amount 485 million tons in 2008, said Oleg Kovalchuk, Deputy Head of the federal state unitary enterprise Rosmorport at a conference in March.
In 2007, the throughput of Russian ports was 451 million tons. Thus, according to estimates, it may grow by 7.5% this year.
In the words of Mr Kovalchuk, the throughput of the RF sea ports is forecasted to amount to 510 million tons in 2009, and to 583 million tons in 2010.
He also said that Rosmorport spent RUR 15.7 billion between September 2002 (when Rosmorport was launched) and 2007. Over RUR 12.2billion of the sum was invested in reconstruction and building hydro-technical facilities, and RUR 3.4 billion in construction of linear ice-breakers at OAO Baltiysky Zavod.
This year Rosmorport is going to invest RUR 8 billion.
In January – February of 2008, the throughput of the RF transport sector grew by 4.7% year-on-year to 823 billion t/km, said the RF Federal Statistics Service.
Railways increased throughput to 356.6 billion t/km (+9%), motor transport to 29.9 billion t/km (+3.6%). That of sea transport rose to 10.4 billion t/km, while river transport throughput fell by 72.8% to 0.9 billion t/km. The throughput of air transport and pipelines grew to 0.5 billion t/km (+36.4%) and 424.7 billion t/km (+1.5%).
RF Transport Throughput in February 2008
| Transport mode | February, billion t/km | % year-on-year | % month-on-month |
| Railways | 174.4 | 111.8 | 95.8 |
| Motor transport | 15.8 | 102.1 | 112.1 |
| Sea transport | 5.1 | 126.1 | 95.5 |
| River transport | 0.5 | 30.1 | 121.5 |
| Air transport | 0.3 | 131.2 | 104.5 |
| Pipelines. | 204.2 | 101.8 | 92.6 |
| Total | 400.3 | 105.9 | 94.7 |
Last February, Eesti Raudtee (Estonian Railway) transported 2.39 million tons of cargo, 40% down year-on-year.
According to the company’s data, in January-February 2008, it transported 5 million tons, which is also 40% less in comparison with the volume carried in the first two months of 2007.
Meanwhile, the share of oil and oil products amounted to 71% of the total transportation volume. During the period, Eesti Raudtee carried 1.69 million tons of oil and oil products, 28% down year-on-year.
The volume of transported mineral fertilisers fell by 37% to 0.11 million tons. The volume of transit transportation fell by 45% to 1.78 million tons
At the same time, the volume of domestic and export transportation grew. In particular, 0.38 million tons of freight, mainly slate, was carried inside the country.
Container transportation volume doubled and amounted to 2,102 container units. In the first two months of 2008, container transportation volume grew by 76% to 3,781 units.
Eesti Raudtee used to be the leader in transportation volume among the Baltic states. This year, the figures in neighbouring states are better. Just in January 2008, Latvia and Lithunia carried 5 million tons each.
In Ukraine the transportation volume grew by 42.7% year-on-year in Q1 of 2008. 167.74 million tons of freight was transported. The share of railways was about 70% of the volume.
In March 2008, the transportation volume amounted to 61.34 million tons in Ukraine, 11.4% up year-on-year. Transit by railways grew by 8.2% in comparison with the figure in March 2007.
According to Vadim Morozov, First Vice-President of Russian Railways, a high-speed service between Moscow and Nizhny Novgorod is to begin in September 2009.
Mr Morozov said the total cost of high-speed services on this route was estimated at RUR 15.9 billion, of which RUR 12.9 billion had been allocated to developing the necessary infrastructure and reconstructing and upgrading stations, while RUR 3 billion will go on purchasing rolling stock.
Last year, Russian Railways spent RUR 4.4 billion on the project and this year will invest a further RUR 6.2 billion and more than RUR 2 billion in 2009.
Passenger trains between Moscow and Nizhny Novgorod will travel at 160 kph, which will reduce the journey to just 3 hours 30 minutes.
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Alexander Kuznetsov, CEO of South-Caucasian Railway comments on how profitable planned investment and the new investment model is overall.Array
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[NAME] => “All economic risks seem nothing compared to the experience we can get”
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[DETAIL_TEXT] => – Mr Kuznetsov, what is your estimation of the current situation: what has been done and what is to be done in the next stages.
– Now the situation looks as follows: trilateral concession agreement has been signed by RZD, South-Caucasian Railway JSC and the Government of Armenia Republic. The commissions on inspection of Armenian Railway property are working now. We are inspecting the infrastructure, purchase rolling stock (about 2,000 thousand railcars) in contractual terms. We plan to finish an inventory of property by June 1, 2008. Armenian railway carries on operating but soon it will be liquidated as a legal entity.
– How do you regard the current state of the Armenian Railway?
– I have to say the railway needs heavy investment to reach the state claimed by concession contract. First of all, we need high speeds. I do not even comment on the urgent need to bring the railway closer to normative conditions in terms of infrastructure and rolling stock maintenance. As was said above, we face serious problems but I do hope we’ll manage to eliminate them soon. A fact of greater importance than investment volume is the wish to cooperate demonstrated by Armenian railwaymen. This ensures positive results in our cooperation. Moreover, the Government of the Republic believes that Russia will give a second life to the railway.
– Do you think the Armenian Government had to announce the tender? It looked like OAO RZD didn’t have any competitors.
– In fact, we had competitors. What about Indian company Rail India Technical and Economic Services who left the competition after the first stage? Nobody knows what results the tender would have brought if they hadn’t changed their mind.
– What positive aspects of the cooperation can you see for OAO RZD and Russia in general?
– Russia will get the opportunity to strengthen its influence in Caucasus. Speaking of OAO RZD’s position, we take it as a pilot project where our managing technologies will be tested. Of course, we might face many pitfalls on the one hand, but on the other the corporation will acquire invaluable experience in managing a foreign railway complex. Considering the fact that this complex was a part of the Soviet railway system we hope we won’t meet any special difficulties. OAO RZD has never controlled foreign infrastructure before. This project is an unprecedented one for us. Thus, all economic risks seem nothing compared to the experience we can get.
– Do you think you can get investment back?
– There is an OAO RZD Board-considered business plan and this very institution approved the project. First of all, they considered economic aspects of this task. If the Board approved the plan then the planned results look satisfactory for the company. We do not plan to get investment back very fast but they are to be brought back. Moreover, infrastructure investment has a long payback term but, according to the developed business plans, 17-20 years is the normal period to get payback from the global project.
– Do you mean you will receive profits in 17-20 years?
– No, I am speaking about such aspects as speed increase, cargo flow growth, etc. In fact, they bring profits now. Generally speaking, during the first five years we plan to invest only and after that to get certain profit back. All the regional conflicts tend to be solved sooner or later and, consequently, if we had cargo flow of over 30 million tons per year in the Soviet period we could reach the same results one day. Moreover, Armenian railway is favourably located.
– Are there key projects where initial investment is to be directed?
– There are no prepared projects. The technology looks this way: from the very beginning a whole inspection is to be made of the South-Caucasian Railway operation. Our engineers have developed plans for modernisation and reconstruction of the infrastructure, including railway equipment, electrification and energy supply. As a result certain projects will be worked out, the money will be allocated and contractors will be chosen. There are some directions where the basic cargo flows move. These key elements will be modernised in the first instance. At our present-day stage our main tasks have to do with infrastructure strengthening and modernisation of the main line i.e. the join with Georgian railway. Our major efforts will be concentrated there.
– What difficulties could you face?
– Of course, there will be certain difficulties. First of all, there are mountains. In Armenia some stations are located over 2,000 metres above sea level with a complicated track profile and the majority of the work will be implemented there. All these projects will also be complicated by delivery of components and construction materials against a background of a lack of communication with Russia. This makes transportation logistics schemes more difficult. Speaking of the personnel, I think Armenian staff are highly professional, though some investment is required in this area as well.
[~DETAIL_TEXT] => – Mr Kuznetsov, what is your estimation of the current situation: what has been done and what is to be done in the next stages.
– Now the situation looks as follows: trilateral concession agreement has been signed by RZD, South-Caucasian Railway JSC and the Government of Armenia Republic. The commissions on inspection of Armenian Railway property are working now. We are inspecting the infrastructure, purchase rolling stock (about 2,000 thousand railcars) in contractual terms. We plan to finish an inventory of property by June 1, 2008. Armenian railway carries on operating but soon it will be liquidated as a legal entity.
– How do you regard the current state of the Armenian Railway?
– I have to say the railway needs heavy investment to reach the state claimed by concession contract. First of all, we need high speeds. I do not even comment on the urgent need to bring the railway closer to normative conditions in terms of infrastructure and rolling stock maintenance. As was said above, we face serious problems but I do hope we’ll manage to eliminate them soon. A fact of greater importance than investment volume is the wish to cooperate demonstrated by Armenian railwaymen. This ensures positive results in our cooperation. Moreover, the Government of the Republic believes that Russia will give a second life to the railway.
– Do you think the Armenian Government had to announce the tender? It looked like OAO RZD didn’t have any competitors.
– In fact, we had competitors. What about Indian company Rail India Technical and Economic Services who left the competition after the first stage? Nobody knows what results the tender would have brought if they hadn’t changed their mind.
– What positive aspects of the cooperation can you see for OAO RZD and Russia in general?
– Russia will get the opportunity to strengthen its influence in Caucasus. Speaking of OAO RZD’s position, we take it as a pilot project where our managing technologies will be tested. Of course, we might face many pitfalls on the one hand, but on the other the corporation will acquire invaluable experience in managing a foreign railway complex. Considering the fact that this complex was a part of the Soviet railway system we hope we won’t meet any special difficulties. OAO RZD has never controlled foreign infrastructure before. This project is an unprecedented one for us. Thus, all economic risks seem nothing compared to the experience we can get.
– Do you think you can get investment back?
– There is an OAO RZD Board-considered business plan and this very institution approved the project. First of all, they considered economic aspects of this task. If the Board approved the plan then the planned results look satisfactory for the company. We do not plan to get investment back very fast but they are to be brought back. Moreover, infrastructure investment has a long payback term but, according to the developed business plans, 17-20 years is the normal period to get payback from the global project.
– Do you mean you will receive profits in 17-20 years?
– No, I am speaking about such aspects as speed increase, cargo flow growth, etc. In fact, they bring profits now. Generally speaking, during the first five years we plan to invest only and after that to get certain profit back. All the regional conflicts tend to be solved sooner or later and, consequently, if we had cargo flow of over 30 million tons per year in the Soviet period we could reach the same results one day. Moreover, Armenian railway is favourably located.
– Are there key projects where initial investment is to be directed?
– There are no prepared projects. The technology looks this way: from the very beginning a whole inspection is to be made of the South-Caucasian Railway operation. Our engineers have developed plans for modernisation and reconstruction of the infrastructure, including railway equipment, electrification and energy supply. As a result certain projects will be worked out, the money will be allocated and contractors will be chosen. There are some directions where the basic cargo flows move. These key elements will be modernised in the first instance. At our present-day stage our main tasks have to do with infrastructure strengthening and modernisation of the main line i.e. the join with Georgian railway. Our major efforts will be concentrated there.
– What difficulties could you face?
– Of course, there will be certain difficulties. First of all, there are mountains. In Armenia some stations are located over 2,000 metres above sea level with a complicated track profile and the majority of the work will be implemented there. All these projects will also be complicated by delivery of components and construction materials against a background of a lack of communication with Russia. This makes transportation logistics schemes more difficult. Speaking of the personnel, I think Armenian staff are highly professional, though some investment is required in this area as well.
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[DETAIL_TEXT] => – Mr Kuznetsov, what is your estimation of the current situation: what has been done and what is to be done in the next stages.
– Now the situation looks as follows: trilateral concession agreement has been signed by RZD, South-Caucasian Railway JSC and the Government of Armenia Republic. The commissions on inspection of Armenian Railway property are working now. We are inspecting the infrastructure, purchase rolling stock (about 2,000 thousand railcars) in contractual terms. We plan to finish an inventory of property by June 1, 2008. Armenian railway carries on operating but soon it will be liquidated as a legal entity.
– How do you regard the current state of the Armenian Railway?
– I have to say the railway needs heavy investment to reach the state claimed by concession contract. First of all, we need high speeds. I do not even comment on the urgent need to bring the railway closer to normative conditions in terms of infrastructure and rolling stock maintenance. As was said above, we face serious problems but I do hope we’ll manage to eliminate them soon. A fact of greater importance than investment volume is the wish to cooperate demonstrated by Armenian railwaymen. This ensures positive results in our cooperation. Moreover, the Government of the Republic believes that Russia will give a second life to the railway.
– Do you think the Armenian Government had to announce the tender? It looked like OAO RZD didn’t have any competitors.
– In fact, we had competitors. What about Indian company Rail India Technical and Economic Services who left the competition after the first stage? Nobody knows what results the tender would have brought if they hadn’t changed their mind.
– What positive aspects of the cooperation can you see for OAO RZD and Russia in general?
– Russia will get the opportunity to strengthen its influence in Caucasus. Speaking of OAO RZD’s position, we take it as a pilot project where our managing technologies will be tested. Of course, we might face many pitfalls on the one hand, but on the other the corporation will acquire invaluable experience in managing a foreign railway complex. Considering the fact that this complex was a part of the Soviet railway system we hope we won’t meet any special difficulties. OAO RZD has never controlled foreign infrastructure before. This project is an unprecedented one for us. Thus, all economic risks seem nothing compared to the experience we can get.
– Do you think you can get investment back?
– There is an OAO RZD Board-considered business plan and this very institution approved the project. First of all, they considered economic aspects of this task. If the Board approved the plan then the planned results look satisfactory for the company. We do not plan to get investment back very fast but they are to be brought back. Moreover, infrastructure investment has a long payback term but, according to the developed business plans, 17-20 years is the normal period to get payback from the global project.
– Do you mean you will receive profits in 17-20 years?
– No, I am speaking about such aspects as speed increase, cargo flow growth, etc. In fact, they bring profits now. Generally speaking, during the first five years we plan to invest only and after that to get certain profit back. All the regional conflicts tend to be solved sooner or later and, consequently, if we had cargo flow of over 30 million tons per year in the Soviet period we could reach the same results one day. Moreover, Armenian railway is favourably located.
– Are there key projects where initial investment is to be directed?
– There are no prepared projects. The technology looks this way: from the very beginning a whole inspection is to be made of the South-Caucasian Railway operation. Our engineers have developed plans for modernisation and reconstruction of the infrastructure, including railway equipment, electrification and energy supply. As a result certain projects will be worked out, the money will be allocated and contractors will be chosen. There are some directions where the basic cargo flows move. These key elements will be modernised in the first instance. At our present-day stage our main tasks have to do with infrastructure strengthening and modernisation of the main line i.e. the join with Georgian railway. Our major efforts will be concentrated there.
– What difficulties could you face?
– Of course, there will be certain difficulties. First of all, there are mountains. In Armenia some stations are located over 2,000 metres above sea level with a complicated track profile and the majority of the work will be implemented there. All these projects will also be complicated by delivery of components and construction materials against a background of a lack of communication with Russia. This makes transportation logistics schemes more difficult. Speaking of the personnel, I think Armenian staff are highly professional, though some investment is required in this area as well.
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– How do you regard the current state of the Armenian Railway?
– I have to say the railway needs heavy investment to reach the state claimed by concession contract. First of all, we need high speeds. I do not even comment on the urgent need to bring the railway closer to normative conditions in terms of infrastructure and rolling stock maintenance. As was said above, we face serious problems but I do hope we’ll manage to eliminate them soon. A fact of greater importance than investment volume is the wish to cooperate demonstrated by Armenian railwaymen. This ensures positive results in our cooperation. Moreover, the Government of the Republic believes that Russia will give a second life to the railway.
– Do you think the Armenian Government had to announce the tender? It looked like OAO RZD didn’t have any competitors.
– In fact, we had competitors. What about Indian company Rail India Technical and Economic Services who left the competition after the first stage? Nobody knows what results the tender would have brought if they hadn’t changed their mind.
– What positive aspects of the cooperation can you see for OAO RZD and Russia in general?
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– Do you think you can get investment back?
– There is an OAO RZD Board-considered business plan and this very institution approved the project. First of all, they considered economic aspects of this task. If the Board approved the plan then the planned results look satisfactory for the company. We do not plan to get investment back very fast but they are to be brought back. Moreover, infrastructure investment has a long payback term but, according to the developed business plans, 17-20 years is the normal period to get payback from the global project.
– Do you mean you will receive profits in 17-20 years?
– No, I am speaking about such aspects as speed increase, cargo flow growth, etc. In fact, they bring profits now. Generally speaking, during the first five years we plan to invest only and after that to get certain profit back. All the regional conflicts tend to be solved sooner or later and, consequently, if we had cargo flow of over 30 million tons per year in the Soviet period we could reach the same results one day. Moreover, Armenian railway is favourably located.
– Are there key projects where initial investment is to be directed?
– There are no prepared projects. The technology looks this way: from the very beginning a whole inspection is to be made of the South-Caucasian Railway operation. Our engineers have developed plans for modernisation and reconstruction of the infrastructure, including railway equipment, electrification and energy supply. As a result certain projects will be worked out, the money will be allocated and contractors will be chosen. There are some directions where the basic cargo flows move. These key elements will be modernised in the first instance. At our present-day stage our main tasks have to do with infrastructure strengthening and modernisation of the main line i.e. the join with Georgian railway. Our major efforts will be concentrated there.
– What difficulties could you face?
– Of course, there will be certain difficulties. First of all, there are mountains. In Armenia some stations are located over 2,000 metres above sea level with a complicated track profile and the majority of the work will be implemented there. All these projects will also be complicated by delivery of components and construction materials against a background of a lack of communication with Russia. This makes transportation logistics schemes more difficult. Speaking of the personnel, I think Armenian staff are highly professional, though some investment is required in this area as well.
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[DETAIL_TEXT] => The winner takes all
First of all, the reason why the Ministry of Transport and Communication of Armenia announced a preliminary qualification tender on Armenian railway concession needs to be clarified.
According to experts, one of the basic reasons to put the railway under concession terms is the lack of heavy investment required to develop the enterprise. To improve efficiency the company has undergone significant structural changes recently. However, no great positive results were achieved.
The most conservative estimates of the World Bank, which performs as the Armenian Railway’s creditor, show that the enterprise will require more than USD 170 million in the next 15 years to overcome the crisis initially originating from the conflict in Nagorny Karabakh. This conflict resulted in widespread damage to the railway. Moreover, the whole system of the route is worn out and needs modernisation. The Armenian Government doesn’t plan to allocate resources to modernise the railway since the latter brings little profit. Experts believe if the current situation doesn’t change the railway will lose its rolling stock completely. The rolling stock volume now is exhausted and its general operation age amounts to 25–30 years. Despite the fact that the railway has brought some profit in recent years, it is not enough to restore the system. Annual investment worth USD 1–2 million cannot help when the actual required volume totals about USD 100-200 million.
One more fact to bear in mind is the recent misunderstanding between Armenian Railway and Ukrainian Railway when the Ukrainian State Transport Administration stopped cooperation in cargo transportation going to Armenia and back to the Ukraine. This was because Armenia broke the terms of payment for cargo railcar use and ignored numerous requests by the Ukrainian Railway Administration to pay debts. The problem was happily resolved in November 2006, however, it was alarm signal. Considering the situation, the Armenian Government made a decision to announce a concession tender for the national railway. Concession is a typical mechanism developed to attract investment in foreign countries but it is new to the post-Soviet states.
Russia is out of competition
Initially the concession agreement was supposed to be developed by OAO RZD (by the way, the Russians were first to claim their interest in the project), Republic of Iran Railway Company and Kazakhstan Temir Zholy National Company, which possess significant experience in railway transport restructuring between them.
The Armenian Government announced the tender to choose a potential concessionaire in September 2007 and invitations were forwarded to 40 international railway companies. Several months later, two companies promoted their claims to participate in the tender. They were RZD and Indian company Rail India Technical and Economic Services (RITES). After the first stage of the competition RITES refused to go on, having realised the final outcome of the competition was quite clear. Moreover, the Armenian Government didn’t hide their eager interest in dealing with the Russian Railway grandee. Andranik Manukyan, Minister of Transport and Communication of Armenia, repeated over and over again that, “it would be great if such a corporation as OAO RZD became an Armenian Railway concessionaire.”
Huge Investment Required
Andranik Manukyan announced the decision to give Armenian railway into concession (including rolling stock and infrastructure) in late 2007 after the technical-economic proposals developed by OAO RZD were considered. According to Armenian experts, the project exceeded even the greatest expectations of the National Railway Administration. Official announcement of the tender results took place in Yerevan on January 16.
According to the OAO RZD Corporate Communication department, to control the Armenian railway, OAO RZD launched South-Caucasian Railway JSC. It is believed the newly created company will comprise the staff of the Armenian railway and is also to purchase current rolling stock. Alexander Kuznetsov, who took the post of OAO RZD President Adviser responsible for concession projects development, was appointed the head of South-Caucasian Railway JSC. In 1998–2000 he was the head of October Railway, then he was appointed the First Deputy Plenipotentiary of the President in the North-West Federal District and then took the post of head of the Transport Coordination Department at the RF Transport Ministry.
As it is known there are several scenarios for the project’s development. According to the first, Armenian Railway will still be engaged in domestic transportation only. It should be remembered the railway now is practically isolated from the world. In this case the investment volume will amount to USD 570 million, about USD 220 million is to be spent in the next five years. This line of development is mainly focused on restoration of railway infrastructure (about 90% of investment), with the rest of the finances going to rolling stock purchase.
The second development scenario requires greater investment. For railway communication with Turkey to be renewed in 2009, the investment volume grows up to USD 604,800,000; if in 2010 the line to Azerbaijan is put into operation – up to USD 1.77 billion. If the communication with Georgia and Abkhazia via Russia is launched in 2011, OAO RZD is to invest USD 2.15 billion.
The terms of the concession agreement last 30 years with the right to prolong the contract. After the first twenty years, OAO RZD will have the opportunity to prolong the agreement for twenty years more i.e. actually Armenian railway will have undergone concession operation for fifty years.
It is planned that during the first thirty years OAO RZD will invest USD 400 million into Armenian infrastructure development. Moreover, some USD 170 million will be invested in rolling stock renewal. At the same time OAO RZD will act as a guarantor of the claimed investment volume.
After concluding the contract OAO RZD is obliged to pay USD 5 million to the Armenian Government upfront and after that to transfer 2% of the cargo transportation income to the national budget annually. The World Bank is to perform as a consultant for the deal.
Tasty Morsel?
What will the concessionaire get, having invested hugely in the enterprise? Armenian Railway JSC is a 100% state-run company which controls most of the national rolling stock and the whole railway infrastructure system. Armenian railway is the oldest line of the CIS that performs as a strategically important route giving passage to basic cargoes via the only join with Georgia. This join allows 80% of cargo to flow towards the Georgian ports of Poti and Batumi and further on by sea to Russia and the Ukraine. The railway was built by the Russian Empire in the second half of 19th century. Now the line is completely electrified and equipped with modern communication systems and auto-lock systems. Armenian railway operates four container terminals, of which Karmir Blur is the largest one constructed to handle 40ft containers. Here are the riches.
No doubt, a major factor is the geopolitical interests of Russia. Thus, Russia is interested in land transit to Iran and the ports of the Persian Gulf not only via Azerbaijan but also via Georgia and Armenia, restoring the old “TransCaucasian Bridge” that had been operating since 1890s. However, to achieve this goal, OAO RZD has to restore communication with Georgia including ferry-line Novorossiysk – Poti.
Russian companies engaged in railway business concession can also be profitable since they will get the opportunity to transport goods to the markets of Azerbaijan, Georgia, Armenia and probably Turkey. Thus, significant expansion of OAO RZD’s influence in the CIS can be forecasted as well as acquiring valuable experience of foreign core-assets control.
This deal looks attractive for Armenia as well because they are pinning their hopes on the opportunity to handle transit cargoes when communication with Turkey and Azerbaijan is launched. This will see the Armenian railway increase in profitability and let railway transport develop rapidly. The joining of OAO RZD as a foreign partner will help the Armenian railway out of total isolation, which limits its business capacities at the moment. Thus, if considering the economic development of the South-Caucasus this decision looks very promising.
”Everybody knew OAO RZD would win the tender. Now we reach the most important stage i.e. clarifying the contractual details, working out cooperation principles and, of course, development of the financial policy” says Gagig Grigoryan, Head of the Corporate Communication Department of the Armenian Transport Ministry.
On February 2008, after approval of certain working details, OAO RZD, South-Caucasian Railway JSC and the Armenian Government signed the agreement on concession. A detailed investment programme and management system will be formed in the near future. The concessionaire is supposed to start control of the project in the second half of 2008.
by Stanislav Russkov
Reference
Until the 1940s the USSR performed as a concessionaire of railways of North Iran and until 1953, of Chinese-Eastern railway.
Within the framework of concession contracts the USSR controlled railway objects in Afghanistan, Austria, Finland, Mongolia and North Korea. Since the largest share in this joint venture belonged to the USSR, the state bore a heavy financial load i.e. expenditures on their maintenance and reconstruction. The lion’s share of expenditure of such sort belongs to the Russian Federation in Russian-Mongolian railway joint venture Ulan-Bator Railway.
Viewpoint
Vladimir Yakunin,
OAO RZD President:
– Receiving Armenian railway in terms of concession goes hand-in-hand with the strategic goals of the corporation. This will assist in transport business development and strengthen OAO RZD’s competitiveness on the international transport market. Russian Railways will be able to use its acquired experience as a managing company. Moreover, this will impact favourably on OAO RZD’s image and status.
Tamara Kasyanova,
CEO of “2K Audit – business consultations” Engineering Company:
– According to the contract, the concessionaire is obliged to fulfil quite tough terms. He has to invest in rolling stock within 10 years. Moreover, reconstruction of the line requires USD 170–180 million. Also the upfront money – USD 5 million plus an annual 2% from cargo transportation profit – looks impressive. However, despite all these factors, Armenian railway can become a key element of the international North-South transport corridor with the participation of Iran and Turkey. The Russian Government plans to cooperate with Iran directly via Armenia and further on via Abkhazia. To construct a direct route to the south is quite a realistic thing to do. Transport diversification seems to have turned into the most important aspect of the foreign policy of Russia.
Samvel Melikyan,
Meltrans JSC, CEO:
– I personally take concession positively and I am glad OAO RZD has become the managing company. Since nobody could have offered better economic terms like Russia did. Moreover, we should not forget that the CIS is a unified system, consequently, no adapting is required from either side. I have to confess Armenian railway has lost its potential in the past 15 years. Container transportation is very expensive for the Republic since the only way out for us is to restore railway communication. Armenian railway can give much but we need huge investment and professional management. I am sure OAO RZD is capable of coping with both tasks.
Gagig Agadzhanyan,
Apaven JSC, Executive Director:
– OAO RZD’s victory in the tender can be considered deserved. All the experts engaged in the transport sector share this opinion. Even if I wished it, I could not find negative aspects in Armenian-Russian cooperation. Armenia is a unique state. With its total area of only 29,000 square kilometres it has communication with all its neighbors: Georgia, Azerbaijan, Turkey and Iran. Unfortunately, political conflicts prevented communication and cooperation development. However, now I think Russian presence will play the role of a de-blocking factor. A concession contract for us is a sort of rescue because cargo transportation via the ports of Turkey and the port of Novorossiysk is extremely expensive. If the cargo flow following these ports now re-directs towards renewed railway we could save our transport costs.
[~DETAIL_TEXT] => The winner takes all
First of all, the reason why the Ministry of Transport and Communication of Armenia announced a preliminary qualification tender on Armenian railway concession needs to be clarified.
According to experts, one of the basic reasons to put the railway under concession terms is the lack of heavy investment required to develop the enterprise. To improve efficiency the company has undergone significant structural changes recently. However, no great positive results were achieved.
The most conservative estimates of the World Bank, which performs as the Armenian Railway’s creditor, show that the enterprise will require more than USD 170 million in the next 15 years to overcome the crisis initially originating from the conflict in Nagorny Karabakh. This conflict resulted in widespread damage to the railway. Moreover, the whole system of the route is worn out and needs modernisation. The Armenian Government doesn’t plan to allocate resources to modernise the railway since the latter brings little profit. Experts believe if the current situation doesn’t change the railway will lose its rolling stock completely. The rolling stock volume now is exhausted and its general operation age amounts to 25–30 years. Despite the fact that the railway has brought some profit in recent years, it is not enough to restore the system. Annual investment worth USD 1–2 million cannot help when the actual required volume totals about USD 100-200 million.
One more fact to bear in mind is the recent misunderstanding between Armenian Railway and Ukrainian Railway when the Ukrainian State Transport Administration stopped cooperation in cargo transportation going to Armenia and back to the Ukraine. This was because Armenia broke the terms of payment for cargo railcar use and ignored numerous requests by the Ukrainian Railway Administration to pay debts. The problem was happily resolved in November 2006, however, it was alarm signal. Considering the situation, the Armenian Government made a decision to announce a concession tender for the national railway. Concession is a typical mechanism developed to attract investment in foreign countries but it is new to the post-Soviet states.
Russia is out of competition
Initially the concession agreement was supposed to be developed by OAO RZD (by the way, the Russians were first to claim their interest in the project), Republic of Iran Railway Company and Kazakhstan Temir Zholy National Company, which possess significant experience in railway transport restructuring between them.
The Armenian Government announced the tender to choose a potential concessionaire in September 2007 and invitations were forwarded to 40 international railway companies. Several months later, two companies promoted their claims to participate in the tender. They were RZD and Indian company Rail India Technical and Economic Services (RITES). After the first stage of the competition RITES refused to go on, having realised the final outcome of the competition was quite clear. Moreover, the Armenian Government didn’t hide their eager interest in dealing with the Russian Railway grandee. Andranik Manukyan, Minister of Transport and Communication of Armenia, repeated over and over again that, “it would be great if such a corporation as OAO RZD became an Armenian Railway concessionaire.”
Huge Investment Required
Andranik Manukyan announced the decision to give Armenian railway into concession (including rolling stock and infrastructure) in late 2007 after the technical-economic proposals developed by OAO RZD were considered. According to Armenian experts, the project exceeded even the greatest expectations of the National Railway Administration. Official announcement of the tender results took place in Yerevan on January 16.
According to the OAO RZD Corporate Communication department, to control the Armenian railway, OAO RZD launched South-Caucasian Railway JSC. It is believed the newly created company will comprise the staff of the Armenian railway and is also to purchase current rolling stock. Alexander Kuznetsov, who took the post of OAO RZD President Adviser responsible for concession projects development, was appointed the head of South-Caucasian Railway JSC. In 1998–2000 he was the head of October Railway, then he was appointed the First Deputy Plenipotentiary of the President in the North-West Federal District and then took the post of head of the Transport Coordination Department at the RF Transport Ministry.
As it is known there are several scenarios for the project’s development. According to the first, Armenian Railway will still be engaged in domestic transportation only. It should be remembered the railway now is practically isolated from the world. In this case the investment volume will amount to USD 570 million, about USD 220 million is to be spent in the next five years. This line of development is mainly focused on restoration of railway infrastructure (about 90% of investment), with the rest of the finances going to rolling stock purchase.
The second development scenario requires greater investment. For railway communication with Turkey to be renewed in 2009, the investment volume grows up to USD 604,800,000; if in 2010 the line to Azerbaijan is put into operation – up to USD 1.77 billion. If the communication with Georgia and Abkhazia via Russia is launched in 2011, OAO RZD is to invest USD 2.15 billion.
The terms of the concession agreement last 30 years with the right to prolong the contract. After the first twenty years, OAO RZD will have the opportunity to prolong the agreement for twenty years more i.e. actually Armenian railway will have undergone concession operation for fifty years.
It is planned that during the first thirty years OAO RZD will invest USD 400 million into Armenian infrastructure development. Moreover, some USD 170 million will be invested in rolling stock renewal. At the same time OAO RZD will act as a guarantor of the claimed investment volume.
After concluding the contract OAO RZD is obliged to pay USD 5 million to the Armenian Government upfront and after that to transfer 2% of the cargo transportation income to the national budget annually. The World Bank is to perform as a consultant for the deal.
Tasty Morsel?
What will the concessionaire get, having invested hugely in the enterprise? Armenian Railway JSC is a 100% state-run company which controls most of the national rolling stock and the whole railway infrastructure system. Armenian railway is the oldest line of the CIS that performs as a strategically important route giving passage to basic cargoes via the only join with Georgia. This join allows 80% of cargo to flow towards the Georgian ports of Poti and Batumi and further on by sea to Russia and the Ukraine. The railway was built by the Russian Empire in the second half of 19th century. Now the line is completely electrified and equipped with modern communication systems and auto-lock systems. Armenian railway operates four container terminals, of which Karmir Blur is the largest one constructed to handle 40ft containers. Here are the riches.
No doubt, a major factor is the geopolitical interests of Russia. Thus, Russia is interested in land transit to Iran and the ports of the Persian Gulf not only via Azerbaijan but also via Georgia and Armenia, restoring the old “TransCaucasian Bridge” that had been operating since 1890s. However, to achieve this goal, OAO RZD has to restore communication with Georgia including ferry-line Novorossiysk – Poti.
Russian companies engaged in railway business concession can also be profitable since they will get the opportunity to transport goods to the markets of Azerbaijan, Georgia, Armenia and probably Turkey. Thus, significant expansion of OAO RZD’s influence in the CIS can be forecasted as well as acquiring valuable experience of foreign core-assets control.
This deal looks attractive for Armenia as well because they are pinning their hopes on the opportunity to handle transit cargoes when communication with Turkey and Azerbaijan is launched. This will see the Armenian railway increase in profitability and let railway transport develop rapidly. The joining of OAO RZD as a foreign partner will help the Armenian railway out of total isolation, which limits its business capacities at the moment. Thus, if considering the economic development of the South-Caucasus this decision looks very promising.
”Everybody knew OAO RZD would win the tender. Now we reach the most important stage i.e. clarifying the contractual details, working out cooperation principles and, of course, development of the financial policy” says Gagig Grigoryan, Head of the Corporate Communication Department of the Armenian Transport Ministry.
On February 2008, after approval of certain working details, OAO RZD, South-Caucasian Railway JSC and the Armenian Government signed the agreement on concession. A detailed investment programme and management system will be formed in the near future. The concessionaire is supposed to start control of the project in the second half of 2008.
by Stanislav Russkov
Reference
Until the 1940s the USSR performed as a concessionaire of railways of North Iran and until 1953, of Chinese-Eastern railway.
Within the framework of concession contracts the USSR controlled railway objects in Afghanistan, Austria, Finland, Mongolia and North Korea. Since the largest share in this joint venture belonged to the USSR, the state bore a heavy financial load i.e. expenditures on their maintenance and reconstruction. The lion’s share of expenditure of such sort belongs to the Russian Federation in Russian-Mongolian railway joint venture Ulan-Bator Railway.
Viewpoint
Vladimir Yakunin,
OAO RZD President:
– Receiving Armenian railway in terms of concession goes hand-in-hand with the strategic goals of the corporation. This will assist in transport business development and strengthen OAO RZD’s competitiveness on the international transport market. Russian Railways will be able to use its acquired experience as a managing company. Moreover, this will impact favourably on OAO RZD’s image and status.
Tamara Kasyanova,
CEO of “2K Audit – business consultations” Engineering Company:
– According to the contract, the concessionaire is obliged to fulfil quite tough terms. He has to invest in rolling stock within 10 years. Moreover, reconstruction of the line requires USD 170–180 million. Also the upfront money – USD 5 million plus an annual 2% from cargo transportation profit – looks impressive. However, despite all these factors, Armenian railway can become a key element of the international North-South transport corridor with the participation of Iran and Turkey. The Russian Government plans to cooperate with Iran directly via Armenia and further on via Abkhazia. To construct a direct route to the south is quite a realistic thing to do. Transport diversification seems to have turned into the most important aspect of the foreign policy of Russia.
Samvel Melikyan,
Meltrans JSC, CEO:
– I personally take concession positively and I am glad OAO RZD has become the managing company. Since nobody could have offered better economic terms like Russia did. Moreover, we should not forget that the CIS is a unified system, consequently, no adapting is required from either side. I have to confess Armenian railway has lost its potential in the past 15 years. Container transportation is very expensive for the Republic since the only way out for us is to restore railway communication. Armenian railway can give much but we need huge investment and professional management. I am sure OAO RZD is capable of coping with both tasks.
Gagig Agadzhanyan,
Apaven JSC, Executive Director:
– OAO RZD’s victory in the tender can be considered deserved. All the experts engaged in the transport sector share this opinion. Even if I wished it, I could not find negative aspects in Armenian-Russian cooperation. Armenia is a unique state. With its total area of only 29,000 square kilometres it has communication with all its neighbors: Georgia, Azerbaijan, Turkey and Iran. Unfortunately, political conflicts prevented communication and cooperation development. However, now I think Russian presence will play the role of a de-blocking factor. A concession contract for us is a sort of rescue because cargo transportation via the ports of Turkey and the port of Novorossiysk is extremely expensive. If the cargo flow following these ports now re-directs towards renewed railway we could save our transport costs.
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[DETAIL_TEXT] => The winner takes all
First of all, the reason why the Ministry of Transport and Communication of Armenia announced a preliminary qualification tender on Armenian railway concession needs to be clarified.
According to experts, one of the basic reasons to put the railway under concession terms is the lack of heavy investment required to develop the enterprise. To improve efficiency the company has undergone significant structural changes recently. However, no great positive results were achieved.
The most conservative estimates of the World Bank, which performs as the Armenian Railway’s creditor, show that the enterprise will require more than USD 170 million in the next 15 years to overcome the crisis initially originating from the conflict in Nagorny Karabakh. This conflict resulted in widespread damage to the railway. Moreover, the whole system of the route is worn out and needs modernisation. The Armenian Government doesn’t plan to allocate resources to modernise the railway since the latter brings little profit. Experts believe if the current situation doesn’t change the railway will lose its rolling stock completely. The rolling stock volume now is exhausted and its general operation age amounts to 25–30 years. Despite the fact that the railway has brought some profit in recent years, it is not enough to restore the system. Annual investment worth USD 1–2 million cannot help when the actual required volume totals about USD 100-200 million.
One more fact to bear in mind is the recent misunderstanding between Armenian Railway and Ukrainian Railway when the Ukrainian State Transport Administration stopped cooperation in cargo transportation going to Armenia and back to the Ukraine. This was because Armenia broke the terms of payment for cargo railcar use and ignored numerous requests by the Ukrainian Railway Administration to pay debts. The problem was happily resolved in November 2006, however, it was alarm signal. Considering the situation, the Armenian Government made a decision to announce a concession tender for the national railway. Concession is a typical mechanism developed to attract investment in foreign countries but it is new to the post-Soviet states.
Russia is out of competition
Initially the concession agreement was supposed to be developed by OAO RZD (by the way, the Russians were first to claim their interest in the project), Republic of Iran Railway Company and Kazakhstan Temir Zholy National Company, which possess significant experience in railway transport restructuring between them.
The Armenian Government announced the tender to choose a potential concessionaire in September 2007 and invitations were forwarded to 40 international railway companies. Several months later, two companies promoted their claims to participate in the tender. They were RZD and Indian company Rail India Technical and Economic Services (RITES). After the first stage of the competition RITES refused to go on, having realised the final outcome of the competition was quite clear. Moreover, the Armenian Government didn’t hide their eager interest in dealing with the Russian Railway grandee. Andranik Manukyan, Minister of Transport and Communication of Armenia, repeated over and over again that, “it would be great if such a corporation as OAO RZD became an Armenian Railway concessionaire.”
Huge Investment Required
Andranik Manukyan announced the decision to give Armenian railway into concession (including rolling stock and infrastructure) in late 2007 after the technical-economic proposals developed by OAO RZD were considered. According to Armenian experts, the project exceeded even the greatest expectations of the National Railway Administration. Official announcement of the tender results took place in Yerevan on January 16.
According to the OAO RZD Corporate Communication department, to control the Armenian railway, OAO RZD launched South-Caucasian Railway JSC. It is believed the newly created company will comprise the staff of the Armenian railway and is also to purchase current rolling stock. Alexander Kuznetsov, who took the post of OAO RZD President Adviser responsible for concession projects development, was appointed the head of South-Caucasian Railway JSC. In 1998–2000 he was the head of October Railway, then he was appointed the First Deputy Plenipotentiary of the President in the North-West Federal District and then took the post of head of the Transport Coordination Department at the RF Transport Ministry.
As it is known there are several scenarios for the project’s development. According to the first, Armenian Railway will still be engaged in domestic transportation only. It should be remembered the railway now is practically isolated from the world. In this case the investment volume will amount to USD 570 million, about USD 220 million is to be spent in the next five years. This line of development is mainly focused on restoration of railway infrastructure (about 90% of investment), with the rest of the finances going to rolling stock purchase.
The second development scenario requires greater investment. For railway communication with Turkey to be renewed in 2009, the investment volume grows up to USD 604,800,000; if in 2010 the line to Azerbaijan is put into operation – up to USD 1.77 billion. If the communication with Georgia and Abkhazia via Russia is launched in 2011, OAO RZD is to invest USD 2.15 billion.
The terms of the concession agreement last 30 years with the right to prolong the contract. After the first twenty years, OAO RZD will have the opportunity to prolong the agreement for twenty years more i.e. actually Armenian railway will have undergone concession operation for fifty years.
It is planned that during the first thirty years OAO RZD will invest USD 400 million into Armenian infrastructure development. Moreover, some USD 170 million will be invested in rolling stock renewal. At the same time OAO RZD will act as a guarantor of the claimed investment volume.
After concluding the contract OAO RZD is obliged to pay USD 5 million to the Armenian Government upfront and after that to transfer 2% of the cargo transportation income to the national budget annually. The World Bank is to perform as a consultant for the deal.
Tasty Morsel?
What will the concessionaire get, having invested hugely in the enterprise? Armenian Railway JSC is a 100% state-run company which controls most of the national rolling stock and the whole railway infrastructure system. Armenian railway is the oldest line of the CIS that performs as a strategically important route giving passage to basic cargoes via the only join with Georgia. This join allows 80% of cargo to flow towards the Georgian ports of Poti and Batumi and further on by sea to Russia and the Ukraine. The railway was built by the Russian Empire in the second half of 19th century. Now the line is completely electrified and equipped with modern communication systems and auto-lock systems. Armenian railway operates four container terminals, of which Karmir Blur is the largest one constructed to handle 40ft containers. Here are the riches.
No doubt, a major factor is the geopolitical interests of Russia. Thus, Russia is interested in land transit to Iran and the ports of the Persian Gulf not only via Azerbaijan but also via Georgia and Armenia, restoring the old “TransCaucasian Bridge” that had been operating since 1890s. However, to achieve this goal, OAO RZD has to restore communication with Georgia including ferry-line Novorossiysk – Poti.
Russian companies engaged in railway business concession can also be profitable since they will get the opportunity to transport goods to the markets of Azerbaijan, Georgia, Armenia and probably Turkey. Thus, significant expansion of OAO RZD’s influence in the CIS can be forecasted as well as acquiring valuable experience of foreign core-assets control.
This deal looks attractive for Armenia as well because they are pinning their hopes on the opportunity to handle transit cargoes when communication with Turkey and Azerbaijan is launched. This will see the Armenian railway increase in profitability and let railway transport develop rapidly. The joining of OAO RZD as a foreign partner will help the Armenian railway out of total isolation, which limits its business capacities at the moment. Thus, if considering the economic development of the South-Caucasus this decision looks very promising.
”Everybody knew OAO RZD would win the tender. Now we reach the most important stage i.e. clarifying the contractual details, working out cooperation principles and, of course, development of the financial policy” says Gagig Grigoryan, Head of the Corporate Communication Department of the Armenian Transport Ministry.
On February 2008, after approval of certain working details, OAO RZD, South-Caucasian Railway JSC and the Armenian Government signed the agreement on concession. A detailed investment programme and management system will be formed in the near future. The concessionaire is supposed to start control of the project in the second half of 2008.
by Stanislav Russkov
Reference
Until the 1940s the USSR performed as a concessionaire of railways of North Iran and until 1953, of Chinese-Eastern railway.
Within the framework of concession contracts the USSR controlled railway objects in Afghanistan, Austria, Finland, Mongolia and North Korea. Since the largest share in this joint venture belonged to the USSR, the state bore a heavy financial load i.e. expenditures on their maintenance and reconstruction. The lion’s share of expenditure of such sort belongs to the Russian Federation in Russian-Mongolian railway joint venture Ulan-Bator Railway.
Viewpoint
Vladimir Yakunin,
OAO RZD President:
– Receiving Armenian railway in terms of concession goes hand-in-hand with the strategic goals of the corporation. This will assist in transport business development and strengthen OAO RZD’s competitiveness on the international transport market. Russian Railways will be able to use its acquired experience as a managing company. Moreover, this will impact favourably on OAO RZD’s image and status.
Tamara Kasyanova,
CEO of “2K Audit – business consultations” Engineering Company:
– According to the contract, the concessionaire is obliged to fulfil quite tough terms. He has to invest in rolling stock within 10 years. Moreover, reconstruction of the line requires USD 170–180 million. Also the upfront money – USD 5 million plus an annual 2% from cargo transportation profit – looks impressive. However, despite all these factors, Armenian railway can become a key element of the international North-South transport corridor with the participation of Iran and Turkey. The Russian Government plans to cooperate with Iran directly via Armenia and further on via Abkhazia. To construct a direct route to the south is quite a realistic thing to do. Transport diversification seems to have turned into the most important aspect of the foreign policy of Russia.
Samvel Melikyan,
Meltrans JSC, CEO:
– I personally take concession positively and I am glad OAO RZD has become the managing company. Since nobody could have offered better economic terms like Russia did. Moreover, we should not forget that the CIS is a unified system, consequently, no adapting is required from either side. I have to confess Armenian railway has lost its potential in the past 15 years. Container transportation is very expensive for the Republic since the only way out for us is to restore railway communication. Armenian railway can give much but we need huge investment and professional management. I am sure OAO RZD is capable of coping with both tasks.
Gagig Agadzhanyan,
Apaven JSC, Executive Director:
– OAO RZD’s victory in the tender can be considered deserved. All the experts engaged in the transport sector share this opinion. Even if I wished it, I could not find negative aspects in Armenian-Russian cooperation. Armenia is a unique state. With its total area of only 29,000 square kilometres it has communication with all its neighbors: Georgia, Azerbaijan, Turkey and Iran. Unfortunately, political conflicts prevented communication and cooperation development. However, now I think Russian presence will play the role of a de-blocking factor. A concession contract for us is a sort of rescue because cargo transportation via the ports of Turkey and the port of Novorossiysk is extremely expensive. If the cargo flow following these ports now re-directs towards renewed railway we could save our transport costs.
[~DETAIL_TEXT] => The winner takes all
First of all, the reason why the Ministry of Transport and Communication of Armenia announced a preliminary qualification tender on Armenian railway concession needs to be clarified.
According to experts, one of the basic reasons to put the railway under concession terms is the lack of heavy investment required to develop the enterprise. To improve efficiency the company has undergone significant structural changes recently. However, no great positive results were achieved.
The most conservative estimates of the World Bank, which performs as the Armenian Railway’s creditor, show that the enterprise will require more than USD 170 million in the next 15 years to overcome the crisis initially originating from the conflict in Nagorny Karabakh. This conflict resulted in widespread damage to the railway. Moreover, the whole system of the route is worn out and needs modernisation. The Armenian Government doesn’t plan to allocate resources to modernise the railway since the latter brings little profit. Experts believe if the current situation doesn’t change the railway will lose its rolling stock completely. The rolling stock volume now is exhausted and its general operation age amounts to 25–30 years. Despite the fact that the railway has brought some profit in recent years, it is not enough to restore the system. Annual investment worth USD 1–2 million cannot help when the actual required volume totals about USD 100-200 million.
One more fact to bear in mind is the recent misunderstanding between Armenian Railway and Ukrainian Railway when the Ukrainian State Transport Administration stopped cooperation in cargo transportation going to Armenia and back to the Ukraine. This was because Armenia broke the terms of payment for cargo railcar use and ignored numerous requests by the Ukrainian Railway Administration to pay debts. The problem was happily resolved in November 2006, however, it was alarm signal. Considering the situation, the Armenian Government made a decision to announce a concession tender for the national railway. Concession is a typical mechanism developed to attract investment in foreign countries but it is new to the post-Soviet states.
Russia is out of competition
Initially the concession agreement was supposed to be developed by OAO RZD (by the way, the Russians were first to claim their interest in the project), Republic of Iran Railway Company and Kazakhstan Temir Zholy National Company, which possess significant experience in railway transport restructuring between them.
The Armenian Government announced the tender to choose a potential concessionaire in September 2007 and invitations were forwarded to 40 international railway companies. Several months later, two companies promoted their claims to participate in the tender. They were RZD and Indian company Rail India Technical and Economic Services (RITES). After the first stage of the competition RITES refused to go on, having realised the final outcome of the competition was quite clear. Moreover, the Armenian Government didn’t hide their eager interest in dealing with the Russian Railway grandee. Andranik Manukyan, Minister of Transport and Communication of Armenia, repeated over and over again that, “it would be great if such a corporation as OAO RZD became an Armenian Railway concessionaire.”
Huge Investment Required
Andranik Manukyan announced the decision to give Armenian railway into concession (including rolling stock and infrastructure) in late 2007 after the technical-economic proposals developed by OAO RZD were considered. According to Armenian experts, the project exceeded even the greatest expectations of the National Railway Administration. Official announcement of the tender results took place in Yerevan on January 16.
According to the OAO RZD Corporate Communication department, to control the Armenian railway, OAO RZD launched South-Caucasian Railway JSC. It is believed the newly created company will comprise the staff of the Armenian railway and is also to purchase current rolling stock. Alexander Kuznetsov, who took the post of OAO RZD President Adviser responsible for concession projects development, was appointed the head of South-Caucasian Railway JSC. In 1998–2000 he was the head of October Railway, then he was appointed the First Deputy Plenipotentiary of the President in the North-West Federal District and then took the post of head of the Transport Coordination Department at the RF Transport Ministry.
As it is known there are several scenarios for the project’s development. According to the first, Armenian Railway will still be engaged in domestic transportation only. It should be remembered the railway now is practically isolated from the world. In this case the investment volume will amount to USD 570 million, about USD 220 million is to be spent in the next five years. This line of development is mainly focused on restoration of railway infrastructure (about 90% of investment), with the rest of the finances going to rolling stock purchase.
The second development scenario requires greater investment. For railway communication with Turkey to be renewed in 2009, the investment volume grows up to USD 604,800,000; if in 2010 the line to Azerbaijan is put into operation – up to USD 1.77 billion. If the communication with Georgia and Abkhazia via Russia is launched in 2011, OAO RZD is to invest USD 2.15 billion.
The terms of the concession agreement last 30 years with the right to prolong the contract. After the first twenty years, OAO RZD will have the opportunity to prolong the agreement for twenty years more i.e. actually Armenian railway will have undergone concession operation for fifty years.
It is planned that during the first thirty years OAO RZD will invest USD 400 million into Armenian infrastructure development. Moreover, some USD 170 million will be invested in rolling stock renewal. At the same time OAO RZD will act as a guarantor of the claimed investment volume.
After concluding the contract OAO RZD is obliged to pay USD 5 million to the Armenian Government upfront and after that to transfer 2% of the cargo transportation income to the national budget annually. The World Bank is to perform as a consultant for the deal.
Tasty Morsel?
What will the concessionaire get, having invested hugely in the enterprise? Armenian Railway JSC is a 100% state-run company which controls most of the national rolling stock and the whole railway infrastructure system. Armenian railway is the oldest line of the CIS that performs as a strategically important route giving passage to basic cargoes via the only join with Georgia. This join allows 80% of cargo to flow towards the Georgian ports of Poti and Batumi and further on by sea to Russia and the Ukraine. The railway was built by the Russian Empire in the second half of 19th century. Now the line is completely electrified and equipped with modern communication systems and auto-lock systems. Armenian railway operates four container terminals, of which Karmir Blur is the largest one constructed to handle 40ft containers. Here are the riches.
No doubt, a major factor is the geopolitical interests of Russia. Thus, Russia is interested in land transit to Iran and the ports of the Persian Gulf not only via Azerbaijan but also via Georgia and Armenia, restoring the old “TransCaucasian Bridge” that had been operating since 1890s. However, to achieve this goal, OAO RZD has to restore communication with Georgia including ferry-line Novorossiysk – Poti.
Russian companies engaged in railway business concession can also be profitable since they will get the opportunity to transport goods to the markets of Azerbaijan, Georgia, Armenia and probably Turkey. Thus, significant expansion of OAO RZD’s influence in the CIS can be forecasted as well as acquiring valuable experience of foreign core-assets control.
This deal looks attractive for Armenia as well because they are pinning their hopes on the opportunity to handle transit cargoes when communication with Turkey and Azerbaijan is launched. This will see the Armenian railway increase in profitability and let railway transport develop rapidly. The joining of OAO RZD as a foreign partner will help the Armenian railway out of total isolation, which limits its business capacities at the moment. Thus, if considering the economic development of the South-Caucasus this decision looks very promising.
”Everybody knew OAO RZD would win the tender. Now we reach the most important stage i.e. clarifying the contractual details, working out cooperation principles and, of course, development of the financial policy” says Gagig Grigoryan, Head of the Corporate Communication Department of the Armenian Transport Ministry.
On February 2008, after approval of certain working details, OAO RZD, South-Caucasian Railway JSC and the Armenian Government signed the agreement on concession. A detailed investment programme and management system will be formed in the near future. The concessionaire is supposed to start control of the project in the second half of 2008.
by Stanislav Russkov
Reference
Until the 1940s the USSR performed as a concessionaire of railways of North Iran and until 1953, of Chinese-Eastern railway.
Within the framework of concession contracts the USSR controlled railway objects in Afghanistan, Austria, Finland, Mongolia and North Korea. Since the largest share in this joint venture belonged to the USSR, the state bore a heavy financial load i.e. expenditures on their maintenance and reconstruction. The lion’s share of expenditure of such sort belongs to the Russian Federation in Russian-Mongolian railway joint venture Ulan-Bator Railway.
Viewpoint
Vladimir Yakunin,
OAO RZD President:
– Receiving Armenian railway in terms of concession goes hand-in-hand with the strategic goals of the corporation. This will assist in transport business development and strengthen OAO RZD’s competitiveness on the international transport market. Russian Railways will be able to use its acquired experience as a managing company. Moreover, this will impact favourably on OAO RZD’s image and status.
Tamara Kasyanova,
CEO of “2K Audit – business consultations” Engineering Company:
– According to the contract, the concessionaire is obliged to fulfil quite tough terms. He has to invest in rolling stock within 10 years. Moreover, reconstruction of the line requires USD 170–180 million. Also the upfront money – USD 5 million plus an annual 2% from cargo transportation profit – looks impressive. However, despite all these factors, Armenian railway can become a key element of the international North-South transport corridor with the participation of Iran and Turkey. The Russian Government plans to cooperate with Iran directly via Armenia and further on via Abkhazia. To construct a direct route to the south is quite a realistic thing to do. Transport diversification seems to have turned into the most important aspect of the foreign policy of Russia.
Samvel Melikyan,
Meltrans JSC, CEO:
– I personally take concession positively and I am glad OAO RZD has become the managing company. Since nobody could have offered better economic terms like Russia did. Moreover, we should not forget that the CIS is a unified system, consequently, no adapting is required from either side. I have to confess Armenian railway has lost its potential in the past 15 years. Container transportation is very expensive for the Republic since the only way out for us is to restore railway communication. Armenian railway can give much but we need huge investment and professional management. I am sure OAO RZD is capable of coping with both tasks.
Gagig Agadzhanyan,
Apaven JSC, Executive Director:
– OAO RZD’s victory in the tender can be considered deserved. All the experts engaged in the transport sector share this opinion. Even if I wished it, I could not find negative aspects in Armenian-Russian cooperation. Armenia is a unique state. With its total area of only 29,000 square kilometres it has communication with all its neighbors: Georgia, Azerbaijan, Turkey and Iran. Unfortunately, political conflicts prevented communication and cooperation development. However, now I think Russian presence will play the role of a de-blocking factor. A concession contract for us is a sort of rescue because cargo transportation via the ports of Turkey and the port of Novorossiysk is extremely expensive. If the cargo flow following these ports now re-directs towards renewed railway we could save our transport costs.
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[PREVIEW_TEXT] => Not long ago the official session summing up the results of the concession tender held by Armenian Railway took place. It was no surprise that OAO RZD was the winner. Currently, the corporation is taking steps to implement its perspective plans in Armenia. But how worthy is the planned investment and how beneficial is the new investment mechanism for both sides?
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[DETAIL_TEXT] => ROYAL railways
The first victory of OAO RZD was a tender for construction of the railway in a North-South project developed by Saudi Arabia. According to OAO RZD President Vladimir Yakunin, the contract is estimated at USD 800 million.
To appreciate how complicated the project is, let’s turn to some facts. Most of the Kingdom is a vast, deserted plateau divided by dried river channels. Hot and dry south winds in spring and early summer cause sandstorms and only a wintry north wind relieves the land with cold spell. However, a poor landscape and unfavourable climate is compensated for by significant oil and natural gas deposits. Drilling revealed reserves of crude oil in 77 oilfields equivalent to 261.7 billion barrels, or 26% of global oil reserves. And gas basins hold about 6.339 trillion cubic metres. Moreover, such metals as iron, gold, chromium, copper, lead and zinc can be found in the country.
Until the 1950s, camel caravans transported domestic goods across Saudi Arabia. Hedjaz railway, a 1,300 km-long line built in 1908, had been out of operation since the First World War. Oil production has changed the state completely and given rise to its radical development.
Construction of a railway network, ports and communications helped the country to make a big step forward.
In 1970–1990s, a branched railway network was created to link huge dry lands located in distant parts of the country. Railway communication was also extended. A constructed railway with a gauge of 1435 mm that linked Riyadh and Dammam port in the Persian Gulf via Hufuf oasis was extended to the Al Jubail industrial center. In 1972, the additional line linking the main line and Al Kharj was constructed. The main railway is the 570 km long and the second line is 35.5 km long. As a result, by 2002, the aggregate railway length totaled 1,392 km.
However, this was not enough and, by 2005, the Government of Saudi Arabia decided to link the central and northern regions of the country and ports on the Red sea by railway through a North-South project. The project is believed to be one of the most ambitious and expensive in the Arabian world. A special fund from Saudi Arabia’s Ministry of Finances performs as a financing institution to support the project. One of the major goals of this corridor is to transport bauxites and phosphates to the ports more easily. According some experts, the total cost of the project is estimated at more than USD 2 billion. Construction is expected to be completed in 2010–2011 and the length of Kingdom’s railway network will reach 2,400 km.
Initially, the project was geographically divided into four parts. In 2006, tenders for each part were announced. 28 companies and consortiums, including OAO RZD, forwarded their requests to participate. Saudi Binladin Group, founded by the famous terrorist’s father, was among the competitors as well. Considering the long-lasting ties of the company and the King’s family, the latter had every chance of winning. For OAO RZD’s part, a natural obstacle to participate successfully was not only a lack of construction experience in Saudi Arabia but lack of foreign construction experience in general. Moreover, until 2006, economic relations between Russia and Saudi Arabia remained rather undeveloped. Thus, OAO RZD lost the tender on constructing the first sector of the North-South corridor. However, Binladin Group lost the game as well.
Then, both companies participated in the tender on railway construction from Az Zabirah to Riyadh. By the way, this is the only railway line developed for passenger transportation, the other lines within the project were designed for mineral transportation. This time OAO RZD’s financial and technical proposals were accepted as the best.
According to the contract, OAO RZD is obliged to lay 520 km of track, construct 621 culverts, 20 passages for camels, 26 railway and motor overbridges, 8 railway bridges and also carry out earthworks totalling more than 112 million cubic metres. The company is to use known corporate construction organisations Roszheldorstroi and Zarubezhstroi. In particular, track is supposed to be constructed by Russian railwaymen working in split shifts. About 400 specialists are to be taken on. “We always focus on what we usually do best of all. The rest of the work local companies will realise”, Oleg Toni, OAO RZD Vice-President, states. Negotiations with local construction companies are unfolding now.
Around Algeria along Russian railroads
The second success of Russian railways was announced in February. Quite significantly, the news was delivered by Abdelaziz Bouteflika, President of Algeria, during his visit to Moscow. The corporation won the tender for railway infrastructure construction in Algeria. Official announcement of the tender results took place several days later. Besides OAO RZD, more than 28 companies from Germany, France, Italy, Canada, Spain and China participated in the competition.
According to a three year contract, OAO RZD will contribute in modernisation of 14 suburban stations in the African state’s capital. The company will also have to dismantle over 58.5 km of old track and lay 95 km of new line. The contract also envisages construction of a tunnel 1,700 m long and 34 construction projects including motor overbridges and other bridges. Moreover, the contract includes complex work on electrification of an Algeria railway section (52 km long), construction of a telecommunication system (along a 38 km-long stretch) and creation of a modern centre for Algerian railway control.
Climate and natural conditions are rather specific in Algeria since desert cover 80 per cent of the territory. However, like Saudi Arabia, the country is rich in natural reserves. In terms of valuable minerals, Algeria takes the leading position on the African continent. The state owns oil, natural gas, iron ore, phosphates, coal, zinc and mercury reserves. Natural gas reserves of 4.55 trillion cubic metres place the country seventh in the world and is the fourth-biggest global exporter (60 billion cubic metres per year). In this respect, Algeria comes after Russia, Canada and Norway.
The first railways were constructed here one hundred years ago. Their total length is about 4,000 km. The main line travels north-west from the Tunisian border to the Algerian-Morocco border. Some branches tie the main line with basic ports and Algerian cities.
Several years ago, when negotiations of OAO RZD and Algeria were only ready to start, this market was estimated at USD 4–5 billion. Some experts say that construction of a suburban railway sector around the capital will cost more than USD 1billion.
Commenting on this victory, Vladimir Yakunin, OAO RZD President, stated: «Our corporation has acquired experience of railway construction in different climatic conditions. Our Algerian contract demonstrates the fact that Russian railway technologies are in demand worldwide».
Third, but not last
The contract concluded with Iran railways in late March 2008 proves Vladimir Yakunin’s comments. The contract envisages electrification of 46 km of Tabriz – Azarshahr railway. This railway sector is of a social nature, constructed to transport students from a pedagogical university.
The contract lasts 9 months and includes 1.5 years of guaranteed service. In Vladimir Yakunin’s words, Zarubezhstroitechnology (an OAO RZD affiliate) will perform as subcontractor for the project. The corporation is to launch an Iranian office which will coordinate work.
Basically, Russian construction materials and equipment is to be used for construction. Thus, to cover this, Russia plans to deliver specialised machinery to Iran.
OAO RZD cherishes prospective plans for future foreign contracts. The corporation intends to participate in tenders held in North Korea, Lebanon, Jordan, Venezuela, Bulgaria and Bahrain if tender terms seem attractive for the Russian company. One point of particular interest for the corporation is construction of 40 km bridge linking Bahrain and Qatar.
Experts, in their turn, believe that OAO RZD should fulfil obligations within concluded contracts first, since a good performance may attract positive reactions from other Mid-East neighbours.
by Olga Gorbunova
viewpoint
Oleg Toni,
ОAO RZD Vice-President:
–Now, after many years, we have reached the international tender market and I have to confess we fell behind modern conditions. It resulted in losing the first tender held in Saudi Arabia. However, having analysed our errors, we took the required steps and won the second tender due to the fact that our proposal looked promising. To create this proposal, we used many approaches typical of our Russian activities. Technical solutions we worked out have already been tested and are applied in different countries now. The conclusion I make is that we are a competitive company, though high-speed technologies are not yet developed in Russia. But this just needs time.
In order to win a tender, careful engineering project is to be developed. We must realise exactly what we want to do and with the help of which resources. This sort of analysis is the basis to move on. It is quite clear we do not plan to carry our fuel, bulldozers and excavators to Saudi Arabia but we do plan to use our rail and sleepers there. Negotiations with probable suppliers are underway now.
Marcus Montenecourt,
AmstedRail, CEO Russia/CIS:
– I believe Russian Railways has accumulated great experience which is being applied worldwide. No doubt it will be useful in Saudi Arabia’s sands as well. Of course, the country has different standards and a different gauge. If the corporation solves a given task successfully there, it will strengthen its position on the global market and give it a chance of receiving contracts from other big players.
[~DETAIL_TEXT] => ROYAL railways
The first victory of OAO RZD was a tender for construction of the railway in a North-South project developed by Saudi Arabia. According to OAO RZD President Vladimir Yakunin, the contract is estimated at USD 800 million.
To appreciate how complicated the project is, let’s turn to some facts. Most of the Kingdom is a vast, deserted plateau divided by dried river channels. Hot and dry south winds in spring and early summer cause sandstorms and only a wintry north wind relieves the land with cold spell. However, a poor landscape and unfavourable climate is compensated for by significant oil and natural gas deposits. Drilling revealed reserves of crude oil in 77 oilfields equivalent to 261.7 billion barrels, or 26% of global oil reserves. And gas basins hold about 6.339 trillion cubic metres. Moreover, such metals as iron, gold, chromium, copper, lead and zinc can be found in the country.
Until the 1950s, camel caravans transported domestic goods across Saudi Arabia. Hedjaz railway, a 1,300 km-long line built in 1908, had been out of operation since the First World War. Oil production has changed the state completely and given rise to its radical development.
Construction of a railway network, ports and communications helped the country to make a big step forward.
In 1970–1990s, a branched railway network was created to link huge dry lands located in distant parts of the country. Railway communication was also extended. A constructed railway with a gauge of 1435 mm that linked Riyadh and Dammam port in the Persian Gulf via Hufuf oasis was extended to the Al Jubail industrial center. In 1972, the additional line linking the main line and Al Kharj was constructed. The main railway is the 570 km long and the second line is 35.5 km long. As a result, by 2002, the aggregate railway length totaled 1,392 km.
However, this was not enough and, by 2005, the Government of Saudi Arabia decided to link the central and northern regions of the country and ports on the Red sea by railway through a North-South project. The project is believed to be one of the most ambitious and expensive in the Arabian world. A special fund from Saudi Arabia’s Ministry of Finances performs as a financing institution to support the project. One of the major goals of this corridor is to transport bauxites and phosphates to the ports more easily. According some experts, the total cost of the project is estimated at more than USD 2 billion. Construction is expected to be completed in 2010–2011 and the length of Kingdom’s railway network will reach 2,400 km.
Initially, the project was geographically divided into four parts. In 2006, tenders for each part were announced. 28 companies and consortiums, including OAO RZD, forwarded their requests to participate. Saudi Binladin Group, founded by the famous terrorist’s father, was among the competitors as well. Considering the long-lasting ties of the company and the King’s family, the latter had every chance of winning. For OAO RZD’s part, a natural obstacle to participate successfully was not only a lack of construction experience in Saudi Arabia but lack of foreign construction experience in general. Moreover, until 2006, economic relations between Russia and Saudi Arabia remained rather undeveloped. Thus, OAO RZD lost the tender on constructing the first sector of the North-South corridor. However, Binladin Group lost the game as well.
Then, both companies participated in the tender on railway construction from Az Zabirah to Riyadh. By the way, this is the only railway line developed for passenger transportation, the other lines within the project were designed for mineral transportation. This time OAO RZD’s financial and technical proposals were accepted as the best.
According to the contract, OAO RZD is obliged to lay 520 km of track, construct 621 culverts, 20 passages for camels, 26 railway and motor overbridges, 8 railway bridges and also carry out earthworks totalling more than 112 million cubic metres. The company is to use known corporate construction organisations Roszheldorstroi and Zarubezhstroi. In particular, track is supposed to be constructed by Russian railwaymen working in split shifts. About 400 specialists are to be taken on. “We always focus on what we usually do best of all. The rest of the work local companies will realise”, Oleg Toni, OAO RZD Vice-President, states. Negotiations with local construction companies are unfolding now.
Around Algeria along Russian railroads
The second success of Russian railways was announced in February. Quite significantly, the news was delivered by Abdelaziz Bouteflika, President of Algeria, during his visit to Moscow. The corporation won the tender for railway infrastructure construction in Algeria. Official announcement of the tender results took place several days later. Besides OAO RZD, more than 28 companies from Germany, France, Italy, Canada, Spain and China participated in the competition.
According to a three year contract, OAO RZD will contribute in modernisation of 14 suburban stations in the African state’s capital. The company will also have to dismantle over 58.5 km of old track and lay 95 km of new line. The contract also envisages construction of a tunnel 1,700 m long and 34 construction projects including motor overbridges and other bridges. Moreover, the contract includes complex work on electrification of an Algeria railway section (52 km long), construction of a telecommunication system (along a 38 km-long stretch) and creation of a modern centre for Algerian railway control.
Climate and natural conditions are rather specific in Algeria since desert cover 80 per cent of the territory. However, like Saudi Arabia, the country is rich in natural reserves. In terms of valuable minerals, Algeria takes the leading position on the African continent. The state owns oil, natural gas, iron ore, phosphates, coal, zinc and mercury reserves. Natural gas reserves of 4.55 trillion cubic metres place the country seventh in the world and is the fourth-biggest global exporter (60 billion cubic metres per year). In this respect, Algeria comes after Russia, Canada and Norway.
The first railways were constructed here one hundred years ago. Their total length is about 4,000 km. The main line travels north-west from the Tunisian border to the Algerian-Morocco border. Some branches tie the main line with basic ports and Algerian cities.
Several years ago, when negotiations of OAO RZD and Algeria were only ready to start, this market was estimated at USD 4–5 billion. Some experts say that construction of a suburban railway sector around the capital will cost more than USD 1billion.
Commenting on this victory, Vladimir Yakunin, OAO RZD President, stated: «Our corporation has acquired experience of railway construction in different climatic conditions. Our Algerian contract demonstrates the fact that Russian railway technologies are in demand worldwide».
Third, but not last
The contract concluded with Iran railways in late March 2008 proves Vladimir Yakunin’s comments. The contract envisages electrification of 46 km of Tabriz – Azarshahr railway. This railway sector is of a social nature, constructed to transport students from a pedagogical university.
The contract lasts 9 months and includes 1.5 years of guaranteed service. In Vladimir Yakunin’s words, Zarubezhstroitechnology (an OAO RZD affiliate) will perform as subcontractor for the project. The corporation is to launch an Iranian office which will coordinate work.
Basically, Russian construction materials and equipment is to be used for construction. Thus, to cover this, Russia plans to deliver specialised machinery to Iran.
OAO RZD cherishes prospective plans for future foreign contracts. The corporation intends to participate in tenders held in North Korea, Lebanon, Jordan, Venezuela, Bulgaria and Bahrain if tender terms seem attractive for the Russian company. One point of particular interest for the corporation is construction of 40 km bridge linking Bahrain and Qatar.
Experts, in their turn, believe that OAO RZD should fulfil obligations within concluded contracts first, since a good performance may attract positive reactions from other Mid-East neighbours.
by Olga Gorbunova
viewpoint
Oleg Toni,
ОAO RZD Vice-President:
–Now, after many years, we have reached the international tender market and I have to confess we fell behind modern conditions. It resulted in losing the first tender held in Saudi Arabia. However, having analysed our errors, we took the required steps and won the second tender due to the fact that our proposal looked promising. To create this proposal, we used many approaches typical of our Russian activities. Technical solutions we worked out have already been tested and are applied in different countries now. The conclusion I make is that we are a competitive company, though high-speed technologies are not yet developed in Russia. But this just needs time.
In order to win a tender, careful engineering project is to be developed. We must realise exactly what we want to do and with the help of which resources. This sort of analysis is the basis to move on. It is quite clear we do not plan to carry our fuel, bulldozers and excavators to Saudi Arabia but we do plan to use our rail and sleepers there. Negotiations with probable suppliers are underway now.
Marcus Montenecourt,
AmstedRail, CEO Russia/CIS:
– I believe Russian Railways has accumulated great experience which is being applied worldwide. No doubt it will be useful in Saudi Arabia’s sands as well. Of course, the country has different standards and a different gauge. If the corporation solves a given task successfully there, it will strengthen its position on the global market and give it a chance of receiving contracts from other big players.
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[DETAIL_TEXT] => ROYAL railways
The first victory of OAO RZD was a tender for construction of the railway in a North-South project developed by Saudi Arabia. According to OAO RZD President Vladimir Yakunin, the contract is estimated at USD 800 million.
To appreciate how complicated the project is, let’s turn to some facts. Most of the Kingdom is a vast, deserted plateau divided by dried river channels. Hot and dry south winds in spring and early summer cause sandstorms and only a wintry north wind relieves the land with cold spell. However, a poor landscape and unfavourable climate is compensated for by significant oil and natural gas deposits. Drilling revealed reserves of crude oil in 77 oilfields equivalent to 261.7 billion barrels, or 26% of global oil reserves. And gas basins hold about 6.339 trillion cubic metres. Moreover, such metals as iron, gold, chromium, copper, lead and zinc can be found in the country.
Until the 1950s, camel caravans transported domestic goods across Saudi Arabia. Hedjaz railway, a 1,300 km-long line built in 1908, had been out of operation since the First World War. Oil production has changed the state completely and given rise to its radical development.
Construction of a railway network, ports and communications helped the country to make a big step forward.
In 1970–1990s, a branched railway network was created to link huge dry lands located in distant parts of the country. Railway communication was also extended. A constructed railway with a gauge of 1435 mm that linked Riyadh and Dammam port in the Persian Gulf via Hufuf oasis was extended to the Al Jubail industrial center. In 1972, the additional line linking the main line and Al Kharj was constructed. The main railway is the 570 km long and the second line is 35.5 km long. As a result, by 2002, the aggregate railway length totaled 1,392 km.
However, this was not enough and, by 2005, the Government of Saudi Arabia decided to link the central and northern regions of the country and ports on the Red sea by railway through a North-South project. The project is believed to be one of the most ambitious and expensive in the Arabian world. A special fund from Saudi Arabia’s Ministry of Finances performs as a financing institution to support the project. One of the major goals of this corridor is to transport bauxites and phosphates to the ports more easily. According some experts, the total cost of the project is estimated at more than USD 2 billion. Construction is expected to be completed in 2010–2011 and the length of Kingdom’s railway network will reach 2,400 km.
Initially, the project was geographically divided into four parts. In 2006, tenders for each part were announced. 28 companies and consortiums, including OAO RZD, forwarded their requests to participate. Saudi Binladin Group, founded by the famous terrorist’s father, was among the competitors as well. Considering the long-lasting ties of the company and the King’s family, the latter had every chance of winning. For OAO RZD’s part, a natural obstacle to participate successfully was not only a lack of construction experience in Saudi Arabia but lack of foreign construction experience in general. Moreover, until 2006, economic relations between Russia and Saudi Arabia remained rather undeveloped. Thus, OAO RZD lost the tender on constructing the first sector of the North-South corridor. However, Binladin Group lost the game as well.
Then, both companies participated in the tender on railway construction from Az Zabirah to Riyadh. By the way, this is the only railway line developed for passenger transportation, the other lines within the project were designed for mineral transportation. This time OAO RZD’s financial and technical proposals were accepted as the best.
According to the contract, OAO RZD is obliged to lay 520 km of track, construct 621 culverts, 20 passages for camels, 26 railway and motor overbridges, 8 railway bridges and also carry out earthworks totalling more than 112 million cubic metres. The company is to use known corporate construction organisations Roszheldorstroi and Zarubezhstroi. In particular, track is supposed to be constructed by Russian railwaymen working in split shifts. About 400 specialists are to be taken on. “We always focus on what we usually do best of all. The rest of the work local companies will realise”, Oleg Toni, OAO RZD Vice-President, states. Negotiations with local construction companies are unfolding now.
Around Algeria along Russian railroads
The second success of Russian railways was announced in February. Quite significantly, the news was delivered by Abdelaziz Bouteflika, President of Algeria, during his visit to Moscow. The corporation won the tender for railway infrastructure construction in Algeria. Official announcement of the tender results took place several days later. Besides OAO RZD, more than 28 companies from Germany, France, Italy, Canada, Spain and China participated in the competition.
According to a three year contract, OAO RZD will contribute in modernisation of 14 suburban stations in the African state’s capital. The company will also have to dismantle over 58.5 km of old track and lay 95 km of new line. The contract also envisages construction of a tunnel 1,700 m long and 34 construction projects including motor overbridges and other bridges. Moreover, the contract includes complex work on electrification of an Algeria railway section (52 km long), construction of a telecommunication system (along a 38 km-long stretch) and creation of a modern centre for Algerian railway control.
Climate and natural conditions are rather specific in Algeria since desert cover 80 per cent of the territory. However, like Saudi Arabia, the country is rich in natural reserves. In terms of valuable minerals, Algeria takes the leading position on the African continent. The state owns oil, natural gas, iron ore, phosphates, coal, zinc and mercury reserves. Natural gas reserves of 4.55 trillion cubic metres place the country seventh in the world and is the fourth-biggest global exporter (60 billion cubic metres per year). In this respect, Algeria comes after Russia, Canada and Norway.
The first railways were constructed here one hundred years ago. Their total length is about 4,000 km. The main line travels north-west from the Tunisian border to the Algerian-Morocco border. Some branches tie the main line with basic ports and Algerian cities.
Several years ago, when negotiations of OAO RZD and Algeria were only ready to start, this market was estimated at USD 4–5 billion. Some experts say that construction of a suburban railway sector around the capital will cost more than USD 1billion.
Commenting on this victory, Vladimir Yakunin, OAO RZD President, stated: «Our corporation has acquired experience of railway construction in different climatic conditions. Our Algerian contract demonstrates the fact that Russian railway technologies are in demand worldwide».
Third, but not last
The contract concluded with Iran railways in late March 2008 proves Vladimir Yakunin’s comments. The contract envisages electrification of 46 km of Tabriz – Azarshahr railway. This railway sector is of a social nature, constructed to transport students from a pedagogical university.
The contract lasts 9 months and includes 1.5 years of guaranteed service. In Vladimir Yakunin’s words, Zarubezhstroitechnology (an OAO RZD affiliate) will perform as subcontractor for the project. The corporation is to launch an Iranian office which will coordinate work.
Basically, Russian construction materials and equipment is to be used for construction. Thus, to cover this, Russia plans to deliver specialised machinery to Iran.
OAO RZD cherishes prospective plans for future foreign contracts. The corporation intends to participate in tenders held in North Korea, Lebanon, Jordan, Venezuela, Bulgaria and Bahrain if tender terms seem attractive for the Russian company. One point of particular interest for the corporation is construction of 40 km bridge linking Bahrain and Qatar.
Experts, in their turn, believe that OAO RZD should fulfil obligations within concluded contracts first, since a good performance may attract positive reactions from other Mid-East neighbours.
by Olga Gorbunova
viewpoint
Oleg Toni,
ОAO RZD Vice-President:
–Now, after many years, we have reached the international tender market and I have to confess we fell behind modern conditions. It resulted in losing the first tender held in Saudi Arabia. However, having analysed our errors, we took the required steps and won the second tender due to the fact that our proposal looked promising. To create this proposal, we used many approaches typical of our Russian activities. Technical solutions we worked out have already been tested and are applied in different countries now. The conclusion I make is that we are a competitive company, though high-speed technologies are not yet developed in Russia. But this just needs time.
In order to win a tender, careful engineering project is to be developed. We must realise exactly what we want to do and with the help of which resources. This sort of analysis is the basis to move on. It is quite clear we do not plan to carry our fuel, bulldozers and excavators to Saudi Arabia but we do plan to use our rail and sleepers there. Negotiations with probable suppliers are underway now.
Marcus Montenecourt,
AmstedRail, CEO Russia/CIS:
– I believe Russian Railways has accumulated great experience which is being applied worldwide. No doubt it will be useful in Saudi Arabia’s sands as well. Of course, the country has different standards and a different gauge. If the corporation solves a given task successfully there, it will strengthen its position on the global market and give it a chance of receiving contracts from other big players.
[~DETAIL_TEXT] => ROYAL railways
The first victory of OAO RZD was a tender for construction of the railway in a North-South project developed by Saudi Arabia. According to OAO RZD President Vladimir Yakunin, the contract is estimated at USD 800 million.
To appreciate how complicated the project is, let’s turn to some facts. Most of the Kingdom is a vast, deserted plateau divided by dried river channels. Hot and dry south winds in spring and early summer cause sandstorms and only a wintry north wind relieves the land with cold spell. However, a poor landscape and unfavourable climate is compensated for by significant oil and natural gas deposits. Drilling revealed reserves of crude oil in 77 oilfields equivalent to 261.7 billion barrels, or 26% of global oil reserves. And gas basins hold about 6.339 trillion cubic metres. Moreover, such metals as iron, gold, chromium, copper, lead and zinc can be found in the country.
Until the 1950s, camel caravans transported domestic goods across Saudi Arabia. Hedjaz railway, a 1,300 km-long line built in 1908, had been out of operation since the First World War. Oil production has changed the state completely and given rise to its radical development.
Construction of a railway network, ports and communications helped the country to make a big step forward.
In 1970–1990s, a branched railway network was created to link huge dry lands located in distant parts of the country. Railway communication was also extended. A constructed railway with a gauge of 1435 mm that linked Riyadh and Dammam port in the Persian Gulf via Hufuf oasis was extended to the Al Jubail industrial center. In 1972, the additional line linking the main line and Al Kharj was constructed. The main railway is the 570 km long and the second line is 35.5 km long. As a result, by 2002, the aggregate railway length totaled 1,392 km.
However, this was not enough and, by 2005, the Government of Saudi Arabia decided to link the central and northern regions of the country and ports on the Red sea by railway through a North-South project. The project is believed to be one of the most ambitious and expensive in the Arabian world. A special fund from Saudi Arabia’s Ministry of Finances performs as a financing institution to support the project. One of the major goals of this corridor is to transport bauxites and phosphates to the ports more easily. According some experts, the total cost of the project is estimated at more than USD 2 billion. Construction is expected to be completed in 2010–2011 and the length of Kingdom’s railway network will reach 2,400 km.
Initially, the project was geographically divided into four parts. In 2006, tenders for each part were announced. 28 companies and consortiums, including OAO RZD, forwarded their requests to participate. Saudi Binladin Group, founded by the famous terrorist’s father, was among the competitors as well. Considering the long-lasting ties of the company and the King’s family, the latter had every chance of winning. For OAO RZD’s part, a natural obstacle to participate successfully was not only a lack of construction experience in Saudi Arabia but lack of foreign construction experience in general. Moreover, until 2006, economic relations between Russia and Saudi Arabia remained rather undeveloped. Thus, OAO RZD lost the tender on constructing the first sector of the North-South corridor. However, Binladin Group lost the game as well.
Then, both companies participated in the tender on railway construction from Az Zabirah to Riyadh. By the way, this is the only railway line developed for passenger transportation, the other lines within the project were designed for mineral transportation. This time OAO RZD’s financial and technical proposals were accepted as the best.
According to the contract, OAO RZD is obliged to lay 520 km of track, construct 621 culverts, 20 passages for camels, 26 railway and motor overbridges, 8 railway bridges and also carry out earthworks totalling more than 112 million cubic metres. The company is to use known corporate construction organisations Roszheldorstroi and Zarubezhstroi. In particular, track is supposed to be constructed by Russian railwaymen working in split shifts. About 400 specialists are to be taken on. “We always focus on what we usually do best of all. The rest of the work local companies will realise”, Oleg Toni, OAO RZD Vice-President, states. Negotiations with local construction companies are unfolding now.
Around Algeria along Russian railroads
The second success of Russian railways was announced in February. Quite significantly, the news was delivered by Abdelaziz Bouteflika, President of Algeria, during his visit to Moscow. The corporation won the tender for railway infrastructure construction in Algeria. Official announcement of the tender results took place several days later. Besides OAO RZD, more than 28 companies from Germany, France, Italy, Canada, Spain and China participated in the competition.
According to a three year contract, OAO RZD will contribute in modernisation of 14 suburban stations in the African state’s capital. The company will also have to dismantle over 58.5 km of old track and lay 95 km of new line. The contract also envisages construction of a tunnel 1,700 m long and 34 construction projects including motor overbridges and other bridges. Moreover, the contract includes complex work on electrification of an Algeria railway section (52 km long), construction of a telecommunication system (along a 38 km-long stretch) and creation of a modern centre for Algerian railway control.
Climate and natural conditions are rather specific in Algeria since desert cover 80 per cent of the territory. However, like Saudi Arabia, the country is rich in natural reserves. In terms of valuable minerals, Algeria takes the leading position on the African continent. The state owns oil, natural gas, iron ore, phosphates, coal, zinc and mercury reserves. Natural gas reserves of 4.55 trillion cubic metres place the country seventh in the world and is the fourth-biggest global exporter (60 billion cubic metres per year). In this respect, Algeria comes after Russia, Canada and Norway.
The first railways were constructed here one hundred years ago. Their total length is about 4,000 km. The main line travels north-west from the Tunisian border to the Algerian-Morocco border. Some branches tie the main line with basic ports and Algerian cities.
Several years ago, when negotiations of OAO RZD and Algeria were only ready to start, this market was estimated at USD 4–5 billion. Some experts say that construction of a suburban railway sector around the capital will cost more than USD 1billion.
Commenting on this victory, Vladimir Yakunin, OAO RZD President, stated: «Our corporation has acquired experience of railway construction in different climatic conditions. Our Algerian contract demonstrates the fact that Russian railway technologies are in demand worldwide».
Third, but not last
The contract concluded with Iran railways in late March 2008 proves Vladimir Yakunin’s comments. The contract envisages electrification of 46 km of Tabriz – Azarshahr railway. This railway sector is of a social nature, constructed to transport students from a pedagogical university.
The contract lasts 9 months and includes 1.5 years of guaranteed service. In Vladimir Yakunin’s words, Zarubezhstroitechnology (an OAO RZD affiliate) will perform as subcontractor for the project. The corporation is to launch an Iranian office which will coordinate work.
Basically, Russian construction materials and equipment is to be used for construction. Thus, to cover this, Russia plans to deliver specialised machinery to Iran.
OAO RZD cherishes prospective plans for future foreign contracts. The corporation intends to participate in tenders held in North Korea, Lebanon, Jordan, Venezuela, Bulgaria and Bahrain if tender terms seem attractive for the Russian company. One point of particular interest for the corporation is construction of 40 km bridge linking Bahrain and Qatar.
Experts, in their turn, believe that OAO RZD should fulfil obligations within concluded contracts first, since a good performance may attract positive reactions from other Mid-East neighbours.
by Olga Gorbunova
viewpoint
Oleg Toni,
ОAO RZD Vice-President:
–Now, after many years, we have reached the international tender market and I have to confess we fell behind modern conditions. It resulted in losing the first tender held in Saudi Arabia. However, having analysed our errors, we took the required steps and won the second tender due to the fact that our proposal looked promising. To create this proposal, we used many approaches typical of our Russian activities. Technical solutions we worked out have already been tested and are applied in different countries now. The conclusion I make is that we are a competitive company, though high-speed technologies are not yet developed in Russia. But this just needs time.
In order to win a tender, careful engineering project is to be developed. We must realise exactly what we want to do and with the help of which resources. This sort of analysis is the basis to move on. It is quite clear we do not plan to carry our fuel, bulldozers and excavators to Saudi Arabia but we do plan to use our rail and sleepers there. Negotiations with probable suppliers are underway now.
Marcus Montenecourt,
AmstedRail, CEO Russia/CIS:
– I believe Russian Railways has accumulated great experience which is being applied worldwide. No doubt it will be useful in Saudi Arabia’s sands as well. Of course, the country has different standards and a different gauge. If the corporation solves a given task successfully there, it will strengthen its position on the global market and give it a chance of receiving contracts from other big players.
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[NAME] => From the People’s Republic of China to the USA via the Trans-Siberian Railway
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[DETAIL_TEXT] => Look at the map!
The northern transport corridor project – the North-East West (N.E.W) was developed under the direction of the International Union of Railways (UIC) from 1997 to 1999 for the transportation of container cargoes from China through Russia, Finland and Norway to the North- East part of the USA, as an alternative to the Trans-Pacific route.
The basic advantage of this project is self-evident if we look at a geographical map. Theoretically, the proposed transport corridor will allow cargo to be transported in a shorter time for two reasons: firstly, the route itself is shorter, and secondly, transportation by rail is faster than by sea. Cargoes will be transported across Russia using Trans- Siberian Railways.
At present these cargoes are transported between China and the North-East of the USA across the Pacific Ocean. Containers sent from Chinese ports normally come to the Port of Long Beach, California, and then are delivered to the North-East part of the USA by rail in transit container trains.
The commercial company ‘N.E.W. Corridor AS’ was created in 2005 in Norway in order to organise and realise a pilot project within the framework of the Project ‘N.E.W’ and to establish this future regular cargo route. The International Union of Railways (UIC) and the Nordland District of Norway became its founders and basic shareholders. The Company’s priority was to implement a series of trial transits within six months.
‘N.E.W. Corridor AS’ and the creators of the project N.E.W set the following conditions for carrying out the trial: the distance of 19,216km between Port East (Russia and the Far East) and the Port of Boston should be completed in 23½ days, with a common tariff rate set at $2,300 for a 20-foot transit container, and $3,000 for a 40-foot transit container.
However, the commercial and technological conditions set by the Company and authors of the project, i.e. the targeted transit time and the common tariff rate, were unachievable. They did not match the current existing realistic economic parameters of the international market in transport services. They appeared unacceptable to potential carriers; the marine transport companies, railways, ports and the operators of the project ‘N.E.W’. It was one of the reasons why the transit trials have not taken place yet. Thus, to date, the merits and demerits of this interesting international transport corridor project have not yet been assessed in practice.
Through Murmansk or Narvik?
As a result, the problems set before ‘N.E.W. Corridor AS’ remain unsolved, and the company has stopped its activity. However the initiators of this project have not lost hope for its eventual realisation.
The following variants of the route are now under consideration:
Freight through the Port of Murmansk: (our Magazine has been informed by UIC that this variant of the project has the best potential).
1. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and the Port of Murmansk to the USA;
2. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and through the Customs points at Buslovskaya /Vainikkala (on the Russian-Finnish border) and Oulu Station /Haparanda (on the Finnish-Swedish border) to the Port of Narvik (Norway), and then on to the USA;
3. The North East of China through the Customs point at Manchzhuria /Zabaikalsk to the Port of Murmansk, and then on to the USA;
4. The North East of China through the Customs points at Manchzhuria /Zabaikalsk, Buslovskaya /Vainikkala; and Oulu Station/ Haparanda to the Port of Narvik, and then on to the USA;
5. The Western Province of Sintsian, People’s Republic of China, through the Customs point at Alashankou /Dostyk (on the Chinese-Kazakhstan border) to the Port of Murmansk and then on to the USA;
6. The Western Province of Sinstian, Peoples Republic of China, through the Customs points at Alashankou /Dostyk, Buslovskaya /Vainikkala and Oulu Station /Haparanda to the Port of Narvik and then on to the USA
‘The project is very complex,’ states Boris Lukov, Adviser to the President of the Trans-Siberian Coordination Council (КСТП). In his opinion, the following conditions will need to be met for the corridor to function successfully: co-ordination of common transportation technologies by all participants in the project ‘NEW’; agreed common tariff rates that are competitive against Trans-Pacific and Trans-American route tariff rates; competitive transit times against the Trans-Pacific and Trans-American routes; assured cargo safety for the whole of the container journey; a guaranteed high level of service; en-route container tracking with information readily available to clients; use of modern Customs technology; and the speeding-up of process times through Custom Control Points.
But will it be possible to provide the above conditions?
How do we get Wal-Mart interested?
To realise this project the organisers will have to face a complex set of problems. Firstly, the development of Russia’s transit potential is held back by a number of complications (our magazine has written about this several times). Fluctuating transit transport tariff rates lead to mistrust from RZD’s international partners, as do insufficient throughput at Russian-Chinese border points, and the haphazard approach of the Russian Customs Service. The last two circumstances can easily reduce the main advantage of the NEW route, (that is speed of delivery) to nothing. Market participants report that the passage of a container through a Customs border point can take up to 10 days.
For this reason, and also because of the lower costs of sea deliveries, the majority of carriers prefer to use shipping companies.
Russian authorities are now making efforts to deal with these problems - the unified rate has been lowered; a programme of border point modernisation is under consideration and railway lines are being repaired. Time will show how effective these measures will be.
For the NEW route to be successful, not only will the Trans-Siberian Railway network need to be problem free, but it will also be necessary to meet a number of other conditions. Mr. Lukov explains that, firstly, cargo bases will need to be created close to the North-East China border to facilitate the flow of goods through border points; otherwise the cumulative costs of transportation will remain uncompetitive because rail transportation rates in the People’s Republic of China are too high.
Secondly it will be necessary to provide container transport-loading units in Northern ports, irrespective of whether Murmansk, Arkhangelsk or Norvik are used. The average container train on Trans-Siberian Railways is made up of 78-80 transport units, so the volume of one container train will be about 320 TEU. Furthermore, it will be necessary to reload containers onto the container transport units, which will carry them over the Atlantic to the USA. It is very hard to imagine a sea carrier that will organise a trans-oceanic route for the sake of 300 TEU, especially when considering the tendency to integrate trans-oceanic liners’ capacities. The largest ships already carry more than 10,000 TEU.
Thus, it will be still necessary to find at least 1,700 TEU-cargoes for an ocean carrier. Today, such volumes are not shipped either through the Port of Murmansk, or through the Ports of Arkhangelsk and Narvik to the USA.
The second variant would be to gather containers from several transit trains from China onto one container transport unit. In 2004, 125,000 containers were sent from Port Eastern to Finland, that is 2-3 fully-loaded trains a day. Let’s say for the sake of argument that all these trains will carry goods to the USA. Then the seven trains required to load one container transport unit will arrive over the course of three to four days. Quite a short time! But here it is necessary to remember the question of whether businesses in the north of China will generate such an adequate goods flow.
American trading company Wal - Mart, which annually receives more than 470,000 containers with cargoes from ATR countries, has expressed interest in the reception of cargoes via N.E.W. The prospect may be promising but it will only remain so if all of the above-mentioned transit problems are solved, if cooperation with the Americans is established, if the battle with carriers is won, and if a cargo base in the north of China is established. Probably because there are so many ‘ifs’ the potential participants in the project, both Chinese, and American, are so far limiting their actions to ‘expressions of interest’.
In Conclusion
Project N.E.W. is one of the arguments being used to push for approval of new investment into the development of railway approaches to the Northern ports of the Russian Federation and the construction of new reloading capacities. They are necessary for Russia. The fact of the matter is that the big port of SPb can no longer cope with increased container flows. Already, a number of Russian operators are considering the Port of Arkhangelsk as a possible alternative to transportation through the big port of SPb. Experience shows that international transport corridor projects can be successful.
By Anna Nezhinskaya
Viewpoint
Boris Lukov,
Adviser to the CCTT President:
– To carry out the “N.E.W.” project, all the interested parties (shipping companies, railways, ports and operators) need to work on the technology of through transportation and a competitive through tariff rate in comparison with the charter tariff rate on freight transportation along the TransPacific and TransAmerican railway route.
To fulfil such a staged and complicated work we should create a transport company with transportation management centres in countries which dispatch and receive cargo; the companies must have a department engaged in the “N.E.W.” project in the ports of Vostochny, Murmansk and Narvik, in the transit railways of Russia, Finland, Sweden, in OAO TransContainer and the secretariat of the CCTT.
It seems reasonable to define a main body to coordinate the work of all the structures participating in realisation of the “N.E.W.” project. The secretariat of the CCTT, in cooperation with the international department of the International Union of Railways, could be such a body, since they have considerable practical experience in coordinating the work of shipping companies, railways, ports, forwarders, and operators participating in providing container transportation along the Transsiberian route.
[~DETAIL_TEXT] => Look at the map!
The northern transport corridor project – the North-East West (N.E.W) was developed under the direction of the International Union of Railways (UIC) from 1997 to 1999 for the transportation of container cargoes from China through Russia, Finland and Norway to the North- East part of the USA, as an alternative to the Trans-Pacific route.
The basic advantage of this project is self-evident if we look at a geographical map. Theoretically, the proposed transport corridor will allow cargo to be transported in a shorter time for two reasons: firstly, the route itself is shorter, and secondly, transportation by rail is faster than by sea. Cargoes will be transported across Russia using Trans- Siberian Railways.
At present these cargoes are transported between China and the North-East of the USA across the Pacific Ocean. Containers sent from Chinese ports normally come to the Port of Long Beach, California, and then are delivered to the North-East part of the USA by rail in transit container trains.
The commercial company ‘N.E.W. Corridor AS’ was created in 2005 in Norway in order to organise and realise a pilot project within the framework of the Project ‘N.E.W’ and to establish this future regular cargo route. The International Union of Railways (UIC) and the Nordland District of Norway became its founders and basic shareholders. The Company’s priority was to implement a series of trial transits within six months.
‘N.E.W. Corridor AS’ and the creators of the project N.E.W set the following conditions for carrying out the trial: the distance of 19,216km between Port East (Russia and the Far East) and the Port of Boston should be completed in 23½ days, with a common tariff rate set at $2,300 for a 20-foot transit container, and $3,000 for a 40-foot transit container.
However, the commercial and technological conditions set by the Company and authors of the project, i.e. the targeted transit time and the common tariff rate, were unachievable. They did not match the current existing realistic economic parameters of the international market in transport services. They appeared unacceptable to potential carriers; the marine transport companies, railways, ports and the operators of the project ‘N.E.W’. It was one of the reasons why the transit trials have not taken place yet. Thus, to date, the merits and demerits of this interesting international transport corridor project have not yet been assessed in practice.
Through Murmansk or Narvik?
As a result, the problems set before ‘N.E.W. Corridor AS’ remain unsolved, and the company has stopped its activity. However the initiators of this project have not lost hope for its eventual realisation.
The following variants of the route are now under consideration:
Freight through the Port of Murmansk: (our Magazine has been informed by UIC that this variant of the project has the best potential).
1. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and the Port of Murmansk to the USA;
2. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and through the Customs points at Buslovskaya /Vainikkala (on the Russian-Finnish border) and Oulu Station /Haparanda (on the Finnish-Swedish border) to the Port of Narvik (Norway), and then on to the USA;
3. The North East of China through the Customs point at Manchzhuria /Zabaikalsk to the Port of Murmansk, and then on to the USA;
4. The North East of China through the Customs points at Manchzhuria /Zabaikalsk, Buslovskaya /Vainikkala; and Oulu Station/ Haparanda to the Port of Narvik, and then on to the USA;
5. The Western Province of Sintsian, People’s Republic of China, through the Customs point at Alashankou /Dostyk (on the Chinese-Kazakhstan border) to the Port of Murmansk and then on to the USA;
6. The Western Province of Sinstian, Peoples Republic of China, through the Customs points at Alashankou /Dostyk, Buslovskaya /Vainikkala and Oulu Station /Haparanda to the Port of Narvik and then on to the USA
‘The project is very complex,’ states Boris Lukov, Adviser to the President of the Trans-Siberian Coordination Council (КСТП). In his opinion, the following conditions will need to be met for the corridor to function successfully: co-ordination of common transportation technologies by all participants in the project ‘NEW’; agreed common tariff rates that are competitive against Trans-Pacific and Trans-American route tariff rates; competitive transit times against the Trans-Pacific and Trans-American routes; assured cargo safety for the whole of the container journey; a guaranteed high level of service; en-route container tracking with information readily available to clients; use of modern Customs technology; and the speeding-up of process times through Custom Control Points.
But will it be possible to provide the above conditions?
How do we get Wal-Mart interested?
To realise this project the organisers will have to face a complex set of problems. Firstly, the development of Russia’s transit potential is held back by a number of complications (our magazine has written about this several times). Fluctuating transit transport tariff rates lead to mistrust from RZD’s international partners, as do insufficient throughput at Russian-Chinese border points, and the haphazard approach of the Russian Customs Service. The last two circumstances can easily reduce the main advantage of the NEW route, (that is speed of delivery) to nothing. Market participants report that the passage of a container through a Customs border point can take up to 10 days.
For this reason, and also because of the lower costs of sea deliveries, the majority of carriers prefer to use shipping companies.
Russian authorities are now making efforts to deal with these problems - the unified rate has been lowered; a programme of border point modernisation is under consideration and railway lines are being repaired. Time will show how effective these measures will be.
For the NEW route to be successful, not only will the Trans-Siberian Railway network need to be problem free, but it will also be necessary to meet a number of other conditions. Mr. Lukov explains that, firstly, cargo bases will need to be created close to the North-East China border to facilitate the flow of goods through border points; otherwise the cumulative costs of transportation will remain uncompetitive because rail transportation rates in the People’s Republic of China are too high.
Secondly it will be necessary to provide container transport-loading units in Northern ports, irrespective of whether Murmansk, Arkhangelsk or Norvik are used. The average container train on Trans-Siberian Railways is made up of 78-80 transport units, so the volume of one container train will be about 320 TEU. Furthermore, it will be necessary to reload containers onto the container transport units, which will carry them over the Atlantic to the USA. It is very hard to imagine a sea carrier that will organise a trans-oceanic route for the sake of 300 TEU, especially when considering the tendency to integrate trans-oceanic liners’ capacities. The largest ships already carry more than 10,000 TEU.
Thus, it will be still necessary to find at least 1,700 TEU-cargoes for an ocean carrier. Today, such volumes are not shipped either through the Port of Murmansk, or through the Ports of Arkhangelsk and Narvik to the USA.
The second variant would be to gather containers from several transit trains from China onto one container transport unit. In 2004, 125,000 containers were sent from Port Eastern to Finland, that is 2-3 fully-loaded trains a day. Let’s say for the sake of argument that all these trains will carry goods to the USA. Then the seven trains required to load one container transport unit will arrive over the course of three to four days. Quite a short time! But here it is necessary to remember the question of whether businesses in the north of China will generate such an adequate goods flow.
American trading company Wal - Mart, which annually receives more than 470,000 containers with cargoes from ATR countries, has expressed interest in the reception of cargoes via N.E.W. The prospect may be promising but it will only remain so if all of the above-mentioned transit problems are solved, if cooperation with the Americans is established, if the battle with carriers is won, and if a cargo base in the north of China is established. Probably because there are so many ‘ifs’ the potential participants in the project, both Chinese, and American, are so far limiting their actions to ‘expressions of interest’.
In Conclusion
Project N.E.W. is one of the arguments being used to push for approval of new investment into the development of railway approaches to the Northern ports of the Russian Federation and the construction of new reloading capacities. They are necessary for Russia. The fact of the matter is that the big port of SPb can no longer cope with increased container flows. Already, a number of Russian operators are considering the Port of Arkhangelsk as a possible alternative to transportation through the big port of SPb. Experience shows that international transport corridor projects can be successful.
By Anna Nezhinskaya
Viewpoint
Boris Lukov,
Adviser to the CCTT President:
– To carry out the “N.E.W.” project, all the interested parties (shipping companies, railways, ports and operators) need to work on the technology of through transportation and a competitive through tariff rate in comparison with the charter tariff rate on freight transportation along the TransPacific and TransAmerican railway route.
To fulfil such a staged and complicated work we should create a transport company with transportation management centres in countries which dispatch and receive cargo; the companies must have a department engaged in the “N.E.W.” project in the ports of Vostochny, Murmansk and Narvik, in the transit railways of Russia, Finland, Sweden, in OAO TransContainer and the secretariat of the CCTT.
It seems reasonable to define a main body to coordinate the work of all the structures participating in realisation of the “N.E.W.” project. The secretariat of the CCTT, in cooperation with the international department of the International Union of Railways, could be such a body, since they have considerable practical experience in coordinating the work of shipping companies, railways, ports, forwarders, and operators participating in providing container transportation along the Transsiberian route.
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[DETAIL_TEXT] => Look at the map!
The northern transport corridor project – the North-East West (N.E.W) was developed under the direction of the International Union of Railways (UIC) from 1997 to 1999 for the transportation of container cargoes from China through Russia, Finland and Norway to the North- East part of the USA, as an alternative to the Trans-Pacific route.
The basic advantage of this project is self-evident if we look at a geographical map. Theoretically, the proposed transport corridor will allow cargo to be transported in a shorter time for two reasons: firstly, the route itself is shorter, and secondly, transportation by rail is faster than by sea. Cargoes will be transported across Russia using Trans- Siberian Railways.
At present these cargoes are transported between China and the North-East of the USA across the Pacific Ocean. Containers sent from Chinese ports normally come to the Port of Long Beach, California, and then are delivered to the North-East part of the USA by rail in transit container trains.
The commercial company ‘N.E.W. Corridor AS’ was created in 2005 in Norway in order to organise and realise a pilot project within the framework of the Project ‘N.E.W’ and to establish this future regular cargo route. The International Union of Railways (UIC) and the Nordland District of Norway became its founders and basic shareholders. The Company’s priority was to implement a series of trial transits within six months.
‘N.E.W. Corridor AS’ and the creators of the project N.E.W set the following conditions for carrying out the trial: the distance of 19,216km between Port East (Russia and the Far East) and the Port of Boston should be completed in 23½ days, with a common tariff rate set at $2,300 for a 20-foot transit container, and $3,000 for a 40-foot transit container.
However, the commercial and technological conditions set by the Company and authors of the project, i.e. the targeted transit time and the common tariff rate, were unachievable. They did not match the current existing realistic economic parameters of the international market in transport services. They appeared unacceptable to potential carriers; the marine transport companies, railways, ports and the operators of the project ‘N.E.W’. It was one of the reasons why the transit trials have not taken place yet. Thus, to date, the merits and demerits of this interesting international transport corridor project have not yet been assessed in practice.
Through Murmansk or Narvik?
As a result, the problems set before ‘N.E.W. Corridor AS’ remain unsolved, and the company has stopped its activity. However the initiators of this project have not lost hope for its eventual realisation.
The following variants of the route are now under consideration:
Freight through the Port of Murmansk: (our Magazine has been informed by UIC that this variant of the project has the best potential).
1. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and the Port of Murmansk to the USA;
2. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and through the Customs points at Buslovskaya /Vainikkala (on the Russian-Finnish border) and Oulu Station /Haparanda (on the Finnish-Swedish border) to the Port of Narvik (Norway), and then on to the USA;
3. The North East of China through the Customs point at Manchzhuria /Zabaikalsk to the Port of Murmansk, and then on to the USA;
4. The North East of China through the Customs points at Manchzhuria /Zabaikalsk, Buslovskaya /Vainikkala; and Oulu Station/ Haparanda to the Port of Narvik, and then on to the USA;
5. The Western Province of Sintsian, People’s Republic of China, through the Customs point at Alashankou /Dostyk (on the Chinese-Kazakhstan border) to the Port of Murmansk and then on to the USA;
6. The Western Province of Sinstian, Peoples Republic of China, through the Customs points at Alashankou /Dostyk, Buslovskaya /Vainikkala and Oulu Station /Haparanda to the Port of Narvik and then on to the USA
‘The project is very complex,’ states Boris Lukov, Adviser to the President of the Trans-Siberian Coordination Council (КСТП). In his opinion, the following conditions will need to be met for the corridor to function successfully: co-ordination of common transportation technologies by all participants in the project ‘NEW’; agreed common tariff rates that are competitive against Trans-Pacific and Trans-American route tariff rates; competitive transit times against the Trans-Pacific and Trans-American routes; assured cargo safety for the whole of the container journey; a guaranteed high level of service; en-route container tracking with information readily available to clients; use of modern Customs technology; and the speeding-up of process times through Custom Control Points.
But will it be possible to provide the above conditions?
How do we get Wal-Mart interested?
To realise this project the organisers will have to face a complex set of problems. Firstly, the development of Russia’s transit potential is held back by a number of complications (our magazine has written about this several times). Fluctuating transit transport tariff rates lead to mistrust from RZD’s international partners, as do insufficient throughput at Russian-Chinese border points, and the haphazard approach of the Russian Customs Service. The last two circumstances can easily reduce the main advantage of the NEW route, (that is speed of delivery) to nothing. Market participants report that the passage of a container through a Customs border point can take up to 10 days.
For this reason, and also because of the lower costs of sea deliveries, the majority of carriers prefer to use shipping companies.
Russian authorities are now making efforts to deal with these problems - the unified rate has been lowered; a programme of border point modernisation is under consideration and railway lines are being repaired. Time will show how effective these measures will be.
For the NEW route to be successful, not only will the Trans-Siberian Railway network need to be problem free, but it will also be necessary to meet a number of other conditions. Mr. Lukov explains that, firstly, cargo bases will need to be created close to the North-East China border to facilitate the flow of goods through border points; otherwise the cumulative costs of transportation will remain uncompetitive because rail transportation rates in the People’s Republic of China are too high.
Secondly it will be necessary to provide container transport-loading units in Northern ports, irrespective of whether Murmansk, Arkhangelsk or Norvik are used. The average container train on Trans-Siberian Railways is made up of 78-80 transport units, so the volume of one container train will be about 320 TEU. Furthermore, it will be necessary to reload containers onto the container transport units, which will carry them over the Atlantic to the USA. It is very hard to imagine a sea carrier that will organise a trans-oceanic route for the sake of 300 TEU, especially when considering the tendency to integrate trans-oceanic liners’ capacities. The largest ships already carry more than 10,000 TEU.
Thus, it will be still necessary to find at least 1,700 TEU-cargoes for an ocean carrier. Today, such volumes are not shipped either through the Port of Murmansk, or through the Ports of Arkhangelsk and Narvik to the USA.
The second variant would be to gather containers from several transit trains from China onto one container transport unit. In 2004, 125,000 containers were sent from Port Eastern to Finland, that is 2-3 fully-loaded trains a day. Let’s say for the sake of argument that all these trains will carry goods to the USA. Then the seven trains required to load one container transport unit will arrive over the course of three to four days. Quite a short time! But here it is necessary to remember the question of whether businesses in the north of China will generate such an adequate goods flow.
American trading company Wal - Mart, which annually receives more than 470,000 containers with cargoes from ATR countries, has expressed interest in the reception of cargoes via N.E.W. The prospect may be promising but it will only remain so if all of the above-mentioned transit problems are solved, if cooperation with the Americans is established, if the battle with carriers is won, and if a cargo base in the north of China is established. Probably because there are so many ‘ifs’ the potential participants in the project, both Chinese, and American, are so far limiting their actions to ‘expressions of interest’.
In Conclusion
Project N.E.W. is one of the arguments being used to push for approval of new investment into the development of railway approaches to the Northern ports of the Russian Federation and the construction of new reloading capacities. They are necessary for Russia. The fact of the matter is that the big port of SPb can no longer cope with increased container flows. Already, a number of Russian operators are considering the Port of Arkhangelsk as a possible alternative to transportation through the big port of SPb. Experience shows that international transport corridor projects can be successful.
By Anna Nezhinskaya
Viewpoint
Boris Lukov,
Adviser to the CCTT President:
– To carry out the “N.E.W.” project, all the interested parties (shipping companies, railways, ports and operators) need to work on the technology of through transportation and a competitive through tariff rate in comparison with the charter tariff rate on freight transportation along the TransPacific and TransAmerican railway route.
To fulfil such a staged and complicated work we should create a transport company with transportation management centres in countries which dispatch and receive cargo; the companies must have a department engaged in the “N.E.W.” project in the ports of Vostochny, Murmansk and Narvik, in the transit railways of Russia, Finland, Sweden, in OAO TransContainer and the secretariat of the CCTT.
It seems reasonable to define a main body to coordinate the work of all the structures participating in realisation of the “N.E.W.” project. The secretariat of the CCTT, in cooperation with the international department of the International Union of Railways, could be such a body, since they have considerable practical experience in coordinating the work of shipping companies, railways, ports, forwarders, and operators participating in providing container transportation along the Transsiberian route.
[~DETAIL_TEXT] => Look at the map!
The northern transport corridor project – the North-East West (N.E.W) was developed under the direction of the International Union of Railways (UIC) from 1997 to 1999 for the transportation of container cargoes from China through Russia, Finland and Norway to the North- East part of the USA, as an alternative to the Trans-Pacific route.
The basic advantage of this project is self-evident if we look at a geographical map. Theoretically, the proposed transport corridor will allow cargo to be transported in a shorter time for two reasons: firstly, the route itself is shorter, and secondly, transportation by rail is faster than by sea. Cargoes will be transported across Russia using Trans- Siberian Railways.
At present these cargoes are transported between China and the North-East of the USA across the Pacific Ocean. Containers sent from Chinese ports normally come to the Port of Long Beach, California, and then are delivered to the North-East part of the USA by rail in transit container trains.
The commercial company ‘N.E.W. Corridor AS’ was created in 2005 in Norway in order to organise and realise a pilot project within the framework of the Project ‘N.E.W’ and to establish this future regular cargo route. The International Union of Railways (UIC) and the Nordland District of Norway became its founders and basic shareholders. The Company’s priority was to implement a series of trial transits within six months.
‘N.E.W. Corridor AS’ and the creators of the project N.E.W set the following conditions for carrying out the trial: the distance of 19,216km between Port East (Russia and the Far East) and the Port of Boston should be completed in 23½ days, with a common tariff rate set at $2,300 for a 20-foot transit container, and $3,000 for a 40-foot transit container.
However, the commercial and technological conditions set by the Company and authors of the project, i.e. the targeted transit time and the common tariff rate, were unachievable. They did not match the current existing realistic economic parameters of the international market in transport services. They appeared unacceptable to potential carriers; the marine transport companies, railways, ports and the operators of the project ‘N.E.W’. It was one of the reasons why the transit trials have not taken place yet. Thus, to date, the merits and demerits of this interesting international transport corridor project have not yet been assessed in practice.
Through Murmansk or Narvik?
As a result, the problems set before ‘N.E.W. Corridor AS’ remain unsolved, and the company has stopped its activity. However the initiators of this project have not lost hope for its eventual realisation.
The following variants of the route are now under consideration:
Freight through the Port of Murmansk: (our Magazine has been informed by UIC that this variant of the project has the best potential).
1. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and the Port of Murmansk to the USA;
2. Ports of China: Shanghai and Ningbo, via the Port of Vostochny and through the Customs points at Buslovskaya /Vainikkala (on the Russian-Finnish border) and Oulu Station /Haparanda (on the Finnish-Swedish border) to the Port of Narvik (Norway), and then on to the USA;
3. The North East of China through the Customs point at Manchzhuria /Zabaikalsk to the Port of Murmansk, and then on to the USA;
4. The North East of China through the Customs points at Manchzhuria /Zabaikalsk, Buslovskaya /Vainikkala; and Oulu Station/ Haparanda to the Port of Narvik, and then on to the USA;
5. The Western Province of Sintsian, People’s Republic of China, through the Customs point at Alashankou /Dostyk (on the Chinese-Kazakhstan border) to the Port of Murmansk and then on to the USA;
6. The Western Province of Sinstian, Peoples Republic of China, through the Customs points at Alashankou /Dostyk, Buslovskaya /Vainikkala and Oulu Station /Haparanda to the Port of Narvik and then on to the USA
‘The project is very complex,’ states Boris Lukov, Adviser to the President of the Trans-Siberian Coordination Council (КСТП). In his opinion, the following conditions will need to be met for the corridor to function successfully: co-ordination of common transportation technologies by all participants in the project ‘NEW’; agreed common tariff rates that are competitive against Trans-Pacific and Trans-American route tariff rates; competitive transit times against the Trans-Pacific and Trans-American routes; assured cargo safety for the whole of the container journey; a guaranteed high level of service; en-route container tracking with information readily available to clients; use of modern Customs technology; and the speeding-up of process times through Custom Control Points.
But will it be possible to provide the above conditions?
How do we get Wal-Mart interested?
To realise this project the organisers will have to face a complex set of problems. Firstly, the development of Russia’s transit potential is held back by a number of complications (our magazine has written about this several times). Fluctuating transit transport tariff rates lead to mistrust from RZD’s international partners, as do insufficient throughput at Russian-Chinese border points, and the haphazard approach of the Russian Customs Service. The last two circumstances can easily reduce the main advantage of the NEW route, (that is speed of delivery) to nothing. Market participants report that the passage of a container through a Customs border point can take up to 10 days.
For this reason, and also because of the lower costs of sea deliveries, the majority of carriers prefer to use shipping companies.
Russian authorities are now making efforts to deal with these problems - the unified rate has been lowered; a programme of border point modernisation is under consideration and railway lines are being repaired. Time will show how effective these measures will be.
For the NEW route to be successful, not only will the Trans-Siberian Railway network need to be problem free, but it will also be necessary to meet a number of other conditions. Mr. Lukov explains that, firstly, cargo bases will need to be created close to the North-East China border to facilitate the flow of goods through border points; otherwise the cumulative costs of transportation will remain uncompetitive because rail transportation rates in the People’s Republic of China are too high.
Secondly it will be necessary to provide container transport-loading units in Northern ports, irrespective of whether Murmansk, Arkhangelsk or Norvik are used. The average container train on Trans-Siberian Railways is made up of 78-80 transport units, so the volume of one container train will be about 320 TEU. Furthermore, it will be necessary to reload containers onto the container transport units, which will carry them over the Atlantic to the USA. It is very hard to imagine a sea carrier that will organise a trans-oceanic route for the sake of 300 TEU, especially when considering the tendency to integrate trans-oceanic liners’ capacities. The largest ships already carry more than 10,000 TEU.
Thus, it will be still necessary to find at least 1,700 TEU-cargoes for an ocean carrier. Today, such volumes are not shipped either through the Port of Murmansk, or through the Ports of Arkhangelsk and Narvik to the USA.
The second variant would be to gather containers from several transit trains from China onto one container transport unit. In 2004, 125,000 containers were sent from Port Eastern to Finland, that is 2-3 fully-loaded trains a day. Let’s say for the sake of argument that all these trains will carry goods to the USA. Then the seven trains required to load one container transport unit will arrive over the course of three to four days. Quite a short time! But here it is necessary to remember the question of whether businesses in the north of China will generate such an adequate goods flow.
American trading company Wal - Mart, which annually receives more than 470,000 containers with cargoes from ATR countries, has expressed interest in the reception of cargoes via N.E.W. The prospect may be promising but it will only remain so if all of the above-mentioned transit problems are solved, if cooperation with the Americans is established, if the battle with carriers is won, and if a cargo base in the north of China is established. Probably because there are so many ‘ifs’ the potential participants in the project, both Chinese, and American, are so far limiting their actions to ‘expressions of interest’.
In Conclusion
Project N.E.W. is one of the arguments being used to push for approval of new investment into the development of railway approaches to the Northern ports of the Russian Federation and the construction of new reloading capacities. They are necessary for Russia. The fact of the matter is that the big port of SPb can no longer cope with increased container flows. Already, a number of Russian operators are considering the Port of Arkhangelsk as a possible alternative to transportation through the big port of SPb. Experience shows that international transport corridor projects can be successful.
By Anna Nezhinskaya
Viewpoint
Boris Lukov,
Adviser to the CCTT President:
– To carry out the “N.E.W.” project, all the interested parties (shipping companies, railways, ports and operators) need to work on the technology of through transportation and a competitive through tariff rate in comparison with the charter tariff rate on freight transportation along the TransPacific and TransAmerican railway route.
To fulfil such a staged and complicated work we should create a transport company with transportation management centres in countries which dispatch and receive cargo; the companies must have a department engaged in the “N.E.W.” project in the ports of Vostochny, Murmansk and Narvik, in the transit railways of Russia, Finland, Sweden, in OAO TransContainer and the secretariat of the CCTT.
It seems reasonable to define a main body to coordinate the work of all the structures participating in realisation of the “N.E.W.” project. The secretariat of the CCTT, in cooperation with the international department of the International Union of Railways, could be such a body, since they have considerable practical experience in coordinating the work of shipping companies, railways, ports, forwarders, and operators participating in providing container transportation along the Transsiberian route.
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Valery Veremeyev, Head of Corporate Building and Reform Department of OAO RZD, speaks about the problems and progress of Russian railway reform.Array
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[DETAIL_TEXT] => Start: Some Problems Occurred
– Mr Veremeyev, what are the main results of the two stages of the structural reform of the Russian railway sector?
– I took part in the work of the headquarters reforming the Russian Ministry of Railways, so I saw how much was done in the shortest possible time. We did it understanding the necessity for change and the prospects.
Thus, preliminary works were held in the first stage, and the functions of state regulation and economic activity in railway transport were separated off. As a result, on October 1, 2003, OAO RZD was launched.
In the second stage of the reform, the process of separating segments of the railway services market and adjacent sectors started. After Tariff Regulation №10-01 was adopted, a new impulse was given to the process of private freight wagon park enlargement.
An important result of the stage was the launch of daughter companies of OAO RZD – TransContainer, Refservice, Russkaya Troyka, Elteza, Remputmash, Roszheldorstroy, and Roszheldorproject, and the first suburban passenger companies.
The system of OAO RZD’s activities management also changed significantly. The attention to business issues – such as strategy, investment policy, corporate management, management accounts, budgeting, real estate management, etc. – increased. Such things are rarely mentioned in official reports, and it is hard to evaluate them, but they had a colossal effect and became an important result of the reform.
– What problems have been revealed during the reform, and which of them have not been solved yet?
– I will comment on several areas of actual issues.
The first one is the property. When the capital of OAO RZD was formed, a simplified order was implemented and the property was given to the company together with production and technological complexes. To conclude any contract – on long-term rent, for example, or transfer of the authorised capital to a daughter company, or a sale – the object in question has to be separated from that complex. Disestablishment of complexes is hard and expensive work, so the company will hold it for several years more.
According to legislation, about 75% of the company’s assets may not be sold – such deals are either impossible or are to be approved by the RF Government. As a result, attraction of investment to the sector and asset renewal become more difficult.
In the second block, there are issues of market liberalisation and competition development. Even in the first stages of the reform it became clear that the attempt to create equal conditions for competition in separate market segments was a failure. The formed normative base and the system of state regulation allowed the park of private rolling stock to enlarge. But the competition between OAO RZD as a wagons owner and other operators was not a success. In fact, the market became separated: the wagons of private companies worked on efficient routes where the wagon constituent of the tariff makes transportation profitable, while the OAO RZD provided the rest of the transportation.
Another actual problem that has not been solved so far is deregulation of tariffs on cargo transportation in the sectors where there is competition, especially with other transport modes.
The third block of issues is the system of orders and full compensation for socially important transportation. Long-distance passenger transportation is being made more profitable at the expense of the federal budget, stage-by-stage, but still it started later than was envisaged by the Programme of the Structural Reform. That is why the launch of the Federal Passenger Company has been postponed for three years.
The tariffs on suburban transportation are below the economically viable level, which is why another urgent issue is formation of a legislative base and a system for compensation of a company’s losses to be recouped from the federal and regional budgets. Today, the lack of such mechanisms and a system of contracts between railways and state orders seriously limits the possibility of creating suburban companies on the railway network.
Also, legislative base is to be formed to subsidise students and pupils’ transport (by 50%) from the budget. At the moment, the benefit is given at the company’s expense.
The fourth block of issues is revision and improvement of the normative and legislative base.
– Is foreign experience being used to organise the reform of Russian railways?
– The role of the railway transport in the economy, the topology of the railway network, competitive environment and other historical factors are, to some degree, different in all countries which held reforms.
The specific character of Russian railways is the vast scale of activities, high share of railways in the total transportation volume, network-wide character of transportation and tariffs, significant degree of state tariff regulation and high integration of infrastructure and transportation. All these factors stop us copying the reform model used in other countries. However, we constantly analyse the experience accumulated by other states. Some efficient solutions may be applied in Russia. For example, the launch of passenger suburban transportation in European states and concession mechanisms used for development and construction of new infrastructure.
Authority and OAO RZD: Making a Dialogue
– What measures have been taken so far in the third stage of the reform? What are the most important targets to be reached this year?
– To determine the direction of the structural reform to 2010, the Governmental Committee for Industry, Technologies and Transport Development approved a target model for the railway transport services market in the third stage of the reform. It was done on May 16, 2007. The model defines the structure of the market by the end of the third stage, its main participants, the basis for their cooperation and regulation principles. In accordance with the document, OAO The First Cargo Company was launched. Its activity will stimulate competition between cargo wagons owners and attract investment into the sector.
The park of private freight wagons continues to grow. In March 2008, the number of these wagons exceeded 363,000 units, excluding the ones owned by The First Cargo Company.
Corporate construction is being held actively and an efficient holding structure is being formed by launching daughter companies. The Board of Directors of OAO RZD made decisions on launching subsidiaries in the sector of passenger wagons capital repair, sleeper production, crushed stone, points, and scientific and research activities. Suburban passenger companies are being created. OAO Railway Trade Company has been launched. It specialises in commerce and catering.
Since the realisation of the programme of structural reform started, 47 daughter companies and subsidiaries of OAO RZD have been launched. In February, it was decided to create five more joint-stock companies. This year we are to develop a pack of documents, on the basis of which the Board of Directors will make decision on launching several more daughter companies of OAO RZD.
Attraction of private capital is very important for the sector’s development. Now the Russian Government examines the question of selling the property of 22 wagon repair depots in a tender.
Also, the company is to take an active part in developing a new concept to reform long-distance passenger transportation complexes and launch the Federal Passenger Company.
– Are daughter companies of OAO RZD as efficient as was expected? What are their future plans?
– The efficiency of daughter companies’ activities grows constantly. They are increasing in turnover, the volume of net assets and the profitability of their capital.
In 2007, the revenue of daughter companies of OAO RZD amounted to RUR 156 billion, which is equal to 16% of the revenue from the basic activity of OAO RZD. Last year, the joint assets of daughter companies exceeded RUR 300 billion, and their net profit grew by 80% to more than RUR 7.5 billion. OAO RZD expects it will get over RUR 500 million in dividends from its daughter companies in 2007. These figures prove the scale of the organisational changes and the significance of daughter companies’ work. The main targets are to improve the dynamics of the companies’ development and to provide maximum profit from selling the shareholdings of daughter companies. This process has already started: in January 2008, a 15% shareholding of OAO TransContainer was sold in preparation for an IPO. At the end of 2007, the Board of Directors of OAO RZD approved selling shares of nine more daughter companies in advance. It is planned to get RUR 23.2 billion from selling shares of daughter companies in 2008, and RUR 143.4 billion by the end of 2010. This money will be spent on financing investment programmes.
Naturally, there are some problems in the sector. The “creation” stage is rather difficult for many daughter companies. There are some gaps in corporate management and regulation of the companies’ activities.
– When will passenger suburban transportation sector become profitable, in your opinion?
– According to the most optimistic forecasts, this sector may become profitable not earlier than 2012. Once this is achieved, it will be possible to speak about a flow of scaled private investments into the sector, more active renewal of technologies and providing passengers with high-quality services.
The Government of Russia made very important decisions for Russian railways. They envisage compensation for the revenue shortfall of carriers providing long-distance passenger transportation. Starting from 2007, means to compensate for the profits shortfall were included in the federal budget. Last year the sum was RUR 10.9 billion, in 2008 it is RUR 16.4 billion, and in 2009 it is RUR 22.6 billion. Guidelines for Long-Distance Passenger Transportation and Railway Station Activities were created in the framework of OAO RZD. And they function efficiently.
Thus, the measures preparing separation of the business into an independent structure – the Federal Passenger Company – have been completed already. After analysing passenger flows, the Government will launch the Federal Passenger Company in 2008 in accordance with the target market model. The key problem of the suburban passenger transportation reform is the lack of a legal mechanism for organising socially important transportation so that a carrier suffers no losses. So, a legislative basis is to be formed, a new Tariff Regulation of passenger transportation is to be adopted in 2008, necessary funds are to be found in the federal and regional budgets and all the elements of the system of state order on social transportation are to be worked through.
– Do structural changes influence the attractiveness of the transport sector for private investors?
– Due to structural changes in railway transport, the sector is becoming more open to private investment. According to various estimates, private companies have invested over RUR 120 billion to purchase freight wagons since the reform started. Besides, the share of transportation by private wagons has grown to 37%.
The fast increase of the scale of operators’ activities is going along with the dynamic formation of the freight wagon repair market. Several years ago the share of private repair capacities was less than 1%, two years ago it was not more than 2.5% but by the beginning of 2008 it exceeded 7%. Today, 21 private companies operate in the market of cargo wagon repair, and new projects for constructing private depots are appearing.
The reform allowed activation of unused or insufficiently explored property and land owned by the railway to use it for commerce.
In the second half of 2007, objects under construction in the Ulak-Elga sector in Yakutia and OAO RZD’s shareholding in OAO Elgaugol were sold for RUR 14.2 billion. As a result, the development of the large coal field speeded up.
– What is OAO RZD doing to coordinate the efforts of business and authorities to reform the railway sector?
– A dialogue on the key issues of the reform is going on at the inter-departmental commission for realising structural reform of the railway transport system. There is also a commission of the President of OAO RZD for reform issues. Representatives of the authorities often come to its meetings. Our department regularly puts the issues of reform on the agenda of conferences and roundtable discussion, organised by the company. In this way, all the significant decisions are examined and discussed thoroughly.
Interviewed by Elena Ushkova
biography
Valery Veremeyev
Born in 1976. In 1998, graduated from the Moscow State University of Railways as an engineer-economist specialising in “Economic informatics and automated management systems”. He got a degree of Candidate of economic sciences. In 2004, graduated from the RF President’s Russian Academy of State Service, specialising in “State and municipal administration”.
In 2001-2002, he was a leading specialist in the foreign investments section of the Investment Policy Department at the RF Ministry of Economic Development and Trade.
In 2002-2003, he was Deputy Head of the General Section of Forecast and Economic Analysis, the Economy Department, Russian Ministry of Railways. In 2003, he headed the Capital Investments and Capital Repair Analysis Department for the Russian Ministry of Railways. In 2003-2005, he worked as Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. In 2005-2006, he became the First Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. Since July 2006, has been the Head of the Corporate Construction and Reform Department, OAO RZD.
[~DETAIL_TEXT] => Start: Some Problems Occurred
– Mr Veremeyev, what are the main results of the two stages of the structural reform of the Russian railway sector?
– I took part in the work of the headquarters reforming the Russian Ministry of Railways, so I saw how much was done in the shortest possible time. We did it understanding the necessity for change and the prospects.
Thus, preliminary works were held in the first stage, and the functions of state regulation and economic activity in railway transport were separated off. As a result, on October 1, 2003, OAO RZD was launched.
In the second stage of the reform, the process of separating segments of the railway services market and adjacent sectors started. After Tariff Regulation №10-01 was adopted, a new impulse was given to the process of private freight wagon park enlargement.
An important result of the stage was the launch of daughter companies of OAO RZD – TransContainer, Refservice, Russkaya Troyka, Elteza, Remputmash, Roszheldorstroy, and Roszheldorproject, and the first suburban passenger companies.
The system of OAO RZD’s activities management also changed significantly. The attention to business issues – such as strategy, investment policy, corporate management, management accounts, budgeting, real estate management, etc. – increased. Such things are rarely mentioned in official reports, and it is hard to evaluate them, but they had a colossal effect and became an important result of the reform.
– What problems have been revealed during the reform, and which of them have not been solved yet?
– I will comment on several areas of actual issues.
The first one is the property. When the capital of OAO RZD was formed, a simplified order was implemented and the property was given to the company together with production and technological complexes. To conclude any contract – on long-term rent, for example, or transfer of the authorised capital to a daughter company, or a sale – the object in question has to be separated from that complex. Disestablishment of complexes is hard and expensive work, so the company will hold it for several years more.
According to legislation, about 75% of the company’s assets may not be sold – such deals are either impossible or are to be approved by the RF Government. As a result, attraction of investment to the sector and asset renewal become more difficult.
In the second block, there are issues of market liberalisation and competition development. Even in the first stages of the reform it became clear that the attempt to create equal conditions for competition in separate market segments was a failure. The formed normative base and the system of state regulation allowed the park of private rolling stock to enlarge. But the competition between OAO RZD as a wagons owner and other operators was not a success. In fact, the market became separated: the wagons of private companies worked on efficient routes where the wagon constituent of the tariff makes transportation profitable, while the OAO RZD provided the rest of the transportation.
Another actual problem that has not been solved so far is deregulation of tariffs on cargo transportation in the sectors where there is competition, especially with other transport modes.
The third block of issues is the system of orders and full compensation for socially important transportation. Long-distance passenger transportation is being made more profitable at the expense of the federal budget, stage-by-stage, but still it started later than was envisaged by the Programme of the Structural Reform. That is why the launch of the Federal Passenger Company has been postponed for three years.
The tariffs on suburban transportation are below the economically viable level, which is why another urgent issue is formation of a legislative base and a system for compensation of a company’s losses to be recouped from the federal and regional budgets. Today, the lack of such mechanisms and a system of contracts between railways and state orders seriously limits the possibility of creating suburban companies on the railway network.
Also, legislative base is to be formed to subsidise students and pupils’ transport (by 50%) from the budget. At the moment, the benefit is given at the company’s expense.
The fourth block of issues is revision and improvement of the normative and legislative base.
– Is foreign experience being used to organise the reform of Russian railways?
– The role of the railway transport in the economy, the topology of the railway network, competitive environment and other historical factors are, to some degree, different in all countries which held reforms.
The specific character of Russian railways is the vast scale of activities, high share of railways in the total transportation volume, network-wide character of transportation and tariffs, significant degree of state tariff regulation and high integration of infrastructure and transportation. All these factors stop us copying the reform model used in other countries. However, we constantly analyse the experience accumulated by other states. Some efficient solutions may be applied in Russia. For example, the launch of passenger suburban transportation in European states and concession mechanisms used for development and construction of new infrastructure.
Authority and OAO RZD: Making a Dialogue
– What measures have been taken so far in the third stage of the reform? What are the most important targets to be reached this year?
– To determine the direction of the structural reform to 2010, the Governmental Committee for Industry, Technologies and Transport Development approved a target model for the railway transport services market in the third stage of the reform. It was done on May 16, 2007. The model defines the structure of the market by the end of the third stage, its main participants, the basis for their cooperation and regulation principles. In accordance with the document, OAO The First Cargo Company was launched. Its activity will stimulate competition between cargo wagons owners and attract investment into the sector.
The park of private freight wagons continues to grow. In March 2008, the number of these wagons exceeded 363,000 units, excluding the ones owned by The First Cargo Company.
Corporate construction is being held actively and an efficient holding structure is being formed by launching daughter companies. The Board of Directors of OAO RZD made decisions on launching subsidiaries in the sector of passenger wagons capital repair, sleeper production, crushed stone, points, and scientific and research activities. Suburban passenger companies are being created. OAO Railway Trade Company has been launched. It specialises in commerce and catering.
Since the realisation of the programme of structural reform started, 47 daughter companies and subsidiaries of OAO RZD have been launched. In February, it was decided to create five more joint-stock companies. This year we are to develop a pack of documents, on the basis of which the Board of Directors will make decision on launching several more daughter companies of OAO RZD.
Attraction of private capital is very important for the sector’s development. Now the Russian Government examines the question of selling the property of 22 wagon repair depots in a tender.
Also, the company is to take an active part in developing a new concept to reform long-distance passenger transportation complexes and launch the Federal Passenger Company.
– Are daughter companies of OAO RZD as efficient as was expected? What are their future plans?
– The efficiency of daughter companies’ activities grows constantly. They are increasing in turnover, the volume of net assets and the profitability of their capital.
In 2007, the revenue of daughter companies of OAO RZD amounted to RUR 156 billion, which is equal to 16% of the revenue from the basic activity of OAO RZD. Last year, the joint assets of daughter companies exceeded RUR 300 billion, and their net profit grew by 80% to more than RUR 7.5 billion. OAO RZD expects it will get over RUR 500 million in dividends from its daughter companies in 2007. These figures prove the scale of the organisational changes and the significance of daughter companies’ work. The main targets are to improve the dynamics of the companies’ development and to provide maximum profit from selling the shareholdings of daughter companies. This process has already started: in January 2008, a 15% shareholding of OAO TransContainer was sold in preparation for an IPO. At the end of 2007, the Board of Directors of OAO RZD approved selling shares of nine more daughter companies in advance. It is planned to get RUR 23.2 billion from selling shares of daughter companies in 2008, and RUR 143.4 billion by the end of 2010. This money will be spent on financing investment programmes.
Naturally, there are some problems in the sector. The “creation” stage is rather difficult for many daughter companies. There are some gaps in corporate management and regulation of the companies’ activities.
– When will passenger suburban transportation sector become profitable, in your opinion?
– According to the most optimistic forecasts, this sector may become profitable not earlier than 2012. Once this is achieved, it will be possible to speak about a flow of scaled private investments into the sector, more active renewal of technologies and providing passengers with high-quality services.
The Government of Russia made very important decisions for Russian railways. They envisage compensation for the revenue shortfall of carriers providing long-distance passenger transportation. Starting from 2007, means to compensate for the profits shortfall were included in the federal budget. Last year the sum was RUR 10.9 billion, in 2008 it is RUR 16.4 billion, and in 2009 it is RUR 22.6 billion. Guidelines for Long-Distance Passenger Transportation and Railway Station Activities were created in the framework of OAO RZD. And they function efficiently.
Thus, the measures preparing separation of the business into an independent structure – the Federal Passenger Company – have been completed already. After analysing passenger flows, the Government will launch the Federal Passenger Company in 2008 in accordance with the target market model. The key problem of the suburban passenger transportation reform is the lack of a legal mechanism for organising socially important transportation so that a carrier suffers no losses. So, a legislative basis is to be formed, a new Tariff Regulation of passenger transportation is to be adopted in 2008, necessary funds are to be found in the federal and regional budgets and all the elements of the system of state order on social transportation are to be worked through.
– Do structural changes influence the attractiveness of the transport sector for private investors?
– Due to structural changes in railway transport, the sector is becoming more open to private investment. According to various estimates, private companies have invested over RUR 120 billion to purchase freight wagons since the reform started. Besides, the share of transportation by private wagons has grown to 37%.
The fast increase of the scale of operators’ activities is going along with the dynamic formation of the freight wagon repair market. Several years ago the share of private repair capacities was less than 1%, two years ago it was not more than 2.5% but by the beginning of 2008 it exceeded 7%. Today, 21 private companies operate in the market of cargo wagon repair, and new projects for constructing private depots are appearing.
The reform allowed activation of unused or insufficiently explored property and land owned by the railway to use it for commerce.
In the second half of 2007, objects under construction in the Ulak-Elga sector in Yakutia and OAO RZD’s shareholding in OAO Elgaugol were sold for RUR 14.2 billion. As a result, the development of the large coal field speeded up.
– What is OAO RZD doing to coordinate the efforts of business and authorities to reform the railway sector?
– A dialogue on the key issues of the reform is going on at the inter-departmental commission for realising structural reform of the railway transport system. There is also a commission of the President of OAO RZD for reform issues. Representatives of the authorities often come to its meetings. Our department regularly puts the issues of reform on the agenda of conferences and roundtable discussion, organised by the company. In this way, all the significant decisions are examined and discussed thoroughly.
Interviewed by Elena Ushkova
biography
Valery Veremeyev
Born in 1976. In 1998, graduated from the Moscow State University of Railways as an engineer-economist specialising in “Economic informatics and automated management systems”. He got a degree of Candidate of economic sciences. In 2004, graduated from the RF President’s Russian Academy of State Service, specialising in “State and municipal administration”.
In 2001-2002, he was a leading specialist in the foreign investments section of the Investment Policy Department at the RF Ministry of Economic Development and Trade.
In 2002-2003, he was Deputy Head of the General Section of Forecast and Economic Analysis, the Economy Department, Russian Ministry of Railways. In 2003, he headed the Capital Investments and Capital Repair Analysis Department for the Russian Ministry of Railways. In 2003-2005, he worked as Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. In 2005-2006, he became the First Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. Since July 2006, has been the Head of the Corporate Construction and Reform Department, OAO RZD.
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[DETAIL_TEXT] => Start: Some Problems Occurred
– Mr Veremeyev, what are the main results of the two stages of the structural reform of the Russian railway sector?
– I took part in the work of the headquarters reforming the Russian Ministry of Railways, so I saw how much was done in the shortest possible time. We did it understanding the necessity for change and the prospects.
Thus, preliminary works were held in the first stage, and the functions of state regulation and economic activity in railway transport were separated off. As a result, on October 1, 2003, OAO RZD was launched.
In the second stage of the reform, the process of separating segments of the railway services market and adjacent sectors started. After Tariff Regulation №10-01 was adopted, a new impulse was given to the process of private freight wagon park enlargement.
An important result of the stage was the launch of daughter companies of OAO RZD – TransContainer, Refservice, Russkaya Troyka, Elteza, Remputmash, Roszheldorstroy, and Roszheldorproject, and the first suburban passenger companies.
The system of OAO RZD’s activities management also changed significantly. The attention to business issues – such as strategy, investment policy, corporate management, management accounts, budgeting, real estate management, etc. – increased. Such things are rarely mentioned in official reports, and it is hard to evaluate them, but they had a colossal effect and became an important result of the reform.
– What problems have been revealed during the reform, and which of them have not been solved yet?
– I will comment on several areas of actual issues.
The first one is the property. When the capital of OAO RZD was formed, a simplified order was implemented and the property was given to the company together with production and technological complexes. To conclude any contract – on long-term rent, for example, or transfer of the authorised capital to a daughter company, or a sale – the object in question has to be separated from that complex. Disestablishment of complexes is hard and expensive work, so the company will hold it for several years more.
According to legislation, about 75% of the company’s assets may not be sold – such deals are either impossible or are to be approved by the RF Government. As a result, attraction of investment to the sector and asset renewal become more difficult.
In the second block, there are issues of market liberalisation and competition development. Even in the first stages of the reform it became clear that the attempt to create equal conditions for competition in separate market segments was a failure. The formed normative base and the system of state regulation allowed the park of private rolling stock to enlarge. But the competition between OAO RZD as a wagons owner and other operators was not a success. In fact, the market became separated: the wagons of private companies worked on efficient routes where the wagon constituent of the tariff makes transportation profitable, while the OAO RZD provided the rest of the transportation.
Another actual problem that has not been solved so far is deregulation of tariffs on cargo transportation in the sectors where there is competition, especially with other transport modes.
The third block of issues is the system of orders and full compensation for socially important transportation. Long-distance passenger transportation is being made more profitable at the expense of the federal budget, stage-by-stage, but still it started later than was envisaged by the Programme of the Structural Reform. That is why the launch of the Federal Passenger Company has been postponed for three years.
The tariffs on suburban transportation are below the economically viable level, which is why another urgent issue is formation of a legislative base and a system for compensation of a company’s losses to be recouped from the federal and regional budgets. Today, the lack of such mechanisms and a system of contracts between railways and state orders seriously limits the possibility of creating suburban companies on the railway network.
Also, legislative base is to be formed to subsidise students and pupils’ transport (by 50%) from the budget. At the moment, the benefit is given at the company’s expense.
The fourth block of issues is revision and improvement of the normative and legislative base.
– Is foreign experience being used to organise the reform of Russian railways?
– The role of the railway transport in the economy, the topology of the railway network, competitive environment and other historical factors are, to some degree, different in all countries which held reforms.
The specific character of Russian railways is the vast scale of activities, high share of railways in the total transportation volume, network-wide character of transportation and tariffs, significant degree of state tariff regulation and high integration of infrastructure and transportation. All these factors stop us copying the reform model used in other countries. However, we constantly analyse the experience accumulated by other states. Some efficient solutions may be applied in Russia. For example, the launch of passenger suburban transportation in European states and concession mechanisms used for development and construction of new infrastructure.
Authority and OAO RZD: Making a Dialogue
– What measures have been taken so far in the third stage of the reform? What are the most important targets to be reached this year?
– To determine the direction of the structural reform to 2010, the Governmental Committee for Industry, Technologies and Transport Development approved a target model for the railway transport services market in the third stage of the reform. It was done on May 16, 2007. The model defines the structure of the market by the end of the third stage, its main participants, the basis for their cooperation and regulation principles. In accordance with the document, OAO The First Cargo Company was launched. Its activity will stimulate competition between cargo wagons owners and attract investment into the sector.
The park of private freight wagons continues to grow. In March 2008, the number of these wagons exceeded 363,000 units, excluding the ones owned by The First Cargo Company.
Corporate construction is being held actively and an efficient holding structure is being formed by launching daughter companies. The Board of Directors of OAO RZD made decisions on launching subsidiaries in the sector of passenger wagons capital repair, sleeper production, crushed stone, points, and scientific and research activities. Suburban passenger companies are being created. OAO Railway Trade Company has been launched. It specialises in commerce and catering.
Since the realisation of the programme of structural reform started, 47 daughter companies and subsidiaries of OAO RZD have been launched. In February, it was decided to create five more joint-stock companies. This year we are to develop a pack of documents, on the basis of which the Board of Directors will make decision on launching several more daughter companies of OAO RZD.
Attraction of private capital is very important for the sector’s development. Now the Russian Government examines the question of selling the property of 22 wagon repair depots in a tender.
Also, the company is to take an active part in developing a new concept to reform long-distance passenger transportation complexes and launch the Federal Passenger Company.
– Are daughter companies of OAO RZD as efficient as was expected? What are their future plans?
– The efficiency of daughter companies’ activities grows constantly. They are increasing in turnover, the volume of net assets and the profitability of their capital.
In 2007, the revenue of daughter companies of OAO RZD amounted to RUR 156 billion, which is equal to 16% of the revenue from the basic activity of OAO RZD. Last year, the joint assets of daughter companies exceeded RUR 300 billion, and their net profit grew by 80% to more than RUR 7.5 billion. OAO RZD expects it will get over RUR 500 million in dividends from its daughter companies in 2007. These figures prove the scale of the organisational changes and the significance of daughter companies’ work. The main targets are to improve the dynamics of the companies’ development and to provide maximum profit from selling the shareholdings of daughter companies. This process has already started: in January 2008, a 15% shareholding of OAO TransContainer was sold in preparation for an IPO. At the end of 2007, the Board of Directors of OAO RZD approved selling shares of nine more daughter companies in advance. It is planned to get RUR 23.2 billion from selling shares of daughter companies in 2008, and RUR 143.4 billion by the end of 2010. This money will be spent on financing investment programmes.
Naturally, there are some problems in the sector. The “creation” stage is rather difficult for many daughter companies. There are some gaps in corporate management and regulation of the companies’ activities.
– When will passenger suburban transportation sector become profitable, in your opinion?
– According to the most optimistic forecasts, this sector may become profitable not earlier than 2012. Once this is achieved, it will be possible to speak about a flow of scaled private investments into the sector, more active renewal of technologies and providing passengers with high-quality services.
The Government of Russia made very important decisions for Russian railways. They envisage compensation for the revenue shortfall of carriers providing long-distance passenger transportation. Starting from 2007, means to compensate for the profits shortfall were included in the federal budget. Last year the sum was RUR 10.9 billion, in 2008 it is RUR 16.4 billion, and in 2009 it is RUR 22.6 billion. Guidelines for Long-Distance Passenger Transportation and Railway Station Activities were created in the framework of OAO RZD. And they function efficiently.
Thus, the measures preparing separation of the business into an independent structure – the Federal Passenger Company – have been completed already. After analysing passenger flows, the Government will launch the Federal Passenger Company in 2008 in accordance with the target market model. The key problem of the suburban passenger transportation reform is the lack of a legal mechanism for organising socially important transportation so that a carrier suffers no losses. So, a legislative basis is to be formed, a new Tariff Regulation of passenger transportation is to be adopted in 2008, necessary funds are to be found in the federal and regional budgets and all the elements of the system of state order on social transportation are to be worked through.
– Do structural changes influence the attractiveness of the transport sector for private investors?
– Due to structural changes in railway transport, the sector is becoming more open to private investment. According to various estimates, private companies have invested over RUR 120 billion to purchase freight wagons since the reform started. Besides, the share of transportation by private wagons has grown to 37%.
The fast increase of the scale of operators’ activities is going along with the dynamic formation of the freight wagon repair market. Several years ago the share of private repair capacities was less than 1%, two years ago it was not more than 2.5% but by the beginning of 2008 it exceeded 7%. Today, 21 private companies operate in the market of cargo wagon repair, and new projects for constructing private depots are appearing.
The reform allowed activation of unused or insufficiently explored property and land owned by the railway to use it for commerce.
In the second half of 2007, objects under construction in the Ulak-Elga sector in Yakutia and OAO RZD’s shareholding in OAO Elgaugol were sold for RUR 14.2 billion. As a result, the development of the large coal field speeded up.
– What is OAO RZD doing to coordinate the efforts of business and authorities to reform the railway sector?
– A dialogue on the key issues of the reform is going on at the inter-departmental commission for realising structural reform of the railway transport system. There is also a commission of the President of OAO RZD for reform issues. Representatives of the authorities often come to its meetings. Our department regularly puts the issues of reform on the agenda of conferences and roundtable discussion, organised by the company. In this way, all the significant decisions are examined and discussed thoroughly.
Interviewed by Elena Ushkova
biography
Valery Veremeyev
Born in 1976. In 1998, graduated from the Moscow State University of Railways as an engineer-economist specialising in “Economic informatics and automated management systems”. He got a degree of Candidate of economic sciences. In 2004, graduated from the RF President’s Russian Academy of State Service, specialising in “State and municipal administration”.
In 2001-2002, he was a leading specialist in the foreign investments section of the Investment Policy Department at the RF Ministry of Economic Development and Trade.
In 2002-2003, he was Deputy Head of the General Section of Forecast and Economic Analysis, the Economy Department, Russian Ministry of Railways. In 2003, he headed the Capital Investments and Capital Repair Analysis Department for the Russian Ministry of Railways. In 2003-2005, he worked as Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. In 2005-2006, he became the First Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. Since July 2006, has been the Head of the Corporate Construction and Reform Department, OAO RZD.
[~DETAIL_TEXT] => Start: Some Problems Occurred
– Mr Veremeyev, what are the main results of the two stages of the structural reform of the Russian railway sector?
– I took part in the work of the headquarters reforming the Russian Ministry of Railways, so I saw how much was done in the shortest possible time. We did it understanding the necessity for change and the prospects.
Thus, preliminary works were held in the first stage, and the functions of state regulation and economic activity in railway transport were separated off. As a result, on October 1, 2003, OAO RZD was launched.
In the second stage of the reform, the process of separating segments of the railway services market and adjacent sectors started. After Tariff Regulation №10-01 was adopted, a new impulse was given to the process of private freight wagon park enlargement.
An important result of the stage was the launch of daughter companies of OAO RZD – TransContainer, Refservice, Russkaya Troyka, Elteza, Remputmash, Roszheldorstroy, and Roszheldorproject, and the first suburban passenger companies.
The system of OAO RZD’s activities management also changed significantly. The attention to business issues – such as strategy, investment policy, corporate management, management accounts, budgeting, real estate management, etc. – increased. Such things are rarely mentioned in official reports, and it is hard to evaluate them, but they had a colossal effect and became an important result of the reform.
– What problems have been revealed during the reform, and which of them have not been solved yet?
– I will comment on several areas of actual issues.
The first one is the property. When the capital of OAO RZD was formed, a simplified order was implemented and the property was given to the company together with production and technological complexes. To conclude any contract – on long-term rent, for example, or transfer of the authorised capital to a daughter company, or a sale – the object in question has to be separated from that complex. Disestablishment of complexes is hard and expensive work, so the company will hold it for several years more.
According to legislation, about 75% of the company’s assets may not be sold – such deals are either impossible or are to be approved by the RF Government. As a result, attraction of investment to the sector and asset renewal become more difficult.
In the second block, there are issues of market liberalisation and competition development. Even in the first stages of the reform it became clear that the attempt to create equal conditions for competition in separate market segments was a failure. The formed normative base and the system of state regulation allowed the park of private rolling stock to enlarge. But the competition between OAO RZD as a wagons owner and other operators was not a success. In fact, the market became separated: the wagons of private companies worked on efficient routes where the wagon constituent of the tariff makes transportation profitable, while the OAO RZD provided the rest of the transportation.
Another actual problem that has not been solved so far is deregulation of tariffs on cargo transportation in the sectors where there is competition, especially with other transport modes.
The third block of issues is the system of orders and full compensation for socially important transportation. Long-distance passenger transportation is being made more profitable at the expense of the federal budget, stage-by-stage, but still it started later than was envisaged by the Programme of the Structural Reform. That is why the launch of the Federal Passenger Company has been postponed for three years.
The tariffs on suburban transportation are below the economically viable level, which is why another urgent issue is formation of a legislative base and a system for compensation of a company’s losses to be recouped from the federal and regional budgets. Today, the lack of such mechanisms and a system of contracts between railways and state orders seriously limits the possibility of creating suburban companies on the railway network.
Also, legislative base is to be formed to subsidise students and pupils’ transport (by 50%) from the budget. At the moment, the benefit is given at the company’s expense.
The fourth block of issues is revision and improvement of the normative and legislative base.
– Is foreign experience being used to organise the reform of Russian railways?
– The role of the railway transport in the economy, the topology of the railway network, competitive environment and other historical factors are, to some degree, different in all countries which held reforms.
The specific character of Russian railways is the vast scale of activities, high share of railways in the total transportation volume, network-wide character of transportation and tariffs, significant degree of state tariff regulation and high integration of infrastructure and transportation. All these factors stop us copying the reform model used in other countries. However, we constantly analyse the experience accumulated by other states. Some efficient solutions may be applied in Russia. For example, the launch of passenger suburban transportation in European states and concession mechanisms used for development and construction of new infrastructure.
Authority and OAO RZD: Making a Dialogue
– What measures have been taken so far in the third stage of the reform? What are the most important targets to be reached this year?
– To determine the direction of the structural reform to 2010, the Governmental Committee for Industry, Technologies and Transport Development approved a target model for the railway transport services market in the third stage of the reform. It was done on May 16, 2007. The model defines the structure of the market by the end of the third stage, its main participants, the basis for their cooperation and regulation principles. In accordance with the document, OAO The First Cargo Company was launched. Its activity will stimulate competition between cargo wagons owners and attract investment into the sector.
The park of private freight wagons continues to grow. In March 2008, the number of these wagons exceeded 363,000 units, excluding the ones owned by The First Cargo Company.
Corporate construction is being held actively and an efficient holding structure is being formed by launching daughter companies. The Board of Directors of OAO RZD made decisions on launching subsidiaries in the sector of passenger wagons capital repair, sleeper production, crushed stone, points, and scientific and research activities. Suburban passenger companies are being created. OAO Railway Trade Company has been launched. It specialises in commerce and catering.
Since the realisation of the programme of structural reform started, 47 daughter companies and subsidiaries of OAO RZD have been launched. In February, it was decided to create five more joint-stock companies. This year we are to develop a pack of documents, on the basis of which the Board of Directors will make decision on launching several more daughter companies of OAO RZD.
Attraction of private capital is very important for the sector’s development. Now the Russian Government examines the question of selling the property of 22 wagon repair depots in a tender.
Also, the company is to take an active part in developing a new concept to reform long-distance passenger transportation complexes and launch the Federal Passenger Company.
– Are daughter companies of OAO RZD as efficient as was expected? What are their future plans?
– The efficiency of daughter companies’ activities grows constantly. They are increasing in turnover, the volume of net assets and the profitability of their capital.
In 2007, the revenue of daughter companies of OAO RZD amounted to RUR 156 billion, which is equal to 16% of the revenue from the basic activity of OAO RZD. Last year, the joint assets of daughter companies exceeded RUR 300 billion, and their net profit grew by 80% to more than RUR 7.5 billion. OAO RZD expects it will get over RUR 500 million in dividends from its daughter companies in 2007. These figures prove the scale of the organisational changes and the significance of daughter companies’ work. The main targets are to improve the dynamics of the companies’ development and to provide maximum profit from selling the shareholdings of daughter companies. This process has already started: in January 2008, a 15% shareholding of OAO TransContainer was sold in preparation for an IPO. At the end of 2007, the Board of Directors of OAO RZD approved selling shares of nine more daughter companies in advance. It is planned to get RUR 23.2 billion from selling shares of daughter companies in 2008, and RUR 143.4 billion by the end of 2010. This money will be spent on financing investment programmes.
Naturally, there are some problems in the sector. The “creation” stage is rather difficult for many daughter companies. There are some gaps in corporate management and regulation of the companies’ activities.
– When will passenger suburban transportation sector become profitable, in your opinion?
– According to the most optimistic forecasts, this sector may become profitable not earlier than 2012. Once this is achieved, it will be possible to speak about a flow of scaled private investments into the sector, more active renewal of technologies and providing passengers with high-quality services.
The Government of Russia made very important decisions for Russian railways. They envisage compensation for the revenue shortfall of carriers providing long-distance passenger transportation. Starting from 2007, means to compensate for the profits shortfall were included in the federal budget. Last year the sum was RUR 10.9 billion, in 2008 it is RUR 16.4 billion, and in 2009 it is RUR 22.6 billion. Guidelines for Long-Distance Passenger Transportation and Railway Station Activities were created in the framework of OAO RZD. And they function efficiently.
Thus, the measures preparing separation of the business into an independent structure – the Federal Passenger Company – have been completed already. After analysing passenger flows, the Government will launch the Federal Passenger Company in 2008 in accordance with the target market model. The key problem of the suburban passenger transportation reform is the lack of a legal mechanism for organising socially important transportation so that a carrier suffers no losses. So, a legislative basis is to be formed, a new Tariff Regulation of passenger transportation is to be adopted in 2008, necessary funds are to be found in the federal and regional budgets and all the elements of the system of state order on social transportation are to be worked through.
– Do structural changes influence the attractiveness of the transport sector for private investors?
– Due to structural changes in railway transport, the sector is becoming more open to private investment. According to various estimates, private companies have invested over RUR 120 billion to purchase freight wagons since the reform started. Besides, the share of transportation by private wagons has grown to 37%.
The fast increase of the scale of operators’ activities is going along with the dynamic formation of the freight wagon repair market. Several years ago the share of private repair capacities was less than 1%, two years ago it was not more than 2.5% but by the beginning of 2008 it exceeded 7%. Today, 21 private companies operate in the market of cargo wagon repair, and new projects for constructing private depots are appearing.
The reform allowed activation of unused or insufficiently explored property and land owned by the railway to use it for commerce.
In the second half of 2007, objects under construction in the Ulak-Elga sector in Yakutia and OAO RZD’s shareholding in OAO Elgaugol were sold for RUR 14.2 billion. As a result, the development of the large coal field speeded up.
– What is OAO RZD doing to coordinate the efforts of business and authorities to reform the railway sector?
– A dialogue on the key issues of the reform is going on at the inter-departmental commission for realising structural reform of the railway transport system. There is also a commission of the President of OAO RZD for reform issues. Representatives of the authorities often come to its meetings. Our department regularly puts the issues of reform on the agenda of conferences and roundtable discussion, organised by the company. In this way, all the significant decisions are examined and discussed thoroughly.
Interviewed by Elena Ushkova
biography
Valery Veremeyev
Born in 1976. In 1998, graduated from the Moscow State University of Railways as an engineer-economist specialising in “Economic informatics and automated management systems”. He got a degree of Candidate of economic sciences. In 2004, graduated from the RF President’s Russian Academy of State Service, specialising in “State and municipal administration”.
In 2001-2002, he was a leading specialist in the foreign investments section of the Investment Policy Department at the RF Ministry of Economic Development and Trade.
In 2002-2003, he was Deputy Head of the General Section of Forecast and Economic Analysis, the Economy Department, Russian Ministry of Railways. In 2003, he headed the Capital Investments and Capital Repair Analysis Department for the Russian Ministry of Railways. In 2003-2005, he worked as Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. In 2005-2006, he became the First Deputy Head of the Economic Forecasting and Strategic Development Department, OAO RZD. Since July 2006, has been the Head of the Corporate Construction and Reform Department, OAO RZD.
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