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4 (20) October - February 2009-2010

4 (20) October - February 2009-2010
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РЖД-Партнер

Inspecting with Special Attention

 The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses.
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The task is to fill the Budget

According to figures from the Federal Customs Service of Russia, in August 2009 customs organisations transferred RUR 327.4 billion to the Federal Budget. That is 23.77% less than in August 2008, when total customs charges were RUR 429.51 billion.
Total customs transfers to the Budget for the first eight months of 2009 were 36.9% less than for the same period the previous year, or RUR 1.9 trillion roubles in 2009 compared with RUR 3.06 trillion in 2008.
It seems one can hardly expect any other result than a recession when there is a crisis in the background and a slowdown in foreign trade following it. However, the FCS, together with the tax service, is among the main sources of the country’s budget coffers, so there is, and always will be, a requirement for customs officers to bring maximum financial feedback. For example, last year the government officially put a responsibility on the FCS, Ministry of Finance, FSB and Russian Ministry of Economic Development “to arrange the improvement of the customs administration to exclude all opportunities for smuggling and for diminishing the customs costs of imported goods; and to report the results to the Government of the Russian Federation in the 1st quarter of 2009.”
During the April meeting of FCS Legal Services, Konstantin Chaika, the Deputy Head of this department, openly declared that “for the last few years the priority has been given to the fiscal functions of FCS, in order to fill the budget of Russia, and we, together with the Tax Service, are obliged to fill this budget.” So, there we have it.
The department is using all possible levers to increase revenues, feeling pity neither for brokers, nor for commercial companies, nor for its own employees. Consequently, the number of customs brokers has already fallen sharply, and the reason is the operation since January 2009 of an improved system of guarantees. And, as foreign trade participants say, the customs control is becoming more and more strict.
“The number of customs inspections has increased,” says Valery Svetlov, General Director of International Customs Broker. “But it is most likely connected, first of all, with an increase in the number of risks,” he comments. Among such risks are shipments from regions which are known to produce a large number of illegal drugs. Such cargoes are most likely to be sent for special checks, even if they are absolutely legal and sent from a reliable manufacturer.
Also, many suppliers have cut prices under the pressure of the economic situation that has developed, and that is absolutely understandable. But the fact is that, in order to fight falling costs (because the cost of the imported and exported goods precisely define the amount of fees chargeable), customs officers use their own database of so-called indicative prices. Mr Chaika admits that this database is not being updated promptly and that it falls behind the market situation, which was causing conflicts between the FCS and foreign trade participants even in much calmer times. Now, at a time when prices can go up or down (although mostly downwards) quite rapidly, there is much more chance that the cost of the transported goods is much lower than that recommended by the custom service, and this is what automatically sparks the most thorough checking. “However, it does not mean that the FCS is carrying out a total campaign under the motto ‘Let’s examine everything’,” summarises Mr Svetlov.
The situation is also proved by another development. Recently, Russia’s customs services and the People’s Republic of China signed a Memorandum of methodological and informational cooperation in the field of customs statistics for foreign trade, where the data exchange procedure has been specified, as well as its format and the list. “Data will be given quarterly, and normally specifying six signs of Russia’s foreign trade coding system TN VED,” says the FCS Press Service. Such a high level of specifying details means that the customs service is determined to define precisely the size of the customs duties to be imposed on different commodity items imported.
Market participants unanimously point out that practices such as a very thorough customs code definition are usually used when officers making inspections at customs points are trying hard to impose the customs cost correction procedure (KTS) upon cargoes. Of course, the customs cost in such cases should be revised upwards (and, consequently, the customs duty will grow). Generally speaking, KTS is the most widespread and simple way to raise the size of income the State Budget receives from customs activities.
Nariman Kutlubaev, Chairman of the Expert Council of the RF State Duma Committee for Budgets and Taxes, considers that in conditions of falling volumes, customs employees certainly have an opportunity to check transported cargoes more carefully; and there are many of those who call it “a strengthened pressure”. He thinks that those who participate in foreign trade should be extremely attentive to customs procedures in such situations. They have to improve the quality of their work, in order to prevent trouble with customs services. Generally, Mr Kutlubaev notes that Russia’s FCS has never weakened its customs control over goods moved by foreign trade participants.

There are other ways too …

As regards relocating customs registration operations to those regions close to the border, such a decision has in fact already been approved by the Government of the Russian Federation, and will soon be officially adopted. Moreover, the Federal Customs Service of the Russian Federation has already started implementing this plan, which is dictated by the same problem - to increase revenues in the budget and to maintain the economic safety of the country.
The Concept of Customs Registration and Customs Control of Cargoes in the Places Close to the Border of the Russian Federation became a kind of a sensation. As becomes clear from its title, it assumes relocating main registration procedures for imported goods to the Russian border.
The implementation of this Concept will help create the situation where the “FCS will take effective customs control measures, with application of modern technical facilities, in order to create an obstacle to dishonest foreign trade participants. The attitude to the preliminary declaration data will be changed, as well as the contents of work that goes with it. Kinds and degrees of customs control at the state border and inside the country will become different, which will create an effective barrier in the way of those who are importing doubtful goods,” says the document.
It seems the articles of the Concept look quite logical. However, market participants and officials are voicing serious fears regarding the consequences of replacing customs registration points. They say that the idea itself does not have any serious financial and economic impact. These fears are mostly connected with the lack of logistics infrastructure in border areas.
Another step customs have undertaken is the reform of the customs brokers’ surety system, which has already thrown about 200 companies out of the market. A broker used to have to bring a surety certificate to the FCS as a guarantee that it will fulfil its own financial obligations; or it could put RUR 50 million into the FCS account; or introduce a bank guarantee for this amount. The most popular method among brokers was the system of surety papers, which could be received from the company Customs Card, or from the National Association of Customs Brokers, or from non-commercial organisation Customs Service Veterans Council, or the FTS’ subdivision Rosteck State Corporation. Since January, only Rosteck has remained in the list of possible guarantors, while the customs service had terminated such agreements with all other organisations.
The FCS itself does not comment on the Decision; there are no official clarifications on the declarations either. Experts in this sector think that the Service applies the following logic: this innovation will reduce the risk of non-payments from guarantors in cases when broker companies work dishonestly.
“Being a customs broker, I consider that the optimal way among the existing ways of providing surety is the bank guarantee. This makes a company more independent,” thinks Mr Svetlov. “Also, I do not understand very well why the Rosteck company is a more reliable guarantor than, for example, the same Customs Card. Yes, this organisation is larger but has anyone worked out if it can be a guarantor for such a large number of customs brokers?”
Meanwhile, it is quite difficult to receive bank guarantees during the liquidity crisis. Experts say that the cost of bank services is currently 3% to 5% of the surety certificate amount, and depends on what exactly is securing the guarantees (real estate, deposit accounts, etc.). Thus, one broker company (note that this kind of business is usually categorised as “small” or “average”) should pay from RUR 1.5 million to RUR 2.5 million to the bank once a year.
There are not many companies who can afford to withdraw RUR 50 million from their working capital and to freeze them on the account. So, market participants estimate that, as a result, the following scenarios are possible in future – those companies who are leaving the market will start working in the grey area, and those brokers who are losing licences will merge with the “survivors”, where they will continue to work with their clients, but under new names. “Generally, I hope very much that, as a result of all the changes, the largest transport companies will organise their own broker departments,” noted one market expert. And another forecast is that when the number of broker companies is reduced, prices for their services will grow.
“It is clear right now that cancellation of some general sureties has brought the situation where many customs brokers cannot obtain bank guarantees or freeze working capital, which has finally brought about their expulsion from the register,” emphasised Mr Kotlubaev. Importers are compelled to find free money resources to provide the deposit in the condition when it is too difficult to get guarantees from banks. You do not need to be an economist to understand that such measures make participants in the state customs operation increase their service costs and charges connected with the imports of goods.

The resume

Despite the emerging problems, market participants believe that a situation where customs departments come under the public services spotlight and its internal problems are brought to a head by the crisis will allow for the reduction of corruption. In particular, in order to achieve this, it is offered that a firm hand should start a system of electronic declaration, when preparation of the customs documentation and examination of cargo is done by different employees.
Stanislav Russkov

viewpoint

 Dmitry Mayorov,
Senior Manager of Customs Group, Ernst & Young. St Petersburg

– The question of correct registration of all import customs documentation is becoming a matter of the greatest importance now. Special attention should be paid to proper classification of imported cargoes, especially those which are assessed using the zero import customs duties rate. In its turn, customs are also planning to supervise the correctness of classification for such goods more strictly. In the letter № 68-12/6765 of March 20th, 2009, The Central Customs Management has directly ordered its subordinate customs offices to pay special attention to the proper classification of goods assessed by the zero import duty rate, and to give monthly reports about measures undertaken, the amounts of duties and taxes added, and also the penalties imposed.
This problem grew with the Alterations to the Instruction about the Order of Filling Cargo Customs Declarations and Transit Declarations, approved by the FCS’ Order № 1057 of September 4th, 2007, which came into force on May 19th, 2009. These Alterations considerably change the rules for declaring goods which are imported to Russia in several batches and within a certain period of time. Also, they deal with problems of classification code definitions in customs declarations. As we know, such way is most often applied when goods assessed by the zero import duties rate are arriving in Russia, for example, technical equipment. Importers of such equipment are already having to plan the logistics for delivering components for this equipment taking the new legislative requirements into consideration.

 Dmitry Vasiliev,
Business Development Director of Itella - NLS:

Having faced a reduction in the targeted numbers of customs payments because of shrinking traffic, customs are trying to get as much money as possible from the remaining transport flows. It is quite difficult for cargo owners and foreign trade participants to keep the fragile balance of business profitability in a situation of tougher control and longer cargo registration time at the borders and in ports. When credit is either too expensive or inaccessible, when currency exchange rates have risen, when there are attempts to increase the earlier settled custom charges, and when movement of cargo in ports and at border points are delayed by more severe control, attempts to collect additional payments on borders could deal a serious blow to the whole economy. It is not a secret, that all technologically complex production sites, as well as so-called “replacing imports” industrial enterprises, are bound to imported components and raw materials. Instead of keeping prices low, both importers and manufacturers are forced to put production prices up, reduce production volume or accept worse product quality. [~DETAIL_TEXT] =>

The task is to fill the Budget

According to figures from the Federal Customs Service of Russia, in August 2009 customs organisations transferred RUR 327.4 billion to the Federal Budget. That is 23.77% less than in August 2008, when total customs charges were RUR 429.51 billion.
Total customs transfers to the Budget for the first eight months of 2009 were 36.9% less than for the same period the previous year, or RUR 1.9 trillion roubles in 2009 compared with RUR 3.06 trillion in 2008.
It seems one can hardly expect any other result than a recession when there is a crisis in the background and a slowdown in foreign trade following it. However, the FCS, together with the tax service, is among the main sources of the country’s budget coffers, so there is, and always will be, a requirement for customs officers to bring maximum financial feedback. For example, last year the government officially put a responsibility on the FCS, Ministry of Finance, FSB and Russian Ministry of Economic Development “to arrange the improvement of the customs administration to exclude all opportunities for smuggling and for diminishing the customs costs of imported goods; and to report the results to the Government of the Russian Federation in the 1st quarter of 2009.”
During the April meeting of FCS Legal Services, Konstantin Chaika, the Deputy Head of this department, openly declared that “for the last few years the priority has been given to the fiscal functions of FCS, in order to fill the budget of Russia, and we, together with the Tax Service, are obliged to fill this budget.” So, there we have it.
The department is using all possible levers to increase revenues, feeling pity neither for brokers, nor for commercial companies, nor for its own employees. Consequently, the number of customs brokers has already fallen sharply, and the reason is the operation since January 2009 of an improved system of guarantees. And, as foreign trade participants say, the customs control is becoming more and more strict.
“The number of customs inspections has increased,” says Valery Svetlov, General Director of International Customs Broker. “But it is most likely connected, first of all, with an increase in the number of risks,” he comments. Among such risks are shipments from regions which are known to produce a large number of illegal drugs. Such cargoes are most likely to be sent for special checks, even if they are absolutely legal and sent from a reliable manufacturer.
Also, many suppliers have cut prices under the pressure of the economic situation that has developed, and that is absolutely understandable. But the fact is that, in order to fight falling costs (because the cost of the imported and exported goods precisely define the amount of fees chargeable), customs officers use their own database of so-called indicative prices. Mr Chaika admits that this database is not being updated promptly and that it falls behind the market situation, which was causing conflicts between the FCS and foreign trade participants even in much calmer times. Now, at a time when prices can go up or down (although mostly downwards) quite rapidly, there is much more chance that the cost of the transported goods is much lower than that recommended by the custom service, and this is what automatically sparks the most thorough checking. “However, it does not mean that the FCS is carrying out a total campaign under the motto ‘Let’s examine everything’,” summarises Mr Svetlov.
The situation is also proved by another development. Recently, Russia’s customs services and the People’s Republic of China signed a Memorandum of methodological and informational cooperation in the field of customs statistics for foreign trade, where the data exchange procedure has been specified, as well as its format and the list. “Data will be given quarterly, and normally specifying six signs of Russia’s foreign trade coding system TN VED,” says the FCS Press Service. Such a high level of specifying details means that the customs service is determined to define precisely the size of the customs duties to be imposed on different commodity items imported.
Market participants unanimously point out that practices such as a very thorough customs code definition are usually used when officers making inspections at customs points are trying hard to impose the customs cost correction procedure (KTS) upon cargoes. Of course, the customs cost in such cases should be revised upwards (and, consequently, the customs duty will grow). Generally speaking, KTS is the most widespread and simple way to raise the size of income the State Budget receives from customs activities.
Nariman Kutlubaev, Chairman of the Expert Council of the RF State Duma Committee for Budgets and Taxes, considers that in conditions of falling volumes, customs employees certainly have an opportunity to check transported cargoes more carefully; and there are many of those who call it “a strengthened pressure”. He thinks that those who participate in foreign trade should be extremely attentive to customs procedures in such situations. They have to improve the quality of their work, in order to prevent trouble with customs services. Generally, Mr Kutlubaev notes that Russia’s FCS has never weakened its customs control over goods moved by foreign trade participants.

There are other ways too …

As regards relocating customs registration operations to those regions close to the border, such a decision has in fact already been approved by the Government of the Russian Federation, and will soon be officially adopted. Moreover, the Federal Customs Service of the Russian Federation has already started implementing this plan, which is dictated by the same problem - to increase revenues in the budget and to maintain the economic safety of the country.
The Concept of Customs Registration and Customs Control of Cargoes in the Places Close to the Border of the Russian Federation became a kind of a sensation. As becomes clear from its title, it assumes relocating main registration procedures for imported goods to the Russian border.
The implementation of this Concept will help create the situation where the “FCS will take effective customs control measures, with application of modern technical facilities, in order to create an obstacle to dishonest foreign trade participants. The attitude to the preliminary declaration data will be changed, as well as the contents of work that goes with it. Kinds and degrees of customs control at the state border and inside the country will become different, which will create an effective barrier in the way of those who are importing doubtful goods,” says the document.
It seems the articles of the Concept look quite logical. However, market participants and officials are voicing serious fears regarding the consequences of replacing customs registration points. They say that the idea itself does not have any serious financial and economic impact. These fears are mostly connected with the lack of logistics infrastructure in border areas.
Another step customs have undertaken is the reform of the customs brokers’ surety system, which has already thrown about 200 companies out of the market. A broker used to have to bring a surety certificate to the FCS as a guarantee that it will fulfil its own financial obligations; or it could put RUR 50 million into the FCS account; or introduce a bank guarantee for this amount. The most popular method among brokers was the system of surety papers, which could be received from the company Customs Card, or from the National Association of Customs Brokers, or from non-commercial organisation Customs Service Veterans Council, or the FTS’ subdivision Rosteck State Corporation. Since January, only Rosteck has remained in the list of possible guarantors, while the customs service had terminated such agreements with all other organisations.
The FCS itself does not comment on the Decision; there are no official clarifications on the declarations either. Experts in this sector think that the Service applies the following logic: this innovation will reduce the risk of non-payments from guarantors in cases when broker companies work dishonestly.
“Being a customs broker, I consider that the optimal way among the existing ways of providing surety is the bank guarantee. This makes a company more independent,” thinks Mr Svetlov. “Also, I do not understand very well why the Rosteck company is a more reliable guarantor than, for example, the same Customs Card. Yes, this organisation is larger but has anyone worked out if it can be a guarantor for such a large number of customs brokers?”
Meanwhile, it is quite difficult to receive bank guarantees during the liquidity crisis. Experts say that the cost of bank services is currently 3% to 5% of the surety certificate amount, and depends on what exactly is securing the guarantees (real estate, deposit accounts, etc.). Thus, one broker company (note that this kind of business is usually categorised as “small” or “average”) should pay from RUR 1.5 million to RUR 2.5 million to the bank once a year.
There are not many companies who can afford to withdraw RUR 50 million from their working capital and to freeze them on the account. So, market participants estimate that, as a result, the following scenarios are possible in future – those companies who are leaving the market will start working in the grey area, and those brokers who are losing licences will merge with the “survivors”, where they will continue to work with their clients, but under new names. “Generally, I hope very much that, as a result of all the changes, the largest transport companies will organise their own broker departments,” noted one market expert. And another forecast is that when the number of broker companies is reduced, prices for their services will grow.
“It is clear right now that cancellation of some general sureties has brought the situation where many customs brokers cannot obtain bank guarantees or freeze working capital, which has finally brought about their expulsion from the register,” emphasised Mr Kotlubaev. Importers are compelled to find free money resources to provide the deposit in the condition when it is too difficult to get guarantees from banks. You do not need to be an economist to understand that such measures make participants in the state customs operation increase their service costs and charges connected with the imports of goods.

The resume

Despite the emerging problems, market participants believe that a situation where customs departments come under the public services spotlight and its internal problems are brought to a head by the crisis will allow for the reduction of corruption. In particular, in order to achieve this, it is offered that a firm hand should start a system of electronic declaration, when preparation of the customs documentation and examination of cargo is done by different employees.
Stanislav Russkov

viewpoint

 Dmitry Mayorov,
Senior Manager of Customs Group, Ernst & Young. St Petersburg

– The question of correct registration of all import customs documentation is becoming a matter of the greatest importance now. Special attention should be paid to proper classification of imported cargoes, especially those which are assessed using the zero import customs duties rate. In its turn, customs are also planning to supervise the correctness of classification for such goods more strictly. In the letter № 68-12/6765 of March 20th, 2009, The Central Customs Management has directly ordered its subordinate customs offices to pay special attention to the proper classification of goods assessed by the zero import duty rate, and to give monthly reports about measures undertaken, the amounts of duties and taxes added, and also the penalties imposed.
This problem grew with the Alterations to the Instruction about the Order of Filling Cargo Customs Declarations and Transit Declarations, approved by the FCS’ Order № 1057 of September 4th, 2007, which came into force on May 19th, 2009. These Alterations considerably change the rules for declaring goods which are imported to Russia in several batches and within a certain period of time. Also, they deal with problems of classification code definitions in customs declarations. As we know, such way is most often applied when goods assessed by the zero import duties rate are arriving in Russia, for example, technical equipment. Importers of such equipment are already having to plan the logistics for delivering components for this equipment taking the new legislative requirements into consideration.

 Dmitry Vasiliev,
Business Development Director of Itella - NLS:

Having faced a reduction in the targeted numbers of customs payments because of shrinking traffic, customs are trying to get as much money as possible from the remaining transport flows. It is quite difficult for cargo owners and foreign trade participants to keep the fragile balance of business profitability in a situation of tougher control and longer cargo registration time at the borders and in ports. When credit is either too expensive or inaccessible, when currency exchange rates have risen, when there are attempts to increase the earlier settled custom charges, and when movement of cargo in ports and at border points are delayed by more severe control, attempts to collect additional payments on borders could deal a serious blow to the whole economy. It is not a secret, that all technologically complex production sites, as well as so-called “replacing imports” industrial enterprises, are bound to imported components and raw materials. Instead of keeping prices low, both importers and manufacturers are forced to put production prices up, reduce production volume or accept worse product quality. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. [~PREVIEW_TEXT] =>  The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. 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alt=" " hspace="5" width="300" height="257" align="left" />The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. [ELEMENT_META_TITLE] => Inspecting with Special Attention [ELEMENT_META_KEYWORDS] => inspecting with special attention [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/4/33.jpg" border="1" alt=" " hspace="5" width="300" height="257" align="left" />The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. 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The task is to fill the Budget

According to figures from the Federal Customs Service of Russia, in August 2009 customs organisations transferred RUR 327.4 billion to the Federal Budget. That is 23.77% less than in August 2008, when total customs charges were RUR 429.51 billion.
Total customs transfers to the Budget for the first eight months of 2009 were 36.9% less than for the same period the previous year, or RUR 1.9 trillion roubles in 2009 compared with RUR 3.06 trillion in 2008.
It seems one can hardly expect any other result than a recession when there is a crisis in the background and a slowdown in foreign trade following it. However, the FCS, together with the tax service, is among the main sources of the country’s budget coffers, so there is, and always will be, a requirement for customs officers to bring maximum financial feedback. For example, last year the government officially put a responsibility on the FCS, Ministry of Finance, FSB and Russian Ministry of Economic Development “to arrange the improvement of the customs administration to exclude all opportunities for smuggling and for diminishing the customs costs of imported goods; and to report the results to the Government of the Russian Federation in the 1st quarter of 2009.”
During the April meeting of FCS Legal Services, Konstantin Chaika, the Deputy Head of this department, openly declared that “for the last few years the priority has been given to the fiscal functions of FCS, in order to fill the budget of Russia, and we, together with the Tax Service, are obliged to fill this budget.” So, there we have it.
The department is using all possible levers to increase revenues, feeling pity neither for brokers, nor for commercial companies, nor for its own employees. Consequently, the number of customs brokers has already fallen sharply, and the reason is the operation since January 2009 of an improved system of guarantees. And, as foreign trade participants say, the customs control is becoming more and more strict.
“The number of customs inspections has increased,” says Valery Svetlov, General Director of International Customs Broker. “But it is most likely connected, first of all, with an increase in the number of risks,” he comments. Among such risks are shipments from regions which are known to produce a large number of illegal drugs. Such cargoes are most likely to be sent for special checks, even if they are absolutely legal and sent from a reliable manufacturer.
Also, many suppliers have cut prices under the pressure of the economic situation that has developed, and that is absolutely understandable. But the fact is that, in order to fight falling costs (because the cost of the imported and exported goods precisely define the amount of fees chargeable), customs officers use their own database of so-called indicative prices. Mr Chaika admits that this database is not being updated promptly and that it falls behind the market situation, which was causing conflicts between the FCS and foreign trade participants even in much calmer times. Now, at a time when prices can go up or down (although mostly downwards) quite rapidly, there is much more chance that the cost of the transported goods is much lower than that recommended by the custom service, and this is what automatically sparks the most thorough checking. “However, it does not mean that the FCS is carrying out a total campaign under the motto ‘Let’s examine everything’,” summarises Mr Svetlov.
The situation is also proved by another development. Recently, Russia’s customs services and the People’s Republic of China signed a Memorandum of methodological and informational cooperation in the field of customs statistics for foreign trade, where the data exchange procedure has been specified, as well as its format and the list. “Data will be given quarterly, and normally specifying six signs of Russia’s foreign trade coding system TN VED,” says the FCS Press Service. Such a high level of specifying details means that the customs service is determined to define precisely the size of the customs duties to be imposed on different commodity items imported.
Market participants unanimously point out that practices such as a very thorough customs code definition are usually used when officers making inspections at customs points are trying hard to impose the customs cost correction procedure (KTS) upon cargoes. Of course, the customs cost in such cases should be revised upwards (and, consequently, the customs duty will grow). Generally speaking, KTS is the most widespread and simple way to raise the size of income the State Budget receives from customs activities.
Nariman Kutlubaev, Chairman of the Expert Council of the RF State Duma Committee for Budgets and Taxes, considers that in conditions of falling volumes, customs employees certainly have an opportunity to check transported cargoes more carefully; and there are many of those who call it “a strengthened pressure”. He thinks that those who participate in foreign trade should be extremely attentive to customs procedures in such situations. They have to improve the quality of their work, in order to prevent trouble with customs services. Generally, Mr Kutlubaev notes that Russia’s FCS has never weakened its customs control over goods moved by foreign trade participants.

There are other ways too …

As regards relocating customs registration operations to those regions close to the border, such a decision has in fact already been approved by the Government of the Russian Federation, and will soon be officially adopted. Moreover, the Federal Customs Service of the Russian Federation has already started implementing this plan, which is dictated by the same problem - to increase revenues in the budget and to maintain the economic safety of the country.
The Concept of Customs Registration and Customs Control of Cargoes in the Places Close to the Border of the Russian Federation became a kind of a sensation. As becomes clear from its title, it assumes relocating main registration procedures for imported goods to the Russian border.
The implementation of this Concept will help create the situation where the “FCS will take effective customs control measures, with application of modern technical facilities, in order to create an obstacle to dishonest foreign trade participants. The attitude to the preliminary declaration data will be changed, as well as the contents of work that goes with it. Kinds and degrees of customs control at the state border and inside the country will become different, which will create an effective barrier in the way of those who are importing doubtful goods,” says the document.
It seems the articles of the Concept look quite logical. However, market participants and officials are voicing serious fears regarding the consequences of replacing customs registration points. They say that the idea itself does not have any serious financial and economic impact. These fears are mostly connected with the lack of logistics infrastructure in border areas.
Another step customs have undertaken is the reform of the customs brokers’ surety system, which has already thrown about 200 companies out of the market. A broker used to have to bring a surety certificate to the FCS as a guarantee that it will fulfil its own financial obligations; or it could put RUR 50 million into the FCS account; or introduce a bank guarantee for this amount. The most popular method among brokers was the system of surety papers, which could be received from the company Customs Card, or from the National Association of Customs Brokers, or from non-commercial organisation Customs Service Veterans Council, or the FTS’ subdivision Rosteck State Corporation. Since January, only Rosteck has remained in the list of possible guarantors, while the customs service had terminated such agreements with all other organisations.
The FCS itself does not comment on the Decision; there are no official clarifications on the declarations either. Experts in this sector think that the Service applies the following logic: this innovation will reduce the risk of non-payments from guarantors in cases when broker companies work dishonestly.
“Being a customs broker, I consider that the optimal way among the existing ways of providing surety is the bank guarantee. This makes a company more independent,” thinks Mr Svetlov. “Also, I do not understand very well why the Rosteck company is a more reliable guarantor than, for example, the same Customs Card. Yes, this organisation is larger but has anyone worked out if it can be a guarantor for such a large number of customs brokers?”
Meanwhile, it is quite difficult to receive bank guarantees during the liquidity crisis. Experts say that the cost of bank services is currently 3% to 5% of the surety certificate amount, and depends on what exactly is securing the guarantees (real estate, deposit accounts, etc.). Thus, one broker company (note that this kind of business is usually categorised as “small” or “average”) should pay from RUR 1.5 million to RUR 2.5 million to the bank once a year.
There are not many companies who can afford to withdraw RUR 50 million from their working capital and to freeze them on the account. So, market participants estimate that, as a result, the following scenarios are possible in future – those companies who are leaving the market will start working in the grey area, and those brokers who are losing licences will merge with the “survivors”, where they will continue to work with their clients, but under new names. “Generally, I hope very much that, as a result of all the changes, the largest transport companies will organise their own broker departments,” noted one market expert. And another forecast is that when the number of broker companies is reduced, prices for their services will grow.
“It is clear right now that cancellation of some general sureties has brought the situation where many customs brokers cannot obtain bank guarantees or freeze working capital, which has finally brought about their expulsion from the register,” emphasised Mr Kotlubaev. Importers are compelled to find free money resources to provide the deposit in the condition when it is too difficult to get guarantees from banks. You do not need to be an economist to understand that such measures make participants in the state customs operation increase their service costs and charges connected with the imports of goods.

The resume

Despite the emerging problems, market participants believe that a situation where customs departments come under the public services spotlight and its internal problems are brought to a head by the crisis will allow for the reduction of corruption. In particular, in order to achieve this, it is offered that a firm hand should start a system of electronic declaration, when preparation of the customs documentation and examination of cargo is done by different employees.
Stanislav Russkov

viewpoint

 Dmitry Mayorov,
Senior Manager of Customs Group, Ernst & Young. St Petersburg

– The question of correct registration of all import customs documentation is becoming a matter of the greatest importance now. Special attention should be paid to proper classification of imported cargoes, especially those which are assessed using the zero import customs duties rate. In its turn, customs are also planning to supervise the correctness of classification for such goods more strictly. In the letter № 68-12/6765 of March 20th, 2009, The Central Customs Management has directly ordered its subordinate customs offices to pay special attention to the proper classification of goods assessed by the zero import duty rate, and to give monthly reports about measures undertaken, the amounts of duties and taxes added, and also the penalties imposed.
This problem grew with the Alterations to the Instruction about the Order of Filling Cargo Customs Declarations and Transit Declarations, approved by the FCS’ Order № 1057 of September 4th, 2007, which came into force on May 19th, 2009. These Alterations considerably change the rules for declaring goods which are imported to Russia in several batches and within a certain period of time. Also, they deal with problems of classification code definitions in customs declarations. As we know, such way is most often applied when goods assessed by the zero import duties rate are arriving in Russia, for example, technical equipment. Importers of such equipment are already having to plan the logistics for delivering components for this equipment taking the new legislative requirements into consideration.

 Dmitry Vasiliev,
Business Development Director of Itella - NLS:

Having faced a reduction in the targeted numbers of customs payments because of shrinking traffic, customs are trying to get as much money as possible from the remaining transport flows. It is quite difficult for cargo owners and foreign trade participants to keep the fragile balance of business profitability in a situation of tougher control and longer cargo registration time at the borders and in ports. When credit is either too expensive or inaccessible, when currency exchange rates have risen, when there are attempts to increase the earlier settled custom charges, and when movement of cargo in ports and at border points are delayed by more severe control, attempts to collect additional payments on borders could deal a serious blow to the whole economy. It is not a secret, that all technologically complex production sites, as well as so-called “replacing imports” industrial enterprises, are bound to imported components and raw materials. Instead of keeping prices low, both importers and manufacturers are forced to put production prices up, reduce production volume or accept worse product quality. [~DETAIL_TEXT] =>

The task is to fill the Budget

According to figures from the Federal Customs Service of Russia, in August 2009 customs organisations transferred RUR 327.4 billion to the Federal Budget. That is 23.77% less than in August 2008, when total customs charges were RUR 429.51 billion.
Total customs transfers to the Budget for the first eight months of 2009 were 36.9% less than for the same period the previous year, or RUR 1.9 trillion roubles in 2009 compared with RUR 3.06 trillion in 2008.
It seems one can hardly expect any other result than a recession when there is a crisis in the background and a slowdown in foreign trade following it. However, the FCS, together with the tax service, is among the main sources of the country’s budget coffers, so there is, and always will be, a requirement for customs officers to bring maximum financial feedback. For example, last year the government officially put a responsibility on the FCS, Ministry of Finance, FSB and Russian Ministry of Economic Development “to arrange the improvement of the customs administration to exclude all opportunities for smuggling and for diminishing the customs costs of imported goods; and to report the results to the Government of the Russian Federation in the 1st quarter of 2009.”
During the April meeting of FCS Legal Services, Konstantin Chaika, the Deputy Head of this department, openly declared that “for the last few years the priority has been given to the fiscal functions of FCS, in order to fill the budget of Russia, and we, together with the Tax Service, are obliged to fill this budget.” So, there we have it.
The department is using all possible levers to increase revenues, feeling pity neither for brokers, nor for commercial companies, nor for its own employees. Consequently, the number of customs brokers has already fallen sharply, and the reason is the operation since January 2009 of an improved system of guarantees. And, as foreign trade participants say, the customs control is becoming more and more strict.
“The number of customs inspections has increased,” says Valery Svetlov, General Director of International Customs Broker. “But it is most likely connected, first of all, with an increase in the number of risks,” he comments. Among such risks are shipments from regions which are known to produce a large number of illegal drugs. Such cargoes are most likely to be sent for special checks, even if they are absolutely legal and sent from a reliable manufacturer.
Also, many suppliers have cut prices under the pressure of the economic situation that has developed, and that is absolutely understandable. But the fact is that, in order to fight falling costs (because the cost of the imported and exported goods precisely define the amount of fees chargeable), customs officers use their own database of so-called indicative prices. Mr Chaika admits that this database is not being updated promptly and that it falls behind the market situation, which was causing conflicts between the FCS and foreign trade participants even in much calmer times. Now, at a time when prices can go up or down (although mostly downwards) quite rapidly, there is much more chance that the cost of the transported goods is much lower than that recommended by the custom service, and this is what automatically sparks the most thorough checking. “However, it does not mean that the FCS is carrying out a total campaign under the motto ‘Let’s examine everything’,” summarises Mr Svetlov.
The situation is also proved by another development. Recently, Russia’s customs services and the People’s Republic of China signed a Memorandum of methodological and informational cooperation in the field of customs statistics for foreign trade, where the data exchange procedure has been specified, as well as its format and the list. “Data will be given quarterly, and normally specifying six signs of Russia’s foreign trade coding system TN VED,” says the FCS Press Service. Such a high level of specifying details means that the customs service is determined to define precisely the size of the customs duties to be imposed on different commodity items imported.
Market participants unanimously point out that practices such as a very thorough customs code definition are usually used when officers making inspections at customs points are trying hard to impose the customs cost correction procedure (KTS) upon cargoes. Of course, the customs cost in such cases should be revised upwards (and, consequently, the customs duty will grow). Generally speaking, KTS is the most widespread and simple way to raise the size of income the State Budget receives from customs activities.
Nariman Kutlubaev, Chairman of the Expert Council of the RF State Duma Committee for Budgets and Taxes, considers that in conditions of falling volumes, customs employees certainly have an opportunity to check transported cargoes more carefully; and there are many of those who call it “a strengthened pressure”. He thinks that those who participate in foreign trade should be extremely attentive to customs procedures in such situations. They have to improve the quality of their work, in order to prevent trouble with customs services. Generally, Mr Kutlubaev notes that Russia’s FCS has never weakened its customs control over goods moved by foreign trade participants.

There are other ways too …

As regards relocating customs registration operations to those regions close to the border, such a decision has in fact already been approved by the Government of the Russian Federation, and will soon be officially adopted. Moreover, the Federal Customs Service of the Russian Federation has already started implementing this plan, which is dictated by the same problem - to increase revenues in the budget and to maintain the economic safety of the country.
The Concept of Customs Registration and Customs Control of Cargoes in the Places Close to the Border of the Russian Federation became a kind of a sensation. As becomes clear from its title, it assumes relocating main registration procedures for imported goods to the Russian border.
The implementation of this Concept will help create the situation where the “FCS will take effective customs control measures, with application of modern technical facilities, in order to create an obstacle to dishonest foreign trade participants. The attitude to the preliminary declaration data will be changed, as well as the contents of work that goes with it. Kinds and degrees of customs control at the state border and inside the country will become different, which will create an effective barrier in the way of those who are importing doubtful goods,” says the document.
It seems the articles of the Concept look quite logical. However, market participants and officials are voicing serious fears regarding the consequences of replacing customs registration points. They say that the idea itself does not have any serious financial and economic impact. These fears are mostly connected with the lack of logistics infrastructure in border areas.
Another step customs have undertaken is the reform of the customs brokers’ surety system, which has already thrown about 200 companies out of the market. A broker used to have to bring a surety certificate to the FCS as a guarantee that it will fulfil its own financial obligations; or it could put RUR 50 million into the FCS account; or introduce a bank guarantee for this amount. The most popular method among brokers was the system of surety papers, which could be received from the company Customs Card, or from the National Association of Customs Brokers, or from non-commercial organisation Customs Service Veterans Council, or the FTS’ subdivision Rosteck State Corporation. Since January, only Rosteck has remained in the list of possible guarantors, while the customs service had terminated such agreements with all other organisations.
The FCS itself does not comment on the Decision; there are no official clarifications on the declarations either. Experts in this sector think that the Service applies the following logic: this innovation will reduce the risk of non-payments from guarantors in cases when broker companies work dishonestly.
“Being a customs broker, I consider that the optimal way among the existing ways of providing surety is the bank guarantee. This makes a company more independent,” thinks Mr Svetlov. “Also, I do not understand very well why the Rosteck company is a more reliable guarantor than, for example, the same Customs Card. Yes, this organisation is larger but has anyone worked out if it can be a guarantor for such a large number of customs brokers?”
Meanwhile, it is quite difficult to receive bank guarantees during the liquidity crisis. Experts say that the cost of bank services is currently 3% to 5% of the surety certificate amount, and depends on what exactly is securing the guarantees (real estate, deposit accounts, etc.). Thus, one broker company (note that this kind of business is usually categorised as “small” or “average”) should pay from RUR 1.5 million to RUR 2.5 million to the bank once a year.
There are not many companies who can afford to withdraw RUR 50 million from their working capital and to freeze them on the account. So, market participants estimate that, as a result, the following scenarios are possible in future – those companies who are leaving the market will start working in the grey area, and those brokers who are losing licences will merge with the “survivors”, where they will continue to work with their clients, but under new names. “Generally, I hope very much that, as a result of all the changes, the largest transport companies will organise their own broker departments,” noted one market expert. And another forecast is that when the number of broker companies is reduced, prices for their services will grow.
“It is clear right now that cancellation of some general sureties has brought the situation where many customs brokers cannot obtain bank guarantees or freeze working capital, which has finally brought about their expulsion from the register,” emphasised Mr Kotlubaev. Importers are compelled to find free money resources to provide the deposit in the condition when it is too difficult to get guarantees from banks. You do not need to be an economist to understand that such measures make participants in the state customs operation increase their service costs and charges connected with the imports of goods.

The resume

Despite the emerging problems, market participants believe that a situation where customs departments come under the public services spotlight and its internal problems are brought to a head by the crisis will allow for the reduction of corruption. In particular, in order to achieve this, it is offered that a firm hand should start a system of electronic declaration, when preparation of the customs documentation and examination of cargo is done by different employees.
Stanislav Russkov

viewpoint

 Dmitry Mayorov,
Senior Manager of Customs Group, Ernst & Young. St Petersburg

– The question of correct registration of all import customs documentation is becoming a matter of the greatest importance now. Special attention should be paid to proper classification of imported cargoes, especially those which are assessed using the zero import customs duties rate. In its turn, customs are also planning to supervise the correctness of classification for such goods more strictly. In the letter № 68-12/6765 of March 20th, 2009, The Central Customs Management has directly ordered its subordinate customs offices to pay special attention to the proper classification of goods assessed by the zero import duty rate, and to give monthly reports about measures undertaken, the amounts of duties and taxes added, and also the penalties imposed.
This problem grew with the Alterations to the Instruction about the Order of Filling Cargo Customs Declarations and Transit Declarations, approved by the FCS’ Order № 1057 of September 4th, 2007, which came into force on May 19th, 2009. These Alterations considerably change the rules for declaring goods which are imported to Russia in several batches and within a certain period of time. Also, they deal with problems of classification code definitions in customs declarations. As we know, such way is most often applied when goods assessed by the zero import duties rate are arriving in Russia, for example, technical equipment. Importers of such equipment are already having to plan the logistics for delivering components for this equipment taking the new legislative requirements into consideration.

 Dmitry Vasiliev,
Business Development Director of Itella - NLS:

Having faced a reduction in the targeted numbers of customs payments because of shrinking traffic, customs are trying to get as much money as possible from the remaining transport flows. It is quite difficult for cargo owners and foreign trade participants to keep the fragile balance of business profitability in a situation of tougher control and longer cargo registration time at the borders and in ports. When credit is either too expensive or inaccessible, when currency exchange rates have risen, when there are attempts to increase the earlier settled custom charges, and when movement of cargo in ports and at border points are delayed by more severe control, attempts to collect additional payments on borders could deal a serious blow to the whole economy. It is not a secret, that all technologically complex production sites, as well as so-called “replacing imports” industrial enterprises, are bound to imported components and raw materials. Instead of keeping prices low, both importers and manufacturers are forced to put production prices up, reduce production volume or accept worse product quality. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. [~PREVIEW_TEXT] =>  The crisis and the resulting fall in foreign trade figures has led to a decline in State Budget revenues from the Federal Customs Service (FCS), which is among its largest sources of income. In these circumstances, the FCS has little choice but to take different steps to compensate for the losses. Thus it toughens its relations with businesses. 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РЖД-Партнер

New Times - New Requirements

 In conditions of economic instability, the State is trying to support the engineering sector first of all, including transport, where many people work. The RZD-Partner International magazine asked Valentin Gapanovich, Senior Vice President and Chief Engineer of RZD, to define the main trends of the railway engineering development in near future.
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Targets and Tasks Adjusted

– Mr Gapanovich, what kind of upgrades in locomotive and rolling stock fleet are currently planned by the company, considering that the economy is affected by the crisis?
– It appeared necessary to make some amendments in RZD Investment Program, including alteration in the rolling stock purchasing numbers. Speaking specifically about locomotives, it is planned to acquire 343 units in 2009 and about 400 units in 2010. As regards purchasing freight wagons, here the purchasing situation is a little different. Plenty of rolling stock has been transferred to the recently created RZD’s affiliated companies, and they were made responsible for upgrading it. RZD will not have any rolling stock left after Second Cargo Company is created; then it will only purchase innovative, trial wagons. We shall be engaged in their monitoring with consideration of opportunities to allow them for further mass production. At the moment, the main innovative trend in locomotive building is to create a new generation of locomotives, which should match a number of high requirements. Skipping unneeded philosophical introductions, I shall just announce the whole list. So, new locomotives should be designed using innovative technical solutions, systems and materials; they must match both domestic and international quality requirements; safety norms are to be observed; technical and economic parameters must allow RZD and other independent carriers to use innovative technologies in operation and repair; they should provide competitive and qualitative transport services, completely satisfying needs for transportations and, simultaneously, minimising environmental impact; they have to create comfortable working conditions and meet the currently restricted modern standards for saving energy and resources; etc. The first locomotives of this kind is a cargo electric DC locomotive 2ES6 with traction engines of outside excitation, which was produced by Ural Railway Engineering Plant; and a pre-production model of the mainline diesel locomotive 2TE25A with asynchronous traction engines from Bryansk Machine-Building Plant. It is planned that in 2010 Ural Railway Engineering Plant will start production of the first domestic serial cargo electric DC locomotive 2ES10 with asynchronous traction engines.
– What technologies are becoming priorities for RZD in wagon building sector?
– One of the main directions mentioned in the Strategy for the Railway Transport Development is to create freight wagons with an increased usability level, and also with increased carrying and volumetric capacities. Uralvagonzavod and Promtractor-Wagon have mastered production of wagons with axial load of 25 tons. Uralvagonzavod has released 284 gondola wagons of the model 12-196-01, which are currently taking pre-production tests on West-Siberian Railway. The new gondola wagon’s design allows to increase working line load and annual productivity, and also to save operational costs. Also, in 2008 Roslavl VRZ fulfilled RZD’s order to create two trial samples of gondola wagons for coal transportation with axial load of 27 tons. Using new gondola wagon-coalers on circular routes will provide an increase in their annual efficiency by 19.4% due to improvement in carrying capacity by 33.8%; and simultaneously the wagon will be shorter.
Certification of gondola wagons with closed cab produced by Promtractor-Wagon was finished in 2008 too. And this year we have already become ready to buy up to 150 such gondola wagons in order to use them on circular routes. Using gondola wagons with axial load of 25 tons enables users to increase the weight of cargo carried by the train considerably, when the length of station tracks can stay the same as before. The number of gondola wagons in one train can be increased by 9-11 units, if more capacious is used, and the weight of cargo transported by the train in this case will grow from 700 to 1,300 tons.
In order to achieve better axial load-ability, bogies with axial load of 25 tons on a pair of wheels were designed, and they have already passed a full cycle of factory and tests. They were developed by NPK Uralvagonzavod (the bogie model 18-194-1) and VNIKTI (model 18-9800; RZD is the intellectual property owner).
These bogies’ design includes wheels with S-shaped disks, which have a number of advantages, including minimising risks of cracking and breaking disks for the whole of the wheel service life, and increasing the duration of its run. The design has essential advantages in comparison with cylindrical bearings. Among them there are: longer run between repairs, up to 800,000 km and even more, an opportunity to repair bearings in special service centres. Hobs with a solid pig-iron insert were designed and completely tested, they are needed in order to provide the wagon run up to 210,000 km. They also increase safety and can even restore the wheel surface. Thus the resource will be 250,000 km, and the wheel protective abilities of the hobs were completely confirmed. All freight wagons bought by the company at the moment are equipped with a separate system of brakes, which provides optimum work of its basic element - brakes of the bogie. The joints of brake pipes are thread free, which considerably reduces the number of cases when freight wagons need repair because these pipes are broken. Also, installation of all these elements became simpler, which reduces time of the wagon idling under repair. A significant event for RZD was cooperation with Tatrvagonka. In the framework of the joint project, a pre-production model was designed and built for a jointed type flat wagon which is to carry large-capacity containers, including 45-foot containers. The design of this wagon allows for transporting four 20-foot containers loaded up to the full carrying capacity; it will also reduce the number of wagons in a train and will save operational costs in wagon maintenance service. The pre-production model of the wagon has been delivered from Tatrvagonka to Russia for demonstration at the exhibition and in order to carry out tests which will be followed by its certification. In addition, works are being done now with participation of The First Freight, in order to create a universal covered wagon with an axial load of 25 tons for transportation of the tare, packaged and single cargoes, which demand shelters from weather conditions. The body of this wagon should be equipped with movable side sections. The new wagon design will give from 15% to 20% increase in efficiency due to a larger carrying capacity, because it will reduce cargo handling time and the wagon’s turnover time. Also such wagon’s life cycle expenses will be 11.9% less.

Certification is Obligatory, but to a Reasonable Extent

– Putting new product in operation is quite often followed by problems of its certification. How can RZD help to reduce time, simplify this process and thus support domestic manufacturers? What is done for this by the created two years ago NP UIRE, where you are President?
– In order to reduce the number of certification tests, work was done in 2009 to prepare The Railway Transport Safety Norms in the new edition, where some testing parameters were optimised. Some insignificant parameters were excluded, and tests were replaced by expert conclusions in cases with minor parameters. Simultaneously, the control became stricter where the parameters were essential for achieving technical and economic advantages, for the quality, reliability and safety of rolling stock. For some materials and components an obligatory certification was replaced by a voluntary one, which is to be held in the framework of the railway engineering non-commercial manufacturers’ partnership. At the moment the new edition of Safety Norms is under consideration in the Transport Ministry of the Russian Federation. At the same time, we should not forget that certification is an important mechanism to increase manufacturers’ responsibility for the production quality. An obligatory certification is established by law, and its main purpose is to provide safety in railway transport. Therefore I believe that requirements of obligatory certification should not be softened. Simultaneously, RZD, from its side, prepares and actively participates in improvements of the production norms by removing those requirements which are not really needed. Updating the list of requirements facilitates faster certification, introduction of new rolling stock and complex technical systems.
– NP UIRE has submitted a proposal to the Government regarding the State’s co-financing the most important transport engineering R&D projects, in amount of more than three billion roubles, for the period from 2009 to 2011. Which enterprises and plants are expected to receive this money? What are the sectors where you think projects and innovations should be supported first of all?
– The proposed plan considers, first of all, those projects which potentially have the largest economic benefit both for RZD and for manufacturers. Head executives and organisers of co-financing in locomotive-building sector are Transmashholding and Sinara-Transport Machines. Here priority is given to creating freight and passenger DC and AC electric locomotives with asynchronous traction drives on IGBT-transistors; and to create diesel engines of the new generation, for mainline and shunting diesel locomotives and motorised-coach rolling stock.
– A lot of information is currently circulating, that sometimes unwell worked out products are supplied to RZD. What is being done to solve this problem? How to punish such unreliable suppliers? What work must be carried out in order to prevent appearance of such production?
– Certainly, improvements in quality and reliability of railway machines, their units and components, and also the necessity for transport engineering enterprises to start engaging themselves in innovative and energy-saving technologies is today’s main principle of relations between manufacturers and consumers. Moreover, all aspects of improvement in product quality and safety are firmly connected with the state technical regulation, which is amongst the basic factors to ensure responsibility in business.
There is a technical audit service, which exists in order to prevent cases when unwell worked out product, or, figuratively speaking, semi-finished production appears on the network; also production inspections and acceptance control are being organised at the suppliers’ enterprises. A huge number of irregularities are discovered as early as at the designing stage; also when the design is going to the manufacturing site; while obligatory tests are taking place, when ordered items are manufactured; and after the production has been delivered to the destination and being used. As known, there is no more or less significant enterprise in railway engineering, which would have an effective quality management system, or would master at least simplest modern methods in this area. Creation of qualitatively new railway machinery is possible only on the basis of innovative approaches and worldwide recognised methods of business management; therefore RZD supports and will give a priority to the manufacturers who are gradually starting to follow the requirements of international standards ISO, and after that of IRIS.
– Does RZD have mechanisms to support the leading domestic cargo wagon-building enterprises during this difficult for them economic period?
– RZD does not only support the leading domestic cargo wagon building enterprises, such as Uralvagonzavod, the Wagon-Building Company of Mordovia, Altayvagon and Promtraktorvagon, but new wagon building plants as well. Among absolutely fresh examples I can remember the Tikhvin Wagon-Building Plant, Novokuznetsk Wagon-Building Plant, Orsk Wagon-Building Plant, Bryanskvagonmash, and others.

Open to Innovations

– What do domestic manufacturers consider to be a crucial technical advantage in the Siemens’ and Bombardier’s locomotives? How will a service be organised for the purchased from them items?
– Yes, it is necessary to recognise that despite a considerable growth in purchases of the new domestic rolling stock for the last few years, its technical and technological level is still essentially lagging behind the best world models. The contracts with the leading world manufacturers of railway machines, such as Siemens, Alstom and Bombardier, allow Russian transport machinery engineers to get an access to the world class modern technologies. Usually contracts do not provide a purchase of an assembled railway machine, only its units, systems and parts are supplied, which are not having their analogues in the domestic industry; and also the program of localising manufacturing facilities on the territory of the Russian Federation. Cooperation with foreign manufacturers allows our transport engineers to master manufacturing of modern accessories, to reduce the backlog from the world level, and RZD receives economically effective, modern rolling stock. As regards the service, it is, for example, stipulated that the manufactured by Siemens high-speed electric trains “Sapsan” will be serviced during the whole of their life cycle. According to the contract, the whole responsibility for the maintenance service and repair of the “Sapsan” trains lays with the company Siemens AG. RZD, from its part, bears the responsibility for cleaning and equipping the trains. Also, in order to provide maintenance of the “Sapsan” trains, RZD will send its workers who have had theoretical and practical training in Siemens AG, to work under the management of its German colleagues.
– What stage is the Alstom’s and Transmashholding’s joint project to produce two-storied carriages now at? When will the first carriage pass certification and appear on RZD’s network?
– In 2009, a technical specification was approved to produce a new model of two-storied passenger carriages of locomotive traction, with first-class and second-class sleeping compartments and staff compartments. The technical specification was developed by TMH-Alstom DV and TVZ, where TVZ was the main developer. Alstom Transport’s participation included technical support in the realisation of the project. The peculiarity of such support is that it is not planned to deliver separate carriages, but trains will be supplied, which consist of various carriages. In the framework of realisation the innovative technical policy, TMH has created the first pre-production model, which is a prototype of the two-storied carriage. It is currently passing preliminary approbation on the basis of the Tver Institute for Railway Carriage Manufacturing.
Following the results of all the prototype’s tests, a staff compartment carriage will be manufactured in the first quarter of 2010, then a dining-carriage and a second-class compartment carriage is planned. Expected time when the full complex of testing pre-production models will be completed is the middle of 2011, and the first 16-carriages trains will be released in the fourth quarter of 2011. The first train is planned to be put into operation in the beginning of 2012.
Maria Shevchenko [~DETAIL_TEXT] =>

Targets and Tasks Adjusted

– Mr Gapanovich, what kind of upgrades in locomotive and rolling stock fleet are currently planned by the company, considering that the economy is affected by the crisis?
– It appeared necessary to make some amendments in RZD Investment Program, including alteration in the rolling stock purchasing numbers. Speaking specifically about locomotives, it is planned to acquire 343 units in 2009 and about 400 units in 2010. As regards purchasing freight wagons, here the purchasing situation is a little different. Plenty of rolling stock has been transferred to the recently created RZD’s affiliated companies, and they were made responsible for upgrading it. RZD will not have any rolling stock left after Second Cargo Company is created; then it will only purchase innovative, trial wagons. We shall be engaged in their monitoring with consideration of opportunities to allow them for further mass production. At the moment, the main innovative trend in locomotive building is to create a new generation of locomotives, which should match a number of high requirements. Skipping unneeded philosophical introductions, I shall just announce the whole list. So, new locomotives should be designed using innovative technical solutions, systems and materials; they must match both domestic and international quality requirements; safety norms are to be observed; technical and economic parameters must allow RZD and other independent carriers to use innovative technologies in operation and repair; they should provide competitive and qualitative transport services, completely satisfying needs for transportations and, simultaneously, minimising environmental impact; they have to create comfortable working conditions and meet the currently restricted modern standards for saving energy and resources; etc. The first locomotives of this kind is a cargo electric DC locomotive 2ES6 with traction engines of outside excitation, which was produced by Ural Railway Engineering Plant; and a pre-production model of the mainline diesel locomotive 2TE25A with asynchronous traction engines from Bryansk Machine-Building Plant. It is planned that in 2010 Ural Railway Engineering Plant will start production of the first domestic serial cargo electric DC locomotive 2ES10 with asynchronous traction engines.
– What technologies are becoming priorities for RZD in wagon building sector?
– One of the main directions mentioned in the Strategy for the Railway Transport Development is to create freight wagons with an increased usability level, and also with increased carrying and volumetric capacities. Uralvagonzavod and Promtractor-Wagon have mastered production of wagons with axial load of 25 tons. Uralvagonzavod has released 284 gondola wagons of the model 12-196-01, which are currently taking pre-production tests on West-Siberian Railway. The new gondola wagon’s design allows to increase working line load and annual productivity, and also to save operational costs. Also, in 2008 Roslavl VRZ fulfilled RZD’s order to create two trial samples of gondola wagons for coal transportation with axial load of 27 tons. Using new gondola wagon-coalers on circular routes will provide an increase in their annual efficiency by 19.4% due to improvement in carrying capacity by 33.8%; and simultaneously the wagon will be shorter.
Certification of gondola wagons with closed cab produced by Promtractor-Wagon was finished in 2008 too. And this year we have already become ready to buy up to 150 such gondola wagons in order to use them on circular routes. Using gondola wagons with axial load of 25 tons enables users to increase the weight of cargo carried by the train considerably, when the length of station tracks can stay the same as before. The number of gondola wagons in one train can be increased by 9-11 units, if more capacious is used, and the weight of cargo transported by the train in this case will grow from 700 to 1,300 tons.
In order to achieve better axial load-ability, bogies with axial load of 25 tons on a pair of wheels were designed, and they have already passed a full cycle of factory and tests. They were developed by NPK Uralvagonzavod (the bogie model 18-194-1) and VNIKTI (model 18-9800; RZD is the intellectual property owner).
These bogies’ design includes wheels with S-shaped disks, which have a number of advantages, including minimising risks of cracking and breaking disks for the whole of the wheel service life, and increasing the duration of its run. The design has essential advantages in comparison with cylindrical bearings. Among them there are: longer run between repairs, up to 800,000 km and even more, an opportunity to repair bearings in special service centres. Hobs with a solid pig-iron insert were designed and completely tested, they are needed in order to provide the wagon run up to 210,000 km. They also increase safety and can even restore the wheel surface. Thus the resource will be 250,000 km, and the wheel protective abilities of the hobs were completely confirmed. All freight wagons bought by the company at the moment are equipped with a separate system of brakes, which provides optimum work of its basic element - brakes of the bogie. The joints of brake pipes are thread free, which considerably reduces the number of cases when freight wagons need repair because these pipes are broken. Also, installation of all these elements became simpler, which reduces time of the wagon idling under repair. A significant event for RZD was cooperation with Tatrvagonka. In the framework of the joint project, a pre-production model was designed and built for a jointed type flat wagon which is to carry large-capacity containers, including 45-foot containers. The design of this wagon allows for transporting four 20-foot containers loaded up to the full carrying capacity; it will also reduce the number of wagons in a train and will save operational costs in wagon maintenance service. The pre-production model of the wagon has been delivered from Tatrvagonka to Russia for demonstration at the exhibition and in order to carry out tests which will be followed by its certification. In addition, works are being done now with participation of The First Freight, in order to create a universal covered wagon with an axial load of 25 tons for transportation of the tare, packaged and single cargoes, which demand shelters from weather conditions. The body of this wagon should be equipped with movable side sections. The new wagon design will give from 15% to 20% increase in efficiency due to a larger carrying capacity, because it will reduce cargo handling time and the wagon’s turnover time. Also such wagon’s life cycle expenses will be 11.9% less.

Certification is Obligatory, but to a Reasonable Extent

– Putting new product in operation is quite often followed by problems of its certification. How can RZD help to reduce time, simplify this process and thus support domestic manufacturers? What is done for this by the created two years ago NP UIRE, where you are President?
– In order to reduce the number of certification tests, work was done in 2009 to prepare The Railway Transport Safety Norms in the new edition, where some testing parameters were optimised. Some insignificant parameters were excluded, and tests were replaced by expert conclusions in cases with minor parameters. Simultaneously, the control became stricter where the parameters were essential for achieving technical and economic advantages, for the quality, reliability and safety of rolling stock. For some materials and components an obligatory certification was replaced by a voluntary one, which is to be held in the framework of the railway engineering non-commercial manufacturers’ partnership. At the moment the new edition of Safety Norms is under consideration in the Transport Ministry of the Russian Federation. At the same time, we should not forget that certification is an important mechanism to increase manufacturers’ responsibility for the production quality. An obligatory certification is established by law, and its main purpose is to provide safety in railway transport. Therefore I believe that requirements of obligatory certification should not be softened. Simultaneously, RZD, from its side, prepares and actively participates in improvements of the production norms by removing those requirements which are not really needed. Updating the list of requirements facilitates faster certification, introduction of new rolling stock and complex technical systems.
– NP UIRE has submitted a proposal to the Government regarding the State’s co-financing the most important transport engineering R&D projects, in amount of more than three billion roubles, for the period from 2009 to 2011. Which enterprises and plants are expected to receive this money? What are the sectors where you think projects and innovations should be supported first of all?
– The proposed plan considers, first of all, those projects which potentially have the largest economic benefit both for RZD and for manufacturers. Head executives and organisers of co-financing in locomotive-building sector are Transmashholding and Sinara-Transport Machines. Here priority is given to creating freight and passenger DC and AC electric locomotives with asynchronous traction drives on IGBT-transistors; and to create diesel engines of the new generation, for mainline and shunting diesel locomotives and motorised-coach rolling stock.
– A lot of information is currently circulating, that sometimes unwell worked out products are supplied to RZD. What is being done to solve this problem? How to punish such unreliable suppliers? What work must be carried out in order to prevent appearance of such production?
– Certainly, improvements in quality and reliability of railway machines, their units and components, and also the necessity for transport engineering enterprises to start engaging themselves in innovative and energy-saving technologies is today’s main principle of relations between manufacturers and consumers. Moreover, all aspects of improvement in product quality and safety are firmly connected with the state technical regulation, which is amongst the basic factors to ensure responsibility in business.
There is a technical audit service, which exists in order to prevent cases when unwell worked out product, or, figuratively speaking, semi-finished production appears on the network; also production inspections and acceptance control are being organised at the suppliers’ enterprises. A huge number of irregularities are discovered as early as at the designing stage; also when the design is going to the manufacturing site; while obligatory tests are taking place, when ordered items are manufactured; and after the production has been delivered to the destination and being used. As known, there is no more or less significant enterprise in railway engineering, which would have an effective quality management system, or would master at least simplest modern methods in this area. Creation of qualitatively new railway machinery is possible only on the basis of innovative approaches and worldwide recognised methods of business management; therefore RZD supports and will give a priority to the manufacturers who are gradually starting to follow the requirements of international standards ISO, and after that of IRIS.
– Does RZD have mechanisms to support the leading domestic cargo wagon-building enterprises during this difficult for them economic period?
– RZD does not only support the leading domestic cargo wagon building enterprises, such as Uralvagonzavod, the Wagon-Building Company of Mordovia, Altayvagon and Promtraktorvagon, but new wagon building plants as well. Among absolutely fresh examples I can remember the Tikhvin Wagon-Building Plant, Novokuznetsk Wagon-Building Plant, Orsk Wagon-Building Plant, Bryanskvagonmash, and others.

Open to Innovations

– What do domestic manufacturers consider to be a crucial technical advantage in the Siemens’ and Bombardier’s locomotives? How will a service be organised for the purchased from them items?
– Yes, it is necessary to recognise that despite a considerable growth in purchases of the new domestic rolling stock for the last few years, its technical and technological level is still essentially lagging behind the best world models. The contracts with the leading world manufacturers of railway machines, such as Siemens, Alstom and Bombardier, allow Russian transport machinery engineers to get an access to the world class modern technologies. Usually contracts do not provide a purchase of an assembled railway machine, only its units, systems and parts are supplied, which are not having their analogues in the domestic industry; and also the program of localising manufacturing facilities on the territory of the Russian Federation. Cooperation with foreign manufacturers allows our transport engineers to master manufacturing of modern accessories, to reduce the backlog from the world level, and RZD receives economically effective, modern rolling stock. As regards the service, it is, for example, stipulated that the manufactured by Siemens high-speed electric trains “Sapsan” will be serviced during the whole of their life cycle. According to the contract, the whole responsibility for the maintenance service and repair of the “Sapsan” trains lays with the company Siemens AG. RZD, from its part, bears the responsibility for cleaning and equipping the trains. Also, in order to provide maintenance of the “Sapsan” trains, RZD will send its workers who have had theoretical and practical training in Siemens AG, to work under the management of its German colleagues.
– What stage is the Alstom’s and Transmashholding’s joint project to produce two-storied carriages now at? When will the first carriage pass certification and appear on RZD’s network?
– In 2009, a technical specification was approved to produce a new model of two-storied passenger carriages of locomotive traction, with first-class and second-class sleeping compartments and staff compartments. The technical specification was developed by TMH-Alstom DV and TVZ, where TVZ was the main developer. Alstom Transport’s participation included technical support in the realisation of the project. The peculiarity of such support is that it is not planned to deliver separate carriages, but trains will be supplied, which consist of various carriages. In the framework of realisation the innovative technical policy, TMH has created the first pre-production model, which is a prototype of the two-storied carriage. It is currently passing preliminary approbation on the basis of the Tver Institute for Railway Carriage Manufacturing.
Following the results of all the prototype’s tests, a staff compartment carriage will be manufactured in the first quarter of 2010, then a dining-carriage and a second-class compartment carriage is planned. Expected time when the full complex of testing pre-production models will be completed is the middle of 2011, and the first 16-carriages trains will be released in the fourth quarter of 2011. The first train is planned to be put into operation in the beginning of 2012.
Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  In conditions of economic instability, the State is trying to support the engineering sector first of all, including transport, where many people work. The RZD-Partner International magazine asked Valentin Gapanovich, Senior Vice President and Chief Engineer of RZD, to define the main trends of the railway engineering development in near future. [~PREVIEW_TEXT] =>  In conditions of economic instability, the State is trying to support the engineering sector first of all, including transport, where many people work. The RZD-Partner International magazine asked Valentin Gapanovich, Senior Vice President and Chief Engineer of RZD, to define the main trends of the railway engineering development in near future. 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hspace="5" width="300" height="232" align="left" />In conditions of economic instability, the State is trying to support the engineering sector first of all, including transport, where many people work. 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Targets and Tasks Adjusted

– Mr Gapanovich, what kind of upgrades in locomotive and rolling stock fleet are currently planned by the company, considering that the economy is affected by the crisis?
– It appeared necessary to make some amendments in RZD Investment Program, including alteration in the rolling stock purchasing numbers. Speaking specifically about locomotives, it is planned to acquire 343 units in 2009 and about 400 units in 2010. As regards purchasing freight wagons, here the purchasing situation is a little different. Plenty of rolling stock has been transferred to the recently created RZD’s affiliated companies, and they were made responsible for upgrading it. RZD will not have any rolling stock left after Second Cargo Company is created; then it will only purchase innovative, trial wagons. We shall be engaged in their monitoring with consideration of opportunities to allow them for further mass production. At the moment, the main innovative trend in locomotive building is to create a new generation of locomotives, which should match a number of high requirements. Skipping unneeded philosophical introductions, I shall just announce the whole list. So, new locomotives should be designed using innovative technical solutions, systems and materials; they must match both domestic and international quality requirements; safety norms are to be observed; technical and economic parameters must allow RZD and other independent carriers to use innovative technologies in operation and repair; they should provide competitive and qualitative transport services, completely satisfying needs for transportations and, simultaneously, minimising environmental impact; they have to create comfortable working conditions and meet the currently restricted modern standards for saving energy and resources; etc. The first locomotives of this kind is a cargo electric DC locomotive 2ES6 with traction engines of outside excitation, which was produced by Ural Railway Engineering Plant; and a pre-production model of the mainline diesel locomotive 2TE25A with asynchronous traction engines from Bryansk Machine-Building Plant. It is planned that in 2010 Ural Railway Engineering Plant will start production of the first domestic serial cargo electric DC locomotive 2ES10 with asynchronous traction engines.
– What technologies are becoming priorities for RZD in wagon building sector?
– One of the main directions mentioned in the Strategy for the Railway Transport Development is to create freight wagons with an increased usability level, and also with increased carrying and volumetric capacities. Uralvagonzavod and Promtractor-Wagon have mastered production of wagons with axial load of 25 tons. Uralvagonzavod has released 284 gondola wagons of the model 12-196-01, which are currently taking pre-production tests on West-Siberian Railway. The new gondola wagon’s design allows to increase working line load and annual productivity, and also to save operational costs. Also, in 2008 Roslavl VRZ fulfilled RZD’s order to create two trial samples of gondola wagons for coal transportation with axial load of 27 tons. Using new gondola wagon-coalers on circular routes will provide an increase in their annual efficiency by 19.4% due to improvement in carrying capacity by 33.8%; and simultaneously the wagon will be shorter.
Certification of gondola wagons with closed cab produced by Promtractor-Wagon was finished in 2008 too. And this year we have already become ready to buy up to 150 such gondola wagons in order to use them on circular routes. Using gondola wagons with axial load of 25 tons enables users to increase the weight of cargo carried by the train considerably, when the length of station tracks can stay the same as before. The number of gondola wagons in one train can be increased by 9-11 units, if more capacious is used, and the weight of cargo transported by the train in this case will grow from 700 to 1,300 tons.
In order to achieve better axial load-ability, bogies with axial load of 25 tons on a pair of wheels were designed, and they have already passed a full cycle of factory and tests. They were developed by NPK Uralvagonzavod (the bogie model 18-194-1) and VNIKTI (model 18-9800; RZD is the intellectual property owner).
These bogies’ design includes wheels with S-shaped disks, which have a number of advantages, including minimising risks of cracking and breaking disks for the whole of the wheel service life, and increasing the duration of its run. The design has essential advantages in comparison with cylindrical bearings. Among them there are: longer run between repairs, up to 800,000 km and even more, an opportunity to repair bearings in special service centres. Hobs with a solid pig-iron insert were designed and completely tested, they are needed in order to provide the wagon run up to 210,000 km. They also increase safety and can even restore the wheel surface. Thus the resource will be 250,000 km, and the wheel protective abilities of the hobs were completely confirmed. All freight wagons bought by the company at the moment are equipped with a separate system of brakes, which provides optimum work of its basic element - brakes of the bogie. The joints of brake pipes are thread free, which considerably reduces the number of cases when freight wagons need repair because these pipes are broken. Also, installation of all these elements became simpler, which reduces time of the wagon idling under repair. A significant event for RZD was cooperation with Tatrvagonka. In the framework of the joint project, a pre-production model was designed and built for a jointed type flat wagon which is to carry large-capacity containers, including 45-foot containers. The design of this wagon allows for transporting four 20-foot containers loaded up to the full carrying capacity; it will also reduce the number of wagons in a train and will save operational costs in wagon maintenance service. The pre-production model of the wagon has been delivered from Tatrvagonka to Russia for demonstration at the exhibition and in order to carry out tests which will be followed by its certification. In addition, works are being done now with participation of The First Freight, in order to create a universal covered wagon with an axial load of 25 tons for transportation of the tare, packaged and single cargoes, which demand shelters from weather conditions. The body of this wagon should be equipped with movable side sections. The new wagon design will give from 15% to 20% increase in efficiency due to a larger carrying capacity, because it will reduce cargo handling time and the wagon’s turnover time. Also such wagon’s life cycle expenses will be 11.9% less.

Certification is Obligatory, but to a Reasonable Extent

– Putting new product in operation is quite often followed by problems of its certification. How can RZD help to reduce time, simplify this process and thus support domestic manufacturers? What is done for this by the created two years ago NP UIRE, where you are President?
– In order to reduce the number of certification tests, work was done in 2009 to prepare The Railway Transport Safety Norms in the new edition, where some testing parameters were optimised. Some insignificant parameters were excluded, and tests were replaced by expert conclusions in cases with minor parameters. Simultaneously, the control became stricter where the parameters were essential for achieving technical and economic advantages, for the quality, reliability and safety of rolling stock. For some materials and components an obligatory certification was replaced by a voluntary one, which is to be held in the framework of the railway engineering non-commercial manufacturers’ partnership. At the moment the new edition of Safety Norms is under consideration in the Transport Ministry of the Russian Federation. At the same time, we should not forget that certification is an important mechanism to increase manufacturers’ responsibility for the production quality. An obligatory certification is established by law, and its main purpose is to provide safety in railway transport. Therefore I believe that requirements of obligatory certification should not be softened. Simultaneously, RZD, from its side, prepares and actively participates in improvements of the production norms by removing those requirements which are not really needed. Updating the list of requirements facilitates faster certification, introduction of new rolling stock and complex technical systems.
– NP UIRE has submitted a proposal to the Government regarding the State’s co-financing the most important transport engineering R&D projects, in amount of more than three billion roubles, for the period from 2009 to 2011. Which enterprises and plants are expected to receive this money? What are the sectors where you think projects and innovations should be supported first of all?
– The proposed plan considers, first of all, those projects which potentially have the largest economic benefit both for RZD and for manufacturers. Head executives and organisers of co-financing in locomotive-building sector are Transmashholding and Sinara-Transport Machines. Here priority is given to creating freight and passenger DC and AC electric locomotives with asynchronous traction drives on IGBT-transistors; and to create diesel engines of the new generation, for mainline and shunting diesel locomotives and motorised-coach rolling stock.
– A lot of information is currently circulating, that sometimes unwell worked out products are supplied to RZD. What is being done to solve this problem? How to punish such unreliable suppliers? What work must be carried out in order to prevent appearance of such production?
– Certainly, improvements in quality and reliability of railway machines, their units and components, and also the necessity for transport engineering enterprises to start engaging themselves in innovative and energy-saving technologies is today’s main principle of relations between manufacturers and consumers. Moreover, all aspects of improvement in product quality and safety are firmly connected with the state technical regulation, which is amongst the basic factors to ensure responsibility in business.
There is a technical audit service, which exists in order to prevent cases when unwell worked out product, or, figuratively speaking, semi-finished production appears on the network; also production inspections and acceptance control are being organised at the suppliers’ enterprises. A huge number of irregularities are discovered as early as at the designing stage; also when the design is going to the manufacturing site; while obligatory tests are taking place, when ordered items are manufactured; and after the production has been delivered to the destination and being used. As known, there is no more or less significant enterprise in railway engineering, which would have an effective quality management system, or would master at least simplest modern methods in this area. Creation of qualitatively new railway machinery is possible only on the basis of innovative approaches and worldwide recognised methods of business management; therefore RZD supports and will give a priority to the manufacturers who are gradually starting to follow the requirements of international standards ISO, and after that of IRIS.
– Does RZD have mechanisms to support the leading domestic cargo wagon-building enterprises during this difficult for them economic period?
– RZD does not only support the leading domestic cargo wagon building enterprises, such as Uralvagonzavod, the Wagon-Building Company of Mordovia, Altayvagon and Promtraktorvagon, but new wagon building plants as well. Among absolutely fresh examples I can remember the Tikhvin Wagon-Building Plant, Novokuznetsk Wagon-Building Plant, Orsk Wagon-Building Plant, Bryanskvagonmash, and others.

Open to Innovations

– What do domestic manufacturers consider to be a crucial technical advantage in the Siemens’ and Bombardier’s locomotives? How will a service be organised for the purchased from them items?
– Yes, it is necessary to recognise that despite a considerable growth in purchases of the new domestic rolling stock for the last few years, its technical and technological level is still essentially lagging behind the best world models. The contracts with the leading world manufacturers of railway machines, such as Siemens, Alstom and Bombardier, allow Russian transport machinery engineers to get an access to the world class modern technologies. Usually contracts do not provide a purchase of an assembled railway machine, only its units, systems and parts are supplied, which are not having their analogues in the domestic industry; and also the program of localising manufacturing facilities on the territory of the Russian Federation. Cooperation with foreign manufacturers allows our transport engineers to master manufacturing of modern accessories, to reduce the backlog from the world level, and RZD receives economically effective, modern rolling stock. As regards the service, it is, for example, stipulated that the manufactured by Siemens high-speed electric trains “Sapsan” will be serviced during the whole of their life cycle. According to the contract, the whole responsibility for the maintenance service and repair of the “Sapsan” trains lays with the company Siemens AG. RZD, from its part, bears the responsibility for cleaning and equipping the trains. Also, in order to provide maintenance of the “Sapsan” trains, RZD will send its workers who have had theoretical and practical training in Siemens AG, to work under the management of its German colleagues.
– What stage is the Alstom’s and Transmashholding’s joint project to produce two-storied carriages now at? When will the first carriage pass certification and appear on RZD’s network?
– In 2009, a technical specification was approved to produce a new model of two-storied passenger carriages of locomotive traction, with first-class and second-class sleeping compartments and staff compartments. The technical specification was developed by TMH-Alstom DV and TVZ, where TVZ was the main developer. Alstom Transport’s participation included technical support in the realisation of the project. The peculiarity of such support is that it is not planned to deliver separate carriages, but trains will be supplied, which consist of various carriages. In the framework of realisation the innovative technical policy, TMH has created the first pre-production model, which is a prototype of the two-storied carriage. It is currently passing preliminary approbation on the basis of the Tver Institute for Railway Carriage Manufacturing.
Following the results of all the prototype’s tests, a staff compartment carriage will be manufactured in the first quarter of 2010, then a dining-carriage and a second-class compartment carriage is planned. Expected time when the full complex of testing pre-production models will be completed is the middle of 2011, and the first 16-carriages trains will be released in the fourth quarter of 2011. The first train is planned to be put into operation in the beginning of 2012.
Maria Shevchenko [~DETAIL_TEXT] =>

Targets and Tasks Adjusted

– Mr Gapanovich, what kind of upgrades in locomotive and rolling stock fleet are currently planned by the company, considering that the economy is affected by the crisis?
– It appeared necessary to make some amendments in RZD Investment Program, including alteration in the rolling stock purchasing numbers. Speaking specifically about locomotives, it is planned to acquire 343 units in 2009 and about 400 units in 2010. As regards purchasing freight wagons, here the purchasing situation is a little different. Plenty of rolling stock has been transferred to the recently created RZD’s affiliated companies, and they were made responsible for upgrading it. RZD will not have any rolling stock left after Second Cargo Company is created; then it will only purchase innovative, trial wagons. We shall be engaged in their monitoring with consideration of opportunities to allow them for further mass production. At the moment, the main innovative trend in locomotive building is to create a new generation of locomotives, which should match a number of high requirements. Skipping unneeded philosophical introductions, I shall just announce the whole list. So, new locomotives should be designed using innovative technical solutions, systems and materials; they must match both domestic and international quality requirements; safety norms are to be observed; technical and economic parameters must allow RZD and other independent carriers to use innovative technologies in operation and repair; they should provide competitive and qualitative transport services, completely satisfying needs for transportations and, simultaneously, minimising environmental impact; they have to create comfortable working conditions and meet the currently restricted modern standards for saving energy and resources; etc. The first locomotives of this kind is a cargo electric DC locomotive 2ES6 with traction engines of outside excitation, which was produced by Ural Railway Engineering Plant; and a pre-production model of the mainline diesel locomotive 2TE25A with asynchronous traction engines from Bryansk Machine-Building Plant. It is planned that in 2010 Ural Railway Engineering Plant will start production of the first domestic serial cargo electric DC locomotive 2ES10 with asynchronous traction engines.
– What technologies are becoming priorities for RZD in wagon building sector?
– One of the main directions mentioned in the Strategy for the Railway Transport Development is to create freight wagons with an increased usability level, and also with increased carrying and volumetric capacities. Uralvagonzavod and Promtractor-Wagon have mastered production of wagons with axial load of 25 tons. Uralvagonzavod has released 284 gondola wagons of the model 12-196-01, which are currently taking pre-production tests on West-Siberian Railway. The new gondola wagon’s design allows to increase working line load and annual productivity, and also to save operational costs. Also, in 2008 Roslavl VRZ fulfilled RZD’s order to create two trial samples of gondola wagons for coal transportation with axial load of 27 tons. Using new gondola wagon-coalers on circular routes will provide an increase in their annual efficiency by 19.4% due to improvement in carrying capacity by 33.8%; and simultaneously the wagon will be shorter.
Certification of gondola wagons with closed cab produced by Promtractor-Wagon was finished in 2008 too. And this year we have already become ready to buy up to 150 such gondola wagons in order to use them on circular routes. Using gondola wagons with axial load of 25 tons enables users to increase the weight of cargo carried by the train considerably, when the length of station tracks can stay the same as before. The number of gondola wagons in one train can be increased by 9-11 units, if more capacious is used, and the weight of cargo transported by the train in this case will grow from 700 to 1,300 tons.
In order to achieve better axial load-ability, bogies with axial load of 25 tons on a pair of wheels were designed, and they have already passed a full cycle of factory and tests. They were developed by NPK Uralvagonzavod (the bogie model 18-194-1) and VNIKTI (model 18-9800; RZD is the intellectual property owner).
These bogies’ design includes wheels with S-shaped disks, which have a number of advantages, including minimising risks of cracking and breaking disks for the whole of the wheel service life, and increasing the duration of its run. The design has essential advantages in comparison with cylindrical bearings. Among them there are: longer run between repairs, up to 800,000 km and even more, an opportunity to repair bearings in special service centres. Hobs with a solid pig-iron insert were designed and completely tested, they are needed in order to provide the wagon run up to 210,000 km. They also increase safety and can even restore the wheel surface. Thus the resource will be 250,000 km, and the wheel protective abilities of the hobs were completely confirmed. All freight wagons bought by the company at the moment are equipped with a separate system of brakes, which provides optimum work of its basic element - brakes of the bogie. The joints of brake pipes are thread free, which considerably reduces the number of cases when freight wagons need repair because these pipes are broken. Also, installation of all these elements became simpler, which reduces time of the wagon idling under repair. A significant event for RZD was cooperation with Tatrvagonka. In the framework of the joint project, a pre-production model was designed and built for a jointed type flat wagon which is to carry large-capacity containers, including 45-foot containers. The design of this wagon allows for transporting four 20-foot containers loaded up to the full carrying capacity; it will also reduce the number of wagons in a train and will save operational costs in wagon maintenance service. The pre-production model of the wagon has been delivered from Tatrvagonka to Russia for demonstration at the exhibition and in order to carry out tests which will be followed by its certification. In addition, works are being done now with participation of The First Freight, in order to create a universal covered wagon with an axial load of 25 tons for transportation of the tare, packaged and single cargoes, which demand shelters from weather conditions. The body of this wagon should be equipped with movable side sections. The new wagon design will give from 15% to 20% increase in efficiency due to a larger carrying capacity, because it will reduce cargo handling time and the wagon’s turnover time. Also such wagon’s life cycle expenses will be 11.9% less.

Certification is Obligatory, but to a Reasonable Extent

– Putting new product in operation is quite often followed by problems of its certification. How can RZD help to reduce time, simplify this process and thus support domestic manufacturers? What is done for this by the created two years ago NP UIRE, where you are President?
– In order to reduce the number of certification tests, work was done in 2009 to prepare The Railway Transport Safety Norms in the new edition, where some testing parameters were optimised. Some insignificant parameters were excluded, and tests were replaced by expert conclusions in cases with minor parameters. Simultaneously, the control became stricter where the parameters were essential for achieving technical and economic advantages, for the quality, reliability and safety of rolling stock. For some materials and components an obligatory certification was replaced by a voluntary one, which is to be held in the framework of the railway engineering non-commercial manufacturers’ partnership. At the moment the new edition of Safety Norms is under consideration in the Transport Ministry of the Russian Federation. At the same time, we should not forget that certification is an important mechanism to increase manufacturers’ responsibility for the production quality. An obligatory certification is established by law, and its main purpose is to provide safety in railway transport. Therefore I believe that requirements of obligatory certification should not be softened. Simultaneously, RZD, from its side, prepares and actively participates in improvements of the production norms by removing those requirements which are not really needed. Updating the list of requirements facilitates faster certification, introduction of new rolling stock and complex technical systems.
– NP UIRE has submitted a proposal to the Government regarding the State’s co-financing the most important transport engineering R&D projects, in amount of more than three billion roubles, for the period from 2009 to 2011. Which enterprises and plants are expected to receive this money? What are the sectors where you think projects and innovations should be supported first of all?
– The proposed plan considers, first of all, those projects which potentially have the largest economic benefit both for RZD and for manufacturers. Head executives and organisers of co-financing in locomotive-building sector are Transmashholding and Sinara-Transport Machines. Here priority is given to creating freight and passenger DC and AC electric locomotives with asynchronous traction drives on IGBT-transistors; and to create diesel engines of the new generation, for mainline and shunting diesel locomotives and motorised-coach rolling stock.
– A lot of information is currently circulating, that sometimes unwell worked out products are supplied to RZD. What is being done to solve this problem? How to punish such unreliable suppliers? What work must be carried out in order to prevent appearance of such production?
– Certainly, improvements in quality and reliability of railway machines, their units and components, and also the necessity for transport engineering enterprises to start engaging themselves in innovative and energy-saving technologies is today’s main principle of relations between manufacturers and consumers. Moreover, all aspects of improvement in product quality and safety are firmly connected with the state technical regulation, which is amongst the basic factors to ensure responsibility in business.
There is a technical audit service, which exists in order to prevent cases when unwell worked out product, or, figuratively speaking, semi-finished production appears on the network; also production inspections and acceptance control are being organised at the suppliers’ enterprises. A huge number of irregularities are discovered as early as at the designing stage; also when the design is going to the manufacturing site; while obligatory tests are taking place, when ordered items are manufactured; and after the production has been delivered to the destination and being used. As known, there is no more or less significant enterprise in railway engineering, which would have an effective quality management system, or would master at least simplest modern methods in this area. Creation of qualitatively new railway machinery is possible only on the basis of innovative approaches and worldwide recognised methods of business management; therefore RZD supports and will give a priority to the manufacturers who are gradually starting to follow the requirements of international standards ISO, and after that of IRIS.
– Does RZD have mechanisms to support the leading domestic cargo wagon-building enterprises during this difficult for them economic period?
– RZD does not only support the leading domestic cargo wagon building enterprises, such as Uralvagonzavod, the Wagon-Building Company of Mordovia, Altayvagon and Promtraktorvagon, but new wagon building plants as well. Among absolutely fresh examples I can remember the Tikhvin Wagon-Building Plant, Novokuznetsk Wagon-Building Plant, Orsk Wagon-Building Plant, Bryanskvagonmash, and others.

Open to Innovations

– What do domestic manufacturers consider to be a crucial technical advantage in the Siemens’ and Bombardier’s locomotives? How will a service be organised for the purchased from them items?
– Yes, it is necessary to recognise that despite a considerable growth in purchases of the new domestic rolling stock for the last few years, its technical and technological level is still essentially lagging behind the best world models. The contracts with the leading world manufacturers of railway machines, such as Siemens, Alstom and Bombardier, allow Russian transport machinery engineers to get an access to the world class modern technologies. Usually contracts do not provide a purchase of an assembled railway machine, only its units, systems and parts are supplied, which are not having their analogues in the domestic industry; and also the program of localising manufacturing facilities on the territory of the Russian Federation. Cooperation with foreign manufacturers allows our transport engineers to master manufacturing of modern accessories, to reduce the backlog from the world level, and RZD receives economically effective, modern rolling stock. As regards the service, it is, for example, stipulated that the manufactured by Siemens high-speed electric trains “Sapsan” will be serviced during the whole of their life cycle. According to the contract, the whole responsibility for the maintenance service and repair of the “Sapsan” trains lays with the company Siemens AG. RZD, from its part, bears the responsibility for cleaning and equipping the trains. Also, in order to provide maintenance of the “Sapsan” trains, RZD will send its workers who have had theoretical and practical training in Siemens AG, to work under the management of its German colleagues.
– What stage is the Alstom’s and Transmashholding’s joint project to produce two-storied carriages now at? When will the first carriage pass certification and appear on RZD’s network?
– In 2009, a technical specification was approved to produce a new model of two-storied passenger carriages of locomotive traction, with first-class and second-class sleeping compartments and staff compartments. The technical specification was developed by TMH-Alstom DV and TVZ, where TVZ was the main developer. Alstom Transport’s participation included technical support in the realisation of the project. The peculiarity of such support is that it is not planned to deliver separate carriages, but trains will be supplied, which consist of various carriages. In the framework of realisation the innovative technical policy, TMH has created the first pre-production model, which is a prototype of the two-storied carriage. It is currently passing preliminary approbation on the basis of the Tver Institute for Railway Carriage Manufacturing.
Following the results of all the prototype’s tests, a staff compartment carriage will be manufactured in the first quarter of 2010, then a dining-carriage and a second-class compartment carriage is planned. Expected time when the full complex of testing pre-production models will be completed is the middle of 2011, and the first 16-carriages trains will be released in the fourth quarter of 2011. The first train is planned to be put into operation in the beginning of 2012.
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РЖД-Партнер

The “Test Drive” Is Moving Towards Completion

 Last summer a trial run was done from Moscow to St Petersburg by “Sapsan”, the first high-speed train in Russia. It will be put into regular commercial service in December this year. Now company managers are carrying out further technical tests and certification of the new train’s components. The work of “Sapsan” is currently attracting everybody’s attention because its successful operation will start the large-scale construction of high-speed lines, in which European suppliers can take part as well.
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Why “Moscow - St Petersburg”?

Here we remind readers that the first completed high-speed railway project which is to use “Sapsan” will be on the route from Moscow to St Petersburg. This direction was not chosen by chance. Moscow and St Petersburg are the two business capitals in the country. About 25 million people live in these two cities and their suburbs, which is 18% of the population of the Russian Federation, and almost a quarter of the national GDP is generated here. The total cost of time saved by the introduction of high-speed movement on this route will be about RUR 940 billion annually. According to forecasts, the passenger flow here is going to grow, and about 9.1 million passengers will use rail and air transport on this route in 2010. Railwaymen have estimated that if the high-speed service is organised on this section, then 8.6 million people will use rail transport.
In the first stage, the speed will be about 250 kph and the distance will be covered in 3 hours 45 minutes instead of 4 hours 30 minutes, which is among the main advantages of trains. This way they compete with air transport. To compare: travelling from the centre of Moscow to the centre of St Petersburg using air transport takes at least 5 hours, considering the journey to and from the airport, check-in for the flight and the flight itself.
The agreement between RZD and the company Transport Systems (100% Russian subsidiary of Siemens) on the first engineering design stage of fast and high-speed trains was concluded on April 11th, 2005 in the framework of the Hanover Fair 2005, in presence of Vladmir Putin, Ex-President of the Russian Federation, and Gerhard Schröder, then Federal Chancellor of Germany.
Almost a year later, on May 18th, 2006, during the International Business Forum “Strategic Partnership-1520”, Vladimir Yakunin and Hans Schabert, President of Siemens Transportation Systems Group, signed a 276 million euro contract for the delivery to Russia of eight high-speed electric trains “Velaro RUS”. In April 2007, the 354.1 million euro train technical service contract was signed for 30 years. The ordered quantity of rolling stock is eight ten-carriage high-speed electric trains, four of them are DC type and the other four are based on AC technology.
The train design allows for increasing speeds up to 330 kph. Each 250 metre--long electric train will consist of ten carriages and will be able to take 600 passengers. Rolling stock matches the Russian broad gauge (1520 mm) and is 33 cm wider than the ICE 3 high-speed trains used in Germany. “Sapsan” has two types of carriage, the tourist class and the business class. Interiors are equipped with modern air conditioning systems and ergonomic chairs. There are two seats for passengers with disabilities. During the journey passengers can use the services of a bistro.

The Falcon Is Flying to Russia

In Russia the train has received the name “Sapsan”, in honour of the fastest bird on the planet. Sapsan, or a real falcon, belongs to the family of falcons and is able to reach a speed of 322 kph, or 90 m per second. The first of the eight ordered trains was introduced in Russia in December 2008, in St Petersburg. Here we note that three of the eight ordered trains will be plying the routes between St Petersburg and Moscow and between Moscow and Nizhny Novgorod. Works which will allow for increasing speeds to 160 kph have also already been started between Moscow and Nizhni Novgorod.
In May “Sapsan” was successfully tested on the railroad section between Okulovka and Mstinsky Most. It was assumed that, in order to check the bogie and electrical systems, a train will reach a speed up to 275 kph, which is 10% more than the maximum operational speed. However, after passing this section, the new rolling stock presented a surprise to the “test drive” participants, having passed this stretch at a speed of 281 kph. “Such a speed was reached on Russian railways for the first time,” said Valentin Gapanovich, Senior Vice President of RZD. “The tests we made have shown that, on a regular basis, the train can ply the rail at a speed of up to 200 kph, and in some sections up to 250 kph. It will make such a speed on the greater part of 645 km line between Moscow and St Petersburg, precisely speaking, on the 586 km stretch from Kryukovo station up to the station of Kolpino. And the speed can be increased to 230 kph after modernisation of the infrastructure,” says RZD.
The train made its first run between the two main cities of Russia this year, on July 30th. And the first commercial run is expected on December 18th. Exact ticket costs are not yet clear - marketing research is going on now. But, Vladimir Yakunin, President of RZD said that, at least at the first stage, the journey in a high-speed train will be cheaper than a flight in an economy seat. The president of RZD added that prices later on will depend on the satisfaction of passengers with the service. Representatives of the company say that tourist economy class tickets may cost from RUR 3,300 to RUR 3,900 and business class from RUR 5,000 to RUR 6,000.
Today, four niches have been reserved in the railway timetable for “Sapsan” round trips. Two of them will be used from the very beginning, one in the morning, and one in the evening. Mr Yakunin thinks that both trains will be almost 100% booked.

The Trial Runs Face Complications

Today there is practically no information about intermediate results in trial runs of the new train. The only known fact is that tests are continuing, and that those technical malfunctions found in the course of those tests are being removed. Those who are involved in this process do not reveal what kind of surprises the new train was showing railwaymen, voicing only general points, such as: “This is a new joint venture train, which we have worked out together with our German colleagues. Note that there has never been such a rolling stock in Russia before. So, consequently, “Sapsan” is a kind of first-born. There is a process of a trial operation, where, certainly, some roughness and deviations from technological specifications are revealed. These situations are being resolved together with our German partners. For example, there are some technical details which had not been considered when the contract was made with suppliers. These have been found and are being worked out right here. There were also “surprises” which our German partners did not even know about. They have all been improved quickly and to a high specification. The complications arising are insignificant. Generally speaking, the train is fine and suitable for putting on the route,” one expert from RZD told us on condition of anonymity. The only thing which the representatives of the transport monopoly are speaking about more frankly is when the process of trial runs will be finished.
Maria Shevchenko [~DETAIL_TEXT] =>

Why “Moscow - St Petersburg”?

Here we remind readers that the first completed high-speed railway project which is to use “Sapsan” will be on the route from Moscow to St Petersburg. This direction was not chosen by chance. Moscow and St Petersburg are the two business capitals in the country. About 25 million people live in these two cities and their suburbs, which is 18% of the population of the Russian Federation, and almost a quarter of the national GDP is generated here. The total cost of time saved by the introduction of high-speed movement on this route will be about RUR 940 billion annually. According to forecasts, the passenger flow here is going to grow, and about 9.1 million passengers will use rail and air transport on this route in 2010. Railwaymen have estimated that if the high-speed service is organised on this section, then 8.6 million people will use rail transport.
In the first stage, the speed will be about 250 kph and the distance will be covered in 3 hours 45 minutes instead of 4 hours 30 minutes, which is among the main advantages of trains. This way they compete with air transport. To compare: travelling from the centre of Moscow to the centre of St Petersburg using air transport takes at least 5 hours, considering the journey to and from the airport, check-in for the flight and the flight itself.
The agreement between RZD and the company Transport Systems (100% Russian subsidiary of Siemens) on the first engineering design stage of fast and high-speed trains was concluded on April 11th, 2005 in the framework of the Hanover Fair 2005, in presence of Vladmir Putin, Ex-President of the Russian Federation, and Gerhard Schröder, then Federal Chancellor of Germany.
Almost a year later, on May 18th, 2006, during the International Business Forum “Strategic Partnership-1520”, Vladimir Yakunin and Hans Schabert, President of Siemens Transportation Systems Group, signed a 276 million euro contract for the delivery to Russia of eight high-speed electric trains “Velaro RUS”. In April 2007, the 354.1 million euro train technical service contract was signed for 30 years. The ordered quantity of rolling stock is eight ten-carriage high-speed electric trains, four of them are DC type and the other four are based on AC technology.
The train design allows for increasing speeds up to 330 kph. Each 250 metre--long electric train will consist of ten carriages and will be able to take 600 passengers. Rolling stock matches the Russian broad gauge (1520 mm) and is 33 cm wider than the ICE 3 high-speed trains used in Germany. “Sapsan” has two types of carriage, the tourist class and the business class. Interiors are equipped with modern air conditioning systems and ergonomic chairs. There are two seats for passengers with disabilities. During the journey passengers can use the services of a bistro.

The Falcon Is Flying to Russia

In Russia the train has received the name “Sapsan”, in honour of the fastest bird on the planet. Sapsan, or a real falcon, belongs to the family of falcons and is able to reach a speed of 322 kph, or 90 m per second. The first of the eight ordered trains was introduced in Russia in December 2008, in St Petersburg. Here we note that three of the eight ordered trains will be plying the routes between St Petersburg and Moscow and between Moscow and Nizhny Novgorod. Works which will allow for increasing speeds to 160 kph have also already been started between Moscow and Nizhni Novgorod.
In May “Sapsan” was successfully tested on the railroad section between Okulovka and Mstinsky Most. It was assumed that, in order to check the bogie and electrical systems, a train will reach a speed up to 275 kph, which is 10% more than the maximum operational speed. However, after passing this section, the new rolling stock presented a surprise to the “test drive” participants, having passed this stretch at a speed of 281 kph. “Such a speed was reached on Russian railways for the first time,” said Valentin Gapanovich, Senior Vice President of RZD. “The tests we made have shown that, on a regular basis, the train can ply the rail at a speed of up to 200 kph, and in some sections up to 250 kph. It will make such a speed on the greater part of 645 km line between Moscow and St Petersburg, precisely speaking, on the 586 km stretch from Kryukovo station up to the station of Kolpino. And the speed can be increased to 230 kph after modernisation of the infrastructure,” says RZD.
The train made its first run between the two main cities of Russia this year, on July 30th. And the first commercial run is expected on December 18th. Exact ticket costs are not yet clear - marketing research is going on now. But, Vladimir Yakunin, President of RZD said that, at least at the first stage, the journey in a high-speed train will be cheaper than a flight in an economy seat. The president of RZD added that prices later on will depend on the satisfaction of passengers with the service. Representatives of the company say that tourist economy class tickets may cost from RUR 3,300 to RUR 3,900 and business class from RUR 5,000 to RUR 6,000.
Today, four niches have been reserved in the railway timetable for “Sapsan” round trips. Two of them will be used from the very beginning, one in the morning, and one in the evening. Mr Yakunin thinks that both trains will be almost 100% booked.

The Trial Runs Face Complications

Today there is practically no information about intermediate results in trial runs of the new train. The only known fact is that tests are continuing, and that those technical malfunctions found in the course of those tests are being removed. Those who are involved in this process do not reveal what kind of surprises the new train was showing railwaymen, voicing only general points, such as: “This is a new joint venture train, which we have worked out together with our German colleagues. Note that there has never been such a rolling stock in Russia before. So, consequently, “Sapsan” is a kind of first-born. There is a process of a trial operation, where, certainly, some roughness and deviations from technological specifications are revealed. These situations are being resolved together with our German partners. For example, there are some technical details which had not been considered when the contract was made with suppliers. These have been found and are being worked out right here. There were also “surprises” which our German partners did not even know about. They have all been improved quickly and to a high specification. The complications arising are insignificant. Generally speaking, the train is fine and suitable for putting on the route,” one expert from RZD told us on condition of anonymity. The only thing which the representatives of the transport monopoly are speaking about more frankly is when the process of trial runs will be finished.
Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Last summer a trial run was done from Moscow to St Petersburg by “Sapsan”, the first high-speed train in Russia. It will be put into regular commercial service in December this year. Now company managers are carrying out further technical tests and certification of the new train’s components. The work of “Sapsan” is currently attracting everybody’s attention because its successful operation will start the large-scale construction of high-speed lines, in which European suppliers can take part as well. [~PREVIEW_TEXT] =>  Last summer a trial run was done from Moscow to St Petersburg by “Sapsan”, the first high-speed train in Russia. It will be put into regular commercial service in December this year. Now company managers are carrying out further technical tests and certification of the new train’s components. The work of “Sapsan” is currently attracting everybody’s attention because its successful operation will start the large-scale construction of high-speed lines, in which European suppliers can take part as well. 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Why “Moscow - St Petersburg”?

Here we remind readers that the first completed high-speed railway project which is to use “Sapsan” will be on the route from Moscow to St Petersburg. This direction was not chosen by chance. Moscow and St Petersburg are the two business capitals in the country. About 25 million people live in these two cities and their suburbs, which is 18% of the population of the Russian Federation, and almost a quarter of the national GDP is generated here. The total cost of time saved by the introduction of high-speed movement on this route will be about RUR 940 billion annually. According to forecasts, the passenger flow here is going to grow, and about 9.1 million passengers will use rail and air transport on this route in 2010. Railwaymen have estimated that if the high-speed service is organised on this section, then 8.6 million people will use rail transport.
In the first stage, the speed will be about 250 kph and the distance will be covered in 3 hours 45 minutes instead of 4 hours 30 minutes, which is among the main advantages of trains. This way they compete with air transport. To compare: travelling from the centre of Moscow to the centre of St Petersburg using air transport takes at least 5 hours, considering the journey to and from the airport, check-in for the flight and the flight itself.
The agreement between RZD and the company Transport Systems (100% Russian subsidiary of Siemens) on the first engineering design stage of fast and high-speed trains was concluded on April 11th, 2005 in the framework of the Hanover Fair 2005, in presence of Vladmir Putin, Ex-President of the Russian Federation, and Gerhard Schröder, then Federal Chancellor of Germany.
Almost a year later, on May 18th, 2006, during the International Business Forum “Strategic Partnership-1520”, Vladimir Yakunin and Hans Schabert, President of Siemens Transportation Systems Group, signed a 276 million euro contract for the delivery to Russia of eight high-speed electric trains “Velaro RUS”. In April 2007, the 354.1 million euro train technical service contract was signed for 30 years. The ordered quantity of rolling stock is eight ten-carriage high-speed electric trains, four of them are DC type and the other four are based on AC technology.
The train design allows for increasing speeds up to 330 kph. Each 250 metre--long electric train will consist of ten carriages and will be able to take 600 passengers. Rolling stock matches the Russian broad gauge (1520 mm) and is 33 cm wider than the ICE 3 high-speed trains used in Germany. “Sapsan” has two types of carriage, the tourist class and the business class. Interiors are equipped with modern air conditioning systems and ergonomic chairs. There are two seats for passengers with disabilities. During the journey passengers can use the services of a bistro.

The Falcon Is Flying to Russia

In Russia the train has received the name “Sapsan”, in honour of the fastest bird on the planet. Sapsan, or a real falcon, belongs to the family of falcons and is able to reach a speed of 322 kph, or 90 m per second. The first of the eight ordered trains was introduced in Russia in December 2008, in St Petersburg. Here we note that three of the eight ordered trains will be plying the routes between St Petersburg and Moscow and between Moscow and Nizhny Novgorod. Works which will allow for increasing speeds to 160 kph have also already been started between Moscow and Nizhni Novgorod.
In May “Sapsan” was successfully tested on the railroad section between Okulovka and Mstinsky Most. It was assumed that, in order to check the bogie and electrical systems, a train will reach a speed up to 275 kph, which is 10% more than the maximum operational speed. However, after passing this section, the new rolling stock presented a surprise to the “test drive” participants, having passed this stretch at a speed of 281 kph. “Such a speed was reached on Russian railways for the first time,” said Valentin Gapanovich, Senior Vice President of RZD. “The tests we made have shown that, on a regular basis, the train can ply the rail at a speed of up to 200 kph, and in some sections up to 250 kph. It will make such a speed on the greater part of 645 km line between Moscow and St Petersburg, precisely speaking, on the 586 km stretch from Kryukovo station up to the station of Kolpino. And the speed can be increased to 230 kph after modernisation of the infrastructure,” says RZD.
The train made its first run between the two main cities of Russia this year, on July 30th. And the first commercial run is expected on December 18th. Exact ticket costs are not yet clear - marketing research is going on now. But, Vladimir Yakunin, President of RZD said that, at least at the first stage, the journey in a high-speed train will be cheaper than a flight in an economy seat. The president of RZD added that prices later on will depend on the satisfaction of passengers with the service. Representatives of the company say that tourist economy class tickets may cost from RUR 3,300 to RUR 3,900 and business class from RUR 5,000 to RUR 6,000.
Today, four niches have been reserved in the railway timetable for “Sapsan” round trips. Two of them will be used from the very beginning, one in the morning, and one in the evening. Mr Yakunin thinks that both trains will be almost 100% booked.

The Trial Runs Face Complications

Today there is practically no information about intermediate results in trial runs of the new train. The only known fact is that tests are continuing, and that those technical malfunctions found in the course of those tests are being removed. Those who are involved in this process do not reveal what kind of surprises the new train was showing railwaymen, voicing only general points, such as: “This is a new joint venture train, which we have worked out together with our German colleagues. Note that there has never been such a rolling stock in Russia before. So, consequently, “Sapsan” is a kind of first-born. There is a process of a trial operation, where, certainly, some roughness and deviations from technological specifications are revealed. These situations are being resolved together with our German partners. For example, there are some technical details which had not been considered when the contract was made with suppliers. These have been found and are being worked out right here. There were also “surprises” which our German partners did not even know about. They have all been improved quickly and to a high specification. The complications arising are insignificant. Generally speaking, the train is fine and suitable for putting on the route,” one expert from RZD told us on condition of anonymity. The only thing which the representatives of the transport monopoly are speaking about more frankly is when the process of trial runs will be finished.
Maria Shevchenko [~DETAIL_TEXT] =>

Why “Moscow - St Petersburg”?

Here we remind readers that the first completed high-speed railway project which is to use “Sapsan” will be on the route from Moscow to St Petersburg. This direction was not chosen by chance. Moscow and St Petersburg are the two business capitals in the country. About 25 million people live in these two cities and their suburbs, which is 18% of the population of the Russian Federation, and almost a quarter of the national GDP is generated here. The total cost of time saved by the introduction of high-speed movement on this route will be about RUR 940 billion annually. According to forecasts, the passenger flow here is going to grow, and about 9.1 million passengers will use rail and air transport on this route in 2010. Railwaymen have estimated that if the high-speed service is organised on this section, then 8.6 million people will use rail transport.
In the first stage, the speed will be about 250 kph and the distance will be covered in 3 hours 45 minutes instead of 4 hours 30 minutes, which is among the main advantages of trains. This way they compete with air transport. To compare: travelling from the centre of Moscow to the centre of St Petersburg using air transport takes at least 5 hours, considering the journey to and from the airport, check-in for the flight and the flight itself.
The agreement between RZD and the company Transport Systems (100% Russian subsidiary of Siemens) on the first engineering design stage of fast and high-speed trains was concluded on April 11th, 2005 in the framework of the Hanover Fair 2005, in presence of Vladmir Putin, Ex-President of the Russian Federation, and Gerhard Schröder, then Federal Chancellor of Germany.
Almost a year later, on May 18th, 2006, during the International Business Forum “Strategic Partnership-1520”, Vladimir Yakunin and Hans Schabert, President of Siemens Transportation Systems Group, signed a 276 million euro contract for the delivery to Russia of eight high-speed electric trains “Velaro RUS”. In April 2007, the 354.1 million euro train technical service contract was signed for 30 years. The ordered quantity of rolling stock is eight ten-carriage high-speed electric trains, four of them are DC type and the other four are based on AC technology.
The train design allows for increasing speeds up to 330 kph. Each 250 metre--long electric train will consist of ten carriages and will be able to take 600 passengers. Rolling stock matches the Russian broad gauge (1520 mm) and is 33 cm wider than the ICE 3 high-speed trains used in Germany. “Sapsan” has two types of carriage, the tourist class and the business class. Interiors are equipped with modern air conditioning systems and ergonomic chairs. There are two seats for passengers with disabilities. During the journey passengers can use the services of a bistro.

The Falcon Is Flying to Russia

In Russia the train has received the name “Sapsan”, in honour of the fastest bird on the planet. Sapsan, or a real falcon, belongs to the family of falcons and is able to reach a speed of 322 kph, or 90 m per second. The first of the eight ordered trains was introduced in Russia in December 2008, in St Petersburg. Here we note that three of the eight ordered trains will be plying the routes between St Petersburg and Moscow and between Moscow and Nizhny Novgorod. Works which will allow for increasing speeds to 160 kph have also already been started between Moscow and Nizhni Novgorod.
In May “Sapsan” was successfully tested on the railroad section between Okulovka and Mstinsky Most. It was assumed that, in order to check the bogie and electrical systems, a train will reach a speed up to 275 kph, which is 10% more than the maximum operational speed. However, after passing this section, the new rolling stock presented a surprise to the “test drive” participants, having passed this stretch at a speed of 281 kph. “Such a speed was reached on Russian railways for the first time,” said Valentin Gapanovich, Senior Vice President of RZD. “The tests we made have shown that, on a regular basis, the train can ply the rail at a speed of up to 200 kph, and in some sections up to 250 kph. It will make such a speed on the greater part of 645 km line between Moscow and St Petersburg, precisely speaking, on the 586 km stretch from Kryukovo station up to the station of Kolpino. And the speed can be increased to 230 kph after modernisation of the infrastructure,” says RZD.
The train made its first run between the two main cities of Russia this year, on July 30th. And the first commercial run is expected on December 18th. Exact ticket costs are not yet clear - marketing research is going on now. But, Vladimir Yakunin, President of RZD said that, at least at the first stage, the journey in a high-speed train will be cheaper than a flight in an economy seat. The president of RZD added that prices later on will depend on the satisfaction of passengers with the service. Representatives of the company say that tourist economy class tickets may cost from RUR 3,300 to RUR 3,900 and business class from RUR 5,000 to RUR 6,000.
Today, four niches have been reserved in the railway timetable for “Sapsan” round trips. Two of them will be used from the very beginning, one in the morning, and one in the evening. Mr Yakunin thinks that both trains will be almost 100% booked.

The Trial Runs Face Complications

Today there is practically no information about intermediate results in trial runs of the new train. The only known fact is that tests are continuing, and that those technical malfunctions found in the course of those tests are being removed. Those who are involved in this process do not reveal what kind of surprises the new train was showing railwaymen, voicing only general points, such as: “This is a new joint venture train, which we have worked out together with our German colleagues. Note that there has never been such a rolling stock in Russia before. So, consequently, “Sapsan” is a kind of first-born. There is a process of a trial operation, where, certainly, some roughness and deviations from technological specifications are revealed. These situations are being resolved together with our German partners. For example, there are some technical details which had not been considered when the contract was made with suppliers. These have been found and are being worked out right here. There were also “surprises” which our German partners did not even know about. They have all been improved quickly and to a high specification. The complications arising are insignificant. Generally speaking, the train is fine and suitable for putting on the route,” one expert from RZD told us on condition of anonymity. The only thing which the representatives of the transport monopoly are speaking about more frankly is when the process of trial runs will be finished.
Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Last summer a trial run was done from Moscow to St Petersburg by “Sapsan”, the first high-speed train in Russia. It will be put into regular commercial service in December this year. Now company managers are carrying out further technical tests and certification of the new train’s components. The work of “Sapsan” is currently attracting everybody’s attention because its successful operation will start the large-scale construction of high-speed lines, in which European suppliers can take part as well. [~PREVIEW_TEXT] =>  Last summer a trial run was done from Moscow to St Petersburg by “Sapsan”, the first high-speed train in Russia. It will be put into regular commercial service in December this year. Now company managers are carrying out further technical tests and certification of the new train’s components. The work of “Sapsan” is currently attracting everybody’s attention because its successful operation will start the large-scale construction of high-speed lines, in which European suppliers can take part as well. 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РЖД-Партнер

2009: Warehouse logistics is no longer the focus of attention

 Warehouse real estate in central Russia is not going through the best of times.
The share of vacant premises in the warehouse real estate market has reached
a record level of 34%. Just a year ago experts spoke about a warehouse boom
and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it.
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A year ago

When there was a shortage in warehouses, experts estimated that, at that time, developers commissioned about 50% of warehouses which had been declared earlier to be built on Russian territory. The demand was 1.5 times higher than the number of offered warehouse premises, and lease contracts were signed long before construction was finished and the premises were commissioned.
Such a tendency to commission not more than a half of the declared sites continued for about five years, from 2003 to 2008. Experts think that there were two reasons for this, the shortage of land for construction and the shortage of investment, when prices for land and building materials were growing.
As a result of such a state of affairs, rent rates for this kind of commercial real estate were constantly growing. Simultaneously, it is good to note that the profitability of warehouses in Russia was about 15%, twice as high as in Europe.
Thus, in 2007 rent rates grew by 10% and reached the European level in the Central region. In 2008 this situation was repeated. Average rent rates for quality warehouse complexes hit $ 130 per square metre a year (excluding VAT and operational costs), with consideration of $ 30-40 per square metre a year operational costs for A-class warehouses. Because of the severe shortage in supply, B-class warehouse rent rates barely differed from A-class warehouse rates.
Experts hold that, at that time, the growth in rates was caused by the growth in land prices and by falls in warehouse real estate profitability. In 2007 the cost of construction was $ 1,000 for one square metre (annual income was about 15%; the recoupment time about eight years), and in 2006 it was $ 800 (recoupment time six years).

Time to keep a cool head

But this year the market situation has dramatically changed. During the first half of 2009, tendencies were noticed which had never been seen in the Russian market before. Turnover in the retail sector shrank in the second quarter by 3% - 5% in comparison with the same period last year. Cargo turnover in transport kept shrinking throughout the first half of the year. And from January 2009 the figures in growth charts became negative in the motor transport sector, the one most sensitive to end users’ demand.
Also, the Russian warehouse real estate market lost its attractiveness with foreign investors. Some of them have left this sector, and others have frozen their projects and focused just on those projects which were in their finishing stages.
Developers have started quitting regional projects. They prefer to finish those in the Moscow region, where the economy, as everybody thinks, will start recovering earlier than others. In comparison with the planned volumes, the warehouse construction is expected to shrink more than three-fold by the end of this year in Moscow region, and four-fold across the whole of Russia. At the moment, only the largest network developers are still working in the regions.
The growth in supply of quality real estate is currently created mainly because tenants are leaving the rented premises and started projects are finishing.
Short-term (1 to 3 years) direct rent supply in A-class warehouse complexes have appeared on the market. Simultaneously, it became possible to conclude RUR contracts in some areas, or to fix minimum or maximum currency rate limits in rent contracts for one or two years.

Exceptions in Central Russia

According to Knight Frank Research, the situation with warehouse real estate in Moscow in the first half of 2009 was the following: total supply in all classes was 9.22 million square metres, 5.28 million square metres of them were high quality real estate. The total A-class offer was 3.48 million sq metres, with 1.80 million of B-class.
321,000 square metres of real estate has been built for the first half of 2009, and 337,000 square metres is planned to be commissioned. Thus, total new warehouse area in 2009 is more than 600,000 square metres, which is similar to the respective figures in 2006 and 2008.
There are no more than 8-9% of vacant areas in A and B-class warehouses, which is approximately 380,000 square metres.
Rent rates are from $ 100 to $ 120 per square metre a year in the A-class and from $ 70 to $ 90 in the B-class, without VAT and operational costs (which are about one third of the rent rate) and municipal payments. Thus, the rent rates have returned to the level of 2005 and 2006, which is 20% to 30% lower than those of the third quarter of 2008.
In the first half of 2009 the demand fell by 40% in comparison with the same period of 2008, but it is still higher than in 2006. Simultaneously, the average demanded warehouse area has shrunk from 8,000 to 3,000 square metres.
As regards the forecast for the end of the year for the central Russia, experts note that so far there are no preconditions for the demand to be increased for the quality warehouses. If the situation in the economy stabilises, it is possible to expect that demand for quality premises will grow in the beginning of 2010, while the level of vacant areas will remain stable due to tenants leaving premises. Rent rates in complexes of different classes will be stipulated in different currencies. For example, fixed RUR rates will continue to be offered for two or three years in lower quality complexes, while in high-quality complexes the rate will be mostly estimated in currency of loans which had been used for the construction of the site. In such cases the level of rent rates is defined during negotiations and depends on the area of the rented premises, the rent term, the stability of the tenant’s business, quality of the site and some other parameters. Further considerable decreases in rent rates in quality warehouses before the end of 2009 are not expected.
Speaking about St Petersburg, the warehouse market started to develop in this city later than all other sectors, such as residential, office and commercial real estate, and consequently, the most active commissioning of warehouses in St Petersburg was in 2008. About 1.4 million square metres of warehouses were put into operation in 2008, which is 46% more than in 2007.
Experts say that more than 5 million square metres of warehouse premises of different classes were in St Petersburg at that time, and more than six million square metres including suburbs. The shortage in warehouse space was about 1.5 million square metres.
The A- and B-class warehouses constituted about 10% of the total premises offered, however it was expected, that, due to re-equipment, the share of A and B-class premises would be increased to 20% - 30% of the total market offer in the next 2 or 3 years. Occupancy of A and B-class warehouses was close to 100%, and the average size of inquiry about rent was from 2,500 square metres to 6,000 square metres.
However, by the end of 2008 the share of the vacant areas was already about 25%. According to Knight Frank Research, the figures for the first half of 2009 in St Petersburg were as follows: the total amount of quality areas was 1.57 million square metres, including 901,200 square metres of A-class and 670,000 square metres of B-class. 835,500 square metres of the quality areas were leased, including 624,600 square metres of A-class and 210,900 square metres of B-class. 94,200 square metres of A-class and 22,200 square metres of B-class premises were put into operation in the first half of 2009. The share of the vacant areas was 36.2% and 13.4% respectively. The reason for the growth in the share of vacant warehouses is that many tenants had decided to exchange A-class and B-class premises for C-class.
Rent rates (triple net) became USD 110 – USD 130 (A) and USD 90 – USD 115 (B) per square metre a year; and rates for operational charges were USD 37 – USD 42 (A) and USD 35 – USD 40 (B) per square metre a year.
There are similar tendencies in Moscow and St Petersburg: because most developers are facing problems with financing and it is not clear when former demand will be restored, the realisation of warehouse projects has been suspended. Secondary warehouse rent offers have appeared in the market and rent rates according to these offers are considerably lower than average market prices. Generally, the level of solvent demand in the market has been seriously reduced, which is caused, first of all, by the fundamental decrease in the turnover in commercial activities and industrial enterprises. Tenants are tending to change commercial conditions as per the current market situation and prefer to only consider those sites which have already been put into operation. Thus in the first half 2009 not a single rent contract was concluded before the premises were commissioned.
There are also tougher measures. In crisis conditions many companies are trying hard to minimise their costs. Therefore warehouse owners could always face the situation when the tenants, despite all possible penal sanctions, will terminate contracts and leave for those landlords which are offering lower prices. “Actually, in the present situation tenants are in a more advantageous position than warehouse owners. Commercial activity in the market has shrunk, but there are enough warehouses to satisfy the demand,” emphasises David Hessler, Director for Supply Chain Services in CIS, JTI.
There are exceptions from the rules, both in Moscow and St Petersburg. Thus Finnish network Prisma continues opening shops and is planning to start its own logistics centre in Russia. Vesa Punnonen, President of the Finnish corporation SOK Retail International says that currently the company is searching for suitable land to start a logistics centre. The project will be triggered when 10 sites are in the network (four Prisma shops are working in St Petersburg at the moment). Before 2015 the retailer is planning to have 15 to 20 sites in the St Petersburg and Leningrad region, and a total of 20 to 30 shops across Russia.
Another St Petersburg exception from the rules is going to be the cluster of car components which is currently being created, and also the relocation of customs terminals from Moscow to the border. But nobody can say with confidence how long it is going to take for exceptions to grow into trends. Analysts think that from one-and-a-half to two years will be needed to fill the currently vacant areas. But it does not mean that the construction of new warehouses will be started within this period.
Alexey Strigin [~DETAIL_TEXT] =>

A year ago

When there was a shortage in warehouses, experts estimated that, at that time, developers commissioned about 50% of warehouses which had been declared earlier to be built on Russian territory. The demand was 1.5 times higher than the number of offered warehouse premises, and lease contracts were signed long before construction was finished and the premises were commissioned.
Such a tendency to commission not more than a half of the declared sites continued for about five years, from 2003 to 2008. Experts think that there were two reasons for this, the shortage of land for construction and the shortage of investment, when prices for land and building materials were growing.
As a result of such a state of affairs, rent rates for this kind of commercial real estate were constantly growing. Simultaneously, it is good to note that the profitability of warehouses in Russia was about 15%, twice as high as in Europe.
Thus, in 2007 rent rates grew by 10% and reached the European level in the Central region. In 2008 this situation was repeated. Average rent rates for quality warehouse complexes hit $ 130 per square metre a year (excluding VAT and operational costs), with consideration of $ 30-40 per square metre a year operational costs for A-class warehouses. Because of the severe shortage in supply, B-class warehouse rent rates barely differed from A-class warehouse rates.
Experts hold that, at that time, the growth in rates was caused by the growth in land prices and by falls in warehouse real estate profitability. In 2007 the cost of construction was $ 1,000 for one square metre (annual income was about 15%; the recoupment time about eight years), and in 2006 it was $ 800 (recoupment time six years).

Time to keep a cool head

But this year the market situation has dramatically changed. During the first half of 2009, tendencies were noticed which had never been seen in the Russian market before. Turnover in the retail sector shrank in the second quarter by 3% - 5% in comparison with the same period last year. Cargo turnover in transport kept shrinking throughout the first half of the year. And from January 2009 the figures in growth charts became negative in the motor transport sector, the one most sensitive to end users’ demand.
Also, the Russian warehouse real estate market lost its attractiveness with foreign investors. Some of them have left this sector, and others have frozen their projects and focused just on those projects which were in their finishing stages.
Developers have started quitting regional projects. They prefer to finish those in the Moscow region, where the economy, as everybody thinks, will start recovering earlier than others. In comparison with the planned volumes, the warehouse construction is expected to shrink more than three-fold by the end of this year in Moscow region, and four-fold across the whole of Russia. At the moment, only the largest network developers are still working in the regions.
The growth in supply of quality real estate is currently created mainly because tenants are leaving the rented premises and started projects are finishing.
Short-term (1 to 3 years) direct rent supply in A-class warehouse complexes have appeared on the market. Simultaneously, it became possible to conclude RUR contracts in some areas, or to fix minimum or maximum currency rate limits in rent contracts for one or two years.

Exceptions in Central Russia

According to Knight Frank Research, the situation with warehouse real estate in Moscow in the first half of 2009 was the following: total supply in all classes was 9.22 million square metres, 5.28 million square metres of them were high quality real estate. The total A-class offer was 3.48 million sq metres, with 1.80 million of B-class.
321,000 square metres of real estate has been built for the first half of 2009, and 337,000 square metres is planned to be commissioned. Thus, total new warehouse area in 2009 is more than 600,000 square metres, which is similar to the respective figures in 2006 and 2008.
There are no more than 8-9% of vacant areas in A and B-class warehouses, which is approximately 380,000 square metres.
Rent rates are from $ 100 to $ 120 per square metre a year in the A-class and from $ 70 to $ 90 in the B-class, without VAT and operational costs (which are about one third of the rent rate) and municipal payments. Thus, the rent rates have returned to the level of 2005 and 2006, which is 20% to 30% lower than those of the third quarter of 2008.
In the first half of 2009 the demand fell by 40% in comparison with the same period of 2008, but it is still higher than in 2006. Simultaneously, the average demanded warehouse area has shrunk from 8,000 to 3,000 square metres.
As regards the forecast for the end of the year for the central Russia, experts note that so far there are no preconditions for the demand to be increased for the quality warehouses. If the situation in the economy stabilises, it is possible to expect that demand for quality premises will grow in the beginning of 2010, while the level of vacant areas will remain stable due to tenants leaving premises. Rent rates in complexes of different classes will be stipulated in different currencies. For example, fixed RUR rates will continue to be offered for two or three years in lower quality complexes, while in high-quality complexes the rate will be mostly estimated in currency of loans which had been used for the construction of the site. In such cases the level of rent rates is defined during negotiations and depends on the area of the rented premises, the rent term, the stability of the tenant’s business, quality of the site and some other parameters. Further considerable decreases in rent rates in quality warehouses before the end of 2009 are not expected.
Speaking about St Petersburg, the warehouse market started to develop in this city later than all other sectors, such as residential, office and commercial real estate, and consequently, the most active commissioning of warehouses in St Petersburg was in 2008. About 1.4 million square metres of warehouses were put into operation in 2008, which is 46% more than in 2007.
Experts say that more than 5 million square metres of warehouse premises of different classes were in St Petersburg at that time, and more than six million square metres including suburbs. The shortage in warehouse space was about 1.5 million square metres.
The A- and B-class warehouses constituted about 10% of the total premises offered, however it was expected, that, due to re-equipment, the share of A and B-class premises would be increased to 20% - 30% of the total market offer in the next 2 or 3 years. Occupancy of A and B-class warehouses was close to 100%, and the average size of inquiry about rent was from 2,500 square metres to 6,000 square metres.
However, by the end of 2008 the share of the vacant areas was already about 25%. According to Knight Frank Research, the figures for the first half of 2009 in St Petersburg were as follows: the total amount of quality areas was 1.57 million square metres, including 901,200 square metres of A-class and 670,000 square metres of B-class. 835,500 square metres of the quality areas were leased, including 624,600 square metres of A-class and 210,900 square metres of B-class. 94,200 square metres of A-class and 22,200 square metres of B-class premises were put into operation in the first half of 2009. The share of the vacant areas was 36.2% and 13.4% respectively. The reason for the growth in the share of vacant warehouses is that many tenants had decided to exchange A-class and B-class premises for C-class.
Rent rates (triple net) became USD 110 – USD 130 (A) and USD 90 – USD 115 (B) per square metre a year; and rates for operational charges were USD 37 – USD 42 (A) and USD 35 – USD 40 (B) per square metre a year.
There are similar tendencies in Moscow and St Petersburg: because most developers are facing problems with financing and it is not clear when former demand will be restored, the realisation of warehouse projects has been suspended. Secondary warehouse rent offers have appeared in the market and rent rates according to these offers are considerably lower than average market prices. Generally, the level of solvent demand in the market has been seriously reduced, which is caused, first of all, by the fundamental decrease in the turnover in commercial activities and industrial enterprises. Tenants are tending to change commercial conditions as per the current market situation and prefer to only consider those sites which have already been put into operation. Thus in the first half 2009 not a single rent contract was concluded before the premises were commissioned.
There are also tougher measures. In crisis conditions many companies are trying hard to minimise their costs. Therefore warehouse owners could always face the situation when the tenants, despite all possible penal sanctions, will terminate contracts and leave for those landlords which are offering lower prices. “Actually, in the present situation tenants are in a more advantageous position than warehouse owners. Commercial activity in the market has shrunk, but there are enough warehouses to satisfy the demand,” emphasises David Hessler, Director for Supply Chain Services in CIS, JTI.
There are exceptions from the rules, both in Moscow and St Petersburg. Thus Finnish network Prisma continues opening shops and is planning to start its own logistics centre in Russia. Vesa Punnonen, President of the Finnish corporation SOK Retail International says that currently the company is searching for suitable land to start a logistics centre. The project will be triggered when 10 sites are in the network (four Prisma shops are working in St Petersburg at the moment). Before 2015 the retailer is planning to have 15 to 20 sites in the St Petersburg and Leningrad region, and a total of 20 to 30 shops across Russia.
Another St Petersburg exception from the rules is going to be the cluster of car components which is currently being created, and also the relocation of customs terminals from Moscow to the border. But nobody can say with confidence how long it is going to take for exceptions to grow into trends. Analysts think that from one-and-a-half to two years will be needed to fill the currently vacant areas. But it does not mean that the construction of new warehouses will be started within this period.
Alexey Strigin [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Warehouse real estate in central Russia is not going through the best of times.
The share of vacant premises in the warehouse real estate market has reached
a record level of 34%. Just a year ago experts spoke about a warehouse boom
and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. [~PREVIEW_TEXT] =>  Warehouse real estate in central Russia is not going through the best of times.
The share of vacant premises in the warehouse real estate market has reached
a record level of 34%. Just a year ago experts spoke about a warehouse boom
and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. 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src="/ufiles/image/rus/partner/2009/4/30.jpg" border="1" alt=" " hspace="5" width="200" height="301" align="left" />Warehouse real estate in central Russia is not going through the best of times. <br />The share of vacant premises in the warehouse real estate market has reached <br />a record level of 34%. Just a year ago experts spoke about a warehouse boom <br />and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. [ELEMENT_META_TITLE] => 2009: Warehouse logistics is no longer the focus of attention [ELEMENT_META_KEYWORDS] => 2009: warehouse logistics is no longer the focus of attention [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/4/30.jpg" border="1" alt=" " hspace="5" width="200" height="301" align="left" />Warehouse real estate in central Russia is not going through the best of times. <br />The share of vacant premises in the warehouse real estate market has reached <br />a record level of 34%. Just a year ago experts spoke about a warehouse boom <br />and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. 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A year ago

When there was a shortage in warehouses, experts estimated that, at that time, developers commissioned about 50% of warehouses which had been declared earlier to be built on Russian territory. The demand was 1.5 times higher than the number of offered warehouse premises, and lease contracts were signed long before construction was finished and the premises were commissioned.
Such a tendency to commission not more than a half of the declared sites continued for about five years, from 2003 to 2008. Experts think that there were two reasons for this, the shortage of land for construction and the shortage of investment, when prices for land and building materials were growing.
As a result of such a state of affairs, rent rates for this kind of commercial real estate were constantly growing. Simultaneously, it is good to note that the profitability of warehouses in Russia was about 15%, twice as high as in Europe.
Thus, in 2007 rent rates grew by 10% and reached the European level in the Central region. In 2008 this situation was repeated. Average rent rates for quality warehouse complexes hit $ 130 per square metre a year (excluding VAT and operational costs), with consideration of $ 30-40 per square metre a year operational costs for A-class warehouses. Because of the severe shortage in supply, B-class warehouse rent rates barely differed from A-class warehouse rates.
Experts hold that, at that time, the growth in rates was caused by the growth in land prices and by falls in warehouse real estate profitability. In 2007 the cost of construction was $ 1,000 for one square metre (annual income was about 15%; the recoupment time about eight years), and in 2006 it was $ 800 (recoupment time six years).

Time to keep a cool head

But this year the market situation has dramatically changed. During the first half of 2009, tendencies were noticed which had never been seen in the Russian market before. Turnover in the retail sector shrank in the second quarter by 3% - 5% in comparison with the same period last year. Cargo turnover in transport kept shrinking throughout the first half of the year. And from January 2009 the figures in growth charts became negative in the motor transport sector, the one most sensitive to end users’ demand.
Also, the Russian warehouse real estate market lost its attractiveness with foreign investors. Some of them have left this sector, and others have frozen their projects and focused just on those projects which were in their finishing stages.
Developers have started quitting regional projects. They prefer to finish those in the Moscow region, where the economy, as everybody thinks, will start recovering earlier than others. In comparison with the planned volumes, the warehouse construction is expected to shrink more than three-fold by the end of this year in Moscow region, and four-fold across the whole of Russia. At the moment, only the largest network developers are still working in the regions.
The growth in supply of quality real estate is currently created mainly because tenants are leaving the rented premises and started projects are finishing.
Short-term (1 to 3 years) direct rent supply in A-class warehouse complexes have appeared on the market. Simultaneously, it became possible to conclude RUR contracts in some areas, or to fix minimum or maximum currency rate limits in rent contracts for one or two years.

Exceptions in Central Russia

According to Knight Frank Research, the situation with warehouse real estate in Moscow in the first half of 2009 was the following: total supply in all classes was 9.22 million square metres, 5.28 million square metres of them were high quality real estate. The total A-class offer was 3.48 million sq metres, with 1.80 million of B-class.
321,000 square metres of real estate has been built for the first half of 2009, and 337,000 square metres is planned to be commissioned. Thus, total new warehouse area in 2009 is more than 600,000 square metres, which is similar to the respective figures in 2006 and 2008.
There are no more than 8-9% of vacant areas in A and B-class warehouses, which is approximately 380,000 square metres.
Rent rates are from $ 100 to $ 120 per square metre a year in the A-class and from $ 70 to $ 90 in the B-class, without VAT and operational costs (which are about one third of the rent rate) and municipal payments. Thus, the rent rates have returned to the level of 2005 and 2006, which is 20% to 30% lower than those of the third quarter of 2008.
In the first half of 2009 the demand fell by 40% in comparison with the same period of 2008, but it is still higher than in 2006. Simultaneously, the average demanded warehouse area has shrunk from 8,000 to 3,000 square metres.
As regards the forecast for the end of the year for the central Russia, experts note that so far there are no preconditions for the demand to be increased for the quality warehouses. If the situation in the economy stabilises, it is possible to expect that demand for quality premises will grow in the beginning of 2010, while the level of vacant areas will remain stable due to tenants leaving premises. Rent rates in complexes of different classes will be stipulated in different currencies. For example, fixed RUR rates will continue to be offered for two or three years in lower quality complexes, while in high-quality complexes the rate will be mostly estimated in currency of loans which had been used for the construction of the site. In such cases the level of rent rates is defined during negotiations and depends on the area of the rented premises, the rent term, the stability of the tenant’s business, quality of the site and some other parameters. Further considerable decreases in rent rates in quality warehouses before the end of 2009 are not expected.
Speaking about St Petersburg, the warehouse market started to develop in this city later than all other sectors, such as residential, office and commercial real estate, and consequently, the most active commissioning of warehouses in St Petersburg was in 2008. About 1.4 million square metres of warehouses were put into operation in 2008, which is 46% more than in 2007.
Experts say that more than 5 million square metres of warehouse premises of different classes were in St Petersburg at that time, and more than six million square metres including suburbs. The shortage in warehouse space was about 1.5 million square metres.
The A- and B-class warehouses constituted about 10% of the total premises offered, however it was expected, that, due to re-equipment, the share of A and B-class premises would be increased to 20% - 30% of the total market offer in the next 2 or 3 years. Occupancy of A and B-class warehouses was close to 100%, and the average size of inquiry about rent was from 2,500 square metres to 6,000 square metres.
However, by the end of 2008 the share of the vacant areas was already about 25%. According to Knight Frank Research, the figures for the first half of 2009 in St Petersburg were as follows: the total amount of quality areas was 1.57 million square metres, including 901,200 square metres of A-class and 670,000 square metres of B-class. 835,500 square metres of the quality areas were leased, including 624,600 square metres of A-class and 210,900 square metres of B-class. 94,200 square metres of A-class and 22,200 square metres of B-class premises were put into operation in the first half of 2009. The share of the vacant areas was 36.2% and 13.4% respectively. The reason for the growth in the share of vacant warehouses is that many tenants had decided to exchange A-class and B-class premises for C-class.
Rent rates (triple net) became USD 110 – USD 130 (A) and USD 90 – USD 115 (B) per square metre a year; and rates for operational charges were USD 37 – USD 42 (A) and USD 35 – USD 40 (B) per square metre a year.
There are similar tendencies in Moscow and St Petersburg: because most developers are facing problems with financing and it is not clear when former demand will be restored, the realisation of warehouse projects has been suspended. Secondary warehouse rent offers have appeared in the market and rent rates according to these offers are considerably lower than average market prices. Generally, the level of solvent demand in the market has been seriously reduced, which is caused, first of all, by the fundamental decrease in the turnover in commercial activities and industrial enterprises. Tenants are tending to change commercial conditions as per the current market situation and prefer to only consider those sites which have already been put into operation. Thus in the first half 2009 not a single rent contract was concluded before the premises were commissioned.
There are also tougher measures. In crisis conditions many companies are trying hard to minimise their costs. Therefore warehouse owners could always face the situation when the tenants, despite all possible penal sanctions, will terminate contracts and leave for those landlords which are offering lower prices. “Actually, in the present situation tenants are in a more advantageous position than warehouse owners. Commercial activity in the market has shrunk, but there are enough warehouses to satisfy the demand,” emphasises David Hessler, Director for Supply Chain Services in CIS, JTI.
There are exceptions from the rules, both in Moscow and St Petersburg. Thus Finnish network Prisma continues opening shops and is planning to start its own logistics centre in Russia. Vesa Punnonen, President of the Finnish corporation SOK Retail International says that currently the company is searching for suitable land to start a logistics centre. The project will be triggered when 10 sites are in the network (four Prisma shops are working in St Petersburg at the moment). Before 2015 the retailer is planning to have 15 to 20 sites in the St Petersburg and Leningrad region, and a total of 20 to 30 shops across Russia.
Another St Petersburg exception from the rules is going to be the cluster of car components which is currently being created, and also the relocation of customs terminals from Moscow to the border. But nobody can say with confidence how long it is going to take for exceptions to grow into trends. Analysts think that from one-and-a-half to two years will be needed to fill the currently vacant areas. But it does not mean that the construction of new warehouses will be started within this period.
Alexey Strigin [~DETAIL_TEXT] =>

A year ago

When there was a shortage in warehouses, experts estimated that, at that time, developers commissioned about 50% of warehouses which had been declared earlier to be built on Russian territory. The demand was 1.5 times higher than the number of offered warehouse premises, and lease contracts were signed long before construction was finished and the premises were commissioned.
Such a tendency to commission not more than a half of the declared sites continued for about five years, from 2003 to 2008. Experts think that there were two reasons for this, the shortage of land for construction and the shortage of investment, when prices for land and building materials were growing.
As a result of such a state of affairs, rent rates for this kind of commercial real estate were constantly growing. Simultaneously, it is good to note that the profitability of warehouses in Russia was about 15%, twice as high as in Europe.
Thus, in 2007 rent rates grew by 10% and reached the European level in the Central region. In 2008 this situation was repeated. Average rent rates for quality warehouse complexes hit $ 130 per square metre a year (excluding VAT and operational costs), with consideration of $ 30-40 per square metre a year operational costs for A-class warehouses. Because of the severe shortage in supply, B-class warehouse rent rates barely differed from A-class warehouse rates.
Experts hold that, at that time, the growth in rates was caused by the growth in land prices and by falls in warehouse real estate profitability. In 2007 the cost of construction was $ 1,000 for one square metre (annual income was about 15%; the recoupment time about eight years), and in 2006 it was $ 800 (recoupment time six years).

Time to keep a cool head

But this year the market situation has dramatically changed. During the first half of 2009, tendencies were noticed which had never been seen in the Russian market before. Turnover in the retail sector shrank in the second quarter by 3% - 5% in comparison with the same period last year. Cargo turnover in transport kept shrinking throughout the first half of the year. And from January 2009 the figures in growth charts became negative in the motor transport sector, the one most sensitive to end users’ demand.
Also, the Russian warehouse real estate market lost its attractiveness with foreign investors. Some of them have left this sector, and others have frozen their projects and focused just on those projects which were in their finishing stages.
Developers have started quitting regional projects. They prefer to finish those in the Moscow region, where the economy, as everybody thinks, will start recovering earlier than others. In comparison with the planned volumes, the warehouse construction is expected to shrink more than three-fold by the end of this year in Moscow region, and four-fold across the whole of Russia. At the moment, only the largest network developers are still working in the regions.
The growth in supply of quality real estate is currently created mainly because tenants are leaving the rented premises and started projects are finishing.
Short-term (1 to 3 years) direct rent supply in A-class warehouse complexes have appeared on the market. Simultaneously, it became possible to conclude RUR contracts in some areas, or to fix minimum or maximum currency rate limits in rent contracts for one or two years.

Exceptions in Central Russia

According to Knight Frank Research, the situation with warehouse real estate in Moscow in the first half of 2009 was the following: total supply in all classes was 9.22 million square metres, 5.28 million square metres of them were high quality real estate. The total A-class offer was 3.48 million sq metres, with 1.80 million of B-class.
321,000 square metres of real estate has been built for the first half of 2009, and 337,000 square metres is planned to be commissioned. Thus, total new warehouse area in 2009 is more than 600,000 square metres, which is similar to the respective figures in 2006 and 2008.
There are no more than 8-9% of vacant areas in A and B-class warehouses, which is approximately 380,000 square metres.
Rent rates are from $ 100 to $ 120 per square metre a year in the A-class and from $ 70 to $ 90 in the B-class, without VAT and operational costs (which are about one third of the rent rate) and municipal payments. Thus, the rent rates have returned to the level of 2005 and 2006, which is 20% to 30% lower than those of the third quarter of 2008.
In the first half of 2009 the demand fell by 40% in comparison with the same period of 2008, but it is still higher than in 2006. Simultaneously, the average demanded warehouse area has shrunk from 8,000 to 3,000 square metres.
As regards the forecast for the end of the year for the central Russia, experts note that so far there are no preconditions for the demand to be increased for the quality warehouses. If the situation in the economy stabilises, it is possible to expect that demand for quality premises will grow in the beginning of 2010, while the level of vacant areas will remain stable due to tenants leaving premises. Rent rates in complexes of different classes will be stipulated in different currencies. For example, fixed RUR rates will continue to be offered for two or three years in lower quality complexes, while in high-quality complexes the rate will be mostly estimated in currency of loans which had been used for the construction of the site. In such cases the level of rent rates is defined during negotiations and depends on the area of the rented premises, the rent term, the stability of the tenant’s business, quality of the site and some other parameters. Further considerable decreases in rent rates in quality warehouses before the end of 2009 are not expected.
Speaking about St Petersburg, the warehouse market started to develop in this city later than all other sectors, such as residential, office and commercial real estate, and consequently, the most active commissioning of warehouses in St Petersburg was in 2008. About 1.4 million square metres of warehouses were put into operation in 2008, which is 46% more than in 2007.
Experts say that more than 5 million square metres of warehouse premises of different classes were in St Petersburg at that time, and more than six million square metres including suburbs. The shortage in warehouse space was about 1.5 million square metres.
The A- and B-class warehouses constituted about 10% of the total premises offered, however it was expected, that, due to re-equipment, the share of A and B-class premises would be increased to 20% - 30% of the total market offer in the next 2 or 3 years. Occupancy of A and B-class warehouses was close to 100%, and the average size of inquiry about rent was from 2,500 square metres to 6,000 square metres.
However, by the end of 2008 the share of the vacant areas was already about 25%. According to Knight Frank Research, the figures for the first half of 2009 in St Petersburg were as follows: the total amount of quality areas was 1.57 million square metres, including 901,200 square metres of A-class and 670,000 square metres of B-class. 835,500 square metres of the quality areas were leased, including 624,600 square metres of A-class and 210,900 square metres of B-class. 94,200 square metres of A-class and 22,200 square metres of B-class premises were put into operation in the first half of 2009. The share of the vacant areas was 36.2% and 13.4% respectively. The reason for the growth in the share of vacant warehouses is that many tenants had decided to exchange A-class and B-class premises for C-class.
Rent rates (triple net) became USD 110 – USD 130 (A) and USD 90 – USD 115 (B) per square metre a year; and rates for operational charges were USD 37 – USD 42 (A) and USD 35 – USD 40 (B) per square metre a year.
There are similar tendencies in Moscow and St Petersburg: because most developers are facing problems with financing and it is not clear when former demand will be restored, the realisation of warehouse projects has been suspended. Secondary warehouse rent offers have appeared in the market and rent rates according to these offers are considerably lower than average market prices. Generally, the level of solvent demand in the market has been seriously reduced, which is caused, first of all, by the fundamental decrease in the turnover in commercial activities and industrial enterprises. Tenants are tending to change commercial conditions as per the current market situation and prefer to only consider those sites which have already been put into operation. Thus in the first half 2009 not a single rent contract was concluded before the premises were commissioned.
There are also tougher measures. In crisis conditions many companies are trying hard to minimise their costs. Therefore warehouse owners could always face the situation when the tenants, despite all possible penal sanctions, will terminate contracts and leave for those landlords which are offering lower prices. “Actually, in the present situation tenants are in a more advantageous position than warehouse owners. Commercial activity in the market has shrunk, but there are enough warehouses to satisfy the demand,” emphasises David Hessler, Director for Supply Chain Services in CIS, JTI.
There are exceptions from the rules, both in Moscow and St Petersburg. Thus Finnish network Prisma continues opening shops and is planning to start its own logistics centre in Russia. Vesa Punnonen, President of the Finnish corporation SOK Retail International says that currently the company is searching for suitable land to start a logistics centre. The project will be triggered when 10 sites are in the network (four Prisma shops are working in St Petersburg at the moment). Before 2015 the retailer is planning to have 15 to 20 sites in the St Petersburg and Leningrad region, and a total of 20 to 30 shops across Russia.
Another St Petersburg exception from the rules is going to be the cluster of car components which is currently being created, and also the relocation of customs terminals from Moscow to the border. But nobody can say with confidence how long it is going to take for exceptions to grow into trends. Analysts think that from one-and-a-half to two years will be needed to fill the currently vacant areas. But it does not mean that the construction of new warehouses will be started within this period.
Alexey Strigin [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Warehouse real estate in central Russia is not going through the best of times.
The share of vacant premises in the warehouse real estate market has reached
a record level of 34%. Just a year ago experts spoke about a warehouse boom
and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. [~PREVIEW_TEXT] =>  Warehouse real estate in central Russia is not going through the best of times.
The share of vacant premises in the warehouse real estate market has reached
a record level of 34%. Just a year ago experts spoke about a warehouse boom
and emphasised a noticeable revival in this market sector - the demand was growing and supply could hardly catch up with it. 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РЖД-Партнер

Time-proved cooperation

 The degree of interaction of the Oktyabrskaya Railway (an affiliate of RZD) with the world’s leading transport and engineering companies has reached a new level. Large infrastructure projects, especially those in the high-speed railway sector, are either being carried out now or in the near future.
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Recession is not a hindrance

The Oktyabrskaya Railway is the oldest railway in Russia. Since it was created, the railway has been an example of effective international cooperation in the sectors of railway construction, rolling stock development and organisation of transportation. At the beginning of the 21st century, railway reforms made the issue of RZD’s integration into the world transport system especially important. Thus, in “The Strategy of the RF Railway Transport Development to 2030” special attention is paid to investment projects targeted at making the state and RZD’s foreign economic activities more efficient. And some of the projects are to be realised on the territory of the Oktyabrskaya Railway.
Traditionally, the Oktyabrskaya Railway has had close business relations with the Finnish railway. There are a number of activities in which they have cooperated successfully: establishment of joint ventures in the sectors of freight and passenger transportation, provision of the most effective cargo exchange procedure, including optimising the handover of cargo trains at border crossings, organisation of comfortable and fast passenger travel between the two countries, as well as developing joint logistics and experience-sharing schemes.
Recently, the volume of freight and passenger transportation between Russia and Finland grew significantly.

Everything for partners

When speaking of such railway projects, we must mention the joint venture of TransContainer and Finnish Railways (VR Ltd.) – ContainerTransScandinavia, registered on March 22, 2007, in Finland.
To organise transportation of cars, RailTransAuto was launched. It is a joint venture of Russian Railways JSC (51% shareholding) and TransGroup AS (49% shareholding). The company’s major activity is organisation of a single logistics service to transport cars produced by Russian and foreign companies from where they are manufactured to where they are sold.
The Oktyabrskaya Railway not only constantly works to maintain border stations, but also strives to improve the technology used at international border crossings. The further implementation of effective information technologies, such as giving preliminary information to customs bodies and preliminary e-declaration of import cargo, is most promising.
The technology to inform customs bodies early was developed by the Oktyabrskaya Railway and the RF North-Western Customs Directorate and tested at the Moscow-Tovarnaya railway station. This technology reduces the time spent on document processing, improves the efficiency of labour resources at at customs and border control and cuts down on idling, which can arise because of the incorrect execution of transport and consignment documents.

High speed

There are a lot of spheres in which the Oktyabrskaya Railway cooperates with the Finnish railwaymen but the joint project envisaging organisation of high-speed passenger communication between St Petersburg and Helsinki is a top priority. High-speed, multi-voltage, electric Pendolino trains, produced by Alstom, are to be used on the line.
In November 2006, a Russian-Finnish joint stock company, Oy Karelian Trains Ltd., was launched. It is the owner of the high-speed rolling stock. The company held an international tender on train supply and, in September 2007, a contract with Alstom was concluded. It envisages delivery of four high-speed, multi-voltage electric Pendolino trains. Since 2007, the Russian party has been reconstructing the St Petersburg – Vyborg – Buslovskaya (state border) line, which will be used for high-speed transportation in order to reduce travel time from 2 hours 15 minutes to 1 hour and 30 minutes.
Russian Railways JSC has started to purchase the Pendolino trains, and the first of them was delivered in September 2009. The commercial exploitation of this rolling stock is to begin in Q4 of 2010. On the line St Petersburg – Helsinki it will run at speeds of up to 220 kph. On the Russian section, the maximum speed will be 200 kph. Pendolino trains were chosen as the rolling stock most suitable for the parameters of the Finnish railways. Nowadays, the first electric train is being tested. High-speed trains consist of seven wagons, with the capacity of each train being 352 passengers.
The high-speed trains are supposed to run on the reconstructed rail line St Petersburg – Buslovskaya, while the trains carrying cargo to northern ports on the Baltic Sea will use the new Kamennogorsk – Losevo section. Construction of a new double-track electrified line Losevo – Kamennogorsk is planned for this. Its length will be 68 km. Also, the adjacent sections Ruch’i – Losevo, Kamennogorsk – Vyborg and Vyborg – Primorsk - Ermilovo are to be reconstructed.
Considering the capacity of the adjacent sections after reconstruction, the capacity of Losevo – Kamennogorsk section (St Petersburg division of the Oktyabrskaya Railway) will be approximately 40 million tons of cargo per annum, which will allow the freight flow between Russia and Finland to increase.
The programme of the Oktyabrskaya Railway for 2009 envisages investment of RUR 14.5 billion to organise works to develop the existing infrastructure.
The payback period of the project is 10 years. After high-speed communication is put into operation, the travel time for passenger trains running between St Petersburg and Helsinki (443 km) is set to be 3.5 hours.
Another important project of the Oktyabrskaya Railway is organisation of high-speed communication on the St Petersburg – Moscow line. In January-May 2009, the company spent RUR 1.717 billion to finance the project. The St Petersburg – Moscow railway line is being modernised in several steps. In 2007-2008, basic works were fulfilled to prepare a number of sections for higher speeds, roadbeds were being strengthened and the overhead lines are being replaced with ones suitable for trains running at speeds of 200 to 250 kph. The total volume of RZD’s investments into the launch of high-speed railway communication between Moscow and St Petersburg is RUR 15 billion, of which RUR 6 billion is to be invested in 2009.
At the end of 2009, a new train “Sapsan” will begin to service the St Petersburg – Moscow line. It was produced by Siemens (Germany). The maximum speed of the train is 300 kph. After it is put into operation, the time needed to travel from the Russian capital to St Petersburg will fall from 4 hours 30 minutes to 3 hours 45 minutes.
“Sapsan” was developed by Siemens especially for RZD: the electric train of Velaro RUS series is adapted for 1,520 mm-wide gauge. The contract for the supply of eight such trains was concluded by RZD and Siemens in May 2006. The cost of the contract is €276 million.
Recently, “Sapsan” completed its first demonstration journey on the route Moscow – St Petersburg. Its first passengers were Vladimir Yakunin, President of RZD, Valentina Matvienko, Governor of St Petersburg and representatives of Siemens.
All in all, in 2008-2010, RZD is going to invest approximately RUR 69 billion into development of faster and high-speed railway communication in the Russian Federation.

Resume

The Russian railway sector is becoming an important part of the world transport system, which implies that its management meets international standards. And the oldest Russian railway is the leader again. Improving the quality of services, safety of transportation and effectiveness of its management, the Oktyabrskaya Railway received its ISO 9001:2000 certificate at the end of 2007, which will strengthen foreign partners’ confidence in the company’s quality of work and the reliability of its business contacts.
By Stanislav Russkov [~DETAIL_TEXT] =>

Recession is not a hindrance

The Oktyabrskaya Railway is the oldest railway in Russia. Since it was created, the railway has been an example of effective international cooperation in the sectors of railway construction, rolling stock development and organisation of transportation. At the beginning of the 21st century, railway reforms made the issue of RZD’s integration into the world transport system especially important. Thus, in “The Strategy of the RF Railway Transport Development to 2030” special attention is paid to investment projects targeted at making the state and RZD’s foreign economic activities more efficient. And some of the projects are to be realised on the territory of the Oktyabrskaya Railway.
Traditionally, the Oktyabrskaya Railway has had close business relations with the Finnish railway. There are a number of activities in which they have cooperated successfully: establishment of joint ventures in the sectors of freight and passenger transportation, provision of the most effective cargo exchange procedure, including optimising the handover of cargo trains at border crossings, organisation of comfortable and fast passenger travel between the two countries, as well as developing joint logistics and experience-sharing schemes.
Recently, the volume of freight and passenger transportation between Russia and Finland grew significantly.

Everything for partners

When speaking of such railway projects, we must mention the joint venture of TransContainer and Finnish Railways (VR Ltd.) – ContainerTransScandinavia, registered on March 22, 2007, in Finland.
To organise transportation of cars, RailTransAuto was launched. It is a joint venture of Russian Railways JSC (51% shareholding) and TransGroup AS (49% shareholding). The company’s major activity is organisation of a single logistics service to transport cars produced by Russian and foreign companies from where they are manufactured to where they are sold.
The Oktyabrskaya Railway not only constantly works to maintain border stations, but also strives to improve the technology used at international border crossings. The further implementation of effective information technologies, such as giving preliminary information to customs bodies and preliminary e-declaration of import cargo, is most promising.
The technology to inform customs bodies early was developed by the Oktyabrskaya Railway and the RF North-Western Customs Directorate and tested at the Moscow-Tovarnaya railway station. This technology reduces the time spent on document processing, improves the efficiency of labour resources at at customs and border control and cuts down on idling, which can arise because of the incorrect execution of transport and consignment documents.

High speed

There are a lot of spheres in which the Oktyabrskaya Railway cooperates with the Finnish railwaymen but the joint project envisaging organisation of high-speed passenger communication between St Petersburg and Helsinki is a top priority. High-speed, multi-voltage, electric Pendolino trains, produced by Alstom, are to be used on the line.
In November 2006, a Russian-Finnish joint stock company, Oy Karelian Trains Ltd., was launched. It is the owner of the high-speed rolling stock. The company held an international tender on train supply and, in September 2007, a contract with Alstom was concluded. It envisages delivery of four high-speed, multi-voltage electric Pendolino trains. Since 2007, the Russian party has been reconstructing the St Petersburg – Vyborg – Buslovskaya (state border) line, which will be used for high-speed transportation in order to reduce travel time from 2 hours 15 minutes to 1 hour and 30 minutes.
Russian Railways JSC has started to purchase the Pendolino trains, and the first of them was delivered in September 2009. The commercial exploitation of this rolling stock is to begin in Q4 of 2010. On the line St Petersburg – Helsinki it will run at speeds of up to 220 kph. On the Russian section, the maximum speed will be 200 kph. Pendolino trains were chosen as the rolling stock most suitable for the parameters of the Finnish railways. Nowadays, the first electric train is being tested. High-speed trains consist of seven wagons, with the capacity of each train being 352 passengers.
The high-speed trains are supposed to run on the reconstructed rail line St Petersburg – Buslovskaya, while the trains carrying cargo to northern ports on the Baltic Sea will use the new Kamennogorsk – Losevo section. Construction of a new double-track electrified line Losevo – Kamennogorsk is planned for this. Its length will be 68 km. Also, the adjacent sections Ruch’i – Losevo, Kamennogorsk – Vyborg and Vyborg – Primorsk - Ermilovo are to be reconstructed.
Considering the capacity of the adjacent sections after reconstruction, the capacity of Losevo – Kamennogorsk section (St Petersburg division of the Oktyabrskaya Railway) will be approximately 40 million tons of cargo per annum, which will allow the freight flow between Russia and Finland to increase.
The programme of the Oktyabrskaya Railway for 2009 envisages investment of RUR 14.5 billion to organise works to develop the existing infrastructure.
The payback period of the project is 10 years. After high-speed communication is put into operation, the travel time for passenger trains running between St Petersburg and Helsinki (443 km) is set to be 3.5 hours.
Another important project of the Oktyabrskaya Railway is organisation of high-speed communication on the St Petersburg – Moscow line. In January-May 2009, the company spent RUR 1.717 billion to finance the project. The St Petersburg – Moscow railway line is being modernised in several steps. In 2007-2008, basic works were fulfilled to prepare a number of sections for higher speeds, roadbeds were being strengthened and the overhead lines are being replaced with ones suitable for trains running at speeds of 200 to 250 kph. The total volume of RZD’s investments into the launch of high-speed railway communication between Moscow and St Petersburg is RUR 15 billion, of which RUR 6 billion is to be invested in 2009.
At the end of 2009, a new train “Sapsan” will begin to service the St Petersburg – Moscow line. It was produced by Siemens (Germany). The maximum speed of the train is 300 kph. After it is put into operation, the time needed to travel from the Russian capital to St Petersburg will fall from 4 hours 30 minutes to 3 hours 45 minutes.
“Sapsan” was developed by Siemens especially for RZD: the electric train of Velaro RUS series is adapted for 1,520 mm-wide gauge. The contract for the supply of eight such trains was concluded by RZD and Siemens in May 2006. The cost of the contract is €276 million.
Recently, “Sapsan” completed its first demonstration journey on the route Moscow – St Petersburg. Its first passengers were Vladimir Yakunin, President of RZD, Valentina Matvienko, Governor of St Petersburg and representatives of Siemens.
All in all, in 2008-2010, RZD is going to invest approximately RUR 69 billion into development of faster and high-speed railway communication in the Russian Federation.

Resume

The Russian railway sector is becoming an important part of the world transport system, which implies that its management meets international standards. And the oldest Russian railway is the leader again. Improving the quality of services, safety of transportation and effectiveness of its management, the Oktyabrskaya Railway received its ISO 9001:2000 certificate at the end of 2007, which will strengthen foreign partners’ confidence in the company’s quality of work and the reliability of its business contacts.
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Recession is not a hindrance

The Oktyabrskaya Railway is the oldest railway in Russia. Since it was created, the railway has been an example of effective international cooperation in the sectors of railway construction, rolling stock development and organisation of transportation. At the beginning of the 21st century, railway reforms made the issue of RZD’s integration into the world transport system especially important. Thus, in “The Strategy of the RF Railway Transport Development to 2030” special attention is paid to investment projects targeted at making the state and RZD’s foreign economic activities more efficient. And some of the projects are to be realised on the territory of the Oktyabrskaya Railway.
Traditionally, the Oktyabrskaya Railway has had close business relations with the Finnish railway. There are a number of activities in which they have cooperated successfully: establishment of joint ventures in the sectors of freight and passenger transportation, provision of the most effective cargo exchange procedure, including optimising the handover of cargo trains at border crossings, organisation of comfortable and fast passenger travel between the two countries, as well as developing joint logistics and experience-sharing schemes.
Recently, the volume of freight and passenger transportation between Russia and Finland grew significantly.

Everything for partners

When speaking of such railway projects, we must mention the joint venture of TransContainer and Finnish Railways (VR Ltd.) – ContainerTransScandinavia, registered on March 22, 2007, in Finland.
To organise transportation of cars, RailTransAuto was launched. It is a joint venture of Russian Railways JSC (51% shareholding) and TransGroup AS (49% shareholding). The company’s major activity is organisation of a single logistics service to transport cars produced by Russian and foreign companies from where they are manufactured to where they are sold.
The Oktyabrskaya Railway not only constantly works to maintain border stations, but also strives to improve the technology used at international border crossings. The further implementation of effective information technologies, such as giving preliminary information to customs bodies and preliminary e-declaration of import cargo, is most promising.
The technology to inform customs bodies early was developed by the Oktyabrskaya Railway and the RF North-Western Customs Directorate and tested at the Moscow-Tovarnaya railway station. This technology reduces the time spent on document processing, improves the efficiency of labour resources at at customs and border control and cuts down on idling, which can arise because of the incorrect execution of transport and consignment documents.

High speed

There are a lot of spheres in which the Oktyabrskaya Railway cooperates with the Finnish railwaymen but the joint project envisaging organisation of high-speed passenger communication between St Petersburg and Helsinki is a top priority. High-speed, multi-voltage, electric Pendolino trains, produced by Alstom, are to be used on the line.
In November 2006, a Russian-Finnish joint stock company, Oy Karelian Trains Ltd., was launched. It is the owner of the high-speed rolling stock. The company held an international tender on train supply and, in September 2007, a contract with Alstom was concluded. It envisages delivery of four high-speed, multi-voltage electric Pendolino trains. Since 2007, the Russian party has been reconstructing the St Petersburg – Vyborg – Buslovskaya (state border) line, which will be used for high-speed transportation in order to reduce travel time from 2 hours 15 minutes to 1 hour and 30 minutes.
Russian Railways JSC has started to purchase the Pendolino trains, and the first of them was delivered in September 2009. The commercial exploitation of this rolling stock is to begin in Q4 of 2010. On the line St Petersburg – Helsinki it will run at speeds of up to 220 kph. On the Russian section, the maximum speed will be 200 kph. Pendolino trains were chosen as the rolling stock most suitable for the parameters of the Finnish railways. Nowadays, the first electric train is being tested. High-speed trains consist of seven wagons, with the capacity of each train being 352 passengers.
The high-speed trains are supposed to run on the reconstructed rail line St Petersburg – Buslovskaya, while the trains carrying cargo to northern ports on the Baltic Sea will use the new Kamennogorsk – Losevo section. Construction of a new double-track electrified line Losevo – Kamennogorsk is planned for this. Its length will be 68 km. Also, the adjacent sections Ruch’i – Losevo, Kamennogorsk – Vyborg and Vyborg – Primorsk - Ermilovo are to be reconstructed.
Considering the capacity of the adjacent sections after reconstruction, the capacity of Losevo – Kamennogorsk section (St Petersburg division of the Oktyabrskaya Railway) will be approximately 40 million tons of cargo per annum, which will allow the freight flow between Russia and Finland to increase.
The programme of the Oktyabrskaya Railway for 2009 envisages investment of RUR 14.5 billion to organise works to develop the existing infrastructure.
The payback period of the project is 10 years. After high-speed communication is put into operation, the travel time for passenger trains running between St Petersburg and Helsinki (443 km) is set to be 3.5 hours.
Another important project of the Oktyabrskaya Railway is organisation of high-speed communication on the St Petersburg – Moscow line. In January-May 2009, the company spent RUR 1.717 billion to finance the project. The St Petersburg – Moscow railway line is being modernised in several steps. In 2007-2008, basic works were fulfilled to prepare a number of sections for higher speeds, roadbeds were being strengthened and the overhead lines are being replaced with ones suitable for trains running at speeds of 200 to 250 kph. The total volume of RZD’s investments into the launch of high-speed railway communication between Moscow and St Petersburg is RUR 15 billion, of which RUR 6 billion is to be invested in 2009.
At the end of 2009, a new train “Sapsan” will begin to service the St Petersburg – Moscow line. It was produced by Siemens (Germany). The maximum speed of the train is 300 kph. After it is put into operation, the time needed to travel from the Russian capital to St Petersburg will fall from 4 hours 30 minutes to 3 hours 45 minutes.
“Sapsan” was developed by Siemens especially for RZD: the electric train of Velaro RUS series is adapted for 1,520 mm-wide gauge. The contract for the supply of eight such trains was concluded by RZD and Siemens in May 2006. The cost of the contract is €276 million.
Recently, “Sapsan” completed its first demonstration journey on the route Moscow – St Petersburg. Its first passengers were Vladimir Yakunin, President of RZD, Valentina Matvienko, Governor of St Petersburg and representatives of Siemens.
All in all, in 2008-2010, RZD is going to invest approximately RUR 69 billion into development of faster and high-speed railway communication in the Russian Federation.

Resume

The Russian railway sector is becoming an important part of the world transport system, which implies that its management meets international standards. And the oldest Russian railway is the leader again. Improving the quality of services, safety of transportation and effectiveness of its management, the Oktyabrskaya Railway received its ISO 9001:2000 certificate at the end of 2007, which will strengthen foreign partners’ confidence in the company’s quality of work and the reliability of its business contacts.
By Stanislav Russkov [~DETAIL_TEXT] =>

Recession is not a hindrance

The Oktyabrskaya Railway is the oldest railway in Russia. Since it was created, the railway has been an example of effective international cooperation in the sectors of railway construction, rolling stock development and organisation of transportation. At the beginning of the 21st century, railway reforms made the issue of RZD’s integration into the world transport system especially important. Thus, in “The Strategy of the RF Railway Transport Development to 2030” special attention is paid to investment projects targeted at making the state and RZD’s foreign economic activities more efficient. And some of the projects are to be realised on the territory of the Oktyabrskaya Railway.
Traditionally, the Oktyabrskaya Railway has had close business relations with the Finnish railway. There are a number of activities in which they have cooperated successfully: establishment of joint ventures in the sectors of freight and passenger transportation, provision of the most effective cargo exchange procedure, including optimising the handover of cargo trains at border crossings, organisation of comfortable and fast passenger travel between the two countries, as well as developing joint logistics and experience-sharing schemes.
Recently, the volume of freight and passenger transportation between Russia and Finland grew significantly.

Everything for partners

When speaking of such railway projects, we must mention the joint venture of TransContainer and Finnish Railways (VR Ltd.) – ContainerTransScandinavia, registered on March 22, 2007, in Finland.
To organise transportation of cars, RailTransAuto was launched. It is a joint venture of Russian Railways JSC (51% shareholding) and TransGroup AS (49% shareholding). The company’s major activity is organisation of a single logistics service to transport cars produced by Russian and foreign companies from where they are manufactured to where they are sold.
The Oktyabrskaya Railway not only constantly works to maintain border stations, but also strives to improve the technology used at international border crossings. The further implementation of effective information technologies, such as giving preliminary information to customs bodies and preliminary e-declaration of import cargo, is most promising.
The technology to inform customs bodies early was developed by the Oktyabrskaya Railway and the RF North-Western Customs Directorate and tested at the Moscow-Tovarnaya railway station. This technology reduces the time spent on document processing, improves the efficiency of labour resources at at customs and border control and cuts down on idling, which can arise because of the incorrect execution of transport and consignment documents.

High speed

There are a lot of spheres in which the Oktyabrskaya Railway cooperates with the Finnish railwaymen but the joint project envisaging organisation of high-speed passenger communication between St Petersburg and Helsinki is a top priority. High-speed, multi-voltage, electric Pendolino trains, produced by Alstom, are to be used on the line.
In November 2006, a Russian-Finnish joint stock company, Oy Karelian Trains Ltd., was launched. It is the owner of the high-speed rolling stock. The company held an international tender on train supply and, in September 2007, a contract with Alstom was concluded. It envisages delivery of four high-speed, multi-voltage electric Pendolino trains. Since 2007, the Russian party has been reconstructing the St Petersburg – Vyborg – Buslovskaya (state border) line, which will be used for high-speed transportation in order to reduce travel time from 2 hours 15 minutes to 1 hour and 30 minutes.
Russian Railways JSC has started to purchase the Pendolino trains, and the first of them was delivered in September 2009. The commercial exploitation of this rolling stock is to begin in Q4 of 2010. On the line St Petersburg – Helsinki it will run at speeds of up to 220 kph. On the Russian section, the maximum speed will be 200 kph. Pendolino trains were chosen as the rolling stock most suitable for the parameters of the Finnish railways. Nowadays, the first electric train is being tested. High-speed trains consist of seven wagons, with the capacity of each train being 352 passengers.
The high-speed trains are supposed to run on the reconstructed rail line St Petersburg – Buslovskaya, while the trains carrying cargo to northern ports on the Baltic Sea will use the new Kamennogorsk – Losevo section. Construction of a new double-track electrified line Losevo – Kamennogorsk is planned for this. Its length will be 68 km. Also, the adjacent sections Ruch’i – Losevo, Kamennogorsk – Vyborg and Vyborg – Primorsk - Ermilovo are to be reconstructed.
Considering the capacity of the adjacent sections after reconstruction, the capacity of Losevo – Kamennogorsk section (St Petersburg division of the Oktyabrskaya Railway) will be approximately 40 million tons of cargo per annum, which will allow the freight flow between Russia and Finland to increase.
The programme of the Oktyabrskaya Railway for 2009 envisages investment of RUR 14.5 billion to organise works to develop the existing infrastructure.
The payback period of the project is 10 years. After high-speed communication is put into operation, the travel time for passenger trains running between St Petersburg and Helsinki (443 km) is set to be 3.5 hours.
Another important project of the Oktyabrskaya Railway is organisation of high-speed communication on the St Petersburg – Moscow line. In January-May 2009, the company spent RUR 1.717 billion to finance the project. The St Petersburg – Moscow railway line is being modernised in several steps. In 2007-2008, basic works were fulfilled to prepare a number of sections for higher speeds, roadbeds were being strengthened and the overhead lines are being replaced with ones suitable for trains running at speeds of 200 to 250 kph. The total volume of RZD’s investments into the launch of high-speed railway communication between Moscow and St Petersburg is RUR 15 billion, of which RUR 6 billion is to be invested in 2009.
At the end of 2009, a new train “Sapsan” will begin to service the St Petersburg – Moscow line. It was produced by Siemens (Germany). The maximum speed of the train is 300 kph. After it is put into operation, the time needed to travel from the Russian capital to St Petersburg will fall from 4 hours 30 minutes to 3 hours 45 minutes.
“Sapsan” was developed by Siemens especially for RZD: the electric train of Velaro RUS series is adapted for 1,520 mm-wide gauge. The contract for the supply of eight such trains was concluded by RZD and Siemens in May 2006. The cost of the contract is €276 million.
Recently, “Sapsan” completed its first demonstration journey on the route Moscow – St Petersburg. Its first passengers were Vladimir Yakunin, President of RZD, Valentina Matvienko, Governor of St Petersburg and representatives of Siemens.
All in all, in 2008-2010, RZD is going to invest approximately RUR 69 billion into development of faster and high-speed railway communication in the Russian Federation.

Resume

The Russian railway sector is becoming an important part of the world transport system, which implies that its management meets international standards. And the oldest Russian railway is the leader again. Improving the quality of services, safety of transportation and effectiveness of its management, the Oktyabrskaya Railway received its ISO 9001:2000 certificate at the end of 2007, which will strengthen foreign partners’ confidence in the company’s quality of work and the reliability of its business contacts.
By Stanislav Russkov [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The degree of interaction of the Oktyabrskaya Railway (an affiliate of RZD) with the world’s leading transport and engineering companies has reached a new level. Large infrastructure projects, especially those in the high-speed railway sector, are either being carried out now or in the near future. [~PREVIEW_TEXT] =>  The degree of interaction of the Oktyabrskaya Railway (an affiliate of RZD) with the world’s leading transport and engineering companies has reached a new level. Large infrastructure projects, especially those in the high-speed railway sector, are either being carried out now or in the near future. 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РЖД-Партнер

To Mongolia With Love

 RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes
to benefit from it.
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To Raise It Properly

It became known during the bilateral meetings in Ulan-Bator of Russian and Mongolian Presidents, Dmitry Medvedev and Tsakhiagiin Elbegdorj, that RZD will take an active part in the development of the Mongolian economy. RZD has received a share in Mongolia’s railways. Mr Medvedev has signed a decree “On the transfer of federally-owned shares in JSC Ulan-Bator Railways to the trust management of Russian Railways”.
Shares are being transferred to the trust management of the Russian state monopoly for five years.
As stated in the signed document, 50% of shares owned by Russia in Ulan-Bator Railways are being transferred to the trust management of Russian Railways for five years. The decision has been taken in order to increase the efficiency of their management.
“In fact, Russian Railways has already started to participate in the development of Ulan-Bator Railways and is giving practical assistance in carrying out major track repairs, upgrading rolling stock and improving transport technology,” noted Vladimir Yakunin, President of RZD.
“In order to finance the delivery of building materials and to implement reconstruction works on the upper portion of railway tracks, a $ 36 million loan contract has been signed between our companies for two years,” reminded Mr Yakunin. “The first project to lay 108km of continuous welded rail tracks along the Mandal – Davaany stretch was launched on June 6th 2009, within the framework of celebrating 60th anniversary of Ulan-Bator Railways.”
The joint-stock company Ulan-Bator Railways was founded in 1949 on the basis of an agreement between the governments of the USSR and the Mongolian People’s Republic, with equal distribution of shares in its charter capital. Until now The Federal Railway Transport Agency (Roszheldor) has been executing the power of a shareholder in this company on behalf of the Russian Federation.
The single technical base with Russian railways, including the 1520 mm-wide track, explains the important geostrategic role of Ulan-Bator Railways in terms of providing transport and economic ties with China.
Simultaneously, the current technical state of the Ulan-Bator Railways’ main assets (70% deterioration in rolling stock, and more than 50% in the upper portion of the tracks) negatively influences the carrying ability of this railroad, its throughput and the development of new prospective traffic opportunities, including cargo transits.
For the past 15 years the Russian shareholder has not provided any financing for Ulan-Bator Railways; and the Mongolian party’s investment in the development of this mainline has not exceeded $150 million.
The agreement to expand the range of cooperation between RZD and Ulan-Bator Railways was signed in February 2008, considering the important role which this mainline plays in the commercial and economic relations of Russia and Mongolia, its geopolitical value due to organisation of cargo flows to Asia-Pacific Countries, and also following the numerous requests of the Mongolian side for technical aid.
Recently Mr Yakunin has introduced the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia”. The main task is to build the infrastructure leading to the largest mineral deposits of the country.
Three main directions are specified in this project. The first is to modernise the current network of Mongolian mainline (major infrastructure repairs, improving junctions, partial construction of second tracks and upgrading rolling stock).
The second is the construction of a new railroad from Zuunbayan to Tavan Tolgoi, in order to provide the opportunity for coal exports from the Tavan-Tolgoi deposits, both to China and by northern routes, through Russian ports in the Far East.
The third direction is the later construction of an additional railway branch Bayantumen – Bor – Under, in order to make the northern route shorter (and using Russian railway infrastructure) and to provide the opportunity for developing the deposits in eastern regions of Mongolia.
Mr Yakunin said that the investments in the development of Mongolian railway infrastructure could be up to $ 6.5 billion, including $ 2.2 billion to modernise the current railway network, $ 0.4 billion to upgrade rolling stock and $ 3.9 billion to build new railroads from Dalanzadgad to Zuunbayan (to coal, copper and gold deposits) and from Sainshand to Bayantumen (a railroad from the mainline to the Chinese border).
Since 2007, RZD have supplied the Mongolian partners with 1,350 freight wagons. In the near future, according to the contract signed in July 2009, RZD will lease them 10 locomotives. Also, Russian railwaymen have already started track repairs on the Mongolian railroad from Mandal to Davaany, a total length of 108km. RZD will spend $ 36 million to do this work.
The president of RZD said that the realisation of the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia, which was developed by Russian Railways experts, will enhance the efficiency of Mongolia’s domestic rail transport and its transit shipments.

Choose Who You Want

RZD emphasises that a necessary condition for this concept to be implemented is equal participation of the Mongolian government as an Ulan-Bator Railways shareholder.
The main way to do this is for the Mongolian party to transfer the rights (licences) to work with mineral deposits on the Mongolian territory to a specially created joint venture “Infrastructure Development”, says the company.
The agreement to create the joint venture was signed on May 13th, 2009 by the representatives of RZD and Mongolian state companies Erdenes-MGL and Mongolym Tomor Zam (MTZ), as a result of Russian Prime Minister Vladimir Putin’s visit to Ulan-Bator. (RZD owns 50% of the shares in this enterprise, 25% belongs to Erdenes-MGL and 25% to MTZ).
The joint venture’s targets include modernisation of railways in the country and construction of the infrastructure to the largest mineral deposits. By now, the company has been registered and its charter capital has been fully paid by its founders.
The main ways to get a return on the investments into modernisation and improvement of the Mongolian railway network is via the profitable work of the joint-stock company Ulan-Bator Railways, through costs optimisation and establishing economically viable tariffs; and also incomes gained from the development of new mineral deposits.
Mr Yakunin had declared earlier that the Mongolian party could give its contribution in the form of giving rights to the joint venture to develop the country’s largest deposits, first of all the Tavan-Tolgoy’s 6 billion-ton coal deposit (the researched deposits are about 900 million tons). The joint venture should not be engaged in the development of the deposits itself. It is to organise competitions and choose partners for new project companies, where the joint venture would receive 25% plus one share, and the investor could have 75% minus one share. The development project proposed by RZD Tavan-Tolgoy includes building a railroad from the deposit to the Ulan-Bator railway, from which coal should be delivered via the Transsib to Russian ports of the Far East and further to Japan and South Korea. But these wide-ranging documents about the creation of the joint venture have started to face resistance from other players (primarily from China) immediately after their signing.
News that Chinese state companies were setting up in Mongolia sparked great anxiety in the Russian Federation. In July, the Transport Ministry of Mongolia and the Railway Ministry of the People’s Republic of China signed a memorandum of mutual understanding, which included the participation of Beijing in modernisation of railways in the country. Simultaneously, it offered to build a branch line to Tavan-Tolgoy in order to export ores, but through China instead of Russia.
This plan has been supported by some members of the Mongolian government. “It is necessary for us to build a railroad from Tavan-Togol in order to export coal to China, and further to other countries through the port of Tianjin,” declared Haltmaagiin Battulga, Transport Minister of Mongolia. The variant proposed by China of transporting ores from Tavan-Tolgoy has been supported by many Mongolian experts. The fact is that last year the World Bank fulfilled the order of Ulan Bator to answer the question of which way was cheaper. As was reported, transportation to the south would open roads for coal from Tavan-Tolgoy to reach the huge market of China, and moving ores to Japan and South Korea through the Chinese port of Tianjin would be half the cost of that through Russia.
Moreover, Chinese companies have already started realisation of this project. As it became known from the China’s state asset management commission, the Chinese company Shenhua (participating in the tender for the Tavan-Tolgoy development) has started construction of a railway to the southern border of Mongolia, which is to transport coal and copper. The project is to be completed in 2011. “Construction of this road is a part of the Tavan-Tolgoy development plans,” noted the China’s state commission.
“The active participation of big business in Mongolian projects can promote growth in orders for domestic transport engineering. Mongolia desperately needs locomotives, wagons and carriages,” says Igor Kurochtenko, an expert analyst from the Institute of Problems of Natural Monopolies.

The Problem Is Finding Investors

The participation of RZD in the consortium for development of large Mongolian deposits in Tavan-Tolgoy and Oyu-Tolgoy is even more interesting. The investor in this project is to be chosen by competitive tender, which has just passed its first stage. The Russian consortium which consisted of companies Base Element, Renova and Severstal, participated in that stage. However, Mr Enebishem, Head of Erdenes MGL, who is representing the State’s interests in the largest strategic deposits in Mongolia, mentioned, that “about a month ago Severstal announced that it was leaving the consortium”. “RZD will probably join this consortium instead,” he added. The Russian consortium consisting of RZD, Base Element and Renova are the main applicants for the development of the Tavan-Tolgoy deposits, concluded Mr Enebishem. This information was confirmed by RZD, but with a remark that they will not contribute any money there, but will just help to build railways leading to the deposits. The company will not engage in the development of the deposits and in investing in them. The task is to find investors.
Transmashholding may also receive Mongolia’s order. The company is discussing with Ulan-Bator Railways deliveries of modern, highly effective traction and passenger rolling stock to Mongolia. Transmashholding, Russian Railways (RZD) and Ulan Bator Railways signed a memorandum of cooperation in providing Ulan Bator Railways with rolling stock.
The memorandum was signed on August 25th 2009 in Ulan Bator by Andrey Bokarev, Chairman of Transmashholding Board of Directors, Vladimir Yakunin, President of RZD and Vanchigdorzh Otgondemberel, Head of Ulan-Bator Railways.
According to the signed document, the parties have expressed their intention to jointly realise development of the Ulan-Bator Railway complex in the sphere of rolling stock. Joint proposals regarding equipping the Ulan-Bator Railway with modern technical units will be prepared.
According to the memorandum, service centres will be organised for maintenance and repair of the products to be supplied to the Ulan-Bator Railways.
The parties emphasise that they consider it necessary to preserve in the long term the unity of Ulan Bator and RZD railway facilities, which will promote the development of interstate railway communication and increase the transit attractiveness of the transport corridors through Russian and Mongolian territories. The signatories also find it necessary to create technical conditions to increase traffic volumes on Ulan Bator’s road.
During the teamwork on the provisions of the memorandum, the parties agreed to create a joint working group within 15 days.
The development of the “Tavantolgoy” mineral deposit could start in autumn 2010, said Mr Enebishem. Apart from the Russian consortium, applications for Tavan-Tolgoy were submitted by the Japanese Sumitomo and Itochu, American Peabody, Chinese Shenhua, Brazilian Vale, Swiss Xstrata, British-Australian Rio Tinto and BHP Billiton. Experts consider it very important to stake out the Mongolian market right now, where companies from Japan, China and the USA are planning to be established as well.

RESUME

Experts say such active participation by RZD in the Mongolian projects is mostly for political reasons. “Only large joint business projects can promote a higher level of Russian-Mongolian relations,” notes Mr Kurochtenko. “Presence in this region does not have only economic targets,” agrees Evgeniy Shago, Head of the Analytical Department in Ingosstrakh-Investment.
“Just to build the railway in Mongolia without the development of deposits is, by and large, a useless expenditure of money. But even considering the development of the deposits, the recoupment will take quite a long time, about ten years,” said the expert.
But RZD is scarcely frightened by such terms. The company wanted for a long time to enter foreign markets. It has already won the competition for constructing railways in Saudi Arabia, will build a road around the capital of Algeria, and in Armenia it received a road in concession management. So it seems it will be very difficult to lose the competition in Mongolia.
Stanislav Russkov

our reference

The Soviet-Mongolian joint stock company Ulan-Bator Railways was founded and situated in the city of Ulan-Bator as a result of an agreement of June 6th, 1949, between the Government of the USSR and the Mongolian People’s Republic. In 2009, two representatives from RZD joined Ulan-Bator Railways’ Board. Ulan-Bator Railways’ share of total domestic cargo turnover is about 80%, and up to 100% in export-import transportations. Ulan-Bator Railways employs about 16,000 people. Ulan-Bator Railways is almost 2,000km long. In 2008 cargo flows grew by 6.68% compared to 2007, up to 14.6 million tons. As forecasted, total cargo to be transported in 2010 is 20.1 million tons, with 8% - 12% annual growth due to the development of coal, copper and iron ore deposits. For the past 15 years Ulan-Bator Railways has not received any financing from its Russian shareholder; and the investments in the development of Ulan-Bator Railways by the Mongolian party have not exceeded $150 million.
Tavan-Tolgoy is situated in the south of Mongolia. Recently its coal stocks had been estimated to be between 5 and 6 billion tons, of which 40% was coked coal. But in February it was announced that the researched stocks were about 900 million tons. Oyu-Tolgoy is 100km away from Tavan-Tolgoy. The proved and probable stocks, according to the data of 2007, were estimated in 930 million tons of ores, with 0.5% of copper and 0.36 grams of gold per ton. Preliminary investigation was made by the Canadian Ivanhoe Mines.

viewpoint

 Vladimir Yakunin,
President of RZD

– We are starting a new stage in the development of cooperation between Russian Railways and Ulan-Bator Railways. Mutual relations between Russian and Mongolian railwaymen have a very bright future, which is confirmed by new joint infrastructure projects.
Realisation of such trends as the unified gauge, common technical standards and, in the long term, a single information base, will allow the Mongolian transit link to become one of the major container cargo routes from China to Europe.

Alexey Mersiyanov,
General Director of RZD Trading Company:
- The cooperation between RZD Trading Company and Ulan-Bator Railways is based on contracts of export supplies of goods and services. Our company operates both independently and on RZD’s instructions, on the basis of the respective agent’s agreement.
At the present time we are providing bulk supplies of track materials to Mongolia for the purpose of joint construction together with RZD of the Mandal - Davaany stretch owned by JSC Ulan-Bator Railways. Besides, RZD Trading Company has experience in implementing rolling stock repair contracts with the Mongolian mainline.
We must say that we do not have any major problems with the delivery and repair of rolling stock for JSC Ulan-Bator Railways. Cooperation with Mongolian colleagues is matching the standards and the universal practices of international trade.
As regards further relations, RZD Trading Company sees an opportunity for long-term cooperation with JSC Ulan-Bator Railways. It is supported by the fact that our Mongolian colleagues are interested in further deliveries of railway production during the realisation of joint projects with RZD to build and modernize railroads on Mongolian territory, and also in repairing rolling stock at RZD’s enterprises. [~DETAIL_TEXT] =>

To Raise It Properly

It became known during the bilateral meetings in Ulan-Bator of Russian and Mongolian Presidents, Dmitry Medvedev and Tsakhiagiin Elbegdorj, that RZD will take an active part in the development of the Mongolian economy. RZD has received a share in Mongolia’s railways. Mr Medvedev has signed a decree “On the transfer of federally-owned shares in JSC Ulan-Bator Railways to the trust management of Russian Railways”.
Shares are being transferred to the trust management of the Russian state monopoly for five years.
As stated in the signed document, 50% of shares owned by Russia in Ulan-Bator Railways are being transferred to the trust management of Russian Railways for five years. The decision has been taken in order to increase the efficiency of their management.
“In fact, Russian Railways has already started to participate in the development of Ulan-Bator Railways and is giving practical assistance in carrying out major track repairs, upgrading rolling stock and improving transport technology,” noted Vladimir Yakunin, President of RZD.
“In order to finance the delivery of building materials and to implement reconstruction works on the upper portion of railway tracks, a $ 36 million loan contract has been signed between our companies for two years,” reminded Mr Yakunin. “The first project to lay 108km of continuous welded rail tracks along the Mandal – Davaany stretch was launched on June 6th 2009, within the framework of celebrating 60th anniversary of Ulan-Bator Railways.”
The joint-stock company Ulan-Bator Railways was founded in 1949 on the basis of an agreement between the governments of the USSR and the Mongolian People’s Republic, with equal distribution of shares in its charter capital. Until now The Federal Railway Transport Agency (Roszheldor) has been executing the power of a shareholder in this company on behalf of the Russian Federation.
The single technical base with Russian railways, including the 1520 mm-wide track, explains the important geostrategic role of Ulan-Bator Railways in terms of providing transport and economic ties with China.
Simultaneously, the current technical state of the Ulan-Bator Railways’ main assets (70% deterioration in rolling stock, and more than 50% in the upper portion of the tracks) negatively influences the carrying ability of this railroad, its throughput and the development of new prospective traffic opportunities, including cargo transits.
For the past 15 years the Russian shareholder has not provided any financing for Ulan-Bator Railways; and the Mongolian party’s investment in the development of this mainline has not exceeded $150 million.
The agreement to expand the range of cooperation between RZD and Ulan-Bator Railways was signed in February 2008, considering the important role which this mainline plays in the commercial and economic relations of Russia and Mongolia, its geopolitical value due to organisation of cargo flows to Asia-Pacific Countries, and also following the numerous requests of the Mongolian side for technical aid.
Recently Mr Yakunin has introduced the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia”. The main task is to build the infrastructure leading to the largest mineral deposits of the country.
Three main directions are specified in this project. The first is to modernise the current network of Mongolian mainline (major infrastructure repairs, improving junctions, partial construction of second tracks and upgrading rolling stock).
The second is the construction of a new railroad from Zuunbayan to Tavan Tolgoi, in order to provide the opportunity for coal exports from the Tavan-Tolgoi deposits, both to China and by northern routes, through Russian ports in the Far East.
The third direction is the later construction of an additional railway branch Bayantumen – Bor – Under, in order to make the northern route shorter (and using Russian railway infrastructure) and to provide the opportunity for developing the deposits in eastern regions of Mongolia.
Mr Yakunin said that the investments in the development of Mongolian railway infrastructure could be up to $ 6.5 billion, including $ 2.2 billion to modernise the current railway network, $ 0.4 billion to upgrade rolling stock and $ 3.9 billion to build new railroads from Dalanzadgad to Zuunbayan (to coal, copper and gold deposits) and from Sainshand to Bayantumen (a railroad from the mainline to the Chinese border).
Since 2007, RZD have supplied the Mongolian partners with 1,350 freight wagons. In the near future, according to the contract signed in July 2009, RZD will lease them 10 locomotives. Also, Russian railwaymen have already started track repairs on the Mongolian railroad from Mandal to Davaany, a total length of 108km. RZD will spend $ 36 million to do this work.
The president of RZD said that the realisation of the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia, which was developed by Russian Railways experts, will enhance the efficiency of Mongolia’s domestic rail transport and its transit shipments.

Choose Who You Want

RZD emphasises that a necessary condition for this concept to be implemented is equal participation of the Mongolian government as an Ulan-Bator Railways shareholder.
The main way to do this is for the Mongolian party to transfer the rights (licences) to work with mineral deposits on the Mongolian territory to a specially created joint venture “Infrastructure Development”, says the company.
The agreement to create the joint venture was signed on May 13th, 2009 by the representatives of RZD and Mongolian state companies Erdenes-MGL and Mongolym Tomor Zam (MTZ), as a result of Russian Prime Minister Vladimir Putin’s visit to Ulan-Bator. (RZD owns 50% of the shares in this enterprise, 25% belongs to Erdenes-MGL and 25% to MTZ).
The joint venture’s targets include modernisation of railways in the country and construction of the infrastructure to the largest mineral deposits. By now, the company has been registered and its charter capital has been fully paid by its founders.
The main ways to get a return on the investments into modernisation and improvement of the Mongolian railway network is via the profitable work of the joint-stock company Ulan-Bator Railways, through costs optimisation and establishing economically viable tariffs; and also incomes gained from the development of new mineral deposits.
Mr Yakunin had declared earlier that the Mongolian party could give its contribution in the form of giving rights to the joint venture to develop the country’s largest deposits, first of all the Tavan-Tolgoy’s 6 billion-ton coal deposit (the researched deposits are about 900 million tons). The joint venture should not be engaged in the development of the deposits itself. It is to organise competitions and choose partners for new project companies, where the joint venture would receive 25% plus one share, and the investor could have 75% minus one share. The development project proposed by RZD Tavan-Tolgoy includes building a railroad from the deposit to the Ulan-Bator railway, from which coal should be delivered via the Transsib to Russian ports of the Far East and further to Japan and South Korea. But these wide-ranging documents about the creation of the joint venture have started to face resistance from other players (primarily from China) immediately after their signing.
News that Chinese state companies were setting up in Mongolia sparked great anxiety in the Russian Federation. In July, the Transport Ministry of Mongolia and the Railway Ministry of the People’s Republic of China signed a memorandum of mutual understanding, which included the participation of Beijing in modernisation of railways in the country. Simultaneously, it offered to build a branch line to Tavan-Tolgoy in order to export ores, but through China instead of Russia.
This plan has been supported by some members of the Mongolian government. “It is necessary for us to build a railroad from Tavan-Togol in order to export coal to China, and further to other countries through the port of Tianjin,” declared Haltmaagiin Battulga, Transport Minister of Mongolia. The variant proposed by China of transporting ores from Tavan-Tolgoy has been supported by many Mongolian experts. The fact is that last year the World Bank fulfilled the order of Ulan Bator to answer the question of which way was cheaper. As was reported, transportation to the south would open roads for coal from Tavan-Tolgoy to reach the huge market of China, and moving ores to Japan and South Korea through the Chinese port of Tianjin would be half the cost of that through Russia.
Moreover, Chinese companies have already started realisation of this project. As it became known from the China’s state asset management commission, the Chinese company Shenhua (participating in the tender for the Tavan-Tolgoy development) has started construction of a railway to the southern border of Mongolia, which is to transport coal and copper. The project is to be completed in 2011. “Construction of this road is a part of the Tavan-Tolgoy development plans,” noted the China’s state commission.
“The active participation of big business in Mongolian projects can promote growth in orders for domestic transport engineering. Mongolia desperately needs locomotives, wagons and carriages,” says Igor Kurochtenko, an expert analyst from the Institute of Problems of Natural Monopolies.

The Problem Is Finding Investors

The participation of RZD in the consortium for development of large Mongolian deposits in Tavan-Tolgoy and Oyu-Tolgoy is even more interesting. The investor in this project is to be chosen by competitive tender, which has just passed its first stage. The Russian consortium which consisted of companies Base Element, Renova and Severstal, participated in that stage. However, Mr Enebishem, Head of Erdenes MGL, who is representing the State’s interests in the largest strategic deposits in Mongolia, mentioned, that “about a month ago Severstal announced that it was leaving the consortium”. “RZD will probably join this consortium instead,” he added. The Russian consortium consisting of RZD, Base Element and Renova are the main applicants for the development of the Tavan-Tolgoy deposits, concluded Mr Enebishem. This information was confirmed by RZD, but with a remark that they will not contribute any money there, but will just help to build railways leading to the deposits. The company will not engage in the development of the deposits and in investing in them. The task is to find investors.
Transmashholding may also receive Mongolia’s order. The company is discussing with Ulan-Bator Railways deliveries of modern, highly effective traction and passenger rolling stock to Mongolia. Transmashholding, Russian Railways (RZD) and Ulan Bator Railways signed a memorandum of cooperation in providing Ulan Bator Railways with rolling stock.
The memorandum was signed on August 25th 2009 in Ulan Bator by Andrey Bokarev, Chairman of Transmashholding Board of Directors, Vladimir Yakunin, President of RZD and Vanchigdorzh Otgondemberel, Head of Ulan-Bator Railways.
According to the signed document, the parties have expressed their intention to jointly realise development of the Ulan-Bator Railway complex in the sphere of rolling stock. Joint proposals regarding equipping the Ulan-Bator Railway with modern technical units will be prepared.
According to the memorandum, service centres will be organised for maintenance and repair of the products to be supplied to the Ulan-Bator Railways.
The parties emphasise that they consider it necessary to preserve in the long term the unity of Ulan Bator and RZD railway facilities, which will promote the development of interstate railway communication and increase the transit attractiveness of the transport corridors through Russian and Mongolian territories. The signatories also find it necessary to create technical conditions to increase traffic volumes on Ulan Bator’s road.
During the teamwork on the provisions of the memorandum, the parties agreed to create a joint working group within 15 days.
The development of the “Tavantolgoy” mineral deposit could start in autumn 2010, said Mr Enebishem. Apart from the Russian consortium, applications for Tavan-Tolgoy were submitted by the Japanese Sumitomo and Itochu, American Peabody, Chinese Shenhua, Brazilian Vale, Swiss Xstrata, British-Australian Rio Tinto and BHP Billiton. Experts consider it very important to stake out the Mongolian market right now, where companies from Japan, China and the USA are planning to be established as well.

RESUME

Experts say such active participation by RZD in the Mongolian projects is mostly for political reasons. “Only large joint business projects can promote a higher level of Russian-Mongolian relations,” notes Mr Kurochtenko. “Presence in this region does not have only economic targets,” agrees Evgeniy Shago, Head of the Analytical Department in Ingosstrakh-Investment.
“Just to build the railway in Mongolia without the development of deposits is, by and large, a useless expenditure of money. But even considering the development of the deposits, the recoupment will take quite a long time, about ten years,” said the expert.
But RZD is scarcely frightened by such terms. The company wanted for a long time to enter foreign markets. It has already won the competition for constructing railways in Saudi Arabia, will build a road around the capital of Algeria, and in Armenia it received a road in concession management. So it seems it will be very difficult to lose the competition in Mongolia.
Stanislav Russkov

our reference

The Soviet-Mongolian joint stock company Ulan-Bator Railways was founded and situated in the city of Ulan-Bator as a result of an agreement of June 6th, 1949, between the Government of the USSR and the Mongolian People’s Republic. In 2009, two representatives from RZD joined Ulan-Bator Railways’ Board. Ulan-Bator Railways’ share of total domestic cargo turnover is about 80%, and up to 100% in export-import transportations. Ulan-Bator Railways employs about 16,000 people. Ulan-Bator Railways is almost 2,000km long. In 2008 cargo flows grew by 6.68% compared to 2007, up to 14.6 million tons. As forecasted, total cargo to be transported in 2010 is 20.1 million tons, with 8% - 12% annual growth due to the development of coal, copper and iron ore deposits. For the past 15 years Ulan-Bator Railways has not received any financing from its Russian shareholder; and the investments in the development of Ulan-Bator Railways by the Mongolian party have not exceeded $150 million.
Tavan-Tolgoy is situated in the south of Mongolia. Recently its coal stocks had been estimated to be between 5 and 6 billion tons, of which 40% was coked coal. But in February it was announced that the researched stocks were about 900 million tons. Oyu-Tolgoy is 100km away from Tavan-Tolgoy. The proved and probable stocks, according to the data of 2007, were estimated in 930 million tons of ores, with 0.5% of copper and 0.36 grams of gold per ton. Preliminary investigation was made by the Canadian Ivanhoe Mines.

viewpoint

 Vladimir Yakunin,
President of RZD

– We are starting a new stage in the development of cooperation between Russian Railways and Ulan-Bator Railways. Mutual relations between Russian and Mongolian railwaymen have a very bright future, which is confirmed by new joint infrastructure projects.
Realisation of such trends as the unified gauge, common technical standards and, in the long term, a single information base, will allow the Mongolian transit link to become one of the major container cargo routes from China to Europe.

Alexey Mersiyanov,
General Director of RZD Trading Company:
- The cooperation between RZD Trading Company and Ulan-Bator Railways is based on contracts of export supplies of goods and services. Our company operates both independently and on RZD’s instructions, on the basis of the respective agent’s agreement.
At the present time we are providing bulk supplies of track materials to Mongolia for the purpose of joint construction together with RZD of the Mandal - Davaany stretch owned by JSC Ulan-Bator Railways. Besides, RZD Trading Company has experience in implementing rolling stock repair contracts with the Mongolian mainline.
We must say that we do not have any major problems with the delivery and repair of rolling stock for JSC Ulan-Bator Railways. Cooperation with Mongolian colleagues is matching the standards and the universal practices of international trade.
As regards further relations, RZD Trading Company sees an opportunity for long-term cooperation with JSC Ulan-Bator Railways. It is supported by the fact that our Mongolian colleagues are interested in further deliveries of railway production during the realisation of joint projects with RZD to build and modernize railroads on Mongolian territory, and also in repairing rolling stock at RZD’s enterprises. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes
to benefit from it. [~PREVIEW_TEXT] =>  RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes
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To Raise It Properly

It became known during the bilateral meetings in Ulan-Bator of Russian and Mongolian Presidents, Dmitry Medvedev and Tsakhiagiin Elbegdorj, that RZD will take an active part in the development of the Mongolian economy. RZD has received a share in Mongolia’s railways. Mr Medvedev has signed a decree “On the transfer of federally-owned shares in JSC Ulan-Bator Railways to the trust management of Russian Railways”.
Shares are being transferred to the trust management of the Russian state monopoly for five years.
As stated in the signed document, 50% of shares owned by Russia in Ulan-Bator Railways are being transferred to the trust management of Russian Railways for five years. The decision has been taken in order to increase the efficiency of their management.
“In fact, Russian Railways has already started to participate in the development of Ulan-Bator Railways and is giving practical assistance in carrying out major track repairs, upgrading rolling stock and improving transport technology,” noted Vladimir Yakunin, President of RZD.
“In order to finance the delivery of building materials and to implement reconstruction works on the upper portion of railway tracks, a $ 36 million loan contract has been signed between our companies for two years,” reminded Mr Yakunin. “The first project to lay 108km of continuous welded rail tracks along the Mandal – Davaany stretch was launched on June 6th 2009, within the framework of celebrating 60th anniversary of Ulan-Bator Railways.”
The joint-stock company Ulan-Bator Railways was founded in 1949 on the basis of an agreement between the governments of the USSR and the Mongolian People’s Republic, with equal distribution of shares in its charter capital. Until now The Federal Railway Transport Agency (Roszheldor) has been executing the power of a shareholder in this company on behalf of the Russian Federation.
The single technical base with Russian railways, including the 1520 mm-wide track, explains the important geostrategic role of Ulan-Bator Railways in terms of providing transport and economic ties with China.
Simultaneously, the current technical state of the Ulan-Bator Railways’ main assets (70% deterioration in rolling stock, and more than 50% in the upper portion of the tracks) negatively influences the carrying ability of this railroad, its throughput and the development of new prospective traffic opportunities, including cargo transits.
For the past 15 years the Russian shareholder has not provided any financing for Ulan-Bator Railways; and the Mongolian party’s investment in the development of this mainline has not exceeded $150 million.
The agreement to expand the range of cooperation between RZD and Ulan-Bator Railways was signed in February 2008, considering the important role which this mainline plays in the commercial and economic relations of Russia and Mongolia, its geopolitical value due to organisation of cargo flows to Asia-Pacific Countries, and also following the numerous requests of the Mongolian side for technical aid.
Recently Mr Yakunin has introduced the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia”. The main task is to build the infrastructure leading to the largest mineral deposits of the country.
Three main directions are specified in this project. The first is to modernise the current network of Mongolian mainline (major infrastructure repairs, improving junctions, partial construction of second tracks and upgrading rolling stock).
The second is the construction of a new railroad from Zuunbayan to Tavan Tolgoi, in order to provide the opportunity for coal exports from the Tavan-Tolgoi deposits, both to China and by northern routes, through Russian ports in the Far East.
The third direction is the later construction of an additional railway branch Bayantumen – Bor – Under, in order to make the northern route shorter (and using Russian railway infrastructure) and to provide the opportunity for developing the deposits in eastern regions of Mongolia.
Mr Yakunin said that the investments in the development of Mongolian railway infrastructure could be up to $ 6.5 billion, including $ 2.2 billion to modernise the current railway network, $ 0.4 billion to upgrade rolling stock and $ 3.9 billion to build new railroads from Dalanzadgad to Zuunbayan (to coal, copper and gold deposits) and from Sainshand to Bayantumen (a railroad from the mainline to the Chinese border).
Since 2007, RZD have supplied the Mongolian partners with 1,350 freight wagons. In the near future, according to the contract signed in July 2009, RZD will lease them 10 locomotives. Also, Russian railwaymen have already started track repairs on the Mongolian railroad from Mandal to Davaany, a total length of 108km. RZD will spend $ 36 million to do this work.
The president of RZD said that the realisation of the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia, which was developed by Russian Railways experts, will enhance the efficiency of Mongolia’s domestic rail transport and its transit shipments.

Choose Who You Want

RZD emphasises that a necessary condition for this concept to be implemented is equal participation of the Mongolian government as an Ulan-Bator Railways shareholder.
The main way to do this is for the Mongolian party to transfer the rights (licences) to work with mineral deposits on the Mongolian territory to a specially created joint venture “Infrastructure Development”, says the company.
The agreement to create the joint venture was signed on May 13th, 2009 by the representatives of RZD and Mongolian state companies Erdenes-MGL and Mongolym Tomor Zam (MTZ), as a result of Russian Prime Minister Vladimir Putin’s visit to Ulan-Bator. (RZD owns 50% of the shares in this enterprise, 25% belongs to Erdenes-MGL and 25% to MTZ).
The joint venture’s targets include modernisation of railways in the country and construction of the infrastructure to the largest mineral deposits. By now, the company has been registered and its charter capital has been fully paid by its founders.
The main ways to get a return on the investments into modernisation and improvement of the Mongolian railway network is via the profitable work of the joint-stock company Ulan-Bator Railways, through costs optimisation and establishing economically viable tariffs; and also incomes gained from the development of new mineral deposits.
Mr Yakunin had declared earlier that the Mongolian party could give its contribution in the form of giving rights to the joint venture to develop the country’s largest deposits, first of all the Tavan-Tolgoy’s 6 billion-ton coal deposit (the researched deposits are about 900 million tons). The joint venture should not be engaged in the development of the deposits itself. It is to organise competitions and choose partners for new project companies, where the joint venture would receive 25% plus one share, and the investor could have 75% minus one share. The development project proposed by RZD Tavan-Tolgoy includes building a railroad from the deposit to the Ulan-Bator railway, from which coal should be delivered via the Transsib to Russian ports of the Far East and further to Japan and South Korea. But these wide-ranging documents about the creation of the joint venture have started to face resistance from other players (primarily from China) immediately after their signing.
News that Chinese state companies were setting up in Mongolia sparked great anxiety in the Russian Federation. In July, the Transport Ministry of Mongolia and the Railway Ministry of the People’s Republic of China signed a memorandum of mutual understanding, which included the participation of Beijing in modernisation of railways in the country. Simultaneously, it offered to build a branch line to Tavan-Tolgoy in order to export ores, but through China instead of Russia.
This plan has been supported by some members of the Mongolian government. “It is necessary for us to build a railroad from Tavan-Togol in order to export coal to China, and further to other countries through the port of Tianjin,” declared Haltmaagiin Battulga, Transport Minister of Mongolia. The variant proposed by China of transporting ores from Tavan-Tolgoy has been supported by many Mongolian experts. The fact is that last year the World Bank fulfilled the order of Ulan Bator to answer the question of which way was cheaper. As was reported, transportation to the south would open roads for coal from Tavan-Tolgoy to reach the huge market of China, and moving ores to Japan and South Korea through the Chinese port of Tianjin would be half the cost of that through Russia.
Moreover, Chinese companies have already started realisation of this project. As it became known from the China’s state asset management commission, the Chinese company Shenhua (participating in the tender for the Tavan-Tolgoy development) has started construction of a railway to the southern border of Mongolia, which is to transport coal and copper. The project is to be completed in 2011. “Construction of this road is a part of the Tavan-Tolgoy development plans,” noted the China’s state commission.
“The active participation of big business in Mongolian projects can promote growth in orders for domestic transport engineering. Mongolia desperately needs locomotives, wagons and carriages,” says Igor Kurochtenko, an expert analyst from the Institute of Problems of Natural Monopolies.

The Problem Is Finding Investors

The participation of RZD in the consortium for development of large Mongolian deposits in Tavan-Tolgoy and Oyu-Tolgoy is even more interesting. The investor in this project is to be chosen by competitive tender, which has just passed its first stage. The Russian consortium which consisted of companies Base Element, Renova and Severstal, participated in that stage. However, Mr Enebishem, Head of Erdenes MGL, who is representing the State’s interests in the largest strategic deposits in Mongolia, mentioned, that “about a month ago Severstal announced that it was leaving the consortium”. “RZD will probably join this consortium instead,” he added. The Russian consortium consisting of RZD, Base Element and Renova are the main applicants for the development of the Tavan-Tolgoy deposits, concluded Mr Enebishem. This information was confirmed by RZD, but with a remark that they will not contribute any money there, but will just help to build railways leading to the deposits. The company will not engage in the development of the deposits and in investing in them. The task is to find investors.
Transmashholding may also receive Mongolia’s order. The company is discussing with Ulan-Bator Railways deliveries of modern, highly effective traction and passenger rolling stock to Mongolia. Transmashholding, Russian Railways (RZD) and Ulan Bator Railways signed a memorandum of cooperation in providing Ulan Bator Railways with rolling stock.
The memorandum was signed on August 25th 2009 in Ulan Bator by Andrey Bokarev, Chairman of Transmashholding Board of Directors, Vladimir Yakunin, President of RZD and Vanchigdorzh Otgondemberel, Head of Ulan-Bator Railways.
According to the signed document, the parties have expressed their intention to jointly realise development of the Ulan-Bator Railway complex in the sphere of rolling stock. Joint proposals regarding equipping the Ulan-Bator Railway with modern technical units will be prepared.
According to the memorandum, service centres will be organised for maintenance and repair of the products to be supplied to the Ulan-Bator Railways.
The parties emphasise that they consider it necessary to preserve in the long term the unity of Ulan Bator and RZD railway facilities, which will promote the development of interstate railway communication and increase the transit attractiveness of the transport corridors through Russian and Mongolian territories. The signatories also find it necessary to create technical conditions to increase traffic volumes on Ulan Bator’s road.
During the teamwork on the provisions of the memorandum, the parties agreed to create a joint working group within 15 days.
The development of the “Tavantolgoy” mineral deposit could start in autumn 2010, said Mr Enebishem. Apart from the Russian consortium, applications for Tavan-Tolgoy were submitted by the Japanese Sumitomo and Itochu, American Peabody, Chinese Shenhua, Brazilian Vale, Swiss Xstrata, British-Australian Rio Tinto and BHP Billiton. Experts consider it very important to stake out the Mongolian market right now, where companies from Japan, China and the USA are planning to be established as well.

RESUME

Experts say such active participation by RZD in the Mongolian projects is mostly for political reasons. “Only large joint business projects can promote a higher level of Russian-Mongolian relations,” notes Mr Kurochtenko. “Presence in this region does not have only economic targets,” agrees Evgeniy Shago, Head of the Analytical Department in Ingosstrakh-Investment.
“Just to build the railway in Mongolia without the development of deposits is, by and large, a useless expenditure of money. But even considering the development of the deposits, the recoupment will take quite a long time, about ten years,” said the expert.
But RZD is scarcely frightened by such terms. The company wanted for a long time to enter foreign markets. It has already won the competition for constructing railways in Saudi Arabia, will build a road around the capital of Algeria, and in Armenia it received a road in concession management. So it seems it will be very difficult to lose the competition in Mongolia.
Stanislav Russkov

our reference

The Soviet-Mongolian joint stock company Ulan-Bator Railways was founded and situated in the city of Ulan-Bator as a result of an agreement of June 6th, 1949, between the Government of the USSR and the Mongolian People’s Republic. In 2009, two representatives from RZD joined Ulan-Bator Railways’ Board. Ulan-Bator Railways’ share of total domestic cargo turnover is about 80%, and up to 100% in export-import transportations. Ulan-Bator Railways employs about 16,000 people. Ulan-Bator Railways is almost 2,000km long. In 2008 cargo flows grew by 6.68% compared to 2007, up to 14.6 million tons. As forecasted, total cargo to be transported in 2010 is 20.1 million tons, with 8% - 12% annual growth due to the development of coal, copper and iron ore deposits. For the past 15 years Ulan-Bator Railways has not received any financing from its Russian shareholder; and the investments in the development of Ulan-Bator Railways by the Mongolian party have not exceeded $150 million.
Tavan-Tolgoy is situated in the south of Mongolia. Recently its coal stocks had been estimated to be between 5 and 6 billion tons, of which 40% was coked coal. But in February it was announced that the researched stocks were about 900 million tons. Oyu-Tolgoy is 100km away from Tavan-Tolgoy. The proved and probable stocks, according to the data of 2007, were estimated in 930 million tons of ores, with 0.5% of copper and 0.36 grams of gold per ton. Preliminary investigation was made by the Canadian Ivanhoe Mines.

viewpoint

 Vladimir Yakunin,
President of RZD

– We are starting a new stage in the development of cooperation between Russian Railways and Ulan-Bator Railways. Mutual relations between Russian and Mongolian railwaymen have a very bright future, which is confirmed by new joint infrastructure projects.
Realisation of such trends as the unified gauge, common technical standards and, in the long term, a single information base, will allow the Mongolian transit link to become one of the major container cargo routes from China to Europe.

Alexey Mersiyanov,
General Director of RZD Trading Company:
- The cooperation between RZD Trading Company and Ulan-Bator Railways is based on contracts of export supplies of goods and services. Our company operates both independently and on RZD’s instructions, on the basis of the respective agent’s agreement.
At the present time we are providing bulk supplies of track materials to Mongolia for the purpose of joint construction together with RZD of the Mandal - Davaany stretch owned by JSC Ulan-Bator Railways. Besides, RZD Trading Company has experience in implementing rolling stock repair contracts with the Mongolian mainline.
We must say that we do not have any major problems with the delivery and repair of rolling stock for JSC Ulan-Bator Railways. Cooperation with Mongolian colleagues is matching the standards and the universal practices of international trade.
As regards further relations, RZD Trading Company sees an opportunity for long-term cooperation with JSC Ulan-Bator Railways. It is supported by the fact that our Mongolian colleagues are interested in further deliveries of railway production during the realisation of joint projects with RZD to build and modernize railroads on Mongolian territory, and also in repairing rolling stock at RZD’s enterprises. [~DETAIL_TEXT] =>

To Raise It Properly

It became known during the bilateral meetings in Ulan-Bator of Russian and Mongolian Presidents, Dmitry Medvedev and Tsakhiagiin Elbegdorj, that RZD will take an active part in the development of the Mongolian economy. RZD has received a share in Mongolia’s railways. Mr Medvedev has signed a decree “On the transfer of federally-owned shares in JSC Ulan-Bator Railways to the trust management of Russian Railways”.
Shares are being transferred to the trust management of the Russian state monopoly for five years.
As stated in the signed document, 50% of shares owned by Russia in Ulan-Bator Railways are being transferred to the trust management of Russian Railways for five years. The decision has been taken in order to increase the efficiency of their management.
“In fact, Russian Railways has already started to participate in the development of Ulan-Bator Railways and is giving practical assistance in carrying out major track repairs, upgrading rolling stock and improving transport technology,” noted Vladimir Yakunin, President of RZD.
“In order to finance the delivery of building materials and to implement reconstruction works on the upper portion of railway tracks, a $ 36 million loan contract has been signed between our companies for two years,” reminded Mr Yakunin. “The first project to lay 108km of continuous welded rail tracks along the Mandal – Davaany stretch was launched on June 6th 2009, within the framework of celebrating 60th anniversary of Ulan-Bator Railways.”
The joint-stock company Ulan-Bator Railways was founded in 1949 on the basis of an agreement between the governments of the USSR and the Mongolian People’s Republic, with equal distribution of shares in its charter capital. Until now The Federal Railway Transport Agency (Roszheldor) has been executing the power of a shareholder in this company on behalf of the Russian Federation.
The single technical base with Russian railways, including the 1520 mm-wide track, explains the important geostrategic role of Ulan-Bator Railways in terms of providing transport and economic ties with China.
Simultaneously, the current technical state of the Ulan-Bator Railways’ main assets (70% deterioration in rolling stock, and more than 50% in the upper portion of the tracks) negatively influences the carrying ability of this railroad, its throughput and the development of new prospective traffic opportunities, including cargo transits.
For the past 15 years the Russian shareholder has not provided any financing for Ulan-Bator Railways; and the Mongolian party’s investment in the development of this mainline has not exceeded $150 million.
The agreement to expand the range of cooperation between RZD and Ulan-Bator Railways was signed in February 2008, considering the important role which this mainline plays in the commercial and economic relations of Russia and Mongolia, its geopolitical value due to organisation of cargo flows to Asia-Pacific Countries, and also following the numerous requests of the Mongolian side for technical aid.
Recently Mr Yakunin has introduced the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia”. The main task is to build the infrastructure leading to the largest mineral deposits of the country.
Three main directions are specified in this project. The first is to modernise the current network of Mongolian mainline (major infrastructure repairs, improving junctions, partial construction of second tracks and upgrading rolling stock).
The second is the construction of a new railroad from Zuunbayan to Tavan Tolgoi, in order to provide the opportunity for coal exports from the Tavan-Tolgoi deposits, both to China and by northern routes, through Russian ports in the Far East.
The third direction is the later construction of an additional railway branch Bayantumen – Bor – Under, in order to make the northern route shorter (and using Russian railway infrastructure) and to provide the opportunity for developing the deposits in eastern regions of Mongolia.
Mr Yakunin said that the investments in the development of Mongolian railway infrastructure could be up to $ 6.5 billion, including $ 2.2 billion to modernise the current railway network, $ 0.4 billion to upgrade rolling stock and $ 3.9 billion to build new railroads from Dalanzadgad to Zuunbayan (to coal, copper and gold deposits) and from Sainshand to Bayantumen (a railroad from the mainline to the Chinese border).
Since 2007, RZD have supplied the Mongolian partners with 1,350 freight wagons. In the near future, according to the contract signed in July 2009, RZD will lease them 10 locomotives. Also, Russian railwaymen have already started track repairs on the Mongolian railroad from Mandal to Davaany, a total length of 108km. RZD will spend $ 36 million to do this work.
The president of RZD said that the realisation of the “Concept for Implementing the joint Russo-Mongolian Development Project for JSC Ulan-Bator Railways and the Construction of New Rail Infrastructure in Mongolia, which was developed by Russian Railways experts, will enhance the efficiency of Mongolia’s domestic rail transport and its transit shipments.

Choose Who You Want

RZD emphasises that a necessary condition for this concept to be implemented is equal participation of the Mongolian government as an Ulan-Bator Railways shareholder.
The main way to do this is for the Mongolian party to transfer the rights (licences) to work with mineral deposits on the Mongolian territory to a specially created joint venture “Infrastructure Development”, says the company.
The agreement to create the joint venture was signed on May 13th, 2009 by the representatives of RZD and Mongolian state companies Erdenes-MGL and Mongolym Tomor Zam (MTZ), as a result of Russian Prime Minister Vladimir Putin’s visit to Ulan-Bator. (RZD owns 50% of the shares in this enterprise, 25% belongs to Erdenes-MGL and 25% to MTZ).
The joint venture’s targets include modernisation of railways in the country and construction of the infrastructure to the largest mineral deposits. By now, the company has been registered and its charter capital has been fully paid by its founders.
The main ways to get a return on the investments into modernisation and improvement of the Mongolian railway network is via the profitable work of the joint-stock company Ulan-Bator Railways, through costs optimisation and establishing economically viable tariffs; and also incomes gained from the development of new mineral deposits.
Mr Yakunin had declared earlier that the Mongolian party could give its contribution in the form of giving rights to the joint venture to develop the country’s largest deposits, first of all the Tavan-Tolgoy’s 6 billion-ton coal deposit (the researched deposits are about 900 million tons). The joint venture should not be engaged in the development of the deposits itself. It is to organise competitions and choose partners for new project companies, where the joint venture would receive 25% plus one share, and the investor could have 75% minus one share. The development project proposed by RZD Tavan-Tolgoy includes building a railroad from the deposit to the Ulan-Bator railway, from which coal should be delivered via the Transsib to Russian ports of the Far East and further to Japan and South Korea. But these wide-ranging documents about the creation of the joint venture have started to face resistance from other players (primarily from China) immediately after their signing.
News that Chinese state companies were setting up in Mongolia sparked great anxiety in the Russian Federation. In July, the Transport Ministry of Mongolia and the Railway Ministry of the People’s Republic of China signed a memorandum of mutual understanding, which included the participation of Beijing in modernisation of railways in the country. Simultaneously, it offered to build a branch line to Tavan-Tolgoy in order to export ores, but through China instead of Russia.
This plan has been supported by some members of the Mongolian government. “It is necessary for us to build a railroad from Tavan-Togol in order to export coal to China, and further to other countries through the port of Tianjin,” declared Haltmaagiin Battulga, Transport Minister of Mongolia. The variant proposed by China of transporting ores from Tavan-Tolgoy has been supported by many Mongolian experts. The fact is that last year the World Bank fulfilled the order of Ulan Bator to answer the question of which way was cheaper. As was reported, transportation to the south would open roads for coal from Tavan-Tolgoy to reach the huge market of China, and moving ores to Japan and South Korea through the Chinese port of Tianjin would be half the cost of that through Russia.
Moreover, Chinese companies have already started realisation of this project. As it became known from the China’s state asset management commission, the Chinese company Shenhua (participating in the tender for the Tavan-Tolgoy development) has started construction of a railway to the southern border of Mongolia, which is to transport coal and copper. The project is to be completed in 2011. “Construction of this road is a part of the Tavan-Tolgoy development plans,” noted the China’s state commission.
“The active participation of big business in Mongolian projects can promote growth in orders for domestic transport engineering. Mongolia desperately needs locomotives, wagons and carriages,” says Igor Kurochtenko, an expert analyst from the Institute of Problems of Natural Monopolies.

The Problem Is Finding Investors

The participation of RZD in the consortium for development of large Mongolian deposits in Tavan-Tolgoy and Oyu-Tolgoy is even more interesting. The investor in this project is to be chosen by competitive tender, which has just passed its first stage. The Russian consortium which consisted of companies Base Element, Renova and Severstal, participated in that stage. However, Mr Enebishem, Head of Erdenes MGL, who is representing the State’s interests in the largest strategic deposits in Mongolia, mentioned, that “about a month ago Severstal announced that it was leaving the consortium”. “RZD will probably join this consortium instead,” he added. The Russian consortium consisting of RZD, Base Element and Renova are the main applicants for the development of the Tavan-Tolgoy deposits, concluded Mr Enebishem. This information was confirmed by RZD, but with a remark that they will not contribute any money there, but will just help to build railways leading to the deposits. The company will not engage in the development of the deposits and in investing in them. The task is to find investors.
Transmashholding may also receive Mongolia’s order. The company is discussing with Ulan-Bator Railways deliveries of modern, highly effective traction and passenger rolling stock to Mongolia. Transmashholding, Russian Railways (RZD) and Ulan Bator Railways signed a memorandum of cooperation in providing Ulan Bator Railways with rolling stock.
The memorandum was signed on August 25th 2009 in Ulan Bator by Andrey Bokarev, Chairman of Transmashholding Board of Directors, Vladimir Yakunin, President of RZD and Vanchigdorzh Otgondemberel, Head of Ulan-Bator Railways.
According to the signed document, the parties have expressed their intention to jointly realise development of the Ulan-Bator Railway complex in the sphere of rolling stock. Joint proposals regarding equipping the Ulan-Bator Railway with modern technical units will be prepared.
According to the memorandum, service centres will be organised for maintenance and repair of the products to be supplied to the Ulan-Bator Railways.
The parties emphasise that they consider it necessary to preserve in the long term the unity of Ulan Bator and RZD railway facilities, which will promote the development of interstate railway communication and increase the transit attractiveness of the transport corridors through Russian and Mongolian territories. The signatories also find it necessary to create technical conditions to increase traffic volumes on Ulan Bator’s road.
During the teamwork on the provisions of the memorandum, the parties agreed to create a joint working group within 15 days.
The development of the “Tavantolgoy” mineral deposit could start in autumn 2010, said Mr Enebishem. Apart from the Russian consortium, applications for Tavan-Tolgoy were submitted by the Japanese Sumitomo and Itochu, American Peabody, Chinese Shenhua, Brazilian Vale, Swiss Xstrata, British-Australian Rio Tinto and BHP Billiton. Experts consider it very important to stake out the Mongolian market right now, where companies from Japan, China and the USA are planning to be established as well.

RESUME

Experts say such active participation by RZD in the Mongolian projects is mostly for political reasons. “Only large joint business projects can promote a higher level of Russian-Mongolian relations,” notes Mr Kurochtenko. “Presence in this region does not have only economic targets,” agrees Evgeniy Shago, Head of the Analytical Department in Ingosstrakh-Investment.
“Just to build the railway in Mongolia without the development of deposits is, by and large, a useless expenditure of money. But even considering the development of the deposits, the recoupment will take quite a long time, about ten years,” said the expert.
But RZD is scarcely frightened by such terms. The company wanted for a long time to enter foreign markets. It has already won the competition for constructing railways in Saudi Arabia, will build a road around the capital of Algeria, and in Armenia it received a road in concession management. So it seems it will be very difficult to lose the competition in Mongolia.
Stanislav Russkov

our reference

The Soviet-Mongolian joint stock company Ulan-Bator Railways was founded and situated in the city of Ulan-Bator as a result of an agreement of June 6th, 1949, between the Government of the USSR and the Mongolian People’s Republic. In 2009, two representatives from RZD joined Ulan-Bator Railways’ Board. Ulan-Bator Railways’ share of total domestic cargo turnover is about 80%, and up to 100% in export-import transportations. Ulan-Bator Railways employs about 16,000 people. Ulan-Bator Railways is almost 2,000km long. In 2008 cargo flows grew by 6.68% compared to 2007, up to 14.6 million tons. As forecasted, total cargo to be transported in 2010 is 20.1 million tons, with 8% - 12% annual growth due to the development of coal, copper and iron ore deposits. For the past 15 years Ulan-Bator Railways has not received any financing from its Russian shareholder; and the investments in the development of Ulan-Bator Railways by the Mongolian party have not exceeded $150 million.
Tavan-Tolgoy is situated in the south of Mongolia. Recently its coal stocks had been estimated to be between 5 and 6 billion tons, of which 40% was coked coal. But in February it was announced that the researched stocks were about 900 million tons. Oyu-Tolgoy is 100km away from Tavan-Tolgoy. The proved and probable stocks, according to the data of 2007, were estimated in 930 million tons of ores, with 0.5% of copper and 0.36 grams of gold per ton. Preliminary investigation was made by the Canadian Ivanhoe Mines.

viewpoint

 Vladimir Yakunin,
President of RZD

– We are starting a new stage in the development of cooperation between Russian Railways and Ulan-Bator Railways. Mutual relations between Russian and Mongolian railwaymen have a very bright future, which is confirmed by new joint infrastructure projects.
Realisation of such trends as the unified gauge, common technical standards and, in the long term, a single information base, will allow the Mongolian transit link to become one of the major container cargo routes from China to Europe.

Alexey Mersiyanov,
General Director of RZD Trading Company:
- The cooperation between RZD Trading Company and Ulan-Bator Railways is based on contracts of export supplies of goods and services. Our company operates both independently and on RZD’s instructions, on the basis of the respective agent’s agreement.
At the present time we are providing bulk supplies of track materials to Mongolia for the purpose of joint construction together with RZD of the Mandal - Davaany stretch owned by JSC Ulan-Bator Railways. Besides, RZD Trading Company has experience in implementing rolling stock repair contracts with the Mongolian mainline.
We must say that we do not have any major problems with the delivery and repair of rolling stock for JSC Ulan-Bator Railways. Cooperation with Mongolian colleagues is matching the standards and the universal practices of international trade.
As regards further relations, RZD Trading Company sees an opportunity for long-term cooperation with JSC Ulan-Bator Railways. It is supported by the fact that our Mongolian colleagues are interested in further deliveries of railway production during the realisation of joint projects with RZD to build and modernize railroads on Mongolian territory, and also in repairing rolling stock at RZD’s enterprises. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes
to benefit from it. [~PREVIEW_TEXT] =>  RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes
to benefit from it. 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width="200" height="300" align="left" />RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes <br />to benefit from it. [ELEMENT_META_TITLE] => To Mongolia With Love [ELEMENT_META_KEYWORDS] => to mongolia with love [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/4/26.jpg" border="1" alt=" " hspace="5" width="200" height="300" align="left" />RZD has finally established itself as the major partner of, and a probable investor in, Mongolia. Despite the crisis, falling cargo turnover and a slide in the nation’s profits, the Russian carrier will help its Mongolian colleagues to build the railway sector and will participate in the development of its largest mineral deposits. Experts are sure that it is more likely a political step, but RZD hopes <br />to benefit from it. [SECTION_PICTURE_FILE_ALT] => To Mongolia With Love [SECTION_PICTURE_FILE_TITLE] => To Mongolia With Love [SECTION_DETAIL_PICTURE_FILE_ALT] => To Mongolia With Love [SECTION_DETAIL_PICTURE_FILE_TITLE] => To Mongolia With Love [ELEMENT_PREVIEW_PICTURE_FILE_ALT] => To Mongolia With Love [ELEMENT_PREVIEW_PICTURE_FILE_TITLE] => To Mongolia With Love [ELEMENT_DETAIL_PICTURE_FILE_ALT] => To Mongolia With Love [ELEMENT_DETAIL_PICTURE_FILE_TITLE] => To Mongolia With Love ) )
РЖД-Партнер

Panorama. Company

First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature.
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FCT to upgrade IT communications

First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards.
Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature.
The replacement of paper cargo documents for its electronic version is a real upgrade in the practice of stevedoring document execution. It is aimed at bringing a higher quality and more reliable service for FCT clients.

RZD’s investments in Yamal may amount in RUR 300 billion

Development of Yamal will require a deep-sea port construction and laying out of almost 3,000 km of railways, stated Andrey Nedosekov, Deputy Transport Minister, at a meeting in which the project was discussed.
“The existing port infrastructure on the Yamal peninsula does not meet modern requirements. We consider it necessary to define the place to construct a deep-sea port there,” he said.
According to the Strategy of Railway Transport Development to 2030, the total length of railways to be built in the region is 2,794 km. “It will allow the doubling of cargo transportation via Yamal,” said Mr Nedosekov. Some 1,593 km of railways are to be constructed in the region until 2015.
RZD’s investments in Yamal may amount to about RUR 300 billion, announced Vladimir Yakunin, President of RZD at the meeting.
“According to our preliminary estimations, total investment in this region will be about RUR 300 billion,” he said.
He mentioned that most of the funds are to come from the investment component in the railway tariffs.
“We are working in Yamal. Yamal Railway Company, RZD’s and Yamalo-Nenets Autonomous Okrug’s joint venture is already working here. We are planning further construction. But it all depends the economic opportunities,” added the President of RZD.

Russian Railways approves quality management policy

A quality management policy document will form the basis for cooperation between Russian Railways and its engineering products manufacturers. Implementing these key policies will involve three stages.
In the first phase (2009-2011), corporate standards will be developed. They will define the requirements for products and the quality management system for manufacturers, documents on voluntary certification and the declaration of products. Plans will be developed together with the manufacturers to implement the requirements of the IRIS standard.
By optimising the supply system and competition among components manufacturers, the cost of the product will be based on its life cycle cost and performance indicators during operation.
In the second phase (2012-2014), Russian Railways will cooperate with product manufacturers on introducing the main elements of strategic quality management, including through switching to the requirements of the IRIS standard and using modern quality tools.
Agreements will be concluded with product manufacturers about the timing of the introduction of the IRIS standard and regular evaluations will be conducted and brought into alignment with the requirements of this standard.
The third stage (2015) will see the completion of the strategic quality management of products used by Russian Railways. The transition to a system of voluntary certification and the declaration of products and a quality management system will be fully implemented, and product manufacturers will begin active cooperation with each other and their union in order to ensure a guaranteed supply of high quality products.
This period will also see the reduced participation of Russian Railways in producing the final product and a concentration on core activities, while efforts to optimise costs will have a necessary impact on improving the manufacturers’ product quality.

Russkaya Troyka acquires land in Vladivostok port for construction of container terminal

Russkaya Troyka, a company specialising in intermodal container transportation, acquired a 3.5-hectare plot of land in the port of Vladivostok for RUR 103 million. This land is to be used by the company for the construction of a container terminal capable of handling 250,000 TEU per year.
The project consists of two phases. The first one concerns construction of the terminal on both the shore and reclaimed land with a berth line up to 186 metres long, a depth of 15 metres and a total area of 5.42 hectares. The second phase to be implemented on reclaimed land is to have a 405-metre berth line, 15-metre depth and 11.35-hectare area.
The project for the terminal was approved by the Board of Directors of Russian Railways JSC in December 2006 and by the general meeting of Russkaya Troyka shareholders in January 2007.

TransContainer GAMMA Score Raised to GAMMA-6

Standard & Poor’s Governance Services raised its GAMMA Score on Russian container transportation company TransContainer to GAMMA-6 from GAMMA-5+.
The upgrade of the GAMMA Score reflects the growing experience and overall development of governance structures at TransContainer. In the opinion of S&P analysts, these structures demonstrated their effectiveness on several occasions in recent months
“In our opinion, TransContainer’s transparency and the audit process have improved. The board has established an effective process and increased the role of independent directors in the board-level committees,” said Standard & Poor’s governance analyst Elena Pastoukhova. “On the other hand, it is a weakness that majority-owner Russian Railways may face conflicts of interests in the context of related-party transactions and decision-making procedures regarding TransContainer are lengthy. Some strategic issues must be approved by the parent’s board, for example.”

Uralvagonzavod to create JV to build wagons in Kazakhstan

The Ural Wagon-Building Plant (Uralvagonzavod, UVZ, Sverdlovsk Oblast), the Foreign Trade and Investment Bank (Vnesheconombank; VEB) and Kazakhstan Temir Zholy (KTZ, Kazakhstan Railways) are in negotiations to create a joint venture in Kazakhstan to produce gondola wagons, said Evgeny Roshkov, the External Communications Adviser to the UVZ General Director.
“Such negotiations are being held and they are rather successful. In fact, it will mean the localisation of manufacturing facilities for new types of 25 ton-per-axis gondola railcars, which were created by UVZ last year with the participation of Russian Railways JSC. At the moment it is too early to predict how long it will take for this project to be implemented,” he explained.
The Sverdlovsk Oblast Governor’s Information Policy Department mentioned that the Russian Minister of Industry and Commerce, Victor Khristenko, considers this project to be potentially successful. The capacity of the new plant in Kazakhstan is expected to be 5,000 to 10,000 railcars per year.

TMH and RZD prepare a draft agreement for the delivery of 100 diesel locomotives “Vityaz” before 2011

In late August, Transmashholding (TMH) and Russian Railways JSC prepared a draft agreement for the delivery of new mainline diesel freight locomotives 2TE25A”Vityaz” in 2009 and 2010.
A source familiar with the course of the negotiations said that the contract for 25 locomotives with the option to increase this number to 100 diesel locomotives may be signed at the first stage.
Experts estimate the cost of these technical units as being between €3 - 3.5 million for each locomotive.
TMH concluded a preliminary agreement with RZD in May 2008 to provide 100 type 2TE25A locomotives.
Bryansk Machine-Building Plant, part of TMH, has already received a certificate of conformity for the pre-production models of these locomotives. “After Bryansk receives certification for the first batch, production will commence,” announced TMH in its press release.
Type 2TE25A “Vityaz” is the first freight locomotive in the Russian Federation with asynchronous traction engines created with domestic technology. The key innovative element of this diesel locomotive is a traction converter, developed by VNIKTI and manufactured by Electro SI in Moscow. The diesel locomotive is equipped with an engine which was manufactured at the Kolomna plant (also part of TMH).
A family of Russian diesel locomotives will be developed on the basis of Type 2TE25A, including the more powerful TE35 locomotives of both one-unit and two-unit types.
The type 2TE25A exceeds RZD’s current requirements. During tests on Moscow Railway in 2007 this locomotive pulled a 7,800-ton cargo train, whilst the norm in use at present for a 2TE10M locomotive is 5,200 tons.

Rusagrotrans will invest RUR 2 billion into construction of terminals in Central and Southern Federal Regions

This year, Rusagrotrans (a railway operator specialising in domestic and export transportation of grain) is going to invest RUR 2 billion into construction of the first stage of its terminals in the Central and Southern federal regions, said Oleg Rogachev, First Deputy CEO for Development and Corporate Communication.
In his words, a sea terminal will be constructed in Russia’s south, and onland terminals will be built in the Central and Southern federal regions.
“Our target is to create efficient grain-handling elevators by constructing new ones or modernising the existing ones. An elevator with a capacity of 50,000 tons is enough for the effective work of an onland terminal. For a sea terminal, an elevator with the capacity of 150,000-200,000 tons is needed,” explained Mr Rogachev.

Globaltrans: Exceeding Expectations

Globaltrans, the largest private operator providing freight transportation by railway, announced its financial and operational results for the six months ending 30 June 2009.
Globaltrans significantly outperformed the market, demonstrating a 4% decrease in freight rail turnover over H1 of 2008 to 31.2 billion tons-kilometres in H1 of 2009 compared to a 21% decrease reported for the overall Russian freight rail market over the same period.
Strong relationships with key clients, high quality service and the size of its universal (gondola) fleet allowed Globaltrans to maintain volumes by switching between cargoes in a depressed market environment. Globaltrans’ market share in ferrous metals and coal within the overall volume of Russian freight rail transportation increased from 11% to 16% and from 1% to 2% respectively in H1 of 2009 compared with the same period of the previous year.
The pricing of operators’ services remained relatively flat in RUR terms with average price per trip increasing by 1% in RUR terms while decreasing by 27% in USD terms over H1 of 2008 to $ 590.2. The decrease in USD terms is attributable to significant depreciation of the Russian rouble against the US dollar during the period.
Operational efficiency was affected by the economic downturn resulting in the total empty run ratio increasing from 36% to 63%, driven by an increase in the empty run ratio for gondola (open top) cars to 54%. Empty run costs increased by 16% in USD terms in H1 of 2009 (and by 62% in RUR terms) over H1 of 2008 to $ 45.6 million in H1 of 2009.
Commenting on the interim results for the first six months of 2009, Sergey Maltsev, CEO of Globaltrans, said, “Our financial performance, reported in USD terms, is largely affected by the depreciation of the Russian rouble against the US dollar. Operational efficiency was hit by the economic downturn; however our recent acquisitions supported our performance with stable revenues in US Dollars. Our financial stability is reflected in our solid cash flow enabling us to service our debts whilst maintaining comfortable leverage ratios.
I am optimistic about the opportunities for Globaltrans once the Russian economy starts to recover. At this point, we will be able to improve operational efficiency by decreasing empty runs, which translates into a decrease in associated costs along with converting empty trips into loaded ones, so generating additional revenue”. [~DETAIL_TEXT] =>

FCT to upgrade IT communications

First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards.
Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature.
The replacement of paper cargo documents for its electronic version is a real upgrade in the practice of stevedoring document execution. It is aimed at bringing a higher quality and more reliable service for FCT clients.

RZD’s investments in Yamal may amount in RUR 300 billion

Development of Yamal will require a deep-sea port construction and laying out of almost 3,000 km of railways, stated Andrey Nedosekov, Deputy Transport Minister, at a meeting in which the project was discussed.
“The existing port infrastructure on the Yamal peninsula does not meet modern requirements. We consider it necessary to define the place to construct a deep-sea port there,” he said.
According to the Strategy of Railway Transport Development to 2030, the total length of railways to be built in the region is 2,794 km. “It will allow the doubling of cargo transportation via Yamal,” said Mr Nedosekov. Some 1,593 km of railways are to be constructed in the region until 2015.
RZD’s investments in Yamal may amount to about RUR 300 billion, announced Vladimir Yakunin, President of RZD at the meeting.
“According to our preliminary estimations, total investment in this region will be about RUR 300 billion,” he said.
He mentioned that most of the funds are to come from the investment component in the railway tariffs.
“We are working in Yamal. Yamal Railway Company, RZD’s and Yamalo-Nenets Autonomous Okrug’s joint venture is already working here. We are planning further construction. But it all depends the economic opportunities,” added the President of RZD.

Russian Railways approves quality management policy

A quality management policy document will form the basis for cooperation between Russian Railways and its engineering products manufacturers. Implementing these key policies will involve three stages.
In the first phase (2009-2011), corporate standards will be developed. They will define the requirements for products and the quality management system for manufacturers, documents on voluntary certification and the declaration of products. Plans will be developed together with the manufacturers to implement the requirements of the IRIS standard.
By optimising the supply system and competition among components manufacturers, the cost of the product will be based on its life cycle cost and performance indicators during operation.
In the second phase (2012-2014), Russian Railways will cooperate with product manufacturers on introducing the main elements of strategic quality management, including through switching to the requirements of the IRIS standard and using modern quality tools.
Agreements will be concluded with product manufacturers about the timing of the introduction of the IRIS standard and regular evaluations will be conducted and brought into alignment with the requirements of this standard.
The third stage (2015) will see the completion of the strategic quality management of products used by Russian Railways. The transition to a system of voluntary certification and the declaration of products and a quality management system will be fully implemented, and product manufacturers will begin active cooperation with each other and their union in order to ensure a guaranteed supply of high quality products.
This period will also see the reduced participation of Russian Railways in producing the final product and a concentration on core activities, while efforts to optimise costs will have a necessary impact on improving the manufacturers’ product quality.

Russkaya Troyka acquires land in Vladivostok port for construction of container terminal

Russkaya Troyka, a company specialising in intermodal container transportation, acquired a 3.5-hectare plot of land in the port of Vladivostok for RUR 103 million. This land is to be used by the company for the construction of a container terminal capable of handling 250,000 TEU per year.
The project consists of two phases. The first one concerns construction of the terminal on both the shore and reclaimed land with a berth line up to 186 metres long, a depth of 15 metres and a total area of 5.42 hectares. The second phase to be implemented on reclaimed land is to have a 405-metre berth line, 15-metre depth and 11.35-hectare area.
The project for the terminal was approved by the Board of Directors of Russian Railways JSC in December 2006 and by the general meeting of Russkaya Troyka shareholders in January 2007.

TransContainer GAMMA Score Raised to GAMMA-6

Standard & Poor’s Governance Services raised its GAMMA Score on Russian container transportation company TransContainer to GAMMA-6 from GAMMA-5+.
The upgrade of the GAMMA Score reflects the growing experience and overall development of governance structures at TransContainer. In the opinion of S&P analysts, these structures demonstrated their effectiveness on several occasions in recent months
“In our opinion, TransContainer’s transparency and the audit process have improved. The board has established an effective process and increased the role of independent directors in the board-level committees,” said Standard & Poor’s governance analyst Elena Pastoukhova. “On the other hand, it is a weakness that majority-owner Russian Railways may face conflicts of interests in the context of related-party transactions and decision-making procedures regarding TransContainer are lengthy. Some strategic issues must be approved by the parent’s board, for example.”

Uralvagonzavod to create JV to build wagons in Kazakhstan

The Ural Wagon-Building Plant (Uralvagonzavod, UVZ, Sverdlovsk Oblast), the Foreign Trade and Investment Bank (Vnesheconombank; VEB) and Kazakhstan Temir Zholy (KTZ, Kazakhstan Railways) are in negotiations to create a joint venture in Kazakhstan to produce gondola wagons, said Evgeny Roshkov, the External Communications Adviser to the UVZ General Director.
“Such negotiations are being held and they are rather successful. In fact, it will mean the localisation of manufacturing facilities for new types of 25 ton-per-axis gondola railcars, which were created by UVZ last year with the participation of Russian Railways JSC. At the moment it is too early to predict how long it will take for this project to be implemented,” he explained.
The Sverdlovsk Oblast Governor’s Information Policy Department mentioned that the Russian Minister of Industry and Commerce, Victor Khristenko, considers this project to be potentially successful. The capacity of the new plant in Kazakhstan is expected to be 5,000 to 10,000 railcars per year.

TMH and RZD prepare a draft agreement for the delivery of 100 diesel locomotives “Vityaz” before 2011

In late August, Transmashholding (TMH) and Russian Railways JSC prepared a draft agreement for the delivery of new mainline diesel freight locomotives 2TE25A”Vityaz” in 2009 and 2010.
A source familiar with the course of the negotiations said that the contract for 25 locomotives with the option to increase this number to 100 diesel locomotives may be signed at the first stage.
Experts estimate the cost of these technical units as being between €3 - 3.5 million for each locomotive.
TMH concluded a preliminary agreement with RZD in May 2008 to provide 100 type 2TE25A locomotives.
Bryansk Machine-Building Plant, part of TMH, has already received a certificate of conformity for the pre-production models of these locomotives. “After Bryansk receives certification for the first batch, production will commence,” announced TMH in its press release.
Type 2TE25A “Vityaz” is the first freight locomotive in the Russian Federation with asynchronous traction engines created with domestic technology. The key innovative element of this diesel locomotive is a traction converter, developed by VNIKTI and manufactured by Electro SI in Moscow. The diesel locomotive is equipped with an engine which was manufactured at the Kolomna plant (also part of TMH).
A family of Russian diesel locomotives will be developed on the basis of Type 2TE25A, including the more powerful TE35 locomotives of both one-unit and two-unit types.
The type 2TE25A exceeds RZD’s current requirements. During tests on Moscow Railway in 2007 this locomotive pulled a 7,800-ton cargo train, whilst the norm in use at present for a 2TE10M locomotive is 5,200 tons.

Rusagrotrans will invest RUR 2 billion into construction of terminals in Central and Southern Federal Regions

This year, Rusagrotrans (a railway operator specialising in domestic and export transportation of grain) is going to invest RUR 2 billion into construction of the first stage of its terminals in the Central and Southern federal regions, said Oleg Rogachev, First Deputy CEO for Development and Corporate Communication.
In his words, a sea terminal will be constructed in Russia’s south, and onland terminals will be built in the Central and Southern federal regions.
“Our target is to create efficient grain-handling elevators by constructing new ones or modernising the existing ones. An elevator with a capacity of 50,000 tons is enough for the effective work of an onland terminal. For a sea terminal, an elevator with the capacity of 150,000-200,000 tons is needed,” explained Mr Rogachev.

Globaltrans: Exceeding Expectations

Globaltrans, the largest private operator providing freight transportation by railway, announced its financial and operational results for the six months ending 30 June 2009.
Globaltrans significantly outperformed the market, demonstrating a 4% decrease in freight rail turnover over H1 of 2008 to 31.2 billion tons-kilometres in H1 of 2009 compared to a 21% decrease reported for the overall Russian freight rail market over the same period.
Strong relationships with key clients, high quality service and the size of its universal (gondola) fleet allowed Globaltrans to maintain volumes by switching between cargoes in a depressed market environment. Globaltrans’ market share in ferrous metals and coal within the overall volume of Russian freight rail transportation increased from 11% to 16% and from 1% to 2% respectively in H1 of 2009 compared with the same period of the previous year.
The pricing of operators’ services remained relatively flat in RUR terms with average price per trip increasing by 1% in RUR terms while decreasing by 27% in USD terms over H1 of 2008 to $ 590.2. The decrease in USD terms is attributable to significant depreciation of the Russian rouble against the US dollar during the period.
Operational efficiency was affected by the economic downturn resulting in the total empty run ratio increasing from 36% to 63%, driven by an increase in the empty run ratio for gondola (open top) cars to 54%. Empty run costs increased by 16% in USD terms in H1 of 2009 (and by 62% in RUR terms) over H1 of 2008 to $ 45.6 million in H1 of 2009.
Commenting on the interim results for the first six months of 2009, Sergey Maltsev, CEO of Globaltrans, said, “Our financial performance, reported in USD terms, is largely affected by the depreciation of the Russian rouble against the US dollar. Operational efficiency was hit by the economic downturn; however our recent acquisitions supported our performance with stable revenues in US Dollars. Our financial stability is reflected in our solid cash flow enabling us to service our debts whilst maintaining comfortable leverage ratios.
I am optimistic about the opportunities for Globaltrans once the Russian economy starts to recover. At this point, we will be able to improve operational efficiency by decreasing empty runs, which translates into a decrease in associated costs along with converting empty trips into loaded ones, so generating additional revenue”. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature. [~PREVIEW_TEXT] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature. 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FCT to upgrade IT communications

First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards.
Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature.
The replacement of paper cargo documents for its electronic version is a real upgrade in the practice of stevedoring document execution. It is aimed at bringing a higher quality and more reliable service for FCT clients.

RZD’s investments in Yamal may amount in RUR 300 billion

Development of Yamal will require a deep-sea port construction and laying out of almost 3,000 km of railways, stated Andrey Nedosekov, Deputy Transport Minister, at a meeting in which the project was discussed.
“The existing port infrastructure on the Yamal peninsula does not meet modern requirements. We consider it necessary to define the place to construct a deep-sea port there,” he said.
According to the Strategy of Railway Transport Development to 2030, the total length of railways to be built in the region is 2,794 km. “It will allow the doubling of cargo transportation via Yamal,” said Mr Nedosekov. Some 1,593 km of railways are to be constructed in the region until 2015.
RZD’s investments in Yamal may amount to about RUR 300 billion, announced Vladimir Yakunin, President of RZD at the meeting.
“According to our preliminary estimations, total investment in this region will be about RUR 300 billion,” he said.
He mentioned that most of the funds are to come from the investment component in the railway tariffs.
“We are working in Yamal. Yamal Railway Company, RZD’s and Yamalo-Nenets Autonomous Okrug’s joint venture is already working here. We are planning further construction. But it all depends the economic opportunities,” added the President of RZD.

Russian Railways approves quality management policy

A quality management policy document will form the basis for cooperation between Russian Railways and its engineering products manufacturers. Implementing these key policies will involve three stages.
In the first phase (2009-2011), corporate standards will be developed. They will define the requirements for products and the quality management system for manufacturers, documents on voluntary certification and the declaration of products. Plans will be developed together with the manufacturers to implement the requirements of the IRIS standard.
By optimising the supply system and competition among components manufacturers, the cost of the product will be based on its life cycle cost and performance indicators during operation.
In the second phase (2012-2014), Russian Railways will cooperate with product manufacturers on introducing the main elements of strategic quality management, including through switching to the requirements of the IRIS standard and using modern quality tools.
Agreements will be concluded with product manufacturers about the timing of the introduction of the IRIS standard and regular evaluations will be conducted and brought into alignment with the requirements of this standard.
The third stage (2015) will see the completion of the strategic quality management of products used by Russian Railways. The transition to a system of voluntary certification and the declaration of products and a quality management system will be fully implemented, and product manufacturers will begin active cooperation with each other and their union in order to ensure a guaranteed supply of high quality products.
This period will also see the reduced participation of Russian Railways in producing the final product and a concentration on core activities, while efforts to optimise costs will have a necessary impact on improving the manufacturers’ product quality.

Russkaya Troyka acquires land in Vladivostok port for construction of container terminal

Russkaya Troyka, a company specialising in intermodal container transportation, acquired a 3.5-hectare plot of land in the port of Vladivostok for RUR 103 million. This land is to be used by the company for the construction of a container terminal capable of handling 250,000 TEU per year.
The project consists of two phases. The first one concerns construction of the terminal on both the shore and reclaimed land with a berth line up to 186 metres long, a depth of 15 metres and a total area of 5.42 hectares. The second phase to be implemented on reclaimed land is to have a 405-metre berth line, 15-metre depth and 11.35-hectare area.
The project for the terminal was approved by the Board of Directors of Russian Railways JSC in December 2006 and by the general meeting of Russkaya Troyka shareholders in January 2007.

TransContainer GAMMA Score Raised to GAMMA-6

Standard & Poor’s Governance Services raised its GAMMA Score on Russian container transportation company TransContainer to GAMMA-6 from GAMMA-5+.
The upgrade of the GAMMA Score reflects the growing experience and overall development of governance structures at TransContainer. In the opinion of S&P analysts, these structures demonstrated their effectiveness on several occasions in recent months
“In our opinion, TransContainer’s transparency and the audit process have improved. The board has established an effective process and increased the role of independent directors in the board-level committees,” said Standard & Poor’s governance analyst Elena Pastoukhova. “On the other hand, it is a weakness that majority-owner Russian Railways may face conflicts of interests in the context of related-party transactions and decision-making procedures regarding TransContainer are lengthy. Some strategic issues must be approved by the parent’s board, for example.”

Uralvagonzavod to create JV to build wagons in Kazakhstan

The Ural Wagon-Building Plant (Uralvagonzavod, UVZ, Sverdlovsk Oblast), the Foreign Trade and Investment Bank (Vnesheconombank; VEB) and Kazakhstan Temir Zholy (KTZ, Kazakhstan Railways) are in negotiations to create a joint venture in Kazakhstan to produce gondola wagons, said Evgeny Roshkov, the External Communications Adviser to the UVZ General Director.
“Such negotiations are being held and they are rather successful. In fact, it will mean the localisation of manufacturing facilities for new types of 25 ton-per-axis gondola railcars, which were created by UVZ last year with the participation of Russian Railways JSC. At the moment it is too early to predict how long it will take for this project to be implemented,” he explained.
The Sverdlovsk Oblast Governor’s Information Policy Department mentioned that the Russian Minister of Industry and Commerce, Victor Khristenko, considers this project to be potentially successful. The capacity of the new plant in Kazakhstan is expected to be 5,000 to 10,000 railcars per year.

TMH and RZD prepare a draft agreement for the delivery of 100 diesel locomotives “Vityaz” before 2011

In late August, Transmashholding (TMH) and Russian Railways JSC prepared a draft agreement for the delivery of new mainline diesel freight locomotives 2TE25A”Vityaz” in 2009 and 2010.
A source familiar with the course of the negotiations said that the contract for 25 locomotives with the option to increase this number to 100 diesel locomotives may be signed at the first stage.
Experts estimate the cost of these technical units as being between €3 - 3.5 million for each locomotive.
TMH concluded a preliminary agreement with RZD in May 2008 to provide 100 type 2TE25A locomotives.
Bryansk Machine-Building Plant, part of TMH, has already received a certificate of conformity for the pre-production models of these locomotives. “After Bryansk receives certification for the first batch, production will commence,” announced TMH in its press release.
Type 2TE25A “Vityaz” is the first freight locomotive in the Russian Federation with asynchronous traction engines created with domestic technology. The key innovative element of this diesel locomotive is a traction converter, developed by VNIKTI and manufactured by Electro SI in Moscow. The diesel locomotive is equipped with an engine which was manufactured at the Kolomna plant (also part of TMH).
A family of Russian diesel locomotives will be developed on the basis of Type 2TE25A, including the more powerful TE35 locomotives of both one-unit and two-unit types.
The type 2TE25A exceeds RZD’s current requirements. During tests on Moscow Railway in 2007 this locomotive pulled a 7,800-ton cargo train, whilst the norm in use at present for a 2TE10M locomotive is 5,200 tons.

Rusagrotrans will invest RUR 2 billion into construction of terminals in Central and Southern Federal Regions

This year, Rusagrotrans (a railway operator specialising in domestic and export transportation of grain) is going to invest RUR 2 billion into construction of the first stage of its terminals in the Central and Southern federal regions, said Oleg Rogachev, First Deputy CEO for Development and Corporate Communication.
In his words, a sea terminal will be constructed in Russia’s south, and onland terminals will be built in the Central and Southern federal regions.
“Our target is to create efficient grain-handling elevators by constructing new ones or modernising the existing ones. An elevator with a capacity of 50,000 tons is enough for the effective work of an onland terminal. For a sea terminal, an elevator with the capacity of 150,000-200,000 tons is needed,” explained Mr Rogachev.

Globaltrans: Exceeding Expectations

Globaltrans, the largest private operator providing freight transportation by railway, announced its financial and operational results for the six months ending 30 June 2009.
Globaltrans significantly outperformed the market, demonstrating a 4% decrease in freight rail turnover over H1 of 2008 to 31.2 billion tons-kilometres in H1 of 2009 compared to a 21% decrease reported for the overall Russian freight rail market over the same period.
Strong relationships with key clients, high quality service and the size of its universal (gondola) fleet allowed Globaltrans to maintain volumes by switching between cargoes in a depressed market environment. Globaltrans’ market share in ferrous metals and coal within the overall volume of Russian freight rail transportation increased from 11% to 16% and from 1% to 2% respectively in H1 of 2009 compared with the same period of the previous year.
The pricing of operators’ services remained relatively flat in RUR terms with average price per trip increasing by 1% in RUR terms while decreasing by 27% in USD terms over H1 of 2008 to $ 590.2. The decrease in USD terms is attributable to significant depreciation of the Russian rouble against the US dollar during the period.
Operational efficiency was affected by the economic downturn resulting in the total empty run ratio increasing from 36% to 63%, driven by an increase in the empty run ratio for gondola (open top) cars to 54%. Empty run costs increased by 16% in USD terms in H1 of 2009 (and by 62% in RUR terms) over H1 of 2008 to $ 45.6 million in H1 of 2009.
Commenting on the interim results for the first six months of 2009, Sergey Maltsev, CEO of Globaltrans, said, “Our financial performance, reported in USD terms, is largely affected by the depreciation of the Russian rouble against the US dollar. Operational efficiency was hit by the economic downturn; however our recent acquisitions supported our performance with stable revenues in US Dollars. Our financial stability is reflected in our solid cash flow enabling us to service our debts whilst maintaining comfortable leverage ratios.
I am optimistic about the opportunities for Globaltrans once the Russian economy starts to recover. At this point, we will be able to improve operational efficiency by decreasing empty runs, which translates into a decrease in associated costs along with converting empty trips into loaded ones, so generating additional revenue”. [~DETAIL_TEXT] =>

FCT to upgrade IT communications

First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards.
Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature.
The replacement of paper cargo documents for its electronic version is a real upgrade in the practice of stevedoring document execution. It is aimed at bringing a higher quality and more reliable service for FCT clients.

RZD’s investments in Yamal may amount in RUR 300 billion

Development of Yamal will require a deep-sea port construction and laying out of almost 3,000 km of railways, stated Andrey Nedosekov, Deputy Transport Minister, at a meeting in which the project was discussed.
“The existing port infrastructure on the Yamal peninsula does not meet modern requirements. We consider it necessary to define the place to construct a deep-sea port there,” he said.
According to the Strategy of Railway Transport Development to 2030, the total length of railways to be built in the region is 2,794 km. “It will allow the doubling of cargo transportation via Yamal,” said Mr Nedosekov. Some 1,593 km of railways are to be constructed in the region until 2015.
RZD’s investments in Yamal may amount to about RUR 300 billion, announced Vladimir Yakunin, President of RZD at the meeting.
“According to our preliminary estimations, total investment in this region will be about RUR 300 billion,” he said.
He mentioned that most of the funds are to come from the investment component in the railway tariffs.
“We are working in Yamal. Yamal Railway Company, RZD’s and Yamalo-Nenets Autonomous Okrug’s joint venture is already working here. We are planning further construction. But it all depends the economic opportunities,” added the President of RZD.

Russian Railways approves quality management policy

A quality management policy document will form the basis for cooperation between Russian Railways and its engineering products manufacturers. Implementing these key policies will involve three stages.
In the first phase (2009-2011), corporate standards will be developed. They will define the requirements for products and the quality management system for manufacturers, documents on voluntary certification and the declaration of products. Plans will be developed together with the manufacturers to implement the requirements of the IRIS standard.
By optimising the supply system and competition among components manufacturers, the cost of the product will be based on its life cycle cost and performance indicators during operation.
In the second phase (2012-2014), Russian Railways will cooperate with product manufacturers on introducing the main elements of strategic quality management, including through switching to the requirements of the IRIS standard and using modern quality tools.
Agreements will be concluded with product manufacturers about the timing of the introduction of the IRIS standard and regular evaluations will be conducted and brought into alignment with the requirements of this standard.
The third stage (2015) will see the completion of the strategic quality management of products used by Russian Railways. The transition to a system of voluntary certification and the declaration of products and a quality management system will be fully implemented, and product manufacturers will begin active cooperation with each other and their union in order to ensure a guaranteed supply of high quality products.
This period will also see the reduced participation of Russian Railways in producing the final product and a concentration on core activities, while efforts to optimise costs will have a necessary impact on improving the manufacturers’ product quality.

Russkaya Troyka acquires land in Vladivostok port for construction of container terminal

Russkaya Troyka, a company specialising in intermodal container transportation, acquired a 3.5-hectare plot of land in the port of Vladivostok for RUR 103 million. This land is to be used by the company for the construction of a container terminal capable of handling 250,000 TEU per year.
The project consists of two phases. The first one concerns construction of the terminal on both the shore and reclaimed land with a berth line up to 186 metres long, a depth of 15 metres and a total area of 5.42 hectares. The second phase to be implemented on reclaimed land is to have a 405-metre berth line, 15-metre depth and 11.35-hectare area.
The project for the terminal was approved by the Board of Directors of Russian Railways JSC in December 2006 and by the general meeting of Russkaya Troyka shareholders in January 2007.

TransContainer GAMMA Score Raised to GAMMA-6

Standard & Poor’s Governance Services raised its GAMMA Score on Russian container transportation company TransContainer to GAMMA-6 from GAMMA-5+.
The upgrade of the GAMMA Score reflects the growing experience and overall development of governance structures at TransContainer. In the opinion of S&P analysts, these structures demonstrated their effectiveness on several occasions in recent months
“In our opinion, TransContainer’s transparency and the audit process have improved. The board has established an effective process and increased the role of independent directors in the board-level committees,” said Standard & Poor’s governance analyst Elena Pastoukhova. “On the other hand, it is a weakness that majority-owner Russian Railways may face conflicts of interests in the context of related-party transactions and decision-making procedures regarding TransContainer are lengthy. Some strategic issues must be approved by the parent’s board, for example.”

Uralvagonzavod to create JV to build wagons in Kazakhstan

The Ural Wagon-Building Plant (Uralvagonzavod, UVZ, Sverdlovsk Oblast), the Foreign Trade and Investment Bank (Vnesheconombank; VEB) and Kazakhstan Temir Zholy (KTZ, Kazakhstan Railways) are in negotiations to create a joint venture in Kazakhstan to produce gondola wagons, said Evgeny Roshkov, the External Communications Adviser to the UVZ General Director.
“Such negotiations are being held and they are rather successful. In fact, it will mean the localisation of manufacturing facilities for new types of 25 ton-per-axis gondola railcars, which were created by UVZ last year with the participation of Russian Railways JSC. At the moment it is too early to predict how long it will take for this project to be implemented,” he explained.
The Sverdlovsk Oblast Governor’s Information Policy Department mentioned that the Russian Minister of Industry and Commerce, Victor Khristenko, considers this project to be potentially successful. The capacity of the new plant in Kazakhstan is expected to be 5,000 to 10,000 railcars per year.

TMH and RZD prepare a draft agreement for the delivery of 100 diesel locomotives “Vityaz” before 2011

In late August, Transmashholding (TMH) and Russian Railways JSC prepared a draft agreement for the delivery of new mainline diesel freight locomotives 2TE25A”Vityaz” in 2009 and 2010.
A source familiar with the course of the negotiations said that the contract for 25 locomotives with the option to increase this number to 100 diesel locomotives may be signed at the first stage.
Experts estimate the cost of these technical units as being between €3 - 3.5 million for each locomotive.
TMH concluded a preliminary agreement with RZD in May 2008 to provide 100 type 2TE25A locomotives.
Bryansk Machine-Building Plant, part of TMH, has already received a certificate of conformity for the pre-production models of these locomotives. “After Bryansk receives certification for the first batch, production will commence,” announced TMH in its press release.
Type 2TE25A “Vityaz” is the first freight locomotive in the Russian Federation with asynchronous traction engines created with domestic technology. The key innovative element of this diesel locomotive is a traction converter, developed by VNIKTI and manufactured by Electro SI in Moscow. The diesel locomotive is equipped with an engine which was manufactured at the Kolomna plant (also part of TMH).
A family of Russian diesel locomotives will be developed on the basis of Type 2TE25A, including the more powerful TE35 locomotives of both one-unit and two-unit types.
The type 2TE25A exceeds RZD’s current requirements. During tests on Moscow Railway in 2007 this locomotive pulled a 7,800-ton cargo train, whilst the norm in use at present for a 2TE10M locomotive is 5,200 tons.

Rusagrotrans will invest RUR 2 billion into construction of terminals in Central and Southern Federal Regions

This year, Rusagrotrans (a railway operator specialising in domestic and export transportation of grain) is going to invest RUR 2 billion into construction of the first stage of its terminals in the Central and Southern federal regions, said Oleg Rogachev, First Deputy CEO for Development and Corporate Communication.
In his words, a sea terminal will be constructed in Russia’s south, and onland terminals will be built in the Central and Southern federal regions.
“Our target is to create efficient grain-handling elevators by constructing new ones or modernising the existing ones. An elevator with a capacity of 50,000 tons is enough for the effective work of an onland terminal. For a sea terminal, an elevator with the capacity of 150,000-200,000 tons is needed,” explained Mr Rogachev.

Globaltrans: Exceeding Expectations

Globaltrans, the largest private operator providing freight transportation by railway, announced its financial and operational results for the six months ending 30 June 2009.
Globaltrans significantly outperformed the market, demonstrating a 4% decrease in freight rail turnover over H1 of 2008 to 31.2 billion tons-kilometres in H1 of 2009 compared to a 21% decrease reported for the overall Russian freight rail market over the same period.
Strong relationships with key clients, high quality service and the size of its universal (gondola) fleet allowed Globaltrans to maintain volumes by switching between cargoes in a depressed market environment. Globaltrans’ market share in ferrous metals and coal within the overall volume of Russian freight rail transportation increased from 11% to 16% and from 1% to 2% respectively in H1 of 2009 compared with the same period of the previous year.
The pricing of operators’ services remained relatively flat in RUR terms with average price per trip increasing by 1% in RUR terms while decreasing by 27% in USD terms over H1 of 2008 to $ 590.2. The decrease in USD terms is attributable to significant depreciation of the Russian rouble against the US dollar during the period.
Operational efficiency was affected by the economic downturn resulting in the total empty run ratio increasing from 36% to 63%, driven by an increase in the empty run ratio for gondola (open top) cars to 54%. Empty run costs increased by 16% in USD terms in H1 of 2009 (and by 62% in RUR terms) over H1 of 2008 to $ 45.6 million in H1 of 2009.
Commenting on the interim results for the first six months of 2009, Sergey Maltsev, CEO of Globaltrans, said, “Our financial performance, reported in USD terms, is largely affected by the depreciation of the Russian rouble against the US dollar. Operational efficiency was hit by the economic downturn; however our recent acquisitions supported our performance with stable revenues in US Dollars. Our financial stability is reflected in our solid cash flow enabling us to service our debts whilst maintaining comfortable leverage ratios.
I am optimistic about the opportunities for Globaltrans once the Russian economy starts to recover. At this point, we will be able to improve operational efficiency by decreasing empty runs, which translates into a decrease in associated costs along with converting empty trips into loaded ones, so generating additional revenue”. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature. [~PREVIEW_TEXT] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature. 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Company [SECTION_META_KEYWORDS] => panorama. company [SECTION_META_DESCRIPTION] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. Since October 1, 2009, all import containers issued from FCT will have electronic documents formed by shipping and forwarding agents in Conterra information system. These documents will be signed by electronic digital signature. [ELEMENT_META_TITLE] => Panorama. Company [ELEMENT_META_KEYWORDS] => panorama. company [ELEMENT_META_DESCRIPTION] => First Container Terminal (FCT) and ROLIS (parts of NCC group) announced the implementation of electronic digital signatures in FCT’s document execution. This is an example of know-how in Russia’s stevedoring business complying with universal stevedoring standards. 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РЖД-Партнер

What consequences will the price dumping have?

 The world economic crisis impacted the activity of the whole transport sector in Russia, and particularly cargo transportation by road haulage. A decline in production volume appeared in the major industries, first of all in the building sector and ferrous metallurgy and chemical industries. Export of Russian production fell. All these caused almost a 20% decline in the demand for road transporters’ services.
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Import-addicted

According to the data of the Transport Ministry, the total volume of commercial transportation in Russia fell in the first half of 2009 by 21.4% comparing with the same period the previous year. Thus, it made 1.8 billion tons. No wonder motor carriers have serious problems – their total transportation volume fell by 19.3% year-on-year to 856.5 million tons.
Experts at the Transport Ministry consider that the decline in the demand for transport services was caused by the drop in production, the bleak foreign economic and market situation, and a reduction in real household income. “This tendency can be easily explained. According to customs statistics, Russia’s foreign trade turnover amounted to $196.3 billion in January-June 2009, a 45.4% decline year-on-year, including a 47.3% decline in turnover with the CIS, and a 45.1% drop in turnover with other countries,” said Anatoly Pinson, Adviser to the CEO of Sovtransauto holding company. The basic reason for the import volume reduction is the growth of rouble prices for import goods due to devaluation.
It made enterprises abandon the purchase of new equipment, because the demand for their production had fallen, and their financial position had become worse. As for cargoes carried by international road transport, the import transportation volume of engineering products, polymeric materials, base metals, and goods made of stone and gyps reduced in April 2009 compared with the previous month. Meanwhile, transportation volumes of plant products remained practically the same, i.e. the decline at the international road haulage market reflected the economic situation in the state.
All bets are off
In the words of Mr Pinson, the 16% decline of Sovtransauto enterprises’ figures in volume terms in January-June 2009 can be considered a good result. “If you take into account the drop in currency receipts, which amounted to approximately 40%, you will feel the impact of the recession. What is the reason for the contrast? The explanation is simple: the volume of freight transportation decreased, and, in addition to it, the charter rates in euros fell by 30%,” he explained.
There are several reasons for the decline in charter rates. Firstly, the offer of freight transportation surpassed demand. There has appeared a significant surplus in transport capacities. One of the reasons for this was the rapid enlargement of the vehicle park. For example, in 2007 the park of Russian road carriers increased by a third, and in 2008 it became even larger. Everybody hoped that the rates of foreign trade turnover growth and, consequently, freight transportation would grow. The recession became the reason for the increase in competition and the reduction of prices for cargo transportation. Market players note that transporters from neighbouring countries began to cut charter rates in a panic, trying to get the scarce product by means of price dumping.
The losses are particularly noticeable in the container transportation sector. In this segment, the lack of demand led to a drop in the average cost of container transportation by road haulage. In October-November 2008, the price for transporting a container from Kotka to Moscow by road was $2,400-2,800, and then it fell to $2,000-2,200, and by mid-2009 it dropped to $1,400-1,800 and continues to decrease.
“Articulated lorries with awnings are almost loaded nowadays. A number of tenders have been won, particularly those on equipment transportation from Western Europe to Surgut and Saransk. Unfortunately, there is no regular loading for container vehicles, which used to actively service the route Russia-Finland,” confirms Mr Pinson. Earlier, road transporters did not have such discounts: nowadays their tariffs are 60% of their pre-crisis charges. Meanwhile, experts are sure the price dumping will not help the market. Exploitation of a vehicle is more expensive than the sum received by a carrier after the cost of the fuel is reckoned. And it makes up 40% of the transportation net cost.

Reasons and a consequence

Due to the lack of work, a number of transport companies cut jobs, reduced salaries and made drivers take unpaid leave. Some carriers had to return leased rolling stock and some even had to give up their business. “Transport companies are taking measures to keep their workforce, but often they have to tighten belts and reduce salaries, decrease expenditures on rolling stock maintenance, give up investment programmes etc,” say representatives of ASMAP (International Road Carriers Association).
Taking into account the decline in profit base from transportation, Sovtransauto took measures to decrease its expenditures. “The number of administrative personnel and drivers was reduced. We had to cut down wages. Negotiations on re-structuring leasing payments for rolling stock were held. Also, we organised refuelling of cars by cheaper diesel fuel and toughened controls over drivers,” said Mr Pinson.
However, according to experts, these problems are characteristic of all countries that have a lot of transport operators. According to the International Union of Motor Transport, 140,000 people in Europe working in the motor transportation sector have lost their jobs, and in the CIS the figure is 120,000 people.
In these conditions smaller carriers suffer most of all, so the share of larger companies in the segment is growing. Analysts think, the number of market players has reduced by almost 25%, mainly at the expense of so-called private traders (owner-drivers) and the small, local companies. “Firstly, it happened due to the lack of circulating assets. Those carriers who have credit and leasing payments are in the worst position. Secondly, the overwhelming majority of the companies do not have an accurate forwarding system at all stages, especially if they provide package freight transportation,” highlight experts of the First Forwarding Company (PEC). “Only a large company with a specific work process is able to guarantee quality transportation in such conditions.”
“In addition, large professional carriers have a regular clientele – forwarding and logistics companies. In fact, it is they who now rule the market and make more rigid demands in terms of carriers’ reliability and professionalism. Other transport companies are trying to keep their positions by introducing new services, improving the quality of work, using advanced technologies and attractive tariffs. A large company specialising in a certain kind of a cargo transportation, particularly grouped cargo, can guarantee reliability of delivery by means of the latest technologies and innovative approaches, such as SMS, e-documents, computerised warehouses and satellite tracking of cargo along the whole route.
A small company does not have such opportunities,” add specialists at PEC. And the largest Russian companies agree with them. “If a vehicle is the property of an enterprise, it may be put on hold during the recession. Then there will be neither income, nor expense. But the leased vehicles must be exploited. That is why the main task of a carrier is to find loading for such haulage,” considers Mr Pinson.

There is a way out

Nevertheless, the sector of grouped cargo transportation by motor transport has become one of the market leaders. “The volume of transportation by all transport modes fell by 30% in January-June 2009, while the transportation of grouped cargo by road haulage was stable and even increased by 5% on the basic routes,” say experts at PEC. According to the company’s analysts, by the end of 2009 the market could become stable and loss-free before returning to pre-crisis figures in the second half of 2010.
Maria Shevchenko

viewpoint

 Andrey Kurushin,
General Director of ASMAP:

– In November 2008, experts of ASMAP developed the Concept of Recession-Proof Measures, which contains measures targeted at the support of liquidity, the reduction of operational and tax expenditures and the increase of demand for services provided by Russian international road hauliers, etc. Legislative activity regarding minimisation of taxes is being conducted. Together with the RF Ministry of Transport, the Association participated in discussions and developed ways to support Russian international road hauliers and for them to be included in the recession-proof programme of the Russian Government for 2009. The list of measures is rather long, and steps are being taken at all levels.
As for transport companies, special attention should be paid to expenses control. Any factor may be of great importance if it can make for a decrease in costs.
ASMAP applied to the leading vehicle manufacturers (Volvo, Daf, Iveco, MAN, Mersedes-Benz, Renault, Scania) to re-structure leasing payments for the trucks imported to the Russian Federation on leasing terms. At the negotiations, in which ASMAP and leasing companies resident in the RF participated, the lessors confirmed their readiness to restructure leasing payments if a lessor and a lessee conclude additional agreements.
Having taken into account the offers made at the meeting at the end of May, the RF Transport Ministry is taking measures to minimise the negative consequences of the financial crisis and to expand Russian transport companies’ participation in the international transportation of cargoes and passengers.
 

[~DETAIL_TEXT] =>

Import-addicted

According to the data of the Transport Ministry, the total volume of commercial transportation in Russia fell in the first half of 2009 by 21.4% comparing with the same period the previous year. Thus, it made 1.8 billion tons. No wonder motor carriers have serious problems – their total transportation volume fell by 19.3% year-on-year to 856.5 million tons.
Experts at the Transport Ministry consider that the decline in the demand for transport services was caused by the drop in production, the bleak foreign economic and market situation, and a reduction in real household income. “This tendency can be easily explained. According to customs statistics, Russia’s foreign trade turnover amounted to $196.3 billion in January-June 2009, a 45.4% decline year-on-year, including a 47.3% decline in turnover with the CIS, and a 45.1% drop in turnover with other countries,” said Anatoly Pinson, Adviser to the CEO of Sovtransauto holding company. The basic reason for the import volume reduction is the growth of rouble prices for import goods due to devaluation.
It made enterprises abandon the purchase of new equipment, because the demand for their production had fallen, and their financial position had become worse. As for cargoes carried by international road transport, the import transportation volume of engineering products, polymeric materials, base metals, and goods made of stone and gyps reduced in April 2009 compared with the previous month. Meanwhile, transportation volumes of plant products remained practically the same, i.e. the decline at the international road haulage market reflected the economic situation in the state.
All bets are off
In the words of Mr Pinson, the 16% decline of Sovtransauto enterprises’ figures in volume terms in January-June 2009 can be considered a good result. “If you take into account the drop in currency receipts, which amounted to approximately 40%, you will feel the impact of the recession. What is the reason for the contrast? The explanation is simple: the volume of freight transportation decreased, and, in addition to it, the charter rates in euros fell by 30%,” he explained.
There are several reasons for the decline in charter rates. Firstly, the offer of freight transportation surpassed demand. There has appeared a significant surplus in transport capacities. One of the reasons for this was the rapid enlargement of the vehicle park. For example, in 2007 the park of Russian road carriers increased by a third, and in 2008 it became even larger. Everybody hoped that the rates of foreign trade turnover growth and, consequently, freight transportation would grow. The recession became the reason for the increase in competition and the reduction of prices for cargo transportation. Market players note that transporters from neighbouring countries began to cut charter rates in a panic, trying to get the scarce product by means of price dumping.
The losses are particularly noticeable in the container transportation sector. In this segment, the lack of demand led to a drop in the average cost of container transportation by road haulage. In October-November 2008, the price for transporting a container from Kotka to Moscow by road was $2,400-2,800, and then it fell to $2,000-2,200, and by mid-2009 it dropped to $1,400-1,800 and continues to decrease.
“Articulated lorries with awnings are almost loaded nowadays. A number of tenders have been won, particularly those on equipment transportation from Western Europe to Surgut and Saransk. Unfortunately, there is no regular loading for container vehicles, which used to actively service the route Russia-Finland,” confirms Mr Pinson. Earlier, road transporters did not have such discounts: nowadays their tariffs are 60% of their pre-crisis charges. Meanwhile, experts are sure the price dumping will not help the market. Exploitation of a vehicle is more expensive than the sum received by a carrier after the cost of the fuel is reckoned. And it makes up 40% of the transportation net cost.

Reasons and a consequence

Due to the lack of work, a number of transport companies cut jobs, reduced salaries and made drivers take unpaid leave. Some carriers had to return leased rolling stock and some even had to give up their business. “Transport companies are taking measures to keep their workforce, but often they have to tighten belts and reduce salaries, decrease expenditures on rolling stock maintenance, give up investment programmes etc,” say representatives of ASMAP (International Road Carriers Association).
Taking into account the decline in profit base from transportation, Sovtransauto took measures to decrease its expenditures. “The number of administrative personnel and drivers was reduced. We had to cut down wages. Negotiations on re-structuring leasing payments for rolling stock were held. Also, we organised refuelling of cars by cheaper diesel fuel and toughened controls over drivers,” said Mr Pinson.
However, according to experts, these problems are characteristic of all countries that have a lot of transport operators. According to the International Union of Motor Transport, 140,000 people in Europe working in the motor transportation sector have lost their jobs, and in the CIS the figure is 120,000 people.
In these conditions smaller carriers suffer most of all, so the share of larger companies in the segment is growing. Analysts think, the number of market players has reduced by almost 25%, mainly at the expense of so-called private traders (owner-drivers) and the small, local companies. “Firstly, it happened due to the lack of circulating assets. Those carriers who have credit and leasing payments are in the worst position. Secondly, the overwhelming majority of the companies do not have an accurate forwarding system at all stages, especially if they provide package freight transportation,” highlight experts of the First Forwarding Company (PEC). “Only a large company with a specific work process is able to guarantee quality transportation in such conditions.”
“In addition, large professional carriers have a regular clientele – forwarding and logistics companies. In fact, it is they who now rule the market and make more rigid demands in terms of carriers’ reliability and professionalism. Other transport companies are trying to keep their positions by introducing new services, improving the quality of work, using advanced technologies and attractive tariffs. A large company specialising in a certain kind of a cargo transportation, particularly grouped cargo, can guarantee reliability of delivery by means of the latest technologies and innovative approaches, such as SMS, e-documents, computerised warehouses and satellite tracking of cargo along the whole route.
A small company does not have such opportunities,” add specialists at PEC. And the largest Russian companies agree with them. “If a vehicle is the property of an enterprise, it may be put on hold during the recession. Then there will be neither income, nor expense. But the leased vehicles must be exploited. That is why the main task of a carrier is to find loading for such haulage,” considers Mr Pinson.

There is a way out

Nevertheless, the sector of grouped cargo transportation by motor transport has become one of the market leaders. “The volume of transportation by all transport modes fell by 30% in January-June 2009, while the transportation of grouped cargo by road haulage was stable and even increased by 5% on the basic routes,” say experts at PEC. According to the company’s analysts, by the end of 2009 the market could become stable and loss-free before returning to pre-crisis figures in the second half of 2010.
Maria Shevchenko

viewpoint

 Andrey Kurushin,
General Director of ASMAP:

– In November 2008, experts of ASMAP developed the Concept of Recession-Proof Measures, which contains measures targeted at the support of liquidity, the reduction of operational and tax expenditures and the increase of demand for services provided by Russian international road hauliers, etc. Legislative activity regarding minimisation of taxes is being conducted. Together with the RF Ministry of Transport, the Association participated in discussions and developed ways to support Russian international road hauliers and for them to be included in the recession-proof programme of the Russian Government for 2009. The list of measures is rather long, and steps are being taken at all levels.
As for transport companies, special attention should be paid to expenses control. Any factor may be of great importance if it can make for a decrease in costs.
ASMAP applied to the leading vehicle manufacturers (Volvo, Daf, Iveco, MAN, Mersedes-Benz, Renault, Scania) to re-structure leasing payments for the trucks imported to the Russian Federation on leasing terms. At the negotiations, in which ASMAP and leasing companies resident in the RF participated, the lessors confirmed their readiness to restructure leasing payments if a lessor and a lessee conclude additional agreements.
Having taken into account the offers made at the meeting at the end of May, the RF Transport Ministry is taking measures to minimise the negative consequences of the financial crisis and to expand Russian transport companies’ participation in the international transportation of cargoes and passengers.
 

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Import-addicted

According to the data of the Transport Ministry, the total volume of commercial transportation in Russia fell in the first half of 2009 by 21.4% comparing with the same period the previous year. Thus, it made 1.8 billion tons. No wonder motor carriers have serious problems – their total transportation volume fell by 19.3% year-on-year to 856.5 million tons.
Experts at the Transport Ministry consider that the decline in the demand for transport services was caused by the drop in production, the bleak foreign economic and market situation, and a reduction in real household income. “This tendency can be easily explained. According to customs statistics, Russia’s foreign trade turnover amounted to $196.3 billion in January-June 2009, a 45.4% decline year-on-year, including a 47.3% decline in turnover with the CIS, and a 45.1% drop in turnover with other countries,” said Anatoly Pinson, Adviser to the CEO of Sovtransauto holding company. The basic reason for the import volume reduction is the growth of rouble prices for import goods due to devaluation.
It made enterprises abandon the purchase of new equipment, because the demand for their production had fallen, and their financial position had become worse. As for cargoes carried by international road transport, the import transportation volume of engineering products, polymeric materials, base metals, and goods made of stone and gyps reduced in April 2009 compared with the previous month. Meanwhile, transportation volumes of plant products remained practically the same, i.e. the decline at the international road haulage market reflected the economic situation in the state.
All bets are off
In the words of Mr Pinson, the 16% decline of Sovtransauto enterprises’ figures in volume terms in January-June 2009 can be considered a good result. “If you take into account the drop in currency receipts, which amounted to approximately 40%, you will feel the impact of the recession. What is the reason for the contrast? The explanation is simple: the volume of freight transportation decreased, and, in addition to it, the charter rates in euros fell by 30%,” he explained.
There are several reasons for the decline in charter rates. Firstly, the offer of freight transportation surpassed demand. There has appeared a significant surplus in transport capacities. One of the reasons for this was the rapid enlargement of the vehicle park. For example, in 2007 the park of Russian road carriers increased by a third, and in 2008 it became even larger. Everybody hoped that the rates of foreign trade turnover growth and, consequently, freight transportation would grow. The recession became the reason for the increase in competition and the reduction of prices for cargo transportation. Market players note that transporters from neighbouring countries began to cut charter rates in a panic, trying to get the scarce product by means of price dumping.
The losses are particularly noticeable in the container transportation sector. In this segment, the lack of demand led to a drop in the average cost of container transportation by road haulage. In October-November 2008, the price for transporting a container from Kotka to Moscow by road was $2,400-2,800, and then it fell to $2,000-2,200, and by mid-2009 it dropped to $1,400-1,800 and continues to decrease.
“Articulated lorries with awnings are almost loaded nowadays. A number of tenders have been won, particularly those on equipment transportation from Western Europe to Surgut and Saransk. Unfortunately, there is no regular loading for container vehicles, which used to actively service the route Russia-Finland,” confirms Mr Pinson. Earlier, road transporters did not have such discounts: nowadays their tariffs are 60% of their pre-crisis charges. Meanwhile, experts are sure the price dumping will not help the market. Exploitation of a vehicle is more expensive than the sum received by a carrier after the cost of the fuel is reckoned. And it makes up 40% of the transportation net cost.

Reasons and a consequence

Due to the lack of work, a number of transport companies cut jobs, reduced salaries and made drivers take unpaid leave. Some carriers had to return leased rolling stock and some even had to give up their business. “Transport companies are taking measures to keep their workforce, but often they have to tighten belts and reduce salaries, decrease expenditures on rolling stock maintenance, give up investment programmes etc,” say representatives of ASMAP (International Road Carriers Association).
Taking into account the decline in profit base from transportation, Sovtransauto took measures to decrease its expenditures. “The number of administrative personnel and drivers was reduced. We had to cut down wages. Negotiations on re-structuring leasing payments for rolling stock were held. Also, we organised refuelling of cars by cheaper diesel fuel and toughened controls over drivers,” said Mr Pinson.
However, according to experts, these problems are characteristic of all countries that have a lot of transport operators. According to the International Union of Motor Transport, 140,000 people in Europe working in the motor transportation sector have lost their jobs, and in the CIS the figure is 120,000 people.
In these conditions smaller carriers suffer most of all, so the share of larger companies in the segment is growing. Analysts think, the number of market players has reduced by almost 25%, mainly at the expense of so-called private traders (owner-drivers) and the small, local companies. “Firstly, it happened due to the lack of circulating assets. Those carriers who have credit and leasing payments are in the worst position. Secondly, the overwhelming majority of the companies do not have an accurate forwarding system at all stages, especially if they provide package freight transportation,” highlight experts of the First Forwarding Company (PEC). “Only a large company with a specific work process is able to guarantee quality transportation in such conditions.”
“In addition, large professional carriers have a regular clientele – forwarding and logistics companies. In fact, it is they who now rule the market and make more rigid demands in terms of carriers’ reliability and professionalism. Other transport companies are trying to keep their positions by introducing new services, improving the quality of work, using advanced technologies and attractive tariffs. A large company specialising in a certain kind of a cargo transportation, particularly grouped cargo, can guarantee reliability of delivery by means of the latest technologies and innovative approaches, such as SMS, e-documents, computerised warehouses and satellite tracking of cargo along the whole route.
A small company does not have such opportunities,” add specialists at PEC. And the largest Russian companies agree with them. “If a vehicle is the property of an enterprise, it may be put on hold during the recession. Then there will be neither income, nor expense. But the leased vehicles must be exploited. That is why the main task of a carrier is to find loading for such haulage,” considers Mr Pinson.

There is a way out

Nevertheless, the sector of grouped cargo transportation by motor transport has become one of the market leaders. “The volume of transportation by all transport modes fell by 30% in January-June 2009, while the transportation of grouped cargo by road haulage was stable and even increased by 5% on the basic routes,” say experts at PEC. According to the company’s analysts, by the end of 2009 the market could become stable and loss-free before returning to pre-crisis figures in the second half of 2010.
Maria Shevchenko

viewpoint

 Andrey Kurushin,
General Director of ASMAP:

– In November 2008, experts of ASMAP developed the Concept of Recession-Proof Measures, which contains measures targeted at the support of liquidity, the reduction of operational and tax expenditures and the increase of demand for services provided by Russian international road hauliers, etc. Legislative activity regarding minimisation of taxes is being conducted. Together with the RF Ministry of Transport, the Association participated in discussions and developed ways to support Russian international road hauliers and for them to be included in the recession-proof programme of the Russian Government for 2009. The list of measures is rather long, and steps are being taken at all levels.
As for transport companies, special attention should be paid to expenses control. Any factor may be of great importance if it can make for a decrease in costs.
ASMAP applied to the leading vehicle manufacturers (Volvo, Daf, Iveco, MAN, Mersedes-Benz, Renault, Scania) to re-structure leasing payments for the trucks imported to the Russian Federation on leasing terms. At the negotiations, in which ASMAP and leasing companies resident in the RF participated, the lessors confirmed their readiness to restructure leasing payments if a lessor and a lessee conclude additional agreements.
Having taken into account the offers made at the meeting at the end of May, the RF Transport Ministry is taking measures to minimise the negative consequences of the financial crisis and to expand Russian transport companies’ participation in the international transportation of cargoes and passengers.
 

[~DETAIL_TEXT] =>

Import-addicted

According to the data of the Transport Ministry, the total volume of commercial transportation in Russia fell in the first half of 2009 by 21.4% comparing with the same period the previous year. Thus, it made 1.8 billion tons. No wonder motor carriers have serious problems – their total transportation volume fell by 19.3% year-on-year to 856.5 million tons.
Experts at the Transport Ministry consider that the decline in the demand for transport services was caused by the drop in production, the bleak foreign economic and market situation, and a reduction in real household income. “This tendency can be easily explained. According to customs statistics, Russia’s foreign trade turnover amounted to $196.3 billion in January-June 2009, a 45.4% decline year-on-year, including a 47.3% decline in turnover with the CIS, and a 45.1% drop in turnover with other countries,” said Anatoly Pinson, Adviser to the CEO of Sovtransauto holding company. The basic reason for the import volume reduction is the growth of rouble prices for import goods due to devaluation.
It made enterprises abandon the purchase of new equipment, because the demand for their production had fallen, and their financial position had become worse. As for cargoes carried by international road transport, the import transportation volume of engineering products, polymeric materials, base metals, and goods made of stone and gyps reduced in April 2009 compared with the previous month. Meanwhile, transportation volumes of plant products remained practically the same, i.e. the decline at the international road haulage market reflected the economic situation in the state.
All bets are off
In the words of Mr Pinson, the 16% decline of Sovtransauto enterprises’ figures in volume terms in January-June 2009 can be considered a good result. “If you take into account the drop in currency receipts, which amounted to approximately 40%, you will feel the impact of the recession. What is the reason for the contrast? The explanation is simple: the volume of freight transportation decreased, and, in addition to it, the charter rates in euros fell by 30%,” he explained.
There are several reasons for the decline in charter rates. Firstly, the offer of freight transportation surpassed demand. There has appeared a significant surplus in transport capacities. One of the reasons for this was the rapid enlargement of the vehicle park. For example, in 2007 the park of Russian road carriers increased by a third, and in 2008 it became even larger. Everybody hoped that the rates of foreign trade turnover growth and, consequently, freight transportation would grow. The recession became the reason for the increase in competition and the reduction of prices for cargo transportation. Market players note that transporters from neighbouring countries began to cut charter rates in a panic, trying to get the scarce product by means of price dumping.
The losses are particularly noticeable in the container transportation sector. In this segment, the lack of demand led to a drop in the average cost of container transportation by road haulage. In October-November 2008, the price for transporting a container from Kotka to Moscow by road was $2,400-2,800, and then it fell to $2,000-2,200, and by mid-2009 it dropped to $1,400-1,800 and continues to decrease.
“Articulated lorries with awnings are almost loaded nowadays. A number of tenders have been won, particularly those on equipment transportation from Western Europe to Surgut and Saransk. Unfortunately, there is no regular loading for container vehicles, which used to actively service the route Russia-Finland,” confirms Mr Pinson. Earlier, road transporters did not have such discounts: nowadays their tariffs are 60% of their pre-crisis charges. Meanwhile, experts are sure the price dumping will not help the market. Exploitation of a vehicle is more expensive than the sum received by a carrier after the cost of the fuel is reckoned. And it makes up 40% of the transportation net cost.

Reasons and a consequence

Due to the lack of work, a number of transport companies cut jobs, reduced salaries and made drivers take unpaid leave. Some carriers had to return leased rolling stock and some even had to give up their business. “Transport companies are taking measures to keep their workforce, but often they have to tighten belts and reduce salaries, decrease expenditures on rolling stock maintenance, give up investment programmes etc,” say representatives of ASMAP (International Road Carriers Association).
Taking into account the decline in profit base from transportation, Sovtransauto took measures to decrease its expenditures. “The number of administrative personnel and drivers was reduced. We had to cut down wages. Negotiations on re-structuring leasing payments for rolling stock were held. Also, we organised refuelling of cars by cheaper diesel fuel and toughened controls over drivers,” said Mr Pinson.
However, according to experts, these problems are characteristic of all countries that have a lot of transport operators. According to the International Union of Motor Transport, 140,000 people in Europe working in the motor transportation sector have lost their jobs, and in the CIS the figure is 120,000 people.
In these conditions smaller carriers suffer most of all, so the share of larger companies in the segment is growing. Analysts think, the number of market players has reduced by almost 25%, mainly at the expense of so-called private traders (owner-drivers) and the small, local companies. “Firstly, it happened due to the lack of circulating assets. Those carriers who have credit and leasing payments are in the worst position. Secondly, the overwhelming majority of the companies do not have an accurate forwarding system at all stages, especially if they provide package freight transportation,” highlight experts of the First Forwarding Company (PEC). “Only a large company with a specific work process is able to guarantee quality transportation in such conditions.”
“In addition, large professional carriers have a regular clientele – forwarding and logistics companies. In fact, it is they who now rule the market and make more rigid demands in terms of carriers’ reliability and professionalism. Other transport companies are trying to keep their positions by introducing new services, improving the quality of work, using advanced technologies and attractive tariffs. A large company specialising in a certain kind of a cargo transportation, particularly grouped cargo, can guarantee reliability of delivery by means of the latest technologies and innovative approaches, such as SMS, e-documents, computerised warehouses and satellite tracking of cargo along the whole route.
A small company does not have such opportunities,” add specialists at PEC. And the largest Russian companies agree with them. “If a vehicle is the property of an enterprise, it may be put on hold during the recession. Then there will be neither income, nor expense. But the leased vehicles must be exploited. That is why the main task of a carrier is to find loading for such haulage,” considers Mr Pinson.

There is a way out

Nevertheless, the sector of grouped cargo transportation by motor transport has become one of the market leaders. “The volume of transportation by all transport modes fell by 30% in January-June 2009, while the transportation of grouped cargo by road haulage was stable and even increased by 5% on the basic routes,” say experts at PEC. According to the company’s analysts, by the end of 2009 the market could become stable and loss-free before returning to pre-crisis figures in the second half of 2010.
Maria Shevchenko

viewpoint

 Andrey Kurushin,
General Director of ASMAP:

– In November 2008, experts of ASMAP developed the Concept of Recession-Proof Measures, which contains measures targeted at the support of liquidity, the reduction of operational and tax expenditures and the increase of demand for services provided by Russian international road hauliers, etc. Legislative activity regarding minimisation of taxes is being conducted. Together with the RF Ministry of Transport, the Association participated in discussions and developed ways to support Russian international road hauliers and for them to be included in the recession-proof programme of the Russian Government for 2009. The list of measures is rather long, and steps are being taken at all levels.
As for transport companies, special attention should be paid to expenses control. Any factor may be of great importance if it can make for a decrease in costs.
ASMAP applied to the leading vehicle manufacturers (Volvo, Daf, Iveco, MAN, Mersedes-Benz, Renault, Scania) to re-structure leasing payments for the trucks imported to the Russian Federation on leasing terms. At the negotiations, in which ASMAP and leasing companies resident in the RF participated, the lessors confirmed their readiness to restructure leasing payments if a lessor and a lessee conclude additional agreements.
Having taken into account the offers made at the meeting at the end of May, the RF Transport Ministry is taking measures to minimise the negative consequences of the financial crisis and to expand Russian transport companies’ participation in the international transportation of cargoes and passengers.
 

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РЖД-Партнер

Sellers of Air

 Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports.
However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers.
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NEW DEVELOPMENTS NEEDED

In 2006, the nine largest European airlines – among them British Airways, Lufthansa and SAS – demanded the European Commission be harder with Moscow in negotiating the collection of royalties – charges for using Russian airspace for non-stop flights between Europe and Asia. Today Russia has remained the only country in the world which demands payment for using its airspace by foreign carriers. Foreign airlines pay Russia a total of $ 400 million to $ 450 million annually, which compels them to add charges to their passengers. Thus travelling from Europe to China through Russian airspace costs an extra $ 150 to each passenger.
The story with Russian royalties started in 1971, when planes could not yet make non-stop flights between Europe and Asia and, consequently, they were compelled to land at Moscow airports. Russia started charging additional money from foreigners, explaining it by the inconvenience created for domestic flights. But it continued when there was no more landing in Moscow. The Russian side feels that royalty payments are voluntary, since airlines can lay their routes bypassing Russian territory, an unacceptable proposition to foreigners because they are saving up to four hours flight-time and fuel which costs more than $ 10,000 per journey.
As market participants say, Moscow is “taking revenge” on Europe for imposing noise restrictions, which caused most Russian-made planes to be banned from working on European lines. However, it is most likely that the unwillingness of Russia to cancel its royalty charges is explained by purely economic reasons. It is interesting that China does not take money for air, although, just like Russia, it has not signed the international transit agreement. Europe does not charge for air either, in spite of the fact that Russian planes use its airspace.

Consistency in Russian style

Quite a lot of time has passed since 2006, but these negotiations are still far from the closing stages. In 2005 German Gref, who was the Minister for Economic Development and Trade of Russia at that time, promised to abolish the royalties in 2014. Independent onlookers say that if this question is not solved in the near future, the EU could close the door for Russia to enter the WTO for a long time. But by the end of 2006, Igor Levitin, Transport Minister of the Russian Federation, made clear that Russia was not hurrying to the WTO, and that the charges would remain after 2014.
It is interesting that, alongside the EU, Sweden is also holding negotiations on the cancellation of royalties and liberalisation of the transit flights market, which is another headache for the airlines of Russia. If these negotiations are successful, Kallax Airport will start working in the country’s north, which was constructed especially to serve trans-Siberian flights. More than $ 20 million was invested in this airport in the mid-90s after Russian officials gave oral assurances that royalties would be soon cancelled and a large number of foreign airlines would be allowed to make flights. But now this airport is waiting for its time without much success.
Last year Sergey Chemezov, General Director of Rostechnologii State Corporation, and Yury Luzhkov, Mayor of Moscow, declared a requirement to cancel the royalties. The explanation was that Aeroflot was the company which received the royalty, thus putting itself in an exclusive position compared with other companies. The unofficial information is that Aeroflot awards itself a quarter to a third of the total amount, and the rest is transferred to the Ministry of Transport, Rosaviatsia and other state organisations which are responsible for the development of Russian civil aviation.
It is interesting that Aeroflot considers it incorrect to call this money a “royalty” because they are not a payment for using the airspace in Russia, or any certain route in it. Legally, it is a question of indemnification for the benefits missed by Aeroflot, because foreign companies carry out non-stop flights via the same routes where it flies but with landing in Moscow. Such a treatment of the situation is fixed in commercial contracts which Aeroflot has with each interested airline.
As regards the benefit of Aeroflot, this year it became publicly known that, without a royalty, this airline would have been unprofitable for the past six years. Nevertheless, when the new General Director of Aeroflot arrived in August 2009, it appeared that the refusal of this payment was among the main tasks on his list.

Bad games lead to bad landing

Even experts cannot guess how this situation is going to develop. However it is now clear that Russia does not like it very much when its transport interests are hurt. The conflict between the Ministry of Transport of the Russian Federation and the German airline Lufthansa became a good example. In 2007, there was information that Moscow had temporarily forbidden Lufthansa Cargo to fly over Russia, which cost the latter about $ 400,000 per week. Observers of that conflict said that it happened because Lufthansa Cargo had used the airport of Astana in Kazakhstan as its base. Only after it promised to change to Russian airports in Novosibirsk or Krasnoyarsk were the flights renewed but only for a while. Also, the airports in those Siberian cities did not match the technical requirements of the German air company, whose strict flight safety standards are well-known. However, the Russian side has confirmed the seriousness of its decisions by claiming tax from the company, thus this story of intimidation let foreign airlines know precisely whom they were dealing with.
The essence of the conflict between foreign companies and Russia lies in this story. Besides royalties, there is another reason why foreign planes fly over the Russian territory as fast as possible. It is the condition of its airports, which resemble the condition of the whole Russian aviation sector. Official figures show that, from 1992 to 2006, the number of aircraft stations in Russia was reduced by two-thirds, and deterioration of runways reached 80%. It can only spark caution from western companies. Flight safety experts note that most emergencies are connected specifically to airport infrastructure.
It is interesting that the figure of 80% has come into being after the Prosecutor General’s Office of the Russian Federation inspected the country’s airports. The very first check finished with a scandal. It appeared that Magas airport in Ingushetia was working without the necessary licences. It has not been certificated till now, which is an abuse of the Air Code of Russia and means that nobody has allowed it either to accept planes or to send them. Besides, it appeared that this airport does not consider and does not investigate each incident involving civil planes. As was discovered, the certificate, which is to allow the airport to carry out its activity, has to be issued by the Interstate Aviation Committee. Instead of that, a conclusion of local territorial management of civil aircraft was used at Magas airport, and nobody paid attention to the absence of the official certificate for a long time.
Fortunately, this situation is not typical for Russian airports in large cities, but it shows the essence of the problem.
Another peculiarity of Russian airports is different runway coverings. It can be pebble, concrete or asphalt plates. Such coverings do not only affect the chassis of the plane, but also their engine, which is sometimes too low to the ground and therefore sucks up pieces of broken asphalt, concrete or rubble. In such cases, as Russian pilots say, foreign planes are less protected in comparison with the ancient Russian-built planes.
Nevertheless, owners of the airports blame all their problems on a lack of financing. Reconstruction works are linked to budgetary funds, because runways at Russian airports are federal property. But airports are lacking money, especially in the crisis year.

Will hubs save Russia?

The next problem, which is the Scylla and Charybdis of Russian airports, is the training of personnel, primarily dispatchers. Since March 5th, 2008, an additional requirement of the International Civil Aviation Organisation (ICAO) has come into force in the country. It requires that each dispatcher has to have a fluent command of English. Today 4,200 dispatchers know this language, but their ability not go beyond that of aviation phraseology for radio-exchange. Now they need to reach the level of a professional linguist. However, it will be difficult for many of them to learn a foreign language, because their average age is 48 years.
So far the question of when the problems with Russian airports will be solved remained unanswered, especially taking the economic crisis into consideration. The data of how dilapidated they are made the basis for the Transport Ministry of Russia to work out and accept the Concept for the Development of Aircraft Station (Airport) Network of the Russian Federation to 2020. Following this Concept, a national basic aircraft station network will be created. It will consist of 117 aircraft stations, and international hubs will form its basis. It is necessary to note that, for the last 15 years, the network of civil aircraft stations have shrunk almost by half in Russia, and now it totals 351. The network (which, according to the some, is currently being expanded up to 170 airports by 2020) will be federal property; all other airports will be transferred to the regional authority. Such state control could promote the situation quite well, when foreign companies’ planes can use Russian resources.
Due to its historic background, Moscow has all the pre-conditions to become the pioneer of “hub-building”. Apart from Moscow, Krasnoyarsk should also become one of the first Russian hubs, because it is located on the shortest route from North America to India. Experts are already predicting that the following features of the Russian market could make creation of the hubs complicated. First of all, there is unequal passenger traffic in different areas. About 70% of the aviation transport market is currently connected to the Moscow aviation junction, where three large airport complexes are working in conditions of rigid competition for attracting business. Actually, according to Russian legislation, there should not be any competition because, in fact, all airports belong to natural monopolies (their activity is regulated by the federal law “About Natural Monopolies”). The reality is different. Moscow airports are locked in a competitive struggle for clients.
The regions also have their own peculiarities. The status of natural monopoly is held not just by the airport but the air carrier too, because during privatisation some of the airports merged with airlines. As a result, other air carriers have been pushed away from the market, or have been compelled to carry out their activity in obviously unprofitable conditions. According to official statistics, just five years ago there were about 20 such airport-airlines. Foreign airlines can fully and freely operate only when the proper (from the point of view of the Europeans) economic conditions are available at all airports in Russia.
Alexey Strigin [~DETAIL_TEXT] =>

NEW DEVELOPMENTS NEEDED

In 2006, the nine largest European airlines – among them British Airways, Lufthansa and SAS – demanded the European Commission be harder with Moscow in negotiating the collection of royalties – charges for using Russian airspace for non-stop flights between Europe and Asia. Today Russia has remained the only country in the world which demands payment for using its airspace by foreign carriers. Foreign airlines pay Russia a total of $ 400 million to $ 450 million annually, which compels them to add charges to their passengers. Thus travelling from Europe to China through Russian airspace costs an extra $ 150 to each passenger.
The story with Russian royalties started in 1971, when planes could not yet make non-stop flights between Europe and Asia and, consequently, they were compelled to land at Moscow airports. Russia started charging additional money from foreigners, explaining it by the inconvenience created for domestic flights. But it continued when there was no more landing in Moscow. The Russian side feels that royalty payments are voluntary, since airlines can lay their routes bypassing Russian territory, an unacceptable proposition to foreigners because they are saving up to four hours flight-time and fuel which costs more than $ 10,000 per journey.
As market participants say, Moscow is “taking revenge” on Europe for imposing noise restrictions, which caused most Russian-made planes to be banned from working on European lines. However, it is most likely that the unwillingness of Russia to cancel its royalty charges is explained by purely economic reasons. It is interesting that China does not take money for air, although, just like Russia, it has not signed the international transit agreement. Europe does not charge for air either, in spite of the fact that Russian planes use its airspace.

Consistency in Russian style

Quite a lot of time has passed since 2006, but these negotiations are still far from the closing stages. In 2005 German Gref, who was the Minister for Economic Development and Trade of Russia at that time, promised to abolish the royalties in 2014. Independent onlookers say that if this question is not solved in the near future, the EU could close the door for Russia to enter the WTO for a long time. But by the end of 2006, Igor Levitin, Transport Minister of the Russian Federation, made clear that Russia was not hurrying to the WTO, and that the charges would remain after 2014.
It is interesting that, alongside the EU, Sweden is also holding negotiations on the cancellation of royalties and liberalisation of the transit flights market, which is another headache for the airlines of Russia. If these negotiations are successful, Kallax Airport will start working in the country’s north, which was constructed especially to serve trans-Siberian flights. More than $ 20 million was invested in this airport in the mid-90s after Russian officials gave oral assurances that royalties would be soon cancelled and a large number of foreign airlines would be allowed to make flights. But now this airport is waiting for its time without much success.
Last year Sergey Chemezov, General Director of Rostechnologii State Corporation, and Yury Luzhkov, Mayor of Moscow, declared a requirement to cancel the royalties. The explanation was that Aeroflot was the company which received the royalty, thus putting itself in an exclusive position compared with other companies. The unofficial information is that Aeroflot awards itself a quarter to a third of the total amount, and the rest is transferred to the Ministry of Transport, Rosaviatsia and other state organisations which are responsible for the development of Russian civil aviation.
It is interesting that Aeroflot considers it incorrect to call this money a “royalty” because they are not a payment for using the airspace in Russia, or any certain route in it. Legally, it is a question of indemnification for the benefits missed by Aeroflot, because foreign companies carry out non-stop flights via the same routes where it flies but with landing in Moscow. Such a treatment of the situation is fixed in commercial contracts which Aeroflot has with each interested airline.
As regards the benefit of Aeroflot, this year it became publicly known that, without a royalty, this airline would have been unprofitable for the past six years. Nevertheless, when the new General Director of Aeroflot arrived in August 2009, it appeared that the refusal of this payment was among the main tasks on his list.

Bad games lead to bad landing

Even experts cannot guess how this situation is going to develop. However it is now clear that Russia does not like it very much when its transport interests are hurt. The conflict between the Ministry of Transport of the Russian Federation and the German airline Lufthansa became a good example. In 2007, there was information that Moscow had temporarily forbidden Lufthansa Cargo to fly over Russia, which cost the latter about $ 400,000 per week. Observers of that conflict said that it happened because Lufthansa Cargo had used the airport of Astana in Kazakhstan as its base. Only after it promised to change to Russian airports in Novosibirsk or Krasnoyarsk were the flights renewed but only for a while. Also, the airports in those Siberian cities did not match the technical requirements of the German air company, whose strict flight safety standards are well-known. However, the Russian side has confirmed the seriousness of its decisions by claiming tax from the company, thus this story of intimidation let foreign airlines know precisely whom they were dealing with.
The essence of the conflict between foreign companies and Russia lies in this story. Besides royalties, there is another reason why foreign planes fly over the Russian territory as fast as possible. It is the condition of its airports, which resemble the condition of the whole Russian aviation sector. Official figures show that, from 1992 to 2006, the number of aircraft stations in Russia was reduced by two-thirds, and deterioration of runways reached 80%. It can only spark caution from western companies. Flight safety experts note that most emergencies are connected specifically to airport infrastructure.
It is interesting that the figure of 80% has come into being after the Prosecutor General’s Office of the Russian Federation inspected the country’s airports. The very first check finished with a scandal. It appeared that Magas airport in Ingushetia was working without the necessary licences. It has not been certificated till now, which is an abuse of the Air Code of Russia and means that nobody has allowed it either to accept planes or to send them. Besides, it appeared that this airport does not consider and does not investigate each incident involving civil planes. As was discovered, the certificate, which is to allow the airport to carry out its activity, has to be issued by the Interstate Aviation Committee. Instead of that, a conclusion of local territorial management of civil aircraft was used at Magas airport, and nobody paid attention to the absence of the official certificate for a long time.
Fortunately, this situation is not typical for Russian airports in large cities, but it shows the essence of the problem.
Another peculiarity of Russian airports is different runway coverings. It can be pebble, concrete or asphalt plates. Such coverings do not only affect the chassis of the plane, but also their engine, which is sometimes too low to the ground and therefore sucks up pieces of broken asphalt, concrete or rubble. In such cases, as Russian pilots say, foreign planes are less protected in comparison with the ancient Russian-built planes.
Nevertheless, owners of the airports blame all their problems on a lack of financing. Reconstruction works are linked to budgetary funds, because runways at Russian airports are federal property. But airports are lacking money, especially in the crisis year.

Will hubs save Russia?

The next problem, which is the Scylla and Charybdis of Russian airports, is the training of personnel, primarily dispatchers. Since March 5th, 2008, an additional requirement of the International Civil Aviation Organisation (ICAO) has come into force in the country. It requires that each dispatcher has to have a fluent command of English. Today 4,200 dispatchers know this language, but their ability not go beyond that of aviation phraseology for radio-exchange. Now they need to reach the level of a professional linguist. However, it will be difficult for many of them to learn a foreign language, because their average age is 48 years.
So far the question of when the problems with Russian airports will be solved remained unanswered, especially taking the economic crisis into consideration. The data of how dilapidated they are made the basis for the Transport Ministry of Russia to work out and accept the Concept for the Development of Aircraft Station (Airport) Network of the Russian Federation to 2020. Following this Concept, a national basic aircraft station network will be created. It will consist of 117 aircraft stations, and international hubs will form its basis. It is necessary to note that, for the last 15 years, the network of civil aircraft stations have shrunk almost by half in Russia, and now it totals 351. The network (which, according to the some, is currently being expanded up to 170 airports by 2020) will be federal property; all other airports will be transferred to the regional authority. Such state control could promote the situation quite well, when foreign companies’ planes can use Russian resources.
Due to its historic background, Moscow has all the pre-conditions to become the pioneer of “hub-building”. Apart from Moscow, Krasnoyarsk should also become one of the first Russian hubs, because it is located on the shortest route from North America to India. Experts are already predicting that the following features of the Russian market could make creation of the hubs complicated. First of all, there is unequal passenger traffic in different areas. About 70% of the aviation transport market is currently connected to the Moscow aviation junction, where three large airport complexes are working in conditions of rigid competition for attracting business. Actually, according to Russian legislation, there should not be any competition because, in fact, all airports belong to natural monopolies (their activity is regulated by the federal law “About Natural Monopolies”). The reality is different. Moscow airports are locked in a competitive struggle for clients.
The regions also have their own peculiarities. The status of natural monopoly is held not just by the airport but the air carrier too, because during privatisation some of the airports merged with airlines. As a result, other air carriers have been pushed away from the market, or have been compelled to carry out their activity in obviously unprofitable conditions. According to official statistics, just five years ago there were about 20 such airport-airlines. Foreign airlines can fully and freely operate only when the proper (from the point of view of the Europeans) economic conditions are available at all airports in Russia.
Alexey Strigin [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports.
However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [~PREVIEW_TEXT] =>  Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports.
However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. 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height="232" align="left" />Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports. <br />However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [ELEMENT_META_TITLE] => Sellers of Air [ELEMENT_META_KEYWORDS] => sellers of air [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/4/23.jpg" border="1" alt=" " hspace="5" width="300" height="232" align="left" />Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports. <br />However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [SECTION_PICTURE_FILE_ALT] => Sellers of Air [SECTION_PICTURE_FILE_TITLE] => Sellers of Air [SECTION_DETAIL_PICTURE_FILE_ALT] => Sellers of Air [SECTION_DETAIL_PICTURE_FILE_TITLE] => Sellers of Air [ELEMENT_PREVIEW_PICTURE_FILE_ALT] => Sellers of Air [ELEMENT_PREVIEW_PICTURE_FILE_TITLE] => Sellers of Air [ELEMENT_DETAIL_PICTURE_FILE_ALT] => Sellers of Air [ELEMENT_DETAIL_PICTURE_FILE_TITLE] => Sellers of Air ) )

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    [DETAIL_TEXT] => 

NEW DEVELOPMENTS NEEDED

In 2006, the nine largest European airlines – among them British Airways, Lufthansa and SAS – demanded the European Commission be harder with Moscow in negotiating the collection of royalties – charges for using Russian airspace for non-stop flights between Europe and Asia. Today Russia has remained the only country in the world which demands payment for using its airspace by foreign carriers. Foreign airlines pay Russia a total of $ 400 million to $ 450 million annually, which compels them to add charges to their passengers. Thus travelling from Europe to China through Russian airspace costs an extra $ 150 to each passenger.
The story with Russian royalties started in 1971, when planes could not yet make non-stop flights between Europe and Asia and, consequently, they were compelled to land at Moscow airports. Russia started charging additional money from foreigners, explaining it by the inconvenience created for domestic flights. But it continued when there was no more landing in Moscow. The Russian side feels that royalty payments are voluntary, since airlines can lay their routes bypassing Russian territory, an unacceptable proposition to foreigners because they are saving up to four hours flight-time and fuel which costs more than $ 10,000 per journey.
As market participants say, Moscow is “taking revenge” on Europe for imposing noise restrictions, which caused most Russian-made planes to be banned from working on European lines. However, it is most likely that the unwillingness of Russia to cancel its royalty charges is explained by purely economic reasons. It is interesting that China does not take money for air, although, just like Russia, it has not signed the international transit agreement. Europe does not charge for air either, in spite of the fact that Russian planes use its airspace.

Consistency in Russian style

Quite a lot of time has passed since 2006, but these negotiations are still far from the closing stages. In 2005 German Gref, who was the Minister for Economic Development and Trade of Russia at that time, promised to abolish the royalties in 2014. Independent onlookers say that if this question is not solved in the near future, the EU could close the door for Russia to enter the WTO for a long time. But by the end of 2006, Igor Levitin, Transport Minister of the Russian Federation, made clear that Russia was not hurrying to the WTO, and that the charges would remain after 2014.
It is interesting that, alongside the EU, Sweden is also holding negotiations on the cancellation of royalties and liberalisation of the transit flights market, which is another headache for the airlines of Russia. If these negotiations are successful, Kallax Airport will start working in the country’s north, which was constructed especially to serve trans-Siberian flights. More than $ 20 million was invested in this airport in the mid-90s after Russian officials gave oral assurances that royalties would be soon cancelled and a large number of foreign airlines would be allowed to make flights. But now this airport is waiting for its time without much success.
Last year Sergey Chemezov, General Director of Rostechnologii State Corporation, and Yury Luzhkov, Mayor of Moscow, declared a requirement to cancel the royalties. The explanation was that Aeroflot was the company which received the royalty, thus putting itself in an exclusive position compared with other companies. The unofficial information is that Aeroflot awards itself a quarter to a third of the total amount, and the rest is transferred to the Ministry of Transport, Rosaviatsia and other state organisations which are responsible for the development of Russian civil aviation.
It is interesting that Aeroflot considers it incorrect to call this money a “royalty” because they are not a payment for using the airspace in Russia, or any certain route in it. Legally, it is a question of indemnification for the benefits missed by Aeroflot, because foreign companies carry out non-stop flights via the same routes where it flies but with landing in Moscow. Such a treatment of the situation is fixed in commercial contracts which Aeroflot has with each interested airline.
As regards the benefit of Aeroflot, this year it became publicly known that, without a royalty, this airline would have been unprofitable for the past six years. Nevertheless, when the new General Director of Aeroflot arrived in August 2009, it appeared that the refusal of this payment was among the main tasks on his list.

Bad games lead to bad landing

Even experts cannot guess how this situation is going to develop. However it is now clear that Russia does not like it very much when its transport interests are hurt. The conflict between the Ministry of Transport of the Russian Federation and the German airline Lufthansa became a good example. In 2007, there was information that Moscow had temporarily forbidden Lufthansa Cargo to fly over Russia, which cost the latter about $ 400,000 per week. Observers of that conflict said that it happened because Lufthansa Cargo had used the airport of Astana in Kazakhstan as its base. Only after it promised to change to Russian airports in Novosibirsk or Krasnoyarsk were the flights renewed but only for a while. Also, the airports in those Siberian cities did not match the technical requirements of the German air company, whose strict flight safety standards are well-known. However, the Russian side has confirmed the seriousness of its decisions by claiming tax from the company, thus this story of intimidation let foreign airlines know precisely whom they were dealing with.
The essence of the conflict between foreign companies and Russia lies in this story. Besides royalties, there is another reason why foreign planes fly over the Russian territory as fast as possible. It is the condition of its airports, which resemble the condition of the whole Russian aviation sector. Official figures show that, from 1992 to 2006, the number of aircraft stations in Russia was reduced by two-thirds, and deterioration of runways reached 80%. It can only spark caution from western companies. Flight safety experts note that most emergencies are connected specifically to airport infrastructure.
It is interesting that the figure of 80% has come into being after the Prosecutor General’s Office of the Russian Federation inspected the country’s airports. The very first check finished with a scandal. It appeared that Magas airport in Ingushetia was working without the necessary licences. It has not been certificated till now, which is an abuse of the Air Code of Russia and means that nobody has allowed it either to accept planes or to send them. Besides, it appeared that this airport does not consider and does not investigate each incident involving civil planes. As was discovered, the certificate, which is to allow the airport to carry out its activity, has to be issued by the Interstate Aviation Committee. Instead of that, a conclusion of local territorial management of civil aircraft was used at Magas airport, and nobody paid attention to the absence of the official certificate for a long time.
Fortunately, this situation is not typical for Russian airports in large cities, but it shows the essence of the problem.
Another peculiarity of Russian airports is different runway coverings. It can be pebble, concrete or asphalt plates. Such coverings do not only affect the chassis of the plane, but also their engine, which is sometimes too low to the ground and therefore sucks up pieces of broken asphalt, concrete or rubble. In such cases, as Russian pilots say, foreign planes are less protected in comparison with the ancient Russian-built planes.
Nevertheless, owners of the airports blame all their problems on a lack of financing. Reconstruction works are linked to budgetary funds, because runways at Russian airports are federal property. But airports are lacking money, especially in the crisis year.

Will hubs save Russia?

The next problem, which is the Scylla and Charybdis of Russian airports, is the training of personnel, primarily dispatchers. Since March 5th, 2008, an additional requirement of the International Civil Aviation Organisation (ICAO) has come into force in the country. It requires that each dispatcher has to have a fluent command of English. Today 4,200 dispatchers know this language, but their ability not go beyond that of aviation phraseology for radio-exchange. Now they need to reach the level of a professional linguist. However, it will be difficult for many of them to learn a foreign language, because their average age is 48 years.
So far the question of when the problems with Russian airports will be solved remained unanswered, especially taking the economic crisis into consideration. The data of how dilapidated they are made the basis for the Transport Ministry of Russia to work out and accept the Concept for the Development of Aircraft Station (Airport) Network of the Russian Federation to 2020. Following this Concept, a national basic aircraft station network will be created. It will consist of 117 aircraft stations, and international hubs will form its basis. It is necessary to note that, for the last 15 years, the network of civil aircraft stations have shrunk almost by half in Russia, and now it totals 351. The network (which, according to the some, is currently being expanded up to 170 airports by 2020) will be federal property; all other airports will be transferred to the regional authority. Such state control could promote the situation quite well, when foreign companies’ planes can use Russian resources.
Due to its historic background, Moscow has all the pre-conditions to become the pioneer of “hub-building”. Apart from Moscow, Krasnoyarsk should also become one of the first Russian hubs, because it is located on the shortest route from North America to India. Experts are already predicting that the following features of the Russian market could make creation of the hubs complicated. First of all, there is unequal passenger traffic in different areas. About 70% of the aviation transport market is currently connected to the Moscow aviation junction, where three large airport complexes are working in conditions of rigid competition for attracting business. Actually, according to Russian legislation, there should not be any competition because, in fact, all airports belong to natural monopolies (their activity is regulated by the federal law “About Natural Monopolies”). The reality is different. Moscow airports are locked in a competitive struggle for clients.
The regions also have their own peculiarities. The status of natural monopoly is held not just by the airport but the air carrier too, because during privatisation some of the airports merged with airlines. As a result, other air carriers have been pushed away from the market, or have been compelled to carry out their activity in obviously unprofitable conditions. According to official statistics, just five years ago there were about 20 such airport-airlines. Foreign airlines can fully and freely operate only when the proper (from the point of view of the Europeans) economic conditions are available at all airports in Russia.
Alexey Strigin [~DETAIL_TEXT] =>

NEW DEVELOPMENTS NEEDED

In 2006, the nine largest European airlines – among them British Airways, Lufthansa and SAS – demanded the European Commission be harder with Moscow in negotiating the collection of royalties – charges for using Russian airspace for non-stop flights between Europe and Asia. Today Russia has remained the only country in the world which demands payment for using its airspace by foreign carriers. Foreign airlines pay Russia a total of $ 400 million to $ 450 million annually, which compels them to add charges to their passengers. Thus travelling from Europe to China through Russian airspace costs an extra $ 150 to each passenger.
The story with Russian royalties started in 1971, when planes could not yet make non-stop flights between Europe and Asia and, consequently, they were compelled to land at Moscow airports. Russia started charging additional money from foreigners, explaining it by the inconvenience created for domestic flights. But it continued when there was no more landing in Moscow. The Russian side feels that royalty payments are voluntary, since airlines can lay their routes bypassing Russian territory, an unacceptable proposition to foreigners because they are saving up to four hours flight-time and fuel which costs more than $ 10,000 per journey.
As market participants say, Moscow is “taking revenge” on Europe for imposing noise restrictions, which caused most Russian-made planes to be banned from working on European lines. However, it is most likely that the unwillingness of Russia to cancel its royalty charges is explained by purely economic reasons. It is interesting that China does not take money for air, although, just like Russia, it has not signed the international transit agreement. Europe does not charge for air either, in spite of the fact that Russian planes use its airspace.

Consistency in Russian style

Quite a lot of time has passed since 2006, but these negotiations are still far from the closing stages. In 2005 German Gref, who was the Minister for Economic Development and Trade of Russia at that time, promised to abolish the royalties in 2014. Independent onlookers say that if this question is not solved in the near future, the EU could close the door for Russia to enter the WTO for a long time. But by the end of 2006, Igor Levitin, Transport Minister of the Russian Federation, made clear that Russia was not hurrying to the WTO, and that the charges would remain after 2014.
It is interesting that, alongside the EU, Sweden is also holding negotiations on the cancellation of royalties and liberalisation of the transit flights market, which is another headache for the airlines of Russia. If these negotiations are successful, Kallax Airport will start working in the country’s north, which was constructed especially to serve trans-Siberian flights. More than $ 20 million was invested in this airport in the mid-90s after Russian officials gave oral assurances that royalties would be soon cancelled and a large number of foreign airlines would be allowed to make flights. But now this airport is waiting for its time without much success.
Last year Sergey Chemezov, General Director of Rostechnologii State Corporation, and Yury Luzhkov, Mayor of Moscow, declared a requirement to cancel the royalties. The explanation was that Aeroflot was the company which received the royalty, thus putting itself in an exclusive position compared with other companies. The unofficial information is that Aeroflot awards itself a quarter to a third of the total amount, and the rest is transferred to the Ministry of Transport, Rosaviatsia and other state organisations which are responsible for the development of Russian civil aviation.
It is interesting that Aeroflot considers it incorrect to call this money a “royalty” because they are not a payment for using the airspace in Russia, or any certain route in it. Legally, it is a question of indemnification for the benefits missed by Aeroflot, because foreign companies carry out non-stop flights via the same routes where it flies but with landing in Moscow. Such a treatment of the situation is fixed in commercial contracts which Aeroflot has with each interested airline.
As regards the benefit of Aeroflot, this year it became publicly known that, without a royalty, this airline would have been unprofitable for the past six years. Nevertheless, when the new General Director of Aeroflot arrived in August 2009, it appeared that the refusal of this payment was among the main tasks on his list.

Bad games lead to bad landing

Even experts cannot guess how this situation is going to develop. However it is now clear that Russia does not like it very much when its transport interests are hurt. The conflict between the Ministry of Transport of the Russian Federation and the German airline Lufthansa became a good example. In 2007, there was information that Moscow had temporarily forbidden Lufthansa Cargo to fly over Russia, which cost the latter about $ 400,000 per week. Observers of that conflict said that it happened because Lufthansa Cargo had used the airport of Astana in Kazakhstan as its base. Only after it promised to change to Russian airports in Novosibirsk or Krasnoyarsk were the flights renewed but only for a while. Also, the airports in those Siberian cities did not match the technical requirements of the German air company, whose strict flight safety standards are well-known. However, the Russian side has confirmed the seriousness of its decisions by claiming tax from the company, thus this story of intimidation let foreign airlines know precisely whom they were dealing with.
The essence of the conflict between foreign companies and Russia lies in this story. Besides royalties, there is another reason why foreign planes fly over the Russian territory as fast as possible. It is the condition of its airports, which resemble the condition of the whole Russian aviation sector. Official figures show that, from 1992 to 2006, the number of aircraft stations in Russia was reduced by two-thirds, and deterioration of runways reached 80%. It can only spark caution from western companies. Flight safety experts note that most emergencies are connected specifically to airport infrastructure.
It is interesting that the figure of 80% has come into being after the Prosecutor General’s Office of the Russian Federation inspected the country’s airports. The very first check finished with a scandal. It appeared that Magas airport in Ingushetia was working without the necessary licences. It has not been certificated till now, which is an abuse of the Air Code of Russia and means that nobody has allowed it either to accept planes or to send them. Besides, it appeared that this airport does not consider and does not investigate each incident involving civil planes. As was discovered, the certificate, which is to allow the airport to carry out its activity, has to be issued by the Interstate Aviation Committee. Instead of that, a conclusion of local territorial management of civil aircraft was used at Magas airport, and nobody paid attention to the absence of the official certificate for a long time.
Fortunately, this situation is not typical for Russian airports in large cities, but it shows the essence of the problem.
Another peculiarity of Russian airports is different runway coverings. It can be pebble, concrete or asphalt plates. Such coverings do not only affect the chassis of the plane, but also their engine, which is sometimes too low to the ground and therefore sucks up pieces of broken asphalt, concrete or rubble. In such cases, as Russian pilots say, foreign planes are less protected in comparison with the ancient Russian-built planes.
Nevertheless, owners of the airports blame all their problems on a lack of financing. Reconstruction works are linked to budgetary funds, because runways at Russian airports are federal property. But airports are lacking money, especially in the crisis year.

Will hubs save Russia?

The next problem, which is the Scylla and Charybdis of Russian airports, is the training of personnel, primarily dispatchers. Since March 5th, 2008, an additional requirement of the International Civil Aviation Organisation (ICAO) has come into force in the country. It requires that each dispatcher has to have a fluent command of English. Today 4,200 dispatchers know this language, but their ability not go beyond that of aviation phraseology for radio-exchange. Now they need to reach the level of a professional linguist. However, it will be difficult for many of them to learn a foreign language, because their average age is 48 years.
So far the question of when the problems with Russian airports will be solved remained unanswered, especially taking the economic crisis into consideration. The data of how dilapidated they are made the basis for the Transport Ministry of Russia to work out and accept the Concept for the Development of Aircraft Station (Airport) Network of the Russian Federation to 2020. Following this Concept, a national basic aircraft station network will be created. It will consist of 117 aircraft stations, and international hubs will form its basis. It is necessary to note that, for the last 15 years, the network of civil aircraft stations have shrunk almost by half in Russia, and now it totals 351. The network (which, according to the some, is currently being expanded up to 170 airports by 2020) will be federal property; all other airports will be transferred to the regional authority. Such state control could promote the situation quite well, when foreign companies’ planes can use Russian resources.
Due to its historic background, Moscow has all the pre-conditions to become the pioneer of “hub-building”. Apart from Moscow, Krasnoyarsk should also become one of the first Russian hubs, because it is located on the shortest route from North America to India. Experts are already predicting that the following features of the Russian market could make creation of the hubs complicated. First of all, there is unequal passenger traffic in different areas. About 70% of the aviation transport market is currently connected to the Moscow aviation junction, where three large airport complexes are working in conditions of rigid competition for attracting business. Actually, according to Russian legislation, there should not be any competition because, in fact, all airports belong to natural monopolies (their activity is regulated by the federal law “About Natural Monopolies”). The reality is different. Moscow airports are locked in a competitive struggle for clients.
The regions also have their own peculiarities. The status of natural monopoly is held not just by the airport but the air carrier too, because during privatisation some of the airports merged with airlines. As a result, other air carriers have been pushed away from the market, or have been compelled to carry out their activity in obviously unprofitable conditions. According to official statistics, just five years ago there were about 20 such airport-airlines. Foreign airlines can fully and freely operate only when the proper (from the point of view of the Europeans) economic conditions are available at all airports in Russia.
Alexey Strigin [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports.
However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [~PREVIEW_TEXT] =>  Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports.
However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. 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height="232" align="left" />Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports. <br />However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [ELEMENT_META_TITLE] => Sellers of Air [ELEMENT_META_KEYWORDS] => sellers of air [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/4/23.jpg" border="1" alt=" " hspace="5" width="300" height="232" align="left" />Nobody envies the life of foreign airlines in Russia. In fact, they do not have any reasons to develop business in this country. There are not only the most expensive in the world kerosene, old aviaports and ancient runways here, but also high royalties for using the country’s airspace. Those players, for whom it is absolutely necessary to land in Moscow, prefer private, rather than state, airports. <br />However, in its turn, Moscow is finding own arguments to justify its way of conduct, though the final result is still the same - Russia is closed for foreign air carriers. [SECTION_PICTURE_FILE_ALT] => Sellers of Air [SECTION_PICTURE_FILE_TITLE] => Sellers of Air [SECTION_DETAIL_PICTURE_FILE_ALT] => Sellers of Air [SECTION_DETAIL_PICTURE_FILE_TITLE] => Sellers of Air [ELEMENT_PREVIEW_PICTURE_FILE_ALT] => Sellers of Air [ELEMENT_PREVIEW_PICTURE_FILE_TITLE] => Sellers of Air [ELEMENT_DETAIL_PICTURE_FILE_ALT] => Sellers of Air [ELEMENT_DETAIL_PICTURE_FILE_TITLE] => Sellers of Air ) )
РЖД-Партнер

Coercive Restructuring

The debate over the imposition of exclusive rates for transportation of perishable goods in refrigerated containers is still active in Russia. Operators hope to get a 13% discount for container transportations. Experts note that the new tariff will change the structure of the rolling stock in the segment of refrigerated cargo transportation on the RZD network.
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Russia has got Two Problems

Let us recall that in mid-August the representatives of Agentstvo Refperevozki requested the Federal Tariff Service to set the exclusive rates for transportation of perishable goods in refrigerated containers. The reason for this was quite simple. Everyone knows that no one produces new wagon-sets, while the old ones are written off every year. “As a result, our company decided to change the rolling stock and focus mainly on the large-capacity refrigerated container transportations. After all, the Tariff Regulation № 10-01 sets the price for large-capacity refrigerator container transportations with self-contained power supply, i.e. when each container is equipped with GenSet, using a decreasing coefficient,” — said Vitaly Momot, CEO of the Alliance Vostok-Zapad, which is a part of the Agentstvo Refperevozki Holding. The other market participants also admit that there is a tendency to abandon transportation in refrigerated wagons in favor of containers within the industry.
There are a number of reasons why containers are preferred. Firstly, it is due to the average age of the wagons being used, which exceeds 20 years in Russia. Nearly 1000 units of rolling stock are written off every year. At the same time nobody produces refrigerated and isothermal wagons anymore. This rolling stock had been originally supplied by Dessau Plant in Germany and by Bryansk Engineering Plant in Russia until they both stopped doing it more than 20 years ago.
Secondly, the price for a refrigerated container is a lot lower than the price for a refrigerated wagon, which is USD 35-40,000 against USD 130-170,000 respectively.

Let the Tariff be Equalised

In order to make transportation in reefers more profitable, the company had to ask Federal Tariff Service to equalize tariffs. The fact is that two years ago Refservice was granted the exclusive rates for transportation in refrigerated wagon-sets. And thus all other kinds of rolling stock, such as large-capacity refrigerated containers, thermos containers, and isothermal wagons became more expensive considering transportation of one kilo of cargo.
Association of Refrigerated Rolling Stock Operators (ARRSO) has calculated that the delivery of one ton of cargo in a 40-foot container, for example, from Silikatnaya Moscow station to Ugolnaya station in the Far East, which is considered as one of the most profitable directions, costs about 3578.45 rubles while it is only 3114.30 rubles if a refrigerated wagon is used.
Refservice agrees that the industry needs restructuring of the rolling stock used for transportation of perishing goods. “It is impossible to renew the specialized fleet of refrigerated wagon-sets as well as to create a new generation of isothermal wagons without a state target program,” — agrees Oleg Bogomolov, Deputy General Director of Refservice. In addition, containers show better figures in terms of empty mileage. “Although the wagon-sets operate on the circular routes, their empty mileage is relatively high. Containers, on the contrary, can be used for almost all types of cargo on their way back,” — explains the Refservice representative.
However, market participants say that companies can face certain problems in case they use refrigerated containers. “While the use of refrigerated containers is very promising in general, it is virtually impossible to use them outside the Transsib due to lack of the appropriate infrastructure,” — stresses the representative of Tekhnosnab.

Manless Technology is a Key

Refservice, which has radically settled the problem of costs reduction, suggests using self-contained diesel generator sets (SDGS) an alternative for both containers and refrigerated wagon-sets.
As it was mentioned earlier, last year the company suffered the 800 million rubles loss as a result of the transportations in the refrigerated wagon-sets, which constitute 20% of the company’s fleet, primarily in the form of salaries and social package for mechanics, servicing these wagon-sets. As Nikolay Averkov, CEO of Refservice, says, these losses were previously compensated by the revenues from the transportations in the thermos wagons, which were rather profitable, but this year the total traffic has declined and profitability has dropped to zero. Having counted up the losses, the company’s management decided to cut the expenditures by applying so-called manless technology. Together with Russkaya containernaya verf the company designed SDGS, which are connected to the refrigerating system inside the wagon and replace five mechanics.
According to Mr Averkov, it saves up to 40% of the cost of the maintenance operations.
SDGS can be installed in containers, service diesel wagons and self-contained refrigerated wagon-sets.
“The system is controlled by satellite equipment; it generates electricity and keeps the right temperature inside the wagon. This is our know-how, which has already been patented,”- explains the General Director of Refservice. Furthermore, the reefer containers with SDGS can significantly enlarge the range of options for logistics services allowing smaller consignments transportation. The company, which has a fleet of such containers, may offer, in collaboration with road carriers, a “door-to-door” delivery and thus attract new clientele and increase the surplus value.
Refservice plans to put into operation 60 containers, equipped with these diesel sets, during the following year, and bring their number to thousands in the next few years.
Maria Shevchenko [~DETAIL_TEXT] =>

Russia has got Two Problems

Let us recall that in mid-August the representatives of Agentstvo Refperevozki requested the Federal Tariff Service to set the exclusive rates for transportation of perishable goods in refrigerated containers. The reason for this was quite simple. Everyone knows that no one produces new wagon-sets, while the old ones are written off every year. “As a result, our company decided to change the rolling stock and focus mainly on the large-capacity refrigerated container transportations. After all, the Tariff Regulation № 10-01 sets the price for large-capacity refrigerator container transportations with self-contained power supply, i.e. when each container is equipped with GenSet, using a decreasing coefficient,” — said Vitaly Momot, CEO of the Alliance Vostok-Zapad, which is a part of the Agentstvo Refperevozki Holding. The other market participants also admit that there is a tendency to abandon transportation in refrigerated wagons in favor of containers within the industry.
There are a number of reasons why containers are preferred. Firstly, it is due to the average age of the wagons being used, which exceeds 20 years in Russia. Nearly 1000 units of rolling stock are written off every year. At the same time nobody produces refrigerated and isothermal wagons anymore. This rolling stock had been originally supplied by Dessau Plant in Germany and by Bryansk Engineering Plant in Russia until they both stopped doing it more than 20 years ago.
Secondly, the price for a refrigerated container is a lot lower than the price for a refrigerated wagon, which is USD 35-40,000 against USD 130-170,000 respectively.

Let the Tariff be Equalised

In order to make transportation in reefers more profitable, the company had to ask Federal Tariff Service to equalize tariffs. The fact is that two years ago Refservice was granted the exclusive rates for transportation in refrigerated wagon-sets. And thus all other kinds of rolling stock, such as large-capacity refrigerated containers, thermos containers, and isothermal wagons became more expensive considering transportation of one kilo of cargo.
Association of Refrigerated Rolling Stock Operators (ARRSO) has calculated that the delivery of one ton of cargo in a 40-foot container, for example, from Silikatnaya Moscow station to Ugolnaya station in the Far East, which is considered as one of the most profitable directions, costs about 3578.45 rubles while it is only 3114.30 rubles if a refrigerated wagon is used.
Refservice agrees that the industry needs restructuring of the rolling stock used for transportation of perishing goods. “It is impossible to renew the specialized fleet of refrigerated wagon-sets as well as to create a new generation of isothermal wagons without a state target program,” — agrees Oleg Bogomolov, Deputy General Director of Refservice. In addition, containers show better figures in terms of empty mileage. “Although the wagon-sets operate on the circular routes, their empty mileage is relatively high. Containers, on the contrary, can be used for almost all types of cargo on their way back,” — explains the Refservice representative.
However, market participants say that companies can face certain problems in case they use refrigerated containers. “While the use of refrigerated containers is very promising in general, it is virtually impossible to use them outside the Transsib due to lack of the appropriate infrastructure,” — stresses the representative of Tekhnosnab.

Manless Technology is a Key

Refservice, which has radically settled the problem of costs reduction, suggests using self-contained diesel generator sets (SDGS) an alternative for both containers and refrigerated wagon-sets.
As it was mentioned earlier, last year the company suffered the 800 million rubles loss as a result of the transportations in the refrigerated wagon-sets, which constitute 20% of the company’s fleet, primarily in the form of salaries and social package for mechanics, servicing these wagon-sets. As Nikolay Averkov, CEO of Refservice, says, these losses were previously compensated by the revenues from the transportations in the thermos wagons, which were rather profitable, but this year the total traffic has declined and profitability has dropped to zero. Having counted up the losses, the company’s management decided to cut the expenditures by applying so-called manless technology. Together with Russkaya containernaya verf the company designed SDGS, which are connected to the refrigerating system inside the wagon and replace five mechanics.
According to Mr Averkov, it saves up to 40% of the cost of the maintenance operations.
SDGS can be installed in containers, service diesel wagons and self-contained refrigerated wagon-sets.
“The system is controlled by satellite equipment; it generates electricity and keeps the right temperature inside the wagon. This is our know-how, which has already been patented,”- explains the General Director of Refservice. Furthermore, the reefer containers with SDGS can significantly enlarge the range of options for logistics services allowing smaller consignments transportation. The company, which has a fleet of such containers, may offer, in collaboration with road carriers, a “door-to-door” delivery and thus attract new clientele and increase the surplus value.
Refservice plans to put into operation 60 containers, equipped with these diesel sets, during the following year, and bring their number to thousands in the next few years.
Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The debate over the imposition of exclusive rates for transportation of perishable goods in refrigerated containers is still active in Russia. Operators hope to get a 13% discount for container transportations. Experts note that the new tariff will change the structure of the rolling stock in the segment of refrigerated cargo transportation on the RZD network. [~PREVIEW_TEXT] => The debate over the imposition of exclusive rates for transportation of perishable goods in refrigerated containers is still active in Russia. Operators hope to get a 13% discount for container transportations. Experts note that the new tariff will change the structure of the rolling stock in the segment of refrigerated cargo transportation on the RZD network. 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    [DETAIL_TEXT] => 

Russia has got Two Problems

Let us recall that in mid-August the representatives of Agentstvo Refperevozki requested the Federal Tariff Service to set the exclusive rates for transportation of perishable goods in refrigerated containers. The reason for this was quite simple. Everyone knows that no one produces new wagon-sets, while the old ones are written off every year. “As a result, our company decided to change the rolling stock and focus mainly on the large-capacity refrigerated container transportations. After all, the Tariff Regulation № 10-01 sets the price for large-capacity refrigerator container transportations with self-contained power supply, i.e. when each container is equipped with GenSet, using a decreasing coefficient,” — said Vitaly Momot, CEO of the Alliance Vostok-Zapad, which is a part of the Agentstvo Refperevozki Holding. The other market participants also admit that there is a tendency to abandon transportation in refrigerated wagons in favor of containers within the industry.
There are a number of reasons why containers are preferred. Firstly, it is due to the average age of the wagons being used, which exceeds 20 years in Russia. Nearly 1000 units of rolling stock are written off every year. At the same time nobody produces refrigerated and isothermal wagons anymore. This rolling stock had been originally supplied by Dessau Plant in Germany and by Bryansk Engineering Plant in Russia until they both stopped doing it more than 20 years ago.
Secondly, the price for a refrigerated container is a lot lower than the price for a refrigerated wagon, which is USD 35-40,000 against USD 130-170,000 respectively.

Let the Tariff be Equalised

In order to make transportation in reefers more profitable, the company had to ask Federal Tariff Service to equalize tariffs. The fact is that two years ago Refservice was granted the exclusive rates for transportation in refrigerated wagon-sets. And thus all other kinds of rolling stock, such as large-capacity refrigerated containers, thermos containers, and isothermal wagons became more expensive considering transportation of one kilo of cargo.
Association of Refrigerated Rolling Stock Operators (ARRSO) has calculated that the delivery of one ton of cargo in a 40-foot container, for example, from Silikatnaya Moscow station to Ugolnaya station in the Far East, which is considered as one of the most profitable directions, costs about 3578.45 rubles while it is only 3114.30 rubles if a refrigerated wagon is used.
Refservice agrees that the industry needs restructuring of the rolling stock used for transportation of perishing goods. “It is impossible to renew the specialized fleet of refrigerated wagon-sets as well as to create a new generation of isothermal wagons without a state target program,” — agrees Oleg Bogomolov, Deputy General Director of Refservice. In addition, containers show better figures in terms of empty mileage. “Although the wagon-sets operate on the circular routes, their empty mileage is relatively high. Containers, on the contrary, can be used for almost all types of cargo on their way back,” — explains the Refservice representative.
However, market participants say that companies can face certain problems in case they use refrigerated containers. “While the use of refrigerated containers is very promising in general, it is virtually impossible to use them outside the Transsib due to lack of the appropriate infrastructure,” — stresses the representative of Tekhnosnab.

Manless Technology is a Key

Refservice, which has radically settled the problem of costs reduction, suggests using self-contained diesel generator sets (SDGS) an alternative for both containers and refrigerated wagon-sets.
As it was mentioned earlier, last year the company suffered the 800 million rubles loss as a result of the transportations in the refrigerated wagon-sets, which constitute 20% of the company’s fleet, primarily in the form of salaries and social package for mechanics, servicing these wagon-sets. As Nikolay Averkov, CEO of Refservice, says, these losses were previously compensated by the revenues from the transportations in the thermos wagons, which were rather profitable, but this year the total traffic has declined and profitability has dropped to zero. Having counted up the losses, the company’s management decided to cut the expenditures by applying so-called manless technology. Together with Russkaya containernaya verf the company designed SDGS, which are connected to the refrigerating system inside the wagon and replace five mechanics.
According to Mr Averkov, it saves up to 40% of the cost of the maintenance operations.
SDGS can be installed in containers, service diesel wagons and self-contained refrigerated wagon-sets.
“The system is controlled by satellite equipment; it generates electricity and keeps the right temperature inside the wagon. This is our know-how, which has already been patented,”- explains the General Director of Refservice. Furthermore, the reefer containers with SDGS can significantly enlarge the range of options for logistics services allowing smaller consignments transportation. The company, which has a fleet of such containers, may offer, in collaboration with road carriers, a “door-to-door” delivery and thus attract new clientele and increase the surplus value.
Refservice plans to put into operation 60 containers, equipped with these diesel sets, during the following year, and bring their number to thousands in the next few years.
Maria Shevchenko [~DETAIL_TEXT] =>

Russia has got Two Problems

Let us recall that in mid-August the representatives of Agentstvo Refperevozki requested the Federal Tariff Service to set the exclusive rates for transportation of perishable goods in refrigerated containers. The reason for this was quite simple. Everyone knows that no one produces new wagon-sets, while the old ones are written off every year. “As a result, our company decided to change the rolling stock and focus mainly on the large-capacity refrigerated container transportations. After all, the Tariff Regulation № 10-01 sets the price for large-capacity refrigerator container transportations with self-contained power supply, i.e. when each container is equipped with GenSet, using a decreasing coefficient,” — said Vitaly Momot, CEO of the Alliance Vostok-Zapad, which is a part of the Agentstvo Refperevozki Holding. The other market participants also admit that there is a tendency to abandon transportation in refrigerated wagons in favor of containers within the industry.
There are a number of reasons why containers are preferred. Firstly, it is due to the average age of the wagons being used, which exceeds 20 years in Russia. Nearly 1000 units of rolling stock are written off every year. At the same time nobody produces refrigerated and isothermal wagons anymore. This rolling stock had been originally supplied by Dessau Plant in Germany and by Bryansk Engineering Plant in Russia until they both stopped doing it more than 20 years ago.
Secondly, the price for a refrigerated container is a lot lower than the price for a refrigerated wagon, which is USD 35-40,000 against USD 130-170,000 respectively.

Let the Tariff be Equalised

In order to make transportation in reefers more profitable, the company had to ask Federal Tariff Service to equalize tariffs. The fact is that two years ago Refservice was granted the exclusive rates for transportation in refrigerated wagon-sets. And thus all other kinds of rolling stock, such as large-capacity refrigerated containers, thermos containers, and isothermal wagons became more expensive considering transportation of one kilo of cargo.
Association of Refrigerated Rolling Stock Operators (ARRSO) has calculated that the delivery of one ton of cargo in a 40-foot container, for example, from Silikatnaya Moscow station to Ugolnaya station in the Far East, which is considered as one of the most profitable directions, costs about 3578.45 rubles while it is only 3114.30 rubles if a refrigerated wagon is used.
Refservice agrees that the industry needs restructuring of the rolling stock used for transportation of perishing goods. “It is impossible to renew the specialized fleet of refrigerated wagon-sets as well as to create a new generation of isothermal wagons without a state target program,” — agrees Oleg Bogomolov, Deputy General Director of Refservice. In addition, containers show better figures in terms of empty mileage. “Although the wagon-sets operate on the circular routes, their empty mileage is relatively high. Containers, on the contrary, can be used for almost all types of cargo on their way back,” — explains the Refservice representative.
However, market participants say that companies can face certain problems in case they use refrigerated containers. “While the use of refrigerated containers is very promising in general, it is virtually impossible to use them outside the Transsib due to lack of the appropriate infrastructure,” — stresses the representative of Tekhnosnab.

Manless Technology is a Key

Refservice, which has radically settled the problem of costs reduction, suggests using self-contained diesel generator sets (SDGS) an alternative for both containers and refrigerated wagon-sets.
As it was mentioned earlier, last year the company suffered the 800 million rubles loss as a result of the transportations in the refrigerated wagon-sets, which constitute 20% of the company’s fleet, primarily in the form of salaries and social package for mechanics, servicing these wagon-sets. As Nikolay Averkov, CEO of Refservice, says, these losses were previously compensated by the revenues from the transportations in the thermos wagons, which were rather profitable, but this year the total traffic has declined and profitability has dropped to zero. Having counted up the losses, the company’s management decided to cut the expenditures by applying so-called manless technology. Together with Russkaya containernaya verf the company designed SDGS, which are connected to the refrigerating system inside the wagon and replace five mechanics.
According to Mr Averkov, it saves up to 40% of the cost of the maintenance operations.
SDGS can be installed in containers, service diesel wagons and self-contained refrigerated wagon-sets.
“The system is controlled by satellite equipment; it generates electricity and keeps the right temperature inside the wagon. This is our know-how, which has already been patented,”- explains the General Director of Refservice. Furthermore, the reefer containers with SDGS can significantly enlarge the range of options for logistics services allowing smaller consignments transportation. The company, which has a fleet of such containers, may offer, in collaboration with road carriers, a “door-to-door” delivery and thus attract new clientele and increase the surplus value.
Refservice plans to put into operation 60 containers, equipped with these diesel sets, during the following year, and bring their number to thousands in the next few years.
Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The debate over the imposition of exclusive rates for transportation of perishable goods in refrigerated containers is still active in Russia. Operators hope to get a 13% discount for container transportations. Experts note that the new tariff will change the structure of the rolling stock in the segment of refrigerated cargo transportation on the RZD network. [~PREVIEW_TEXT] => The debate over the imposition of exclusive rates for transportation of perishable goods in refrigerated containers is still active in Russia. Operators hope to get a 13% discount for container transportations. Experts note that the new tariff will change the structure of the rolling stock in the segment of refrigerated cargo transportation on the RZD network. 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