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    [DETAIL_TEXT] => On September 6, the Board of OAO RZD approved the investment programme for 2006-2008, said Galina Kraft, a vice-president of the company.

Investment will make RUR158 billion in 2006, RUR175 billion in 2007, and RUR198 billion in 2008. Earlier the company's investment programme envisaged investment of RUR175 billion in 2006, RUR202 billion in 2007, and RUR232 billion in 2008.

OAO RZD plans to reduce the investment in 2006, based on the real needs of the company. In 2006-2008, the volume of the investment programme will exceed RUR530 bln.

"75% of the funds (over RUR400 bln) is to be invested into the infrastructure development and renewal, while 18.5% will be spent on purchasing and modernization of the rolling-stock", said G.Kraft. According to her, the company has defined three basic directions of infrastructure development: Kuzbass - ports of North-West, Kuzbass - Far East and Kuzbass - Azov-Black sea transport junction. OAO RZD forecasts that over 60% of the freight flow will be transported along these routes.

The vice-president stressed that, by 2008, on the route Kuzbass-Far East, the throughput will increase by 20% comparing to 2004, while on the Azov route it will grow twice.

She also said that in 2006 the company will spend 18% of the investment on purchasing rolling-stock. In particular, about RUR20 billion will be spent on the purchase of passenger wagons and freight gondola cars under leasing schemes. 

According to Galina Kraft, in the framework of the investment programme, over RUR8.4 bln will be spent on modernizing the basic funds of the company's affiliates and subsidiaries.

Galina Kraft underlined that the realization of the programme will provide an 18% transportation growth.



OAO RZD Will Enter Energy SupplyMarket

It was reported by Andrey Semechkin, a vice-president of OAO RZD, at the III International Symposium "Eltrans-2005", heldin St.-Petersburg.

"Nowadays we are developing an automatic system of power consumption calculation, so that we could in the near future forecast the volumes of electric energy necessary for our company, and have an opportunity to purchase and sell energy surplus on the energy supply wholesale market, like RAO "UES of Russia" does", he said.



Azov Wagons for Iran

Azovmash OJSC, the Iranian Railways and private transport companies signed an agreement on a large-scale programme of long-term cooperation, envisaging a delivery of numerous freight wagons of different types to the Republic of Iran.

The contracts were signed, and today gondola cars are being produced at the enterprise. The first lot of 100 gondola cars with solid car body has been already dispatched to the customer. Now the pre-production model of a flat-car is being tested. Delivery of other freight wagon models to Iran is envisaged. The wagons are produced at the enterprise, or they will be produced in accordance with the technical requirements of the Iranian rail companies. 

The Iranian side has cooperated with Azovmash for 10 years, purchasing oil-petrol tank-wagons.

The Azovmash marketing services work actively to increase wagon deliveries to the Asian market.



OAO RZD and Deutsche Bahn AG Sign Cooperation Agreement

In the course of the 5th Conference of Directors General of European railways in St.-Petersburg, Vladimir Yakunin, the President of Russian Railways, and Hartmud Medorn, the Chairman of the Administration of Deutsche Bahn AG, signed an agreement on cooperation aimed at foundation and operation of representative agencies of the two companies in Moscow and Berlin.

According to the agreement, the agencies are to be non-profit organizations. The parties have set the following key tasks for the agencies: to promote the increase of railway freight and passenger traffic between Russia and Germany, as well as in International connections with third countries; to prepare proposals on the improvement of international freight and passenger traffic, as well as of the quality of services provided by the parties; to help reach mutual decisions on issues concerned with freight and passenger traffic; to support and develop business relations between central authorities of Russian Railways and DB AG; to market services provided by the parties on Russian-German direct railway connection.

The agreement is signed for three years as of the effective date.



Evergreen Opens Agency in Russia

The Evergreen Group has commenced operations at its newly established liner agency company, Global Marine Russia Limited (GMR), in Russia.

Headquartered in St Petersburg, it also has a branch office in Moscow and will be opening further offices in Russia in due course. As the company statement reads, the registration of GMR was officially approved on September 1, 2005. GMR, which will represent the interests of Evergreen Marine Corporation, Hatsu Marine Ltd and Lloyd Triestino SpA, is a joint venture between the Evergreen Group and the Russian company, Overseas Cargo International. Previously, the three lines were represented by Overseas Cargo International as sub-agents of Evergreen's Finnish agent, Oy Loadmasters Ltd.



Intergate Ag: Operations in q1-q3

During the nine months of 2005 Intergate AG specialized in rail transportation of export, import and transit carried 12.22 million tones of cargo.

In the period of January-September of 2005 the company transported 4.87 million tons of metal, 1.13 million tons of raw iron ore, 234 thousand tons of coke, 167 thousand tons of agricultural products and 154 thousand tons of chemical products. Within the nine months of 2005 Intergate AG delivered 3.46 million tons of fertilizers and 762 thousand tons of oil and products, which is 5.8% and 4.2% up year-on-year respectively.



Shares of St.-Petersburg commercial Sea Port Sold

Novolipetsk Metallurgical Plant bought the state's 48.8% stake in St.-Petersburg Commercial Sea Port at a Moscow auction on November 10, which gives it full control of the port operator.

Novolipetsk-affiliated Chupit Limited secured the stake for the starting price of RUR802.5 mln (USD28 mln), unchallenged by two other auction participants connected to Novolipetsk.

Novolipetsk-linked Jysk Staalindustri, registered in Denmark, already owns the other 51.2% in St.-Petersburg Commercial Sea Port.

Analysts said, the purchase would cut Novolipetsk's freight bill by adding the port company to its other logistics operations. St.-Petersburg Commercial Sea Port owns 19% stakes in four stevedoring companies operating in the port, as well as leasing rights to roughly one-quarter of the 160 terminals located in the city's entire port.

"Companies working with raw materials are seeking to integrate ports into their supply chain", said Natalia Odintsova, director of financial consulting at BDO Unikon. "Effective delivering, loading and unloading, and logistics allow companies to save on costs and time for exports", she said. 

A shipping expert said that Novolipetsk, the country's third-largest steelmaker, overpaid considerably for the assets.



Samsung to Build Ice-Breaker OilTankers for Sovcomflot

Samsung Heavy Industries has received an order to build three ice-breaking oil tankers worth a total of USD430 mln from Sovcomflot, a Russian state-owned company. The price quoted for the ice-breaking tankers exceeds the one for ordinary oil tankers threefold. This order is the first ever for ice-breaking vessels with a Korean shipbuilder.

The 7,000 dwt. tankers will be the only vessels that can break ice from both the front and rear when isolated in frozen conditions. When completed in 2007, the tankers will transport crude oil from oilfields in the Northern Arctic regions of Russia to the port of Murmansk in the Barents Sea. 

With the high international oil prices, Russia has been developing oil fields in the Arctic area, and international shipbuilders expect Russia to order at least 20 more ice-breaking oil tankers by 2015. 

"By developing an ice-breaking liquefied natural gas carrier, we could aggressively expand our share of the tanker market", said Kim Jing-Wan, CEO at Samsung Heavy Industries. 

Sovcomflot is Russia's largest shipping company judged by tanker capacity, and it will use the ice-breaking tankers to transport crude oil from the Varandei oil port in the Barents Sea for a joint venture set up by LUKoil and ConocoPhillips. Sovcomflot owns 47 vessels and plans to increase shipments from Russia's ice-affected regions by as much as 30%.



Unique Cranes for Kazakhstan

Ukrainian mechanics are to deliver a series of unique grab cranes to Kazakhstan.

The first of these cranes has already been created at the Novokramatorsky Machine-Building Works (NKMZ) in the Donetsk region and sent to the Sokolovsko-Sarbaisky Mining Works.

"The grab cranes of a new technical level have a higher carrying capacity", said the CEO of NKMZ Viktor Pankov. "The crane can carry up to 10 tons of furnace charge at a time. Its control system was produced by "Siemens"; besides, the crane can be put into operation very soon".

Nowadays, four slab cranes with carrying capacity of 64 tons are prepared for delivery to the Alchevsk Metallurgical Works; two more of such cranes will be delivered to Mariupol.

This year NKMZ will fulfill orders of its partners from 50 countries. The Novokramatorsky Machine-Building Works will produce cranes, coal-plough machines, metallurgical, energy, transport and other equipment of the total cost of USD200 mln.



Locomotives Will Be Produced in Kazakhstan

General Electric Company offered the Government of Kazakhstan to launch an enterprise engaged in locomotive assembling in the Republic.

General Electric offered to develop a new investment project to organize locomotive assembling in Kazakhstan. The Republic's Prime Minister Danial Akhmetov approved the offer and charged Kazakhstan Temir Zholi (Kazakh Railway) with creating a working group to discuss the project and to submit it to the Government in the second half of December for further discussion.

    [~DETAIL_TEXT] => On September 6, the Board of OAO RZD approved the investment programme for 2006-2008, said Galina Kraft, a vice-president of the company.

Investment will make RUR158 billion in 2006, RUR175 billion in 2007, and RUR198 billion in 2008. Earlier the company's investment programme envisaged investment of RUR175 billion in 2006, RUR202 billion in 2007, and RUR232 billion in 2008.

OAO RZD plans to reduce the investment in 2006, based on the real needs of the company. In 2006-2008, the volume of the investment programme will exceed RUR530 bln.

"75% of the funds (over RUR400 bln) is to be invested into the infrastructure development and renewal, while 18.5% will be spent on purchasing and modernization of the rolling-stock", said G.Kraft. According to her, the company has defined three basic directions of infrastructure development: Kuzbass - ports of North-West, Kuzbass - Far East and Kuzbass - Azov-Black sea transport junction. OAO RZD forecasts that over 60% of the freight flow will be transported along these routes.

The vice-president stressed that, by 2008, on the route Kuzbass-Far East, the throughput will increase by 20% comparing to 2004, while on the Azov route it will grow twice.

She also said that in 2006 the company will spend 18% of the investment on purchasing rolling-stock. In particular, about RUR20 billion will be spent on the purchase of passenger wagons and freight gondola cars under leasing schemes. 

According to Galina Kraft, in the framework of the investment programme, over RUR8.4 bln will be spent on modernizing the basic funds of the company's affiliates and subsidiaries.

Galina Kraft underlined that the realization of the programme will provide an 18% transportation growth.



OAO RZD Will Enter Energy SupplyMarket

It was reported by Andrey Semechkin, a vice-president of OAO RZD, at the III International Symposium "Eltrans-2005", heldin St.-Petersburg.

"Nowadays we are developing an automatic system of power consumption calculation, so that we could in the near future forecast the volumes of electric energy necessary for our company, and have an opportunity to purchase and sell energy surplus on the energy supply wholesale market, like RAO "UES of Russia" does", he said.



Azov Wagons for Iran

Azovmash OJSC, the Iranian Railways and private transport companies signed an agreement on a large-scale programme of long-term cooperation, envisaging a delivery of numerous freight wagons of different types to the Republic of Iran.

The contracts were signed, and today gondola cars are being produced at the enterprise. The first lot of 100 gondola cars with solid car body has been already dispatched to the customer. Now the pre-production model of a flat-car is being tested. Delivery of other freight wagon models to Iran is envisaged. The wagons are produced at the enterprise, or they will be produced in accordance with the technical requirements of the Iranian rail companies. 

The Iranian side has cooperated with Azovmash for 10 years, purchasing oil-petrol tank-wagons.

The Azovmash marketing services work actively to increase wagon deliveries to the Asian market.



OAO RZD and Deutsche Bahn AG Sign Cooperation Agreement

In the course of the 5th Conference of Directors General of European railways in St.-Petersburg, Vladimir Yakunin, the President of Russian Railways, and Hartmud Medorn, the Chairman of the Administration of Deutsche Bahn AG, signed an agreement on cooperation aimed at foundation and operation of representative agencies of the two companies in Moscow and Berlin.

According to the agreement, the agencies are to be non-profit organizations. The parties have set the following key tasks for the agencies: to promote the increase of railway freight and passenger traffic between Russia and Germany, as well as in International connections with third countries; to prepare proposals on the improvement of international freight and passenger traffic, as well as of the quality of services provided by the parties; to help reach mutual decisions on issues concerned with freight and passenger traffic; to support and develop business relations between central authorities of Russian Railways and DB AG; to market services provided by the parties on Russian-German direct railway connection.

The agreement is signed for three years as of the effective date.



Evergreen Opens Agency in Russia

The Evergreen Group has commenced operations at its newly established liner agency company, Global Marine Russia Limited (GMR), in Russia.

Headquartered in St Petersburg, it also has a branch office in Moscow and will be opening further offices in Russia in due course. As the company statement reads, the registration of GMR was officially approved on September 1, 2005. GMR, which will represent the interests of Evergreen Marine Corporation, Hatsu Marine Ltd and Lloyd Triestino SpA, is a joint venture between the Evergreen Group and the Russian company, Overseas Cargo International. Previously, the three lines were represented by Overseas Cargo International as sub-agents of Evergreen's Finnish agent, Oy Loadmasters Ltd.



Intergate Ag: Operations in q1-q3

During the nine months of 2005 Intergate AG specialized in rail transportation of export, import and transit carried 12.22 million tones of cargo.

In the period of January-September of 2005 the company transported 4.87 million tons of metal, 1.13 million tons of raw iron ore, 234 thousand tons of coke, 167 thousand tons of agricultural products and 154 thousand tons of chemical products. Within the nine months of 2005 Intergate AG delivered 3.46 million tons of fertilizers and 762 thousand tons of oil and products, which is 5.8% and 4.2% up year-on-year respectively.



Shares of St.-Petersburg commercial Sea Port Sold

Novolipetsk Metallurgical Plant bought the state's 48.8% stake in St.-Petersburg Commercial Sea Port at a Moscow auction on November 10, which gives it full control of the port operator.

Novolipetsk-affiliated Chupit Limited secured the stake for the starting price of RUR802.5 mln (USD28 mln), unchallenged by two other auction participants connected to Novolipetsk.

Novolipetsk-linked Jysk Staalindustri, registered in Denmark, already owns the other 51.2% in St.-Petersburg Commercial Sea Port.

Analysts said, the purchase would cut Novolipetsk's freight bill by adding the port company to its other logistics operations. St.-Petersburg Commercial Sea Port owns 19% stakes in four stevedoring companies operating in the port, as well as leasing rights to roughly one-quarter of the 160 terminals located in the city's entire port.

"Companies working with raw materials are seeking to integrate ports into their supply chain", said Natalia Odintsova, director of financial consulting at BDO Unikon. "Effective delivering, loading and unloading, and logistics allow companies to save on costs and time for exports", she said. 

A shipping expert said that Novolipetsk, the country's third-largest steelmaker, overpaid considerably for the assets.



Samsung to Build Ice-Breaker OilTankers for Sovcomflot

Samsung Heavy Industries has received an order to build three ice-breaking oil tankers worth a total of USD430 mln from Sovcomflot, a Russian state-owned company. The price quoted for the ice-breaking tankers exceeds the one for ordinary oil tankers threefold. This order is the first ever for ice-breaking vessels with a Korean shipbuilder.

The 7,000 dwt. tankers will be the only vessels that can break ice from both the front and rear when isolated in frozen conditions. When completed in 2007, the tankers will transport crude oil from oilfields in the Northern Arctic regions of Russia to the port of Murmansk in the Barents Sea. 

With the high international oil prices, Russia has been developing oil fields in the Arctic area, and international shipbuilders expect Russia to order at least 20 more ice-breaking oil tankers by 2015. 

"By developing an ice-breaking liquefied natural gas carrier, we could aggressively expand our share of the tanker market", said Kim Jing-Wan, CEO at Samsung Heavy Industries. 

Sovcomflot is Russia's largest shipping company judged by tanker capacity, and it will use the ice-breaking tankers to transport crude oil from the Varandei oil port in the Barents Sea for a joint venture set up by LUKoil and ConocoPhillips. Sovcomflot owns 47 vessels and plans to increase shipments from Russia's ice-affected regions by as much as 30%.



Unique Cranes for Kazakhstan

Ukrainian mechanics are to deliver a series of unique grab cranes to Kazakhstan.

The first of these cranes has already been created at the Novokramatorsky Machine-Building Works (NKMZ) in the Donetsk region and sent to the Sokolovsko-Sarbaisky Mining Works.

"The grab cranes of a new technical level have a higher carrying capacity", said the CEO of NKMZ Viktor Pankov. "The crane can carry up to 10 tons of furnace charge at a time. Its control system was produced by "Siemens"; besides, the crane can be put into operation very soon".

Nowadays, four slab cranes with carrying capacity of 64 tons are prepared for delivery to the Alchevsk Metallurgical Works; two more of such cranes will be delivered to Mariupol.

This year NKMZ will fulfill orders of its partners from 50 countries. The Novokramatorsky Machine-Building Works will produce cranes, coal-plough machines, metallurgical, energy, transport and other equipment of the total cost of USD200 mln.



Locomotives Will Be Produced in Kazakhstan

General Electric Company offered the Government of Kazakhstan to launch an enterprise engaged in locomotive assembling in the Republic.

General Electric offered to develop a new investment project to organize locomotive assembling in Kazakhstan. The Republic's Prime Minister Danial Akhmetov approved the offer and charged Kazakhstan Temir Zholi (Kazakh Railway) with creating a working group to discuss the project and to submit it to the Government in the second half of December for further discussion.

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    [DETAIL_TEXT] => On September 6, the Board of OAO RZD approved the investment programme for 2006-2008, said Galina Kraft, a vice-president of the company.

Investment will make RUR158 billion in 2006, RUR175 billion in 2007, and RUR198 billion in 2008. Earlier the company's investment programme envisaged investment of RUR175 billion in 2006, RUR202 billion in 2007, and RUR232 billion in 2008.

OAO RZD plans to reduce the investment in 2006, based on the real needs of the company. In 2006-2008, the volume of the investment programme will exceed RUR530 bln.

"75% of the funds (over RUR400 bln) is to be invested into the infrastructure development and renewal, while 18.5% will be spent on purchasing and modernization of the rolling-stock", said G.Kraft. According to her, the company has defined three basic directions of infrastructure development: Kuzbass - ports of North-West, Kuzbass - Far East and Kuzbass - Azov-Black sea transport junction. OAO RZD forecasts that over 60% of the freight flow will be transported along these routes.

The vice-president stressed that, by 2008, on the route Kuzbass-Far East, the throughput will increase by 20% comparing to 2004, while on the Azov route it will grow twice.

She also said that in 2006 the company will spend 18% of the investment on purchasing rolling-stock. In particular, about RUR20 billion will be spent on the purchase of passenger wagons and freight gondola cars under leasing schemes. 

According to Galina Kraft, in the framework of the investment programme, over RUR8.4 bln will be spent on modernizing the basic funds of the company's affiliates and subsidiaries.

Galina Kraft underlined that the realization of the programme will provide an 18% transportation growth.



OAO RZD Will Enter Energy SupplyMarket

It was reported by Andrey Semechkin, a vice-president of OAO RZD, at the III International Symposium "Eltrans-2005", heldin St.-Petersburg.

"Nowadays we are developing an automatic system of power consumption calculation, so that we could in the near future forecast the volumes of electric energy necessary for our company, and have an opportunity to purchase and sell energy surplus on the energy supply wholesale market, like RAO "UES of Russia" does", he said.



Azov Wagons for Iran

Azovmash OJSC, the Iranian Railways and private transport companies signed an agreement on a large-scale programme of long-term cooperation, envisaging a delivery of numerous freight wagons of different types to the Republic of Iran.

The contracts were signed, and today gondola cars are being produced at the enterprise. The first lot of 100 gondola cars with solid car body has been already dispatched to the customer. Now the pre-production model of a flat-car is being tested. Delivery of other freight wagon models to Iran is envisaged. The wagons are produced at the enterprise, or they will be produced in accordance with the technical requirements of the Iranian rail companies. 

The Iranian side has cooperated with Azovmash for 10 years, purchasing oil-petrol tank-wagons.

The Azovmash marketing services work actively to increase wagon deliveries to the Asian market.



OAO RZD and Deutsche Bahn AG Sign Cooperation Agreement

In the course of the 5th Conference of Directors General of European railways in St.-Petersburg, Vladimir Yakunin, the President of Russian Railways, and Hartmud Medorn, the Chairman of the Administration of Deutsche Bahn AG, signed an agreement on cooperation aimed at foundation and operation of representative agencies of the two companies in Moscow and Berlin.

According to the agreement, the agencies are to be non-profit organizations. The parties have set the following key tasks for the agencies: to promote the increase of railway freight and passenger traffic between Russia and Germany, as well as in International connections with third countries; to prepare proposals on the improvement of international freight and passenger traffic, as well as of the quality of services provided by the parties; to help reach mutual decisions on issues concerned with freight and passenger traffic; to support and develop business relations between central authorities of Russian Railways and DB AG; to market services provided by the parties on Russian-German direct railway connection.

The agreement is signed for three years as of the effective date.



Evergreen Opens Agency in Russia

The Evergreen Group has commenced operations at its newly established liner agency company, Global Marine Russia Limited (GMR), in Russia.

Headquartered in St Petersburg, it also has a branch office in Moscow and will be opening further offices in Russia in due course. As the company statement reads, the registration of GMR was officially approved on September 1, 2005. GMR, which will represent the interests of Evergreen Marine Corporation, Hatsu Marine Ltd and Lloyd Triestino SpA, is a joint venture between the Evergreen Group and the Russian company, Overseas Cargo International. Previously, the three lines were represented by Overseas Cargo International as sub-agents of Evergreen's Finnish agent, Oy Loadmasters Ltd.



Intergate Ag: Operations in q1-q3

During the nine months of 2005 Intergate AG specialized in rail transportation of export, import and transit carried 12.22 million tones of cargo.

In the period of January-September of 2005 the company transported 4.87 million tons of metal, 1.13 million tons of raw iron ore, 234 thousand tons of coke, 167 thousand tons of agricultural products and 154 thousand tons of chemical products. Within the nine months of 2005 Intergate AG delivered 3.46 million tons of fertilizers and 762 thousand tons of oil and products, which is 5.8% and 4.2% up year-on-year respectively.



Shares of St.-Petersburg commercial Sea Port Sold

Novolipetsk Metallurgical Plant bought the state's 48.8% stake in St.-Petersburg Commercial Sea Port at a Moscow auction on November 10, which gives it full control of the port operator.

Novolipetsk-affiliated Chupit Limited secured the stake for the starting price of RUR802.5 mln (USD28 mln), unchallenged by two other auction participants connected to Novolipetsk.

Novolipetsk-linked Jysk Staalindustri, registered in Denmark, already owns the other 51.2% in St.-Petersburg Commercial Sea Port.

Analysts said, the purchase would cut Novolipetsk's freight bill by adding the port company to its other logistics operations. St.-Petersburg Commercial Sea Port owns 19% stakes in four stevedoring companies operating in the port, as well as leasing rights to roughly one-quarter of the 160 terminals located in the city's entire port.

"Companies working with raw materials are seeking to integrate ports into their supply chain", said Natalia Odintsova, director of financial consulting at BDO Unikon. "Effective delivering, loading and unloading, and logistics allow companies to save on costs and time for exports", she said. 

A shipping expert said that Novolipetsk, the country's third-largest steelmaker, overpaid considerably for the assets.



Samsung to Build Ice-Breaker OilTankers for Sovcomflot

Samsung Heavy Industries has received an order to build three ice-breaking oil tankers worth a total of USD430 mln from Sovcomflot, a Russian state-owned company. The price quoted for the ice-breaking tankers exceeds the one for ordinary oil tankers threefold. This order is the first ever for ice-breaking vessels with a Korean shipbuilder.

The 7,000 dwt. tankers will be the only vessels that can break ice from both the front and rear when isolated in frozen conditions. When completed in 2007, the tankers will transport crude oil from oilfields in the Northern Arctic regions of Russia to the port of Murmansk in the Barents Sea. 

With the high international oil prices, Russia has been developing oil fields in the Arctic area, and international shipbuilders expect Russia to order at least 20 more ice-breaking oil tankers by 2015. 

"By developing an ice-breaking liquefied natural gas carrier, we could aggressively expand our share of the tanker market", said Kim Jing-Wan, CEO at Samsung Heavy Industries. 

Sovcomflot is Russia's largest shipping company judged by tanker capacity, and it will use the ice-breaking tankers to transport crude oil from the Varandei oil port in the Barents Sea for a joint venture set up by LUKoil and ConocoPhillips. Sovcomflot owns 47 vessels and plans to increase shipments from Russia's ice-affected regions by as much as 30%.



Unique Cranes for Kazakhstan

Ukrainian mechanics are to deliver a series of unique grab cranes to Kazakhstan.

The first of these cranes has already been created at the Novokramatorsky Machine-Building Works (NKMZ) in the Donetsk region and sent to the Sokolovsko-Sarbaisky Mining Works.

"The grab cranes of a new technical level have a higher carrying capacity", said the CEO of NKMZ Viktor Pankov. "The crane can carry up to 10 tons of furnace charge at a time. Its control system was produced by "Siemens"; besides, the crane can be put into operation very soon".

Nowadays, four slab cranes with carrying capacity of 64 tons are prepared for delivery to the Alchevsk Metallurgical Works; two more of such cranes will be delivered to Mariupol.

This year NKMZ will fulfill orders of its partners from 50 countries. The Novokramatorsky Machine-Building Works will produce cranes, coal-plough machines, metallurgical, energy, transport and other equipment of the total cost of USD200 mln.



Locomotives Will Be Produced in Kazakhstan

General Electric Company offered the Government of Kazakhstan to launch an enterprise engaged in locomotive assembling in the Republic.

General Electric offered to develop a new investment project to organize locomotive assembling in Kazakhstan. The Republic's Prime Minister Danial Akhmetov approved the offer and charged Kazakhstan Temir Zholi (Kazakh Railway) with creating a working group to discuss the project and to submit it to the Government in the second half of December for further discussion.

    [~DETAIL_TEXT] => On September 6, the Board of OAO RZD approved the investment programme for 2006-2008, said Galina Kraft, a vice-president of the company.

Investment will make RUR158 billion in 2006, RUR175 billion in 2007, and RUR198 billion in 2008. Earlier the company's investment programme envisaged investment of RUR175 billion in 2006, RUR202 billion in 2007, and RUR232 billion in 2008.

OAO RZD plans to reduce the investment in 2006, based on the real needs of the company. In 2006-2008, the volume of the investment programme will exceed RUR530 bln.

"75% of the funds (over RUR400 bln) is to be invested into the infrastructure development and renewal, while 18.5% will be spent on purchasing and modernization of the rolling-stock", said G.Kraft. According to her, the company has defined three basic directions of infrastructure development: Kuzbass - ports of North-West, Kuzbass - Far East and Kuzbass - Azov-Black sea transport junction. OAO RZD forecasts that over 60% of the freight flow will be transported along these routes.

The vice-president stressed that, by 2008, on the route Kuzbass-Far East, the throughput will increase by 20% comparing to 2004, while on the Azov route it will grow twice.

She also said that in 2006 the company will spend 18% of the investment on purchasing rolling-stock. In particular, about RUR20 billion will be spent on the purchase of passenger wagons and freight gondola cars under leasing schemes. 

According to Galina Kraft, in the framework of the investment programme, over RUR8.4 bln will be spent on modernizing the basic funds of the company's affiliates and subsidiaries.

Galina Kraft underlined that the realization of the programme will provide an 18% transportation growth.



OAO RZD Will Enter Energy SupplyMarket

It was reported by Andrey Semechkin, a vice-president of OAO RZD, at the III International Symposium "Eltrans-2005", heldin St.-Petersburg.

"Nowadays we are developing an automatic system of power consumption calculation, so that we could in the near future forecast the volumes of electric energy necessary for our company, and have an opportunity to purchase and sell energy surplus on the energy supply wholesale market, like RAO "UES of Russia" does", he said.



Azov Wagons for Iran

Azovmash OJSC, the Iranian Railways and private transport companies signed an agreement on a large-scale programme of long-term cooperation, envisaging a delivery of numerous freight wagons of different types to the Republic of Iran.

The contracts were signed, and today gondola cars are being produced at the enterprise. The first lot of 100 gondola cars with solid car body has been already dispatched to the customer. Now the pre-production model of a flat-car is being tested. Delivery of other freight wagon models to Iran is envisaged. The wagons are produced at the enterprise, or they will be produced in accordance with the technical requirements of the Iranian rail companies. 

The Iranian side has cooperated with Azovmash for 10 years, purchasing oil-petrol tank-wagons.

The Azovmash marketing services work actively to increase wagon deliveries to the Asian market.



OAO RZD and Deutsche Bahn AG Sign Cooperation Agreement

In the course of the 5th Conference of Directors General of European railways in St.-Petersburg, Vladimir Yakunin, the President of Russian Railways, and Hartmud Medorn, the Chairman of the Administration of Deutsche Bahn AG, signed an agreement on cooperation aimed at foundation and operation of representative agencies of the two companies in Moscow and Berlin.

According to the agreement, the agencies are to be non-profit organizations. The parties have set the following key tasks for the agencies: to promote the increase of railway freight and passenger traffic between Russia and Germany, as well as in International connections with third countries; to prepare proposals on the improvement of international freight and passenger traffic, as well as of the quality of services provided by the parties; to help reach mutual decisions on issues concerned with freight and passenger traffic; to support and develop business relations between central authorities of Russian Railways and DB AG; to market services provided by the parties on Russian-German direct railway connection.

The agreement is signed for three years as of the effective date.



Evergreen Opens Agency in Russia

The Evergreen Group has commenced operations at its newly established liner agency company, Global Marine Russia Limited (GMR), in Russia.

Headquartered in St Petersburg, it also has a branch office in Moscow and will be opening further offices in Russia in due course. As the company statement reads, the registration of GMR was officially approved on September 1, 2005. GMR, which will represent the interests of Evergreen Marine Corporation, Hatsu Marine Ltd and Lloyd Triestino SpA, is a joint venture between the Evergreen Group and the Russian company, Overseas Cargo International. Previously, the three lines were represented by Overseas Cargo International as sub-agents of Evergreen's Finnish agent, Oy Loadmasters Ltd.



Intergate Ag: Operations in q1-q3

During the nine months of 2005 Intergate AG specialized in rail transportation of export, import and transit carried 12.22 million tones of cargo.

In the period of January-September of 2005 the company transported 4.87 million tons of metal, 1.13 million tons of raw iron ore, 234 thousand tons of coke, 167 thousand tons of agricultural products and 154 thousand tons of chemical products. Within the nine months of 2005 Intergate AG delivered 3.46 million tons of fertilizers and 762 thousand tons of oil and products, which is 5.8% and 4.2% up year-on-year respectively.



Shares of St.-Petersburg commercial Sea Port Sold

Novolipetsk Metallurgical Plant bought the state's 48.8% stake in St.-Petersburg Commercial Sea Port at a Moscow auction on November 10, which gives it full control of the port operator.

Novolipetsk-affiliated Chupit Limited secured the stake for the starting price of RUR802.5 mln (USD28 mln), unchallenged by two other auction participants connected to Novolipetsk.

Novolipetsk-linked Jysk Staalindustri, registered in Denmark, already owns the other 51.2% in St.-Petersburg Commercial Sea Port.

Analysts said, the purchase would cut Novolipetsk's freight bill by adding the port company to its other logistics operations. St.-Petersburg Commercial Sea Port owns 19% stakes in four stevedoring companies operating in the port, as well as leasing rights to roughly one-quarter of the 160 terminals located in the city's entire port.

"Companies working with raw materials are seeking to integrate ports into their supply chain", said Natalia Odintsova, director of financial consulting at BDO Unikon. "Effective delivering, loading and unloading, and logistics allow companies to save on costs and time for exports", she said. 

A shipping expert said that Novolipetsk, the country's third-largest steelmaker, overpaid considerably for the assets.



Samsung to Build Ice-Breaker OilTankers for Sovcomflot

Samsung Heavy Industries has received an order to build three ice-breaking oil tankers worth a total of USD430 mln from Sovcomflot, a Russian state-owned company. The price quoted for the ice-breaking tankers exceeds the one for ordinary oil tankers threefold. This order is the first ever for ice-breaking vessels with a Korean shipbuilder.

The 7,000 dwt. tankers will be the only vessels that can break ice from both the front and rear when isolated in frozen conditions. When completed in 2007, the tankers will transport crude oil from oilfields in the Northern Arctic regions of Russia to the port of Murmansk in the Barents Sea. 

With the high international oil prices, Russia has been developing oil fields in the Arctic area, and international shipbuilders expect Russia to order at least 20 more ice-breaking oil tankers by 2015. 

"By developing an ice-breaking liquefied natural gas carrier, we could aggressively expand our share of the tanker market", said Kim Jing-Wan, CEO at Samsung Heavy Industries. 

Sovcomflot is Russia's largest shipping company judged by tanker capacity, and it will use the ice-breaking tankers to transport crude oil from the Varandei oil port in the Barents Sea for a joint venture set up by LUKoil and ConocoPhillips. Sovcomflot owns 47 vessels and plans to increase shipments from Russia's ice-affected regions by as much as 30%.



Unique Cranes for Kazakhstan

Ukrainian mechanics are to deliver a series of unique grab cranes to Kazakhstan.

The first of these cranes has already been created at the Novokramatorsky Machine-Building Works (NKMZ) in the Donetsk region and sent to the Sokolovsko-Sarbaisky Mining Works.

"The grab cranes of a new technical level have a higher carrying capacity", said the CEO of NKMZ Viktor Pankov. "The crane can carry up to 10 tons of furnace charge at a time. Its control system was produced by "Siemens"; besides, the crane can be put into operation very soon".

Nowadays, four slab cranes with carrying capacity of 64 tons are prepared for delivery to the Alchevsk Metallurgical Works; two more of such cranes will be delivered to Mariupol.

This year NKMZ will fulfill orders of its partners from 50 countries. The Novokramatorsky Machine-Building Works will produce cranes, coal-plough machines, metallurgical, energy, transport and other equipment of the total cost of USD200 mln.



Locomotives Will Be Produced in Kazakhstan

General Electric Company offered the Government of Kazakhstan to launch an enterprise engaged in locomotive assembling in the Republic.

General Electric offered to develop a new investment project to organize locomotive assembling in Kazakhstan. The Republic's Prime Minister Danial Akhmetov approved the offer and charged Kazakhstan Temir Zholi (Kazakh Railway) with creating a working group to discuss the project and to submit it to the Government in the second half of December for further discussion.

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    [DETAIL_TEXT] => Nowadays the total transport fleet of Russian truck haulers working in the sphere of international container transportation consists of 22 thousand vehicles; in the nearest future it will keep growing. Straight deliveries to and from Europe, Asian countries, the Middle East and the Caucasus, as well as participation in multimodal transport chains, where trucks are used to carry the containers to the specific points, are the main fields of Russian road transport application for container transportation. The reasons for this division are, to a great extent, the road transport operating rules accepted on the territories of EU countries, which maintain quite strict requirements regarding car engines' environmental safety, and the fact that these days Russian trucks are considerably low competitive as compared with the European ones. Thus, straight deliveries between the countries are performed mainly by foreign trucks, while container terminals are served by the Russian ones, as long as there are no obligatory environmental safety requirements in Russia. 

Extending the fleet of modern and efficient trucks, including those for container transportation, is the task of the utmost importance facing Russian truck haulers. The Russian Association of International Automobile Carriers (AIAC) regularly holds negotiations with the biggest truck producers considering the lease of trucks.

A specifically Russian characteristic is the generally low domestic containerized cargo flows. Therefore, all the efforts and interests of Russian truck haulers are focused mainly on foreign trade, which, in its turn, is closely connected with the functioning of ports.

"Our company cooperates on a long-term basis with all container lines calling at Saint-Petersburg regularly, as well as with all big freight terminals of the port - "First Container Terminal", "Severnaya Verf" ("Northern Shipyard"), "Petrolesport", "First Stevedoring Company", and "Second Stevedoring Company", says the chief executive officer of "BaltImpEx" Dmitry Krasilnikov.

At the same time, in the specialists' unanimous opinion, container import growth rate takes the lead over export rate. This creates a disbalance in quantity proportions of commodity turnover and nomenclature of the containers used. Thus, for instance, in accordance with the statistics, 65% of cargoes being imported through the ports of the Far East and carried to the railway stations of Moscow junction, are transported in 20-feet containers; and the rest 35% in 40-feet ones. However, in the opposite direction, the transportation share of the 20-feet containers increases up to 91%. On the whole, this forms a negative tendency, when the terminals and container areas turn into places for keeping empty containers, but not cargoes.

At the same time, the problems of terminal infrastructure in the container transportation sector give a great advantage to the truck owners in comparison with their traditional rival - railway, as long as they, in contrast, do not demand forming a huge consignment and are able to gurantee a high-level "door-to-door" delivery.

Very often road transport's superiority is also determined by a more flexible price policy. While the railway transportation costs are dictated to all the private transport operators and to the main Russian railway carrier OAO RZD by the Federal Tariff Service subordinated to the government, the truck transportation costs are restricted only by the possibilities of the road transport companies. 

Incidentally, it is worth saying that the above mentioned companies compete quite intensively with each other. The exclusive privilege of big companies is the developed high-level service and with its quality guaranteed, while small companies focus above all on price policy, which often has a dumping nature.



What prevents us from moving ahead?

Successful rivalry with railway pushes road transport into those areas of transport business which some years ago seemed to be monopolized by the first competitor. Discussions about the enormous potential of road transport to participate fully in the prospective container cargo flows distribution in Asia-Europe direction are carried on more and more often among professionals. Road transport is also very significant in the case of re-launching the international corridor North-South.

In fact, the potential and scale parameters of road transport possible development are great. It must be said that containers are the cargo flows which truck haulers can confidently rely on even today. It is worth taking into consideration that railways, often losing the competition with road transport, carry only what "is left by truck haulers" due to the simple shortage of trucks. 

At the same time, it is admitted in Russia that, for a further development of container truck haulage, it is necessary not only to increase the rolling-stock fleet, but also to regulate fuel prices and improve road infrastructure, especially in the Eastern part of the country which is acquiring greater significance in the state economy. In particular, the chief executive officer of the terminal "Vostochny International Container Services" (VICS) Vsevolod Goryainov pays attention to that, "We carry cargoes along the roads, but, due to the insufficient development of road infrastructure, the volume of the transported cargoes is not as big as we would like it to be". 

So, we have no choice but to hope that sooner or later the state will notice the "money" which is underfoot in the form of container truck haulage, and that it will draw useful conclusions regarding the state truck industry, as well the state of the Russian roads.



GERMAN NUTELS
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Extending the fleet of modern and efficient trucks, including those for container transportation, is the task of the utmost importance facing Russian truck haulers. The Russian Association of International Automobile Carriers (AIAC) regularly holds negotiations with the biggest truck producers considering the lease of trucks.

A specifically Russian characteristic is the generally low domestic containerized cargo flows. Therefore, all the efforts and interests of Russian truck haulers are focused mainly on foreign trade, which, in its turn, is closely connected with the functioning of ports.

"Our company cooperates on a long-term basis with all container lines calling at Saint-Petersburg regularly, as well as with all big freight terminals of the port - "First Container Terminal", "Severnaya Verf" ("Northern Shipyard"), "Petrolesport", "First Stevedoring Company", and "Second Stevedoring Company", says the chief executive officer of "BaltImpEx" Dmitry Krasilnikov.

At the same time, in the specialists' unanimous opinion, container import growth rate takes the lead over export rate. This creates a disbalance in quantity proportions of commodity turnover and nomenclature of the containers used. Thus, for instance, in accordance with the statistics, 65% of cargoes being imported through the ports of the Far East and carried to the railway stations of Moscow junction, are transported in 20-feet containers; and the rest 35% in 40-feet ones. However, in the opposite direction, the transportation share of the 20-feet containers increases up to 91%. On the whole, this forms a negative tendency, when the terminals and container areas turn into places for keeping empty containers, but not cargoes.

At the same time, the problems of terminal infrastructure in the container transportation sector give a great advantage to the truck owners in comparison with their traditional rival - railway, as long as they, in contrast, do not demand forming a huge consignment and are able to gurantee a high-level "door-to-door" delivery.

Very often road transport's superiority is also determined by a more flexible price policy. While the railway transportation costs are dictated to all the private transport operators and to the main Russian railway carrier OAO RZD by the Federal Tariff Service subordinated to the government, the truck transportation costs are restricted only by the possibilities of the road transport companies. 

Incidentally, it is worth saying that the above mentioned companies compete quite intensively with each other. The exclusive privilege of big companies is the developed high-level service and with its quality guaranteed, while small companies focus above all on price policy, which often has a dumping nature.



What prevents us from moving ahead?

Successful rivalry with railway pushes road transport into those areas of transport business which some years ago seemed to be monopolized by the first competitor. Discussions about the enormous potential of road transport to participate fully in the prospective container cargo flows distribution in Asia-Europe direction are carried on more and more often among professionals. Road transport is also very significant in the case of re-launching the international corridor North-South.

In fact, the potential and scale parameters of road transport possible development are great. It must be said that containers are the cargo flows which truck haulers can confidently rely on even today. It is worth taking into consideration that railways, often losing the competition with road transport, carry only what "is left by truck haulers" due to the simple shortage of trucks. 

At the same time, it is admitted in Russia that, for a further development of container truck haulage, it is necessary not only to increase the rolling-stock fleet, but also to regulate fuel prices and improve road infrastructure, especially in the Eastern part of the country which is acquiring greater significance in the state economy. In particular, the chief executive officer of the terminal "Vostochny International Container Services" (VICS) Vsevolod Goryainov pays attention to that, "We carry cargoes along the roads, but, due to the insufficient development of road infrastructure, the volume of the transported cargoes is not as big as we would like it to be". 

So, we have no choice but to hope that sooner or later the state will notice the "money" which is underfoot in the form of container truck haulage, and that it will draw useful conclusions regarding the state truck industry, as well the state of the Russian roads.



GERMAN NUTELS
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Extending the fleet of modern and efficient trucks, including those for container transportation, is the task of the utmost importance facing Russian truck haulers. The Russian Association of International Automobile Carriers (AIAC) regularly holds negotiations with the biggest truck producers considering the lease of trucks.

A specifically Russian characteristic is the generally low domestic containerized cargo flows. Therefore, all the efforts and interests of Russian truck haulers are focused mainly on foreign trade, which, in its turn, is closely connected with the functioning of ports.

"Our company cooperates on a long-term basis with all container lines calling at Saint-Petersburg regularly, as well as with all big freight terminals of the port - "First Container Terminal", "Severnaya Verf" ("Northern Shipyard"), "Petrolesport", "First Stevedoring Company", and "Second Stevedoring Company", says the chief executive officer of "BaltImpEx" Dmitry Krasilnikov.

At the same time, in the specialists' unanimous opinion, container import growth rate takes the lead over export rate. This creates a disbalance in quantity proportions of commodity turnover and nomenclature of the containers used. Thus, for instance, in accordance with the statistics, 65% of cargoes being imported through the ports of the Far East and carried to the railway stations of Moscow junction, are transported in 20-feet containers; and the rest 35% in 40-feet ones. However, in the opposite direction, the transportation share of the 20-feet containers increases up to 91%. On the whole, this forms a negative tendency, when the terminals and container areas turn into places for keeping empty containers, but not cargoes.

At the same time, the problems of terminal infrastructure in the container transportation sector give a great advantage to the truck owners in comparison with their traditional rival - railway, as long as they, in contrast, do not demand forming a huge consignment and are able to gurantee a high-level "door-to-door" delivery.

Very often road transport's superiority is also determined by a more flexible price policy. While the railway transportation costs are dictated to all the private transport operators and to the main Russian railway carrier OAO RZD by the Federal Tariff Service subordinated to the government, the truck transportation costs are restricted only by the possibilities of the road transport companies. 

Incidentally, it is worth saying that the above mentioned companies compete quite intensively with each other. The exclusive privilege of big companies is the developed high-level service and with its quality guaranteed, while small companies focus above all on price policy, which often has a dumping nature.



What prevents us from moving ahead?

Successful rivalry with railway pushes road transport into those areas of transport business which some years ago seemed to be monopolized by the first competitor. Discussions about the enormous potential of road transport to participate fully in the prospective container cargo flows distribution in Asia-Europe direction are carried on more and more often among professionals. Road transport is also very significant in the case of re-launching the international corridor North-South.

In fact, the potential and scale parameters of road transport possible development are great. It must be said that containers are the cargo flows which truck haulers can confidently rely on even today. It is worth taking into consideration that railways, often losing the competition with road transport, carry only what "is left by truck haulers" due to the simple shortage of trucks. 

At the same time, it is admitted in Russia that, for a further development of container truck haulage, it is necessary not only to increase the rolling-stock fleet, but also to regulate fuel prices and improve road infrastructure, especially in the Eastern part of the country which is acquiring greater significance in the state economy. In particular, the chief executive officer of the terminal "Vostochny International Container Services" (VICS) Vsevolod Goryainov pays attention to that, "We carry cargoes along the roads, but, due to the insufficient development of road infrastructure, the volume of the transported cargoes is not as big as we would like it to be". 

So, we have no choice but to hope that sooner or later the state will notice the "money" which is underfoot in the form of container truck haulage, and that it will draw useful conclusions regarding the state truck industry, as well the state of the Russian roads.



GERMAN NUTELS
    [~DETAIL_TEXT] => Nowadays the total transport fleet of Russian truck haulers working in the sphere of international container transportation consists of 22 thousand vehicles; in the nearest future it will keep growing. Straight deliveries to and from Europe, Asian countries, the Middle East and the Caucasus, as well as participation in multimodal transport chains, where trucks are used to carry the containers to the specific points, are the main fields of Russian road transport application for container transportation. The reasons for this division are, to a great extent, the road transport operating rules accepted on the territories of EU countries, which maintain quite strict requirements regarding car engines' environmental safety, and the fact that these days Russian trucks are considerably low competitive as compared with the European ones. Thus, straight deliveries between the countries are performed mainly by foreign trucks, while container terminals are served by the Russian ones, as long as there are no obligatory environmental safety requirements in Russia. 

Extending the fleet of modern and efficient trucks, including those for container transportation, is the task of the utmost importance facing Russian truck haulers. The Russian Association of International Automobile Carriers (AIAC) regularly holds negotiations with the biggest truck producers considering the lease of trucks.

A specifically Russian characteristic is the generally low domestic containerized cargo flows. Therefore, all the efforts and interests of Russian truck haulers are focused mainly on foreign trade, which, in its turn, is closely connected with the functioning of ports.

"Our company cooperates on a long-term basis with all container lines calling at Saint-Petersburg regularly, as well as with all big freight terminals of the port - "First Container Terminal", "Severnaya Verf" ("Northern Shipyard"), "Petrolesport", "First Stevedoring Company", and "Second Stevedoring Company", says the chief executive officer of "BaltImpEx" Dmitry Krasilnikov.

At the same time, in the specialists' unanimous opinion, container import growth rate takes the lead over export rate. This creates a disbalance in quantity proportions of commodity turnover and nomenclature of the containers used. Thus, for instance, in accordance with the statistics, 65% of cargoes being imported through the ports of the Far East and carried to the railway stations of Moscow junction, are transported in 20-feet containers; and the rest 35% in 40-feet ones. However, in the opposite direction, the transportation share of the 20-feet containers increases up to 91%. On the whole, this forms a negative tendency, when the terminals and container areas turn into places for keeping empty containers, but not cargoes.

At the same time, the problems of terminal infrastructure in the container transportation sector give a great advantage to the truck owners in comparison with their traditional rival - railway, as long as they, in contrast, do not demand forming a huge consignment and are able to gurantee a high-level "door-to-door" delivery.

Very often road transport's superiority is also determined by a more flexible price policy. While the railway transportation costs are dictated to all the private transport operators and to the main Russian railway carrier OAO RZD by the Federal Tariff Service subordinated to the government, the truck transportation costs are restricted only by the possibilities of the road transport companies. 

Incidentally, it is worth saying that the above mentioned companies compete quite intensively with each other. The exclusive privilege of big companies is the developed high-level service and with its quality guaranteed, while small companies focus above all on price policy, which often has a dumping nature.



What prevents us from moving ahead?

Successful rivalry with railway pushes road transport into those areas of transport business which some years ago seemed to be monopolized by the first competitor. Discussions about the enormous potential of road transport to participate fully in the prospective container cargo flows distribution in Asia-Europe direction are carried on more and more often among professionals. Road transport is also very significant in the case of re-launching the international corridor North-South.

In fact, the potential and scale parameters of road transport possible development are great. It must be said that containers are the cargo flows which truck haulers can confidently rely on even today. It is worth taking into consideration that railways, often losing the competition with road transport, carry only what "is left by truck haulers" due to the simple shortage of trucks. 

At the same time, it is admitted in Russia that, for a further development of container truck haulage, it is necessary not only to increase the rolling-stock fleet, but also to regulate fuel prices and improve road infrastructure, especially in the Eastern part of the country which is acquiring greater significance in the state economy. In particular, the chief executive officer of the terminal "Vostochny International Container Services" (VICS) Vsevolod Goryainov pays attention to that, "We carry cargoes along the roads, but, due to the insufficient development of road infrastructure, the volume of the transported cargoes is not as big as we would like it to be". 

So, we have no choice but to hope that sooner or later the state will notice the "money" which is underfoot in the form of container truck haulage, and that it will draw useful conclusions regarding the state truck industry, as well the state of the Russian roads.



GERMAN NUTELS
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Total Containerization

Development of the Russian ports did not use to be connected with container business. Surely, in the Soviet era container terminals were constructed in the Far East, on the Black and Baltic seas and in the North. However, their capacity could satisfy needs only by the early 1980ies standards.  According to project consultant of Transcare Christoph Nienhaus, "the main investors at the ports were companies for handling bulk goods, like minerals, fertilizers and oil products. These new developed transshipment terminals are located in the best places of the ports and they are now limiting the possibilities to create sufficient operating areas for the container business within the ports". Actually, the majority of the Russian terminals are multipurpose and being developed in  different directions. However, lately container business has become one of the most promising streams and many universal ports are expanding container handling capacities in order to increase this cargo flow, but at the same time saving other freight volumes as well.

Experts forecast the container turnover to grow to 7 mln TEU by 2012, wherein 5 mln TEU is to be handled by the Russian ports. The growth rate is to be as follows: the North-Western basin - 20%, the Southern basin - 52%, and the Far-Eastern basin - 28%. Evidently, existing container capacities of the Russian ports can not meet the forecasted demand, but in many of them specialized container terminals existed. There are First Container Terminal (FCT), PetroLesPort in the port of Saint-Petersburg, Mobi Dick in Kronstadt, a big Baltic Container Terminal is being constructed in Ust-Luga - all of them are located in the North-Western basin. It is worth noting that some companies, which have estimated prospects of container handling business, focus on container flows or significantly diversify their business. For instance, PetroLesPort, who initially handled timber, logs and other bulked cargoes, has now equipped two berths for container handling. Now the company's income from container handling constitutes about 60% of the total. If the development programme of the terminal continues, by 2012 container handling will turn into its core activity.

The key feature of Far-Eastern basin is its high potential for transportation growth from South-Eastern Asia and Asia-Pacific region to Russia and North Europe. Vladivostok Container Terminal (VCT), second in Russia largest terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company operate in the region. There are also container handling capacities in Kamchatka and in the port of Vanino, but they work only with coastal trade containers.

In the Southern basin, Novorossiysk Junction Transport and Forwarding Enterprise (NUTEP), NovorosLesExport and Novorossiysk Commercial Sea Port are handling containers.



Investors combination

One of the key conditions of the RF integration into the global container network is transport infrastructure development and creation of up-to-date handling capacities. Such terminals appeared due to fast development of the Russian transportation market, especially its container segment, which, in its turn, made the sector attractive for private investors, both Russian and foreign.

For instance, National Container Company (NCC), launched in 2002 by First Quantum Ltd (UK) and Severstaltrans (Russia), today is the leader in the Russian container market. They were the first who concentrated management of the container terminals network in the key Russian ports. NCC owns the largest container terminal at the Baltic Sea - First Container Terminal (FCT), Vladivostok Container Terminal, Caspian Container Terminal (in the port Olya); it also constructs terminals in Shushary (Leningrad Oblast) and in the port of Ust-Luga. The latter is to become the center for container handling at the Baltics for Europe-Asia cargo flows. The project is being implemented by NCC in cooperation with Eurogate. Cooperation of Russian and foreign investors helps to construct terminals as fast as possible and to equip them using the most modern transport and information technology. Also, the terminal will be included into the global transport network, as it will be connected with terminals owned by Eurogate in Hamburg, Bremen and others.

NCC started entering the Ukrainian market, having become the major investor of the Ilyichevsk container terminal development. NCC invested some  USD 500 mln and aim to expand their terminal's capacity from existing 197 thousand TEU to 4 mln TEU.

The second largest container terminal in the port of Saint-Petersburg - PetroLesPort is also owned by a private company. Initially, the company attracted Hamburger Hafen-und Lagerhaus-AG for the terminal construction.

Container terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company (VSC) are owned by P&O Ports and Severstaltrans Group, having 25% and 75% of shares respectively. Cooperation of such transport giants enables VICS and VSC to develop fast and meet the growing demand for container handling. In 2004 VICS and VSC handled 290 thousand TEU. The terminals capacity grows to meet container throughput in the region, which in 2000-2004 averaged 45%. 

In the summer of 2005 French CMA CGM, third biggest container carrier, and the administration of Saint-Petersburg negotiated the prospects of the company's terminal construction. The French are sure that the container transportation market of the Russian North-West is developing fast, while the domestic stevedores' capacities are almost fully loaded. Naturally, in 2005 container handling volume growth of the region is absolutely unprecedented. Thus, during the first six months Saint-Petersburg stevedores handled 497 thousand TEU, 38% up year-on-year. First Container Terminal, which handles all containers of CMA CGM arriving in Saint-Petersburg, will achieve its maximum capacity by 2007. Taking into consideration these facts, CMA CGM's decision to construct its own terminal is absolutely reasonable.

The Russian market is closely considered by the world leading container operator Hong-Kong Hutchinson Port Holding. In the spring of 2005, the company discussed an investment contract with Saint-Petersburg company Yantar (Amber), who owns the rights on the commercial sea port construction in  Lomonosov (Saint-Petersburg suburb). In exchange, the investor is to get the controlling share holding of Yantar. The Hong-Kong company is also interested in the Russian biggest container terminals operator, but there have been no official statements and decisions yet. If the bargain takes place, Russian railways will receive the container flows which are currently carried from China to Europe by sea.



Exchanging Moneyfor Cargo

Naturally, investments are eagerly awaited and give considerable results.  According to CEO of VICS Vsevolod Goryainov, minor investment and some infrastructure improvement during the short term could allow the terminal to handle up to 400 thousand TEU annually. Current capacities can handle over 300 thousand TEU per annum. The terminal has been successfully increasing its container turnover for a long time. During the last 3 years the annual container handling growth of the terminal averages 44.3%. In 2004 VICS handled 272.53 thousand TEU, 33.19% up year-on-year.

VSC's maximum capacity amounts to 400 thousand TEU annually. If extra container flows are attracted and railway capacity is satisfactory, the two container terminals of the Vostochny port could increase handling to 800 thousand TEU per annum.

Some other terminals have announced handling capacities expansion. Baltic Container Terminal (port of Ust-Luga) will complete the first stage of the construction by 2008 and, after the second stage capacity put into operation, it will handle 500 thousand TEU annually. The investments into the project are estimated at over USD 120 mln. The development plan envisages handling capacity increase to 3 mln TEU. The aggregate investment volume amounts to over USD 200 mln.

The terminal in Kronstradt Mobi Dick plans to handle 500 thousand TEU by 2010 annually, when it starts operating to its maximum potential. In total, USD 100 mln will be invested in the construction of the terminal.

First Container Terminal plans to expand its capacity to 1 mln. TEU annually.

In 2005, container handling volume of PetroLesPort is to grow by 80% to 190-200 thousand TEU from 111 thousand TEU in 2004. In 2006, the third berth for container handling starts operating, and the container turnover is planned to increase to 500 TEU by 2008. The investment volume of PetroLesPort into the container terminal development amounted to some EUR 60 mln. (company's own and borrowed sources). The total cost of container terminal development operations amounts to EUR 140 mln. In 2006, USD 15-18 mln is to be invested.

NUTEP (in the port of Novorossiysk), which started operating in April of 2004, during the first 10 months of 2005 handled 44,217 TEU against 32,801 TEU in the period of April-December of 2004. The potential of NCC's container terminal management is proved by the 38% growth of throughput during the 10 months of 2005, comparing with the same period of the previous year. 



Who Wants? Who Can?

The container handling development in Russia is not that impressive in comparison with other world terminals: in 2004 the aggregate container turnover of the Russian terminals amounted to 1.5 mln TEU, while Hutchinson Port Holding alone handled 40 mln TEU. The development is hampered by the continuous price increase for energy resources, insufficient infrastructure and limited territory. Vsevolod Goryainov, CEO of VICS, noted that further development of the Far-Eastern container terminals is prevented by insufficient quantity of rail accesses and inability of road infrastructure to supply big volumes of container transportation. "In order to enhance the situation we should improve the interaction between all participants of the transport chain and create a united logistic system", he states. According to the project consultant of Transcare Christoph Nienhaus, "the Russian market in particular needs sufficient container terminals at the seaside, as well as in the hinterland. Both have to be linked to each other via dedicated hinterland concepts on rail".

Naturally, these problems can not be resolved only with the budget financial support: foreign private investments are required. However, there arise serious problems. The managing director of Containerships Ltd OY Yvonne Sandber assumes "that the potential of quick development  in this field is seriously delayed with the obstacles created by general problems of Russian reality. The main problem preventing private capital from active inflow is called "bureaucracy". This is an old well-known problem, which, in spite of the announced interest of the government and the authorities in the injection of foreign capital, is really a drag on the way of investing. Besides, problems of the capital inflow result from lack of appropriate legislation and regulations, inactivity of authorities, uncertainty of some procedures etc". Experts of NCC noted that the key problem arising between private investors and the state is that there is no transparent scheme of interaction, which includes the process of obtaining permits, as well as the regulations for creation and operating  federal objects in the ports.

Yvonna Sandberg believes "that the best way for attracting foreign investments is creating easy and simple rules for all players on this market to be strictly fulfilled without any  exceptions, which would immediately improve the investment climate and attractiveness, resulting in real growth of practical interest in investment into the Russian transport segment of economy on behalf of the majority of transport operators. At the same time, this would give a real impulse for development not only to the port infrastructure, but also all other units of transport chain, such as logistics complexes, railway and road carriers, shipping industry and others".

TransCare states that "private investors for container transshipment are still in a reserve position to invest into the ports. But if the investments in sufficient container terminals wait still longer, this conservative position will also have its implications in future. Namely, the space for a reasonable growth of the container business on the Russian market will be limited by insufficient transshipment capacities at the ports, especially the western ports, because of the above mentioned reasons".



VICTORIA  MERKUSHEVA
    [~DETAIL_TEXT] => 

Total Containerization

Development of the Russian ports did not use to be connected with container business. Surely, in the Soviet era container terminals were constructed in the Far East, on the Black and Baltic seas and in the North. However, their capacity could satisfy needs only by the early 1980ies standards.  According to project consultant of Transcare Christoph Nienhaus, "the main investors at the ports were companies for handling bulk goods, like minerals, fertilizers and oil products. These new developed transshipment terminals are located in the best places of the ports and they are now limiting the possibilities to create sufficient operating areas for the container business within the ports". Actually, the majority of the Russian terminals are multipurpose and being developed in  different directions. However, lately container business has become one of the most promising streams and many universal ports are expanding container handling capacities in order to increase this cargo flow, but at the same time saving other freight volumes as well.

Experts forecast the container turnover to grow to 7 mln TEU by 2012, wherein 5 mln TEU is to be handled by the Russian ports. The growth rate is to be as follows: the North-Western basin - 20%, the Southern basin - 52%, and the Far-Eastern basin - 28%. Evidently, existing container capacities of the Russian ports can not meet the forecasted demand, but in many of them specialized container terminals existed. There are First Container Terminal (FCT), PetroLesPort in the port of Saint-Petersburg, Mobi Dick in Kronstadt, a big Baltic Container Terminal is being constructed in Ust-Luga - all of them are located in the North-Western basin. It is worth noting that some companies, which have estimated prospects of container handling business, focus on container flows or significantly diversify their business. For instance, PetroLesPort, who initially handled timber, logs and other bulked cargoes, has now equipped two berths for container handling. Now the company's income from container handling constitutes about 60% of the total. If the development programme of the terminal continues, by 2012 container handling will turn into its core activity.

The key feature of Far-Eastern basin is its high potential for transportation growth from South-Eastern Asia and Asia-Pacific region to Russia and North Europe. Vladivostok Container Terminal (VCT), second in Russia largest terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company operate in the region. There are also container handling capacities in Kamchatka and in the port of Vanino, but they work only with coastal trade containers.

In the Southern basin, Novorossiysk Junction Transport and Forwarding Enterprise (NUTEP), NovorosLesExport and Novorossiysk Commercial Sea Port are handling containers.



Investors combination

One of the key conditions of the RF integration into the global container network is transport infrastructure development and creation of up-to-date handling capacities. Such terminals appeared due to fast development of the Russian transportation market, especially its container segment, which, in its turn, made the sector attractive for private investors, both Russian and foreign.

For instance, National Container Company (NCC), launched in 2002 by First Quantum Ltd (UK) and Severstaltrans (Russia), today is the leader in the Russian container market. They were the first who concentrated management of the container terminals network in the key Russian ports. NCC owns the largest container terminal at the Baltic Sea - First Container Terminal (FCT), Vladivostok Container Terminal, Caspian Container Terminal (in the port Olya); it also constructs terminals in Shushary (Leningrad Oblast) and in the port of Ust-Luga. The latter is to become the center for container handling at the Baltics for Europe-Asia cargo flows. The project is being implemented by NCC in cooperation with Eurogate. Cooperation of Russian and foreign investors helps to construct terminals as fast as possible and to equip them using the most modern transport and information technology. Also, the terminal will be included into the global transport network, as it will be connected with terminals owned by Eurogate in Hamburg, Bremen and others.

NCC started entering the Ukrainian market, having become the major investor of the Ilyichevsk container terminal development. NCC invested some  USD 500 mln and aim to expand their terminal's capacity from existing 197 thousand TEU to 4 mln TEU.

The second largest container terminal in the port of Saint-Petersburg - PetroLesPort is also owned by a private company. Initially, the company attracted Hamburger Hafen-und Lagerhaus-AG for the terminal construction.

Container terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company (VSC) are owned by P&O Ports and Severstaltrans Group, having 25% and 75% of shares respectively. Cooperation of such transport giants enables VICS and VSC to develop fast and meet the growing demand for container handling. In 2004 VICS and VSC handled 290 thousand TEU. The terminals capacity grows to meet container throughput in the region, which in 2000-2004 averaged 45%. 

In the summer of 2005 French CMA CGM, third biggest container carrier, and the administration of Saint-Petersburg negotiated the prospects of the company's terminal construction. The French are sure that the container transportation market of the Russian North-West is developing fast, while the domestic stevedores' capacities are almost fully loaded. Naturally, in 2005 container handling volume growth of the region is absolutely unprecedented. Thus, during the first six months Saint-Petersburg stevedores handled 497 thousand TEU, 38% up year-on-year. First Container Terminal, which handles all containers of CMA CGM arriving in Saint-Petersburg, will achieve its maximum capacity by 2007. Taking into consideration these facts, CMA CGM's decision to construct its own terminal is absolutely reasonable.

The Russian market is closely considered by the world leading container operator Hong-Kong Hutchinson Port Holding. In the spring of 2005, the company discussed an investment contract with Saint-Petersburg company Yantar (Amber), who owns the rights on the commercial sea port construction in  Lomonosov (Saint-Petersburg suburb). In exchange, the investor is to get the controlling share holding of Yantar. The Hong-Kong company is also interested in the Russian biggest container terminals operator, but there have been no official statements and decisions yet. If the bargain takes place, Russian railways will receive the container flows which are currently carried from China to Europe by sea.



Exchanging Moneyfor Cargo

Naturally, investments are eagerly awaited and give considerable results.  According to CEO of VICS Vsevolod Goryainov, minor investment and some infrastructure improvement during the short term could allow the terminal to handle up to 400 thousand TEU annually. Current capacities can handle over 300 thousand TEU per annum. The terminal has been successfully increasing its container turnover for a long time. During the last 3 years the annual container handling growth of the terminal averages 44.3%. In 2004 VICS handled 272.53 thousand TEU, 33.19% up year-on-year.

VSC's maximum capacity amounts to 400 thousand TEU annually. If extra container flows are attracted and railway capacity is satisfactory, the two container terminals of the Vostochny port could increase handling to 800 thousand TEU per annum.

Some other terminals have announced handling capacities expansion. Baltic Container Terminal (port of Ust-Luga) will complete the first stage of the construction by 2008 and, after the second stage capacity put into operation, it will handle 500 thousand TEU annually. The investments into the project are estimated at over USD 120 mln. The development plan envisages handling capacity increase to 3 mln TEU. The aggregate investment volume amounts to over USD 200 mln.

The terminal in Kronstradt Mobi Dick plans to handle 500 thousand TEU by 2010 annually, when it starts operating to its maximum potential. In total, USD 100 mln will be invested in the construction of the terminal.

First Container Terminal plans to expand its capacity to 1 mln. TEU annually.

In 2005, container handling volume of PetroLesPort is to grow by 80% to 190-200 thousand TEU from 111 thousand TEU in 2004. In 2006, the third berth for container handling starts operating, and the container turnover is planned to increase to 500 TEU by 2008. The investment volume of PetroLesPort into the container terminal development amounted to some EUR 60 mln. (company's own and borrowed sources). The total cost of container terminal development operations amounts to EUR 140 mln. In 2006, USD 15-18 mln is to be invested.

NUTEP (in the port of Novorossiysk), which started operating in April of 2004, during the first 10 months of 2005 handled 44,217 TEU against 32,801 TEU in the period of April-December of 2004. The potential of NCC's container terminal management is proved by the 38% growth of throughput during the 10 months of 2005, comparing with the same period of the previous year. 



Who Wants? Who Can?

The container handling development in Russia is not that impressive in comparison with other world terminals: in 2004 the aggregate container turnover of the Russian terminals amounted to 1.5 mln TEU, while Hutchinson Port Holding alone handled 40 mln TEU. The development is hampered by the continuous price increase for energy resources, insufficient infrastructure and limited territory. Vsevolod Goryainov, CEO of VICS, noted that further development of the Far-Eastern container terminals is prevented by insufficient quantity of rail accesses and inability of road infrastructure to supply big volumes of container transportation. "In order to enhance the situation we should improve the interaction between all participants of the transport chain and create a united logistic system", he states. According to the project consultant of Transcare Christoph Nienhaus, "the Russian market in particular needs sufficient container terminals at the seaside, as well as in the hinterland. Both have to be linked to each other via dedicated hinterland concepts on rail".

Naturally, these problems can not be resolved only with the budget financial support: foreign private investments are required. However, there arise serious problems. The managing director of Containerships Ltd OY Yvonne Sandber assumes "that the potential of quick development  in this field is seriously delayed with the obstacles created by general problems of Russian reality. The main problem preventing private capital from active inflow is called "bureaucracy". This is an old well-known problem, which, in spite of the announced interest of the government and the authorities in the injection of foreign capital, is really a drag on the way of investing. Besides, problems of the capital inflow result from lack of appropriate legislation and regulations, inactivity of authorities, uncertainty of some procedures etc". Experts of NCC noted that the key problem arising between private investors and the state is that there is no transparent scheme of interaction, which includes the process of obtaining permits, as well as the regulations for creation and operating  federal objects in the ports.

Yvonna Sandberg believes "that the best way for attracting foreign investments is creating easy and simple rules for all players on this market to be strictly fulfilled without any  exceptions, which would immediately improve the investment climate and attractiveness, resulting in real growth of practical interest in investment into the Russian transport segment of economy on behalf of the majority of transport operators. At the same time, this would give a real impulse for development not only to the port infrastructure, but also all other units of transport chain, such as logistics complexes, railway and road carriers, shipping industry and others".

TransCare states that "private investors for container transshipment are still in a reserve position to invest into the ports. But if the investments in sufficient container terminals wait still longer, this conservative position will also have its implications in future. Namely, the space for a reasonable growth of the container business on the Russian market will be limited by insufficient transshipment capacities at the ports, especially the western ports, because of the above mentioned reasons".



VICTORIA  MERKUSHEVA
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Total Containerization

Development of the Russian ports did not use to be connected with container business. Surely, in the Soviet era container terminals were constructed in the Far East, on the Black and Baltic seas and in the North. However, their capacity could satisfy needs only by the early 1980ies standards.  According to project consultant of Transcare Christoph Nienhaus, "the main investors at the ports were companies for handling bulk goods, like minerals, fertilizers and oil products. These new developed transshipment terminals are located in the best places of the ports and they are now limiting the possibilities to create sufficient operating areas for the container business within the ports". Actually, the majority of the Russian terminals are multipurpose and being developed in  different directions. However, lately container business has become one of the most promising streams and many universal ports are expanding container handling capacities in order to increase this cargo flow, but at the same time saving other freight volumes as well.

Experts forecast the container turnover to grow to 7 mln TEU by 2012, wherein 5 mln TEU is to be handled by the Russian ports. The growth rate is to be as follows: the North-Western basin - 20%, the Southern basin - 52%, and the Far-Eastern basin - 28%. Evidently, existing container capacities of the Russian ports can not meet the forecasted demand, but in many of them specialized container terminals existed. There are First Container Terminal (FCT), PetroLesPort in the port of Saint-Petersburg, Mobi Dick in Kronstadt, a big Baltic Container Terminal is being constructed in Ust-Luga - all of them are located in the North-Western basin. It is worth noting that some companies, which have estimated prospects of container handling business, focus on container flows or significantly diversify their business. For instance, PetroLesPort, who initially handled timber, logs and other bulked cargoes, has now equipped two berths for container handling. Now the company's income from container handling constitutes about 60% of the total. If the development programme of the terminal continues, by 2012 container handling will turn into its core activity.

The key feature of Far-Eastern basin is its high potential for transportation growth from South-Eastern Asia and Asia-Pacific region to Russia and North Europe. Vladivostok Container Terminal (VCT), second in Russia largest terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company operate in the region. There are also container handling capacities in Kamchatka and in the port of Vanino, but they work only with coastal trade containers.

In the Southern basin, Novorossiysk Junction Transport and Forwarding Enterprise (NUTEP), NovorosLesExport and Novorossiysk Commercial Sea Port are handling containers.



Investors combination

One of the key conditions of the RF integration into the global container network is transport infrastructure development and creation of up-to-date handling capacities. Such terminals appeared due to fast development of the Russian transportation market, especially its container segment, which, in its turn, made the sector attractive for private investors, both Russian and foreign.

For instance, National Container Company (NCC), launched in 2002 by First Quantum Ltd (UK) and Severstaltrans (Russia), today is the leader in the Russian container market. They were the first who concentrated management of the container terminals network in the key Russian ports. NCC owns the largest container terminal at the Baltic Sea - First Container Terminal (FCT), Vladivostok Container Terminal, Caspian Container Terminal (in the port Olya); it also constructs terminals in Shushary (Leningrad Oblast) and in the port of Ust-Luga. The latter is to become the center for container handling at the Baltics for Europe-Asia cargo flows. The project is being implemented by NCC in cooperation with Eurogate. Cooperation of Russian and foreign investors helps to construct terminals as fast as possible and to equip them using the most modern transport and information technology. Also, the terminal will be included into the global transport network, as it will be connected with terminals owned by Eurogate in Hamburg, Bremen and others.

NCC started entering the Ukrainian market, having become the major investor of the Ilyichevsk container terminal development. NCC invested some  USD 500 mln and aim to expand their terminal's capacity from existing 197 thousand TEU to 4 mln TEU.

The second largest container terminal in the port of Saint-Petersburg - PetroLesPort is also owned by a private company. Initially, the company attracted Hamburger Hafen-und Lagerhaus-AG for the terminal construction.

Container terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company (VSC) are owned by P&O Ports and Severstaltrans Group, having 25% and 75% of shares respectively. Cooperation of such transport giants enables VICS and VSC to develop fast and meet the growing demand for container handling. In 2004 VICS and VSC handled 290 thousand TEU. The terminals capacity grows to meet container throughput in the region, which in 2000-2004 averaged 45%. 

In the summer of 2005 French CMA CGM, third biggest container carrier, and the administration of Saint-Petersburg negotiated the prospects of the company's terminal construction. The French are sure that the container transportation market of the Russian North-West is developing fast, while the domestic stevedores' capacities are almost fully loaded. Naturally, in 2005 container handling volume growth of the region is absolutely unprecedented. Thus, during the first six months Saint-Petersburg stevedores handled 497 thousand TEU, 38% up year-on-year. First Container Terminal, which handles all containers of CMA CGM arriving in Saint-Petersburg, will achieve its maximum capacity by 2007. Taking into consideration these facts, CMA CGM's decision to construct its own terminal is absolutely reasonable.

The Russian market is closely considered by the world leading container operator Hong-Kong Hutchinson Port Holding. In the spring of 2005, the company discussed an investment contract with Saint-Petersburg company Yantar (Amber), who owns the rights on the commercial sea port construction in  Lomonosov (Saint-Petersburg suburb). In exchange, the investor is to get the controlling share holding of Yantar. The Hong-Kong company is also interested in the Russian biggest container terminals operator, but there have been no official statements and decisions yet. If the bargain takes place, Russian railways will receive the container flows which are currently carried from China to Europe by sea.



Exchanging Moneyfor Cargo

Naturally, investments are eagerly awaited and give considerable results.  According to CEO of VICS Vsevolod Goryainov, minor investment and some infrastructure improvement during the short term could allow the terminal to handle up to 400 thousand TEU annually. Current capacities can handle over 300 thousand TEU per annum. The terminal has been successfully increasing its container turnover for a long time. During the last 3 years the annual container handling growth of the terminal averages 44.3%. In 2004 VICS handled 272.53 thousand TEU, 33.19% up year-on-year.

VSC's maximum capacity amounts to 400 thousand TEU annually. If extra container flows are attracted and railway capacity is satisfactory, the two container terminals of the Vostochny port could increase handling to 800 thousand TEU per annum.

Some other terminals have announced handling capacities expansion. Baltic Container Terminal (port of Ust-Luga) will complete the first stage of the construction by 2008 and, after the second stage capacity put into operation, it will handle 500 thousand TEU annually. The investments into the project are estimated at over USD 120 mln. The development plan envisages handling capacity increase to 3 mln TEU. The aggregate investment volume amounts to over USD 200 mln.

The terminal in Kronstradt Mobi Dick plans to handle 500 thousand TEU by 2010 annually, when it starts operating to its maximum potential. In total, USD 100 mln will be invested in the construction of the terminal.

First Container Terminal plans to expand its capacity to 1 mln. TEU annually.

In 2005, container handling volume of PetroLesPort is to grow by 80% to 190-200 thousand TEU from 111 thousand TEU in 2004. In 2006, the third berth for container handling starts operating, and the container turnover is planned to increase to 500 TEU by 2008. The investment volume of PetroLesPort into the container terminal development amounted to some EUR 60 mln. (company's own and borrowed sources). The total cost of container terminal development operations amounts to EUR 140 mln. In 2006, USD 15-18 mln is to be invested.

NUTEP (in the port of Novorossiysk), which started operating in April of 2004, during the first 10 months of 2005 handled 44,217 TEU against 32,801 TEU in the period of April-December of 2004. The potential of NCC's container terminal management is proved by the 38% growth of throughput during the 10 months of 2005, comparing with the same period of the previous year. 



Who Wants? Who Can?

The container handling development in Russia is not that impressive in comparison with other world terminals: in 2004 the aggregate container turnover of the Russian terminals amounted to 1.5 mln TEU, while Hutchinson Port Holding alone handled 40 mln TEU. The development is hampered by the continuous price increase for energy resources, insufficient infrastructure and limited territory. Vsevolod Goryainov, CEO of VICS, noted that further development of the Far-Eastern container terminals is prevented by insufficient quantity of rail accesses and inability of road infrastructure to supply big volumes of container transportation. "In order to enhance the situation we should improve the interaction between all participants of the transport chain and create a united logistic system", he states. According to the project consultant of Transcare Christoph Nienhaus, "the Russian market in particular needs sufficient container terminals at the seaside, as well as in the hinterland. Both have to be linked to each other via dedicated hinterland concepts on rail".

Naturally, these problems can not be resolved only with the budget financial support: foreign private investments are required. However, there arise serious problems. The managing director of Containerships Ltd OY Yvonne Sandber assumes "that the potential of quick development  in this field is seriously delayed with the obstacles created by general problems of Russian reality. The main problem preventing private capital from active inflow is called "bureaucracy". This is an old well-known problem, which, in spite of the announced interest of the government and the authorities in the injection of foreign capital, is really a drag on the way of investing. Besides, problems of the capital inflow result from lack of appropriate legislation and regulations, inactivity of authorities, uncertainty of some procedures etc". Experts of NCC noted that the key problem arising between private investors and the state is that there is no transparent scheme of interaction, which includes the process of obtaining permits, as well as the regulations for creation and operating  federal objects in the ports.

Yvonna Sandberg believes "that the best way for attracting foreign investments is creating easy and simple rules for all players on this market to be strictly fulfilled without any  exceptions, which would immediately improve the investment climate and attractiveness, resulting in real growth of practical interest in investment into the Russian transport segment of economy on behalf of the majority of transport operators. At the same time, this would give a real impulse for development not only to the port infrastructure, but also all other units of transport chain, such as logistics complexes, railway and road carriers, shipping industry and others".

TransCare states that "private investors for container transshipment are still in a reserve position to invest into the ports. But if the investments in sufficient container terminals wait still longer, this conservative position will also have its implications in future. Namely, the space for a reasonable growth of the container business on the Russian market will be limited by insufficient transshipment capacities at the ports, especially the western ports, because of the above mentioned reasons".



VICTORIA  MERKUSHEVA
    [~DETAIL_TEXT] => 

Total Containerization

Development of the Russian ports did not use to be connected with container business. Surely, in the Soviet era container terminals were constructed in the Far East, on the Black and Baltic seas and in the North. However, their capacity could satisfy needs only by the early 1980ies standards.  According to project consultant of Transcare Christoph Nienhaus, "the main investors at the ports were companies for handling bulk goods, like minerals, fertilizers and oil products. These new developed transshipment terminals are located in the best places of the ports and they are now limiting the possibilities to create sufficient operating areas for the container business within the ports". Actually, the majority of the Russian terminals are multipurpose and being developed in  different directions. However, lately container business has become one of the most promising streams and many universal ports are expanding container handling capacities in order to increase this cargo flow, but at the same time saving other freight volumes as well.

Experts forecast the container turnover to grow to 7 mln TEU by 2012, wherein 5 mln TEU is to be handled by the Russian ports. The growth rate is to be as follows: the North-Western basin - 20%, the Southern basin - 52%, and the Far-Eastern basin - 28%. Evidently, existing container capacities of the Russian ports can not meet the forecasted demand, but in many of them specialized container terminals existed. There are First Container Terminal (FCT), PetroLesPort in the port of Saint-Petersburg, Mobi Dick in Kronstadt, a big Baltic Container Terminal is being constructed in Ust-Luga - all of them are located in the North-Western basin. It is worth noting that some companies, which have estimated prospects of container handling business, focus on container flows or significantly diversify their business. For instance, PetroLesPort, who initially handled timber, logs and other bulked cargoes, has now equipped two berths for container handling. Now the company's income from container handling constitutes about 60% of the total. If the development programme of the terminal continues, by 2012 container handling will turn into its core activity.

The key feature of Far-Eastern basin is its high potential for transportation growth from South-Eastern Asia and Asia-Pacific region to Russia and North Europe. Vladivostok Container Terminal (VCT), second in Russia largest terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company operate in the region. There are also container handling capacities in Kamchatka and in the port of Vanino, but they work only with coastal trade containers.

In the Southern basin, Novorossiysk Junction Transport and Forwarding Enterprise (NUTEP), NovorosLesExport and Novorossiysk Commercial Sea Port are handling containers.



Investors combination

One of the key conditions of the RF integration into the global container network is transport infrastructure development and creation of up-to-date handling capacities. Such terminals appeared due to fast development of the Russian transportation market, especially its container segment, which, in its turn, made the sector attractive for private investors, both Russian and foreign.

For instance, National Container Company (NCC), launched in 2002 by First Quantum Ltd (UK) and Severstaltrans (Russia), today is the leader in the Russian container market. They were the first who concentrated management of the container terminals network in the key Russian ports. NCC owns the largest container terminal at the Baltic Sea - First Container Terminal (FCT), Vladivostok Container Terminal, Caspian Container Terminal (in the port Olya); it also constructs terminals in Shushary (Leningrad Oblast) and in the port of Ust-Luga. The latter is to become the center for container handling at the Baltics for Europe-Asia cargo flows. The project is being implemented by NCC in cooperation with Eurogate. Cooperation of Russian and foreign investors helps to construct terminals as fast as possible and to equip them using the most modern transport and information technology. Also, the terminal will be included into the global transport network, as it will be connected with terminals owned by Eurogate in Hamburg, Bremen and others.

NCC started entering the Ukrainian market, having become the major investor of the Ilyichevsk container terminal development. NCC invested some  USD 500 mln and aim to expand their terminal's capacity from existing 197 thousand TEU to 4 mln TEU.

The second largest container terminal in the port of Saint-Petersburg - PetroLesPort is also owned by a private company. Initially, the company attracted Hamburger Hafen-und Lagerhaus-AG for the terminal construction.

Container terminal Vostochny International Container Services (VICS) and Vostochnaya Stevedoring Company (VSC) are owned by P&O Ports and Severstaltrans Group, having 25% and 75% of shares respectively. Cooperation of such transport giants enables VICS and VSC to develop fast and meet the growing demand for container handling. In 2004 VICS and VSC handled 290 thousand TEU. The terminals capacity grows to meet container throughput in the region, which in 2000-2004 averaged 45%. 

In the summer of 2005 French CMA CGM, third biggest container carrier, and the administration of Saint-Petersburg negotiated the prospects of the company's terminal construction. The French are sure that the container transportation market of the Russian North-West is developing fast, while the domestic stevedores' capacities are almost fully loaded. Naturally, in 2005 container handling volume growth of the region is absolutely unprecedented. Thus, during the first six months Saint-Petersburg stevedores handled 497 thousand TEU, 38% up year-on-year. First Container Terminal, which handles all containers of CMA CGM arriving in Saint-Petersburg, will achieve its maximum capacity by 2007. Taking into consideration these facts, CMA CGM's decision to construct its own terminal is absolutely reasonable.

The Russian market is closely considered by the world leading container operator Hong-Kong Hutchinson Port Holding. In the spring of 2005, the company discussed an investment contract with Saint-Petersburg company Yantar (Amber), who owns the rights on the commercial sea port construction in  Lomonosov (Saint-Petersburg suburb). In exchange, the investor is to get the controlling share holding of Yantar. The Hong-Kong company is also interested in the Russian biggest container terminals operator, but there have been no official statements and decisions yet. If the bargain takes place, Russian railways will receive the container flows which are currently carried from China to Europe by sea.



Exchanging Moneyfor Cargo

Naturally, investments are eagerly awaited and give considerable results.  According to CEO of VICS Vsevolod Goryainov, minor investment and some infrastructure improvement during the short term could allow the terminal to handle up to 400 thousand TEU annually. Current capacities can handle over 300 thousand TEU per annum. The terminal has been successfully increasing its container turnover for a long time. During the last 3 years the annual container handling growth of the terminal averages 44.3%. In 2004 VICS handled 272.53 thousand TEU, 33.19% up year-on-year.

VSC's maximum capacity amounts to 400 thousand TEU annually. If extra container flows are attracted and railway capacity is satisfactory, the two container terminals of the Vostochny port could increase handling to 800 thousand TEU per annum.

Some other terminals have announced handling capacities expansion. Baltic Container Terminal (port of Ust-Luga) will complete the first stage of the construction by 2008 and, after the second stage capacity put into operation, it will handle 500 thousand TEU annually. The investments into the project are estimated at over USD 120 mln. The development plan envisages handling capacity increase to 3 mln TEU. The aggregate investment volume amounts to over USD 200 mln.

The terminal in Kronstradt Mobi Dick plans to handle 500 thousand TEU by 2010 annually, when it starts operating to its maximum potential. In total, USD 100 mln will be invested in the construction of the terminal.

First Container Terminal plans to expand its capacity to 1 mln. TEU annually.

In 2005, container handling volume of PetroLesPort is to grow by 80% to 190-200 thousand TEU from 111 thousand TEU in 2004. In 2006, the third berth for container handling starts operating, and the container turnover is planned to increase to 500 TEU by 2008. The investment volume of PetroLesPort into the container terminal development amounted to some EUR 60 mln. (company's own and borrowed sources). The total cost of container terminal development operations amounts to EUR 140 mln. In 2006, USD 15-18 mln is to be invested.

NUTEP (in the port of Novorossiysk), which started operating in April of 2004, during the first 10 months of 2005 handled 44,217 TEU against 32,801 TEU in the period of April-December of 2004. The potential of NCC's container terminal management is proved by the 38% growth of throughput during the 10 months of 2005, comparing with the same period of the previous year. 



Who Wants? Who Can?

The container handling development in Russia is not that impressive in comparison with other world terminals: in 2004 the aggregate container turnover of the Russian terminals amounted to 1.5 mln TEU, while Hutchinson Port Holding alone handled 40 mln TEU. The development is hampered by the continuous price increase for energy resources, insufficient infrastructure and limited territory. Vsevolod Goryainov, CEO of VICS, noted that further development of the Far-Eastern container terminals is prevented by insufficient quantity of rail accesses and inability of road infrastructure to supply big volumes of container transportation. "In order to enhance the situation we should improve the interaction between all participants of the transport chain and create a united logistic system", he states. According to the project consultant of Transcare Christoph Nienhaus, "the Russian market in particular needs sufficient container terminals at the seaside, as well as in the hinterland. Both have to be linked to each other via dedicated hinterland concepts on rail".

Naturally, these problems can not be resolved only with the budget financial support: foreign private investments are required. However, there arise serious problems. The managing director of Containerships Ltd OY Yvonne Sandber assumes "that the potential of quick development  in this field is seriously delayed with the obstacles created by general problems of Russian reality. The main problem preventing private capital from active inflow is called "bureaucracy". This is an old well-known problem, which, in spite of the announced interest of the government and the authorities in the injection of foreign capital, is really a drag on the way of investing. Besides, problems of the capital inflow result from lack of appropriate legislation and regulations, inactivity of authorities, uncertainty of some procedures etc". Experts of NCC noted that the key problem arising between private investors and the state is that there is no transparent scheme of interaction, which includes the process of obtaining permits, as well as the regulations for creation and operating  federal objects in the ports.

Yvonna Sandberg believes "that the best way for attracting foreign investments is creating easy and simple rules for all players on this market to be strictly fulfilled without any  exceptions, which would immediately improve the investment climate and attractiveness, resulting in real growth of practical interest in investment into the Russian transport segment of economy on behalf of the majority of transport operators. At the same time, this would give a real impulse for development not only to the port infrastructure, but also all other units of transport chain, such as logistics complexes, railway and road carriers, shipping industry and others".

TransCare states that "private investors for container transshipment are still in a reserve position to invest into the ports. But if the investments in sufficient container terminals wait still longer, this conservative position will also have its implications in future. Namely, the space for a reasonable growth of the container business on the Russian market will be limited by insufficient transshipment capacities at the ports, especially the western ports, because of the above mentioned reasons".



VICTORIA  MERKUSHEVA
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Containers in Numbers

Container turnover made on the Russian market leaves the world market far behind in terms of growth rates. According to the results of 2004, container transportation market in Russia grew by 25% and amounted to 2.09 mln TEU (including transborder container transportation by railways). This year the growth is expected to reach about 500 thousand TEU (17-18%). 

Nevertheless, the share of containerized cargo in Russia amounts to 30%, and containers take only 1.5% in aggregate transportation volume (in developed European countries this figure fluctuates between 10% and 70%). The low level of containerization is explained by the nature of the country's economy, not by the market trend: the lion's share of the Russian export is raw materials, while container transportation is determined for produce. Moreover, the transport infrastructure of Russia does not help to improve the situation.

At the same time, according to the experts, the general potential of container transportation in the country is estimated at approximately100 mln tons and shows serious dynamics growth. For five recent years containerized cargo transportation volume has been growing by 15-20% annually. In particular, 2003 exceeded 2002 results by 17% (growth of foreign trade cargo transportation made 20.8%), results of 2004 - at 1.6 times (foreign trade cargo volume doubled). Last year added to the tendency with the increase by 18%, while in the ten months of 2005 the general volume of containerized cargo transportation boosted by 12.5%. 

Experts of the carrier company "Russkaya Troyka" believe that this sector has brilliant perspectives for development. Moreover, the problems with terminal infrastructure and liquidation of rolling stock deficit are solved, the annual increase of 20-25% for 2008-2010 period can be easily forecasted. 

It should be mentioned that now Russia can successfully compete on the transport services market making use of its unique geographical location. In fact, Russia can be regarded as a continental bridge between the countries of the Asian-Pacific region, Europe and Central Asia. Moreover, from the point of view of transport expenses, the minimization of this route is of most attractive sort for big cargo owners. According to the RF Ministry of Transport, the USA transport expenses for cargo delivery from Europe to the Asian-Pacific region make USD 658 bln, Japan spends on it about USD 340 bln, Germany - USD185 bln, and Great Britain - USD124 bln. If new transit routes are created, Russia could assist the world's leaders in reducing these expenditures. It is worth mentioning that the cargo turnover made between the USA and the countries of the Asian-Pacific region amounts to USD1 trillion, or about 14 mln containers per annum. 



Highly Competitive Environment

The geography of the Russian container transportation is rather spacious. The cargo flows are distributed for the continents as follows: Europe and Asian countries take the most part of them (about 40% and 30% respectively); countries of North America take little more than 10%, Central and South America less than 10%. The major tendency of the current year has become export growth accompanied with simultaneous transit cargo flows shortening. The growth of the Russian container export was provided by the increase of paper and cellulose volumes transportation, as well as non-ferrous metals (aluminum, in particular). Thus, last year the growth of paper volumes transported in containers made about 40%, the same results were indicated for non-ferrous metals transportation. 

The situation differs for transit. Vsevolod Goryainov, General Director of "VICS" JSC, says for the second half of the year all the Far-Eastern ports of Russia (those that handle transit cargo mostly) suffer a serious reduction of transit volumes by 30% in average. "This doesn't mean that Asian goods are not in demand anymore. There is still a great necessity in them, but cargo delivery via the TransSib is quite problematic. Consequently, railway has lost some part of transit", Mr.Goryainov stated. "Intercontainer Interfrigo" JSC noted that one of the factors restricting transit development is competition with sea carriers. "Nowadays it is practically impossible to get cargo following from Western Europe to South-Eastern Asia due to extraordinary low prices offered by sea carriers", Maxim Munkin, the company representative in Russia explained. 

Russia undergoes competition not only with sea rivals, but also with neighboring countries. China is actively developing its ports' activities and intends to compete in the area of railway cargo transportation. "Some years ago Chinese Government approved the programme of railways modernization, - Mr.Goryainov says. - So far China has completed the construction of modern railways on the border with Russia, Mongolia, and Uzbekistan. As soon as separate sectors are joined in the united net, Chinese railway will compete with the TranSib. Firstly, low tariffs on transportation will become a competitive advantage of the Chinese side". Thus, in the experts' opinion, such basic container terminals of the Russian Far East as "Vostochny International Container Services" JSC and "Vladivostok Container Terminal" JSC will face Chinese competition. The only question that remains is when the Chinese will decide to launch railway container service. At present China possesses free railway capacities that allow to transport containers to Siberia (by-passing the TransSib and Far-Eastern ports of Russia) and, thus, will be engaged soon. 

It's no secret that motor transportation is a serious competitor as well. At least some 45% of containerized cargo is transported by motor trucks, especially when destined for short distances. At present railways are the only mode of transport in the country where prices and tariffs are regulated by the state. Truckers work under more flexible conditions and set their prices independently. Consequently, motor transport is of more flexible sort for tariff building both for an ultimate client and forwarding companies. Surely, this is the most attractive factor for potential clients. 



Where Container Rivers Flow

"Transportation volumes via the TransSib are one of the most important criteria that allows to evaluate the functioning not only of the whole Russian transport complex, but of the international container system as well", Peter Baskakov, Director of "Transcontainer" of OAO RZD believes. In his words, for the last two years, the Russian railways have solved tactical problems of boosting cargo turnover via the TransSib. Heavy funds are invested into rolling stock and infrastructure, traffic control has been re-organized, customs procedures have been simplified, alternative services for cargo security are being developed. Thus, very attractive conditions to fasten cargo delivery, customs registration and reduce cost of transportation are being created. In fact, the TransSib is the most attractive, comfortable and shortest way to deliver containers from Asia to Europe. "For example, - Peter Baskakov says, - comparative analysis of 40ft container transportation cost from China to Europe via the transocean route port Shanghai-port Hamburg as opposed to the TransSib clearly shows that the latter is competitive for container delivery to Central and Eastern Europe (Germany, Poland, Hungary, Slovakia)". "Cargo flow from the countries of Asian-Pacific region is highly potential, - Vladimir Chisnakov, General Director of "Russkaya Troyka" JSC, states, - we can attract this cargo flow only playing on the major competitive advantage of Russia, i.e. period of delivery. With the help of its reduction, cargo owners can minimize warehouses reserves and working funds engaged in transportation. Our task is to minimize periods of cargo registration in cooperation with customs, ports, stevedoring companies and railway operators. One more competitive advantage can be found here: we should produce quality services and build up logistic of through transportation in both areas for container handling and for cargo owners providing them with information. Multimodal transit increase can also result in cargo flow growth". 

To shorten delivery time, containers are transported by speeded containerized trains. The basis for transit transportation makes up trains following the route Nakhodka Vostochnaya - Buslovskaya - Nakhodka Vostochnaya. Dispatches to the Middle and Central Asia, Moscow and Warsaw are also implemented. 

Surely, TransSib isn't the only transport corridor along which container rivers flow. All the trains mentioned above are just part of possible routes. We should mention other successful projects of block trains: "Eastern wind" (Berlin-Warsaw-Minsk-Moscow and further on towards Kazakhstan and Central Asia), "Mongolian vector" (Europe - CIS, Mongolia, China and back), "Baltica transit" (cargo transportation to/from/via the Baltic countries), China-Finland etc. This year three more trains have been launched: "Northern Lights" (Finland-Moscow), Muuga-Moscow, "Mercury" (Kaliningrad / Klaipeda (Lithuania)-Moscow). Many routes have attracted container cargo flows due to the integration of economic and technological potentials of railways and operator companies interested in developing this direction. The most far-sighted companies are joining their efforts to attract additional volumes of export-import and transit cargo to the Russian railways. This is the wisest step to make, considering the growth of such competitors as ocean carriers, railways of the countries- transport corridors participants that bypass Russia. Private companies of Germany, Iran and Russia are developing "North-South" international transport corridor. This will allow to provide independent transport links and attract additional cargo flows to transit via Russia. The corridor will also change the established container transportation routes and shorten delivery time, providing cargo delivery from India, Pakistan, countries of the Persian Gulf via the territory of Iran to Russia and also transit to the countries of Northern, Eastern and Central Europe. This route is three times shorter than the one servicing container transportation via the Suez Canal now. Nevertheless, to alter the traditional transport flows is not an easy task. It will make both the state bodies and private companies providing transportation in different countries unite their efforts. Today the forecasted transportation volume is estimated at 10 mln tons per year. 



To Risk is to Win

The rapid growth of container market in Russia stimulated a splash of business activities among transport process participants and attracted investors' attention in terms of infrastructure development. However, in V.Chisnakov's words, private stock is just watching now and doesn't invest heavily into the transportation process in container transportation segment. "Transportation needs heavy investment and the terms of covering outlay make 7-8 years. That is why not every investor is ready to offer money for such a term, considering the low level of business profitability in general", says Head of "Russkaya Troyka" JSC. 

Nevertheless, some bold heroes can be named. Such big players as "Transcontainer" JSC, "National Container Company" JSC, "Russkaya Troyka" JSC entered the market. Surely, a great number of small and big operator companies work in the sector of container transportation successfully, but the emergence of the above-mentioned powerful structures combining the state and private business interests has become a remarkable tendency and deserves special attention. 

The center for container cargo transportation "Transcontainer" was separated as OAO RZD affiliate in 2003. By now the company has managed to build up a vertically-integrated structure of container transportation management, container and rolling parks control and transport-forwarding services. "Such very structures possessing a wide range of technologies and property (including transport vehicles and equipment, terminals and warehouses capacities) are on demand by the international container system which comprises the Russian railways", - Peter Baskakov, Director of "Transcontainer" believes. The company takes about 16% on the container transportation market. "Transcontainer" JSC invests heavily into rolling stock purchase and containers (this year they acquired 2 thousand of fitting platforms of new type and 5 thousand of 40ft containers). In 2006 they plan to buy two thousand and 3,500 of the above-mentioned items respectively, to modernize their terminals (in particular, about RUR 3 bln was invested into that). The company possesses 17 departments in the Russian railways net, as well as in the agent net in the Baltic countries, Europe, Central and South-Eastern Asia, and it also dispatches containerized trains for 30 routes. Thus, on the basis of its own department and property OAO RZD is ready to leap forward and provide the whole range of container transportation services. "The key task of our department is to make the services level meet the world standards, - P.Baskakov emphasized. - First of all, this concerns joint information data base assisting in containerized cargo transportation and forwarding. Joining the unified information system of all our resources and, most importantly of our container sites in the cargo formation centers, will allow to establish the net of supporting transport-logistic junctions. Thus, we'll be able to provide our client with any complex transport service independently of the place of his application".

Having passed container transportation to its previous department, now affiliate company, OAO RZD went on and launched the carrier company "Russkaya Troyka" JSC on parity terms with "FESCO" JSC. Its major target is to boost Russia's and the TransSib's share in the general volume of container transportation for "Countries of Asian-Pacific Region - Western Europe" direction and to re-route container cargo flow from the ocean route via the Suez Canal to the TransSib. "Russkaya Troika" has already increased transportation volume by 1,342 TEU per month. In the nearest future the company plans to reach growth to 2,000 TEU per month. "This company launch is a result of the Russian railway strategic approach to competition with foreign container lines and the problem of through tariff rate optimization", P.Baskakov claims.



Fly in the Ointment

Speaking of problems that hinder further quality development of through intermodal container transportation, most market participants agree on the fact that the undeveloped transport infrastructure of the railways, joints "port-station", sea terminals, and old technological approach to transportation organization could become a serious restricting factor of Russia's economic growth. According to P.Baskakov, one of the major restricting factors of the TransSib development is inefficient equipment of the TSR's container terminals. They need to be equipped with reachstackers to handle 40ft containers. "In the industrial centers container terminals usually perform as logistic centers, - P.Basksov noticed. - To increase competition, we have to build up not only the national logistic system on the basis of our terminals, but integrate it into the transnational system. Most effectively it can be done by creating a big logistic center on the Russian-European border that would be connected with the system of the TransSib terminals".

According to "Russkaya Troyka" JSC representative, some problems arise due to the imbalance of export and import cargo flows. In fact, container flow structure and direction work so that the major volume of domestic and export transportation is destined from West to East when transit and import volumes are transported in reverse order - from East to West. Moreover, difference in their volumes makes 1.5-2 times. The Western direction is prevailing. "A possible solution here can become a scheme of registration and taxation of speeded containerized trains considering the opportunity for a cargo owner to redeem a container train as a whole that would allow a partial transportation of empty containers", Vladimir Chisnakov, head of "Russkaya Troyka" JSC offered. He also emphasized the issue of rolling stock and container back run. "This problem is important to consider in the process of changing transportation schemes. One of such transportation schemes can be the "block-train" model which supplies differentiated transportation of loaded and empty containers and envisages an opportunity of speeded back run for empty containers", V.Chisnakov added.

Summing up, it can be easily said that the market of container transportation longs for transfer from quantity to quality and is developing in a much more rapid way than it was expected.

Competitive environment has already formed and any competition stimulates development. To succeed in container market Russia must cooperate with every side interested. "Russkaya Troyka" JSC representative claims that in relation to creating a competition area with the biggest international operators' participating only well-thought approach can be applied. Any state tries to assert the rights of national carriers and participants of the national transport system. Speaking of quality aspect being developed at the moment, international operators can bring in a new culture of servicing, organization and technologies.



VICTORIA MERKUSHEVA
    [~DETAIL_TEXT] => 

Containers in Numbers

Container turnover made on the Russian market leaves the world market far behind in terms of growth rates. According to the results of 2004, container transportation market in Russia grew by 25% and amounted to 2.09 mln TEU (including transborder container transportation by railways). This year the growth is expected to reach about 500 thousand TEU (17-18%). 

Nevertheless, the share of containerized cargo in Russia amounts to 30%, and containers take only 1.5% in aggregate transportation volume (in developed European countries this figure fluctuates between 10% and 70%). The low level of containerization is explained by the nature of the country's economy, not by the market trend: the lion's share of the Russian export is raw materials, while container transportation is determined for produce. Moreover, the transport infrastructure of Russia does not help to improve the situation.

At the same time, according to the experts, the general potential of container transportation in the country is estimated at approximately100 mln tons and shows serious dynamics growth. For five recent years containerized cargo transportation volume has been growing by 15-20% annually. In particular, 2003 exceeded 2002 results by 17% (growth of foreign trade cargo transportation made 20.8%), results of 2004 - at 1.6 times (foreign trade cargo volume doubled). Last year added to the tendency with the increase by 18%, while in the ten months of 2005 the general volume of containerized cargo transportation boosted by 12.5%. 

Experts of the carrier company "Russkaya Troyka" believe that this sector has brilliant perspectives for development. Moreover, the problems with terminal infrastructure and liquidation of rolling stock deficit are solved, the annual increase of 20-25% for 2008-2010 period can be easily forecasted. 

It should be mentioned that now Russia can successfully compete on the transport services market making use of its unique geographical location. In fact, Russia can be regarded as a continental bridge between the countries of the Asian-Pacific region, Europe and Central Asia. Moreover, from the point of view of transport expenses, the minimization of this route is of most attractive sort for big cargo owners. According to the RF Ministry of Transport, the USA transport expenses for cargo delivery from Europe to the Asian-Pacific region make USD 658 bln, Japan spends on it about USD 340 bln, Germany - USD185 bln, and Great Britain - USD124 bln. If new transit routes are created, Russia could assist the world's leaders in reducing these expenditures. It is worth mentioning that the cargo turnover made between the USA and the countries of the Asian-Pacific region amounts to USD1 trillion, or about 14 mln containers per annum. 



Highly Competitive Environment

The geography of the Russian container transportation is rather spacious. The cargo flows are distributed for the continents as follows: Europe and Asian countries take the most part of them (about 40% and 30% respectively); countries of North America take little more than 10%, Central and South America less than 10%. The major tendency of the current year has become export growth accompanied with simultaneous transit cargo flows shortening. The growth of the Russian container export was provided by the increase of paper and cellulose volumes transportation, as well as non-ferrous metals (aluminum, in particular). Thus, last year the growth of paper volumes transported in containers made about 40%, the same results were indicated for non-ferrous metals transportation. 

The situation differs for transit. Vsevolod Goryainov, General Director of "VICS" JSC, says for the second half of the year all the Far-Eastern ports of Russia (those that handle transit cargo mostly) suffer a serious reduction of transit volumes by 30% in average. "This doesn't mean that Asian goods are not in demand anymore. There is still a great necessity in them, but cargo delivery via the TransSib is quite problematic. Consequently, railway has lost some part of transit", Mr.Goryainov stated. "Intercontainer Interfrigo" JSC noted that one of the factors restricting transit development is competition with sea carriers. "Nowadays it is practically impossible to get cargo following from Western Europe to South-Eastern Asia due to extraordinary low prices offered by sea carriers", Maxim Munkin, the company representative in Russia explained. 

Russia undergoes competition not only with sea rivals, but also with neighboring countries. China is actively developing its ports' activities and intends to compete in the area of railway cargo transportation. "Some years ago Chinese Government approved the programme of railways modernization, - Mr.Goryainov says. - So far China has completed the construction of modern railways on the border with Russia, Mongolia, and Uzbekistan. As soon as separate sectors are joined in the united net, Chinese railway will compete with the TranSib. Firstly, low tariffs on transportation will become a competitive advantage of the Chinese side". Thus, in the experts' opinion, such basic container terminals of the Russian Far East as "Vostochny International Container Services" JSC and "Vladivostok Container Terminal" JSC will face Chinese competition. The only question that remains is when the Chinese will decide to launch railway container service. At present China possesses free railway capacities that allow to transport containers to Siberia (by-passing the TransSib and Far-Eastern ports of Russia) and, thus, will be engaged soon. 

It's no secret that motor transportation is a serious competitor as well. At least some 45% of containerized cargo is transported by motor trucks, especially when destined for short distances. At present railways are the only mode of transport in the country where prices and tariffs are regulated by the state. Truckers work under more flexible conditions and set their prices independently. Consequently, motor transport is of more flexible sort for tariff building both for an ultimate client and forwarding companies. Surely, this is the most attractive factor for potential clients. 



Where Container Rivers Flow

"Transportation volumes via the TransSib are one of the most important criteria that allows to evaluate the functioning not only of the whole Russian transport complex, but of the international container system as well", Peter Baskakov, Director of "Transcontainer" of OAO RZD believes. In his words, for the last two years, the Russian railways have solved tactical problems of boosting cargo turnover via the TransSib. Heavy funds are invested into rolling stock and infrastructure, traffic control has been re-organized, customs procedures have been simplified, alternative services for cargo security are being developed. Thus, very attractive conditions to fasten cargo delivery, customs registration and reduce cost of transportation are being created. In fact, the TransSib is the most attractive, comfortable and shortest way to deliver containers from Asia to Europe. "For example, - Peter Baskakov says, - comparative analysis of 40ft container transportation cost from China to Europe via the transocean route port Shanghai-port Hamburg as opposed to the TransSib clearly shows that the latter is competitive for container delivery to Central and Eastern Europe (Germany, Poland, Hungary, Slovakia)". "Cargo flow from the countries of Asian-Pacific region is highly potential, - Vladimir Chisnakov, General Director of "Russkaya Troyka" JSC, states, - we can attract this cargo flow only playing on the major competitive advantage of Russia, i.e. period of delivery. With the help of its reduction, cargo owners can minimize warehouses reserves and working funds engaged in transportation. Our task is to minimize periods of cargo registration in cooperation with customs, ports, stevedoring companies and railway operators. One more competitive advantage can be found here: we should produce quality services and build up logistic of through transportation in both areas for container handling and for cargo owners providing them with information. Multimodal transit increase can also result in cargo flow growth". 

To shorten delivery time, containers are transported by speeded containerized trains. The basis for transit transportation makes up trains following the route Nakhodka Vostochnaya - Buslovskaya - Nakhodka Vostochnaya. Dispatches to the Middle and Central Asia, Moscow and Warsaw are also implemented. 

Surely, TransSib isn't the only transport corridor along which container rivers flow. All the trains mentioned above are just part of possible routes. We should mention other successful projects of block trains: "Eastern wind" (Berlin-Warsaw-Minsk-Moscow and further on towards Kazakhstan and Central Asia), "Mongolian vector" (Europe - CIS, Mongolia, China and back), "Baltica transit" (cargo transportation to/from/via the Baltic countries), China-Finland etc. This year three more trains have been launched: "Northern Lights" (Finland-Moscow), Muuga-Moscow, "Mercury" (Kaliningrad / Klaipeda (Lithuania)-Moscow). Many routes have attracted container cargo flows due to the integration of economic and technological potentials of railways and operator companies interested in developing this direction. The most far-sighted companies are joining their efforts to attract additional volumes of export-import and transit cargo to the Russian railways. This is the wisest step to make, considering the growth of such competitors as ocean carriers, railways of the countries- transport corridors participants that bypass Russia. Private companies of Germany, Iran and Russia are developing "North-South" international transport corridor. This will allow to provide independent transport links and attract additional cargo flows to transit via Russia. The corridor will also change the established container transportation routes and shorten delivery time, providing cargo delivery from India, Pakistan, countries of the Persian Gulf via the territory of Iran to Russia and also transit to the countries of Northern, Eastern and Central Europe. This route is three times shorter than the one servicing container transportation via the Suez Canal now. Nevertheless, to alter the traditional transport flows is not an easy task. It will make both the state bodies and private companies providing transportation in different countries unite their efforts. Today the forecasted transportation volume is estimated at 10 mln tons per year. 



To Risk is to Win

The rapid growth of container market in Russia stimulated a splash of business activities among transport process participants and attracted investors' attention in terms of infrastructure development. However, in V.Chisnakov's words, private stock is just watching now and doesn't invest heavily into the transportation process in container transportation segment. "Transportation needs heavy investment and the terms of covering outlay make 7-8 years. That is why not every investor is ready to offer money for such a term, considering the low level of business profitability in general", says Head of "Russkaya Troyka" JSC. 

Nevertheless, some bold heroes can be named. Such big players as "Transcontainer" JSC, "National Container Company" JSC, "Russkaya Troyka" JSC entered the market. Surely, a great number of small and big operator companies work in the sector of container transportation successfully, but the emergence of the above-mentioned powerful structures combining the state and private business interests has become a remarkable tendency and deserves special attention. 

The center for container cargo transportation "Transcontainer" was separated as OAO RZD affiliate in 2003. By now the company has managed to build up a vertically-integrated structure of container transportation management, container and rolling parks control and transport-forwarding services. "Such very structures possessing a wide range of technologies and property (including transport vehicles and equipment, terminals and warehouses capacities) are on demand by the international container system which comprises the Russian railways", - Peter Baskakov, Director of "Transcontainer" believes. The company takes about 16% on the container transportation market. "Transcontainer" JSC invests heavily into rolling stock purchase and containers (this year they acquired 2 thousand of fitting platforms of new type and 5 thousand of 40ft containers). In 2006 they plan to buy two thousand and 3,500 of the above-mentioned items respectively, to modernize their terminals (in particular, about RUR 3 bln was invested into that). The company possesses 17 departments in the Russian railways net, as well as in the agent net in the Baltic countries, Europe, Central and South-Eastern Asia, and it also dispatches containerized trains for 30 routes. Thus, on the basis of its own department and property OAO RZD is ready to leap forward and provide the whole range of container transportation services. "The key task of our department is to make the services level meet the world standards, - P.Baskakov emphasized. - First of all, this concerns joint information data base assisting in containerized cargo transportation and forwarding. Joining the unified information system of all our resources and, most importantly of our container sites in the cargo formation centers, will allow to establish the net of supporting transport-logistic junctions. Thus, we'll be able to provide our client with any complex transport service independently of the place of his application".

Having passed container transportation to its previous department, now affiliate company, OAO RZD went on and launched the carrier company "Russkaya Troyka" JSC on parity terms with "FESCO" JSC. Its major target is to boost Russia's and the TransSib's share in the general volume of container transportation for "Countries of Asian-Pacific Region - Western Europe" direction and to re-route container cargo flow from the ocean route via the Suez Canal to the TransSib. "Russkaya Troika" has already increased transportation volume by 1,342 TEU per month. In the nearest future the company plans to reach growth to 2,000 TEU per month. "This company launch is a result of the Russian railway strategic approach to competition with foreign container lines and the problem of through tariff rate optimization", P.Baskakov claims.



Fly in the Ointment

Speaking of problems that hinder further quality development of through intermodal container transportation, most market participants agree on the fact that the undeveloped transport infrastructure of the railways, joints "port-station", sea terminals, and old technological approach to transportation organization could become a serious restricting factor of Russia's economic growth. According to P.Baskakov, one of the major restricting factors of the TransSib development is inefficient equipment of the TSR's container terminals. They need to be equipped with reachstackers to handle 40ft containers. "In the industrial centers container terminals usually perform as logistic centers, - P.Basksov noticed. - To increase competition, we have to build up not only the national logistic system on the basis of our terminals, but integrate it into the transnational system. Most effectively it can be done by creating a big logistic center on the Russian-European border that would be connected with the system of the TransSib terminals".

According to "Russkaya Troyka" JSC representative, some problems arise due to the imbalance of export and import cargo flows. In fact, container flow structure and direction work so that the major volume of domestic and export transportation is destined from West to East when transit and import volumes are transported in reverse order - from East to West. Moreover, difference in their volumes makes 1.5-2 times. The Western direction is prevailing. "A possible solution here can become a scheme of registration and taxation of speeded containerized trains considering the opportunity for a cargo owner to redeem a container train as a whole that would allow a partial transportation of empty containers", Vladimir Chisnakov, head of "Russkaya Troyka" JSC offered. He also emphasized the issue of rolling stock and container back run. "This problem is important to consider in the process of changing transportation schemes. One of such transportation schemes can be the "block-train" model which supplies differentiated transportation of loaded and empty containers and envisages an opportunity of speeded back run for empty containers", V.Chisnakov added.

Summing up, it can be easily said that the market of container transportation longs for transfer from quantity to quality and is developing in a much more rapid way than it was expected.

Competitive environment has already formed and any competition stimulates development. To succeed in container market Russia must cooperate with every side interested. "Russkaya Troyka" JSC representative claims that in relation to creating a competition area with the biggest international operators' participating only well-thought approach can be applied. Any state tries to assert the rights of national carriers and participants of the national transport system. Speaking of quality aspect being developed at the moment, international operators can bring in a new culture of servicing, organization and technologies.



VICTORIA MERKUSHEVA
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Containers in Numbers

Container turnover made on the Russian market leaves the world market far behind in terms of growth rates. According to the results of 2004, container transportation market in Russia grew by 25% and amounted to 2.09 mln TEU (including transborder container transportation by railways). This year the growth is expected to reach about 500 thousand TEU (17-18%). 

Nevertheless, the share of containerized cargo in Russia amounts to 30%, and containers take only 1.5% in aggregate transportation volume (in developed European countries this figure fluctuates between 10% and 70%). The low level of containerization is explained by the nature of the country's economy, not by the market trend: the lion's share of the Russian export is raw materials, while container transportation is determined for produce. Moreover, the transport infrastructure of Russia does not help to improve the situation.

At the same time, according to the experts, the general potential of container transportation in the country is estimated at approximately100 mln tons and shows serious dynamics growth. For five recent years containerized cargo transportation volume has been growing by 15-20% annually. In particular, 2003 exceeded 2002 results by 17% (growth of foreign trade cargo transportation made 20.8%), results of 2004 - at 1.6 times (foreign trade cargo volume doubled). Last year added to the tendency with the increase by 18%, while in the ten months of 2005 the general volume of containerized cargo transportation boosted by 12.5%. 

Experts of the carrier company "Russkaya Troyka" believe that this sector has brilliant perspectives for development. Moreover, the problems with terminal infrastructure and liquidation of rolling stock deficit are solved, the annual increase of 20-25% for 2008-2010 period can be easily forecasted. 

It should be mentioned that now Russia can successfully compete on the transport services market making use of its unique geographical location. In fact, Russia can be regarded as a continental bridge between the countries of the Asian-Pacific region, Europe and Central Asia. Moreover, from the point of view of transport expenses, the minimization of this route is of most attractive sort for big cargo owners. According to the RF Ministry of Transport, the USA transport expenses for cargo delivery from Europe to the Asian-Pacific region make USD 658 bln, Japan spends on it about USD 340 bln, Germany - USD185 bln, and Great Britain - USD124 bln. If new transit routes are created, Russia could assist the world's leaders in reducing these expenditures. It is worth mentioning that the cargo turnover made between the USA and the countries of the Asian-Pacific region amounts to USD1 trillion, or about 14 mln containers per annum. 



Highly Competitive Environment

The geography of the Russian container transportation is rather spacious. The cargo flows are distributed for the continents as follows: Europe and Asian countries take the most part of them (about 40% and 30% respectively); countries of North America take little more than 10%, Central and South America less than 10%. The major tendency of the current year has become export growth accompanied with simultaneous transit cargo flows shortening. The growth of the Russian container export was provided by the increase of paper and cellulose volumes transportation, as well as non-ferrous metals (aluminum, in particular). Thus, last year the growth of paper volumes transported in containers made about 40%, the same results were indicated for non-ferrous metals transportation. 

The situation differs for transit. Vsevolod Goryainov, General Director of "VICS" JSC, says for the second half of the year all the Far-Eastern ports of Russia (those that handle transit cargo mostly) suffer a serious reduction of transit volumes by 30% in average. "This doesn't mean that Asian goods are not in demand anymore. There is still a great necessity in them, but cargo delivery via the TransSib is quite problematic. Consequently, railway has lost some part of transit", Mr.Goryainov stated. "Intercontainer Interfrigo" JSC noted that one of the factors restricting transit development is competition with sea carriers. "Nowadays it is practically impossible to get cargo following from Western Europe to South-Eastern Asia due to extraordinary low prices offered by sea carriers", Maxim Munkin, the company representative in Russia explained. 

Russia undergoes competition not only with sea rivals, but also with neighboring countries. China is actively developing its ports' activities and intends to compete in the area of railway cargo transportation. "Some years ago Chinese Government approved the programme of railways modernization, - Mr.Goryainov says. - So far China has completed the construction of modern railways on the border with Russia, Mongolia, and Uzbekistan. As soon as separate sectors are joined in the united net, Chinese railway will compete with the TranSib. Firstly, low tariffs on transportation will become a competitive advantage of the Chinese side". Thus, in the experts' opinion, such basic container terminals of the Russian Far East as "Vostochny International Container Services" JSC and "Vladivostok Container Terminal" JSC will face Chinese competition. The only question that remains is when the Chinese will decide to launch railway container service. At present China possesses free railway capacities that allow to transport containers to Siberia (by-passing the TransSib and Far-Eastern ports of Russia) and, thus, will be engaged soon. 

It's no secret that motor transportation is a serious competitor as well. At least some 45% of containerized cargo is transported by motor trucks, especially when destined for short distances. At present railways are the only mode of transport in the country where prices and tariffs are regulated by the state. Truckers work under more flexible conditions and set their prices independently. Consequently, motor transport is of more flexible sort for tariff building both for an ultimate client and forwarding companies. Surely, this is the most attractive factor for potential clients. 



Where Container Rivers Flow

"Transportation volumes via the TransSib are one of the most important criteria that allows to evaluate the functioning not only of the whole Russian transport complex, but of the international container system as well", Peter Baskakov, Director of "Transcontainer" of OAO RZD believes. In his words, for the last two years, the Russian railways have solved tactical problems of boosting cargo turnover via the TransSib. Heavy funds are invested into rolling stock and infrastructure, traffic control has been re-organized, customs procedures have been simplified, alternative services for cargo security are being developed. Thus, very attractive conditions to fasten cargo delivery, customs registration and reduce cost of transportation are being created. In fact, the TransSib is the most attractive, comfortable and shortest way to deliver containers from Asia to Europe. "For example, - Peter Baskakov says, - comparative analysis of 40ft container transportation cost from China to Europe via the transocean route port Shanghai-port Hamburg as opposed to the TransSib clearly shows that the latter is competitive for container delivery to Central and Eastern Europe (Germany, Poland, Hungary, Slovakia)". "Cargo flow from the countries of Asian-Pacific region is highly potential, - Vladimir Chisnakov, General Director of "Russkaya Troyka" JSC, states, - we can attract this cargo flow only playing on the major competitive advantage of Russia, i.e. period of delivery. With the help of its reduction, cargo owners can minimize warehouses reserves and working funds engaged in transportation. Our task is to minimize periods of cargo registration in cooperation with customs, ports, stevedoring companies and railway operators. One more competitive advantage can be found here: we should produce quality services and build up logistic of through transportation in both areas for container handling and for cargo owners providing them with information. Multimodal transit increase can also result in cargo flow growth". 

To shorten delivery time, containers are transported by speeded containerized trains. The basis for transit transportation makes up trains following the route Nakhodka Vostochnaya - Buslovskaya - Nakhodka Vostochnaya. Dispatches to the Middle and Central Asia, Moscow and Warsaw are also implemented. 

Surely, TransSib isn't the only transport corridor along which container rivers flow. All the trains mentioned above are just part of possible routes. We should mention other successful projects of block trains: "Eastern wind" (Berlin-Warsaw-Minsk-Moscow and further on towards Kazakhstan and Central Asia), "Mongolian vector" (Europe - CIS, Mongolia, China and back), "Baltica transit" (cargo transportation to/from/via the Baltic countries), China-Finland etc. This year three more trains have been launched: "Northern Lights" (Finland-Moscow), Muuga-Moscow, "Mercury" (Kaliningrad / Klaipeda (Lithuania)-Moscow). Many routes have attracted container cargo flows due to the integration of economic and technological potentials of railways and operator companies interested in developing this direction. The most far-sighted companies are joining their efforts to attract additional volumes of export-import and transit cargo to the Russian railways. This is the wisest step to make, considering the growth of such competitors as ocean carriers, railways of the countries- transport corridors participants that bypass Russia. Private companies of Germany, Iran and Russia are developing "North-South" international transport corridor. This will allow to provide independent transport links and attract additional cargo flows to transit via Russia. The corridor will also change the established container transportation routes and shorten delivery time, providing cargo delivery from India, Pakistan, countries of the Persian Gulf via the territory of Iran to Russia and also transit to the countries of Northern, Eastern and Central Europe. This route is three times shorter than the one servicing container transportation via the Suez Canal now. Nevertheless, to alter the traditional transport flows is not an easy task. It will make both the state bodies and private companies providing transportation in different countries unite their efforts. Today the forecasted transportation volume is estimated at 10 mln tons per year. 



To Risk is to Win

The rapid growth of container market in Russia stimulated a splash of business activities among transport process participants and attracted investors' attention in terms of infrastructure development. However, in V.Chisnakov's words, private stock is just watching now and doesn't invest heavily into the transportation process in container transportation segment. "Transportation needs heavy investment and the terms of covering outlay make 7-8 years. That is why not every investor is ready to offer money for such a term, considering the low level of business profitability in general", says Head of "Russkaya Troyka" JSC. 

Nevertheless, some bold heroes can be named. Such big players as "Transcontainer" JSC, "National Container Company" JSC, "Russkaya Troyka" JSC entered the market. Surely, a great number of small and big operator companies work in the sector of container transportation successfully, but the emergence of the above-mentioned powerful structures combining the state and private business interests has become a remarkable tendency and deserves special attention. 

The center for container cargo transportation "Transcontainer" was separated as OAO RZD affiliate in 2003. By now the company has managed to build up a vertically-integrated structure of container transportation management, container and rolling parks control and transport-forwarding services. "Such very structures possessing a wide range of technologies and property (including transport vehicles and equipment, terminals and warehouses capacities) are on demand by the international container system which comprises the Russian railways", - Peter Baskakov, Director of "Transcontainer" believes. The company takes about 16% on the container transportation market. "Transcontainer" JSC invests heavily into rolling stock purchase and containers (this year they acquired 2 thousand of fitting platforms of new type and 5 thousand of 40ft containers). In 2006 they plan to buy two thousand and 3,500 of the above-mentioned items respectively, to modernize their terminals (in particular, about RUR 3 bln was invested into that). The company possesses 17 departments in the Russian railways net, as well as in the agent net in the Baltic countries, Europe, Central and South-Eastern Asia, and it also dispatches containerized trains for 30 routes. Thus, on the basis of its own department and property OAO RZD is ready to leap forward and provide the whole range of container transportation services. "The key task of our department is to make the services level meet the world standards, - P.Baskakov emphasized. - First of all, this concerns joint information data base assisting in containerized cargo transportation and forwarding. Joining the unified information system of all our resources and, most importantly of our container sites in the cargo formation centers, will allow to establish the net of supporting transport-logistic junctions. Thus, we'll be able to provide our client with any complex transport service independently of the place of his application".

Having passed container transportation to its previous department, now affiliate company, OAO RZD went on and launched the carrier company "Russkaya Troyka" JSC on parity terms with "FESCO" JSC. Its major target is to boost Russia's and the TransSib's share in the general volume of container transportation for "Countries of Asian-Pacific Region - Western Europe" direction and to re-route container cargo flow from the ocean route via the Suez Canal to the TransSib. "Russkaya Troika" has already increased transportation volume by 1,342 TEU per month. In the nearest future the company plans to reach growth to 2,000 TEU per month. "This company launch is a result of the Russian railway strategic approach to competition with foreign container lines and the problem of through tariff rate optimization", P.Baskakov claims.



Fly in the Ointment

Speaking of problems that hinder further quality development of through intermodal container transportation, most market participants agree on the fact that the undeveloped transport infrastructure of the railways, joints "port-station", sea terminals, and old technological approach to transportation organization could become a serious restricting factor of Russia's economic growth. According to P.Baskakov, one of the major restricting factors of the TransSib development is inefficient equipment of the TSR's container terminals. They need to be equipped with reachstackers to handle 40ft containers. "In the industrial centers container terminals usually perform as logistic centers, - P.Basksov noticed. - To increase competition, we have to build up not only the national logistic system on the basis of our terminals, but integrate it into the transnational system. Most effectively it can be done by creating a big logistic center on the Russian-European border that would be connected with the system of the TransSib terminals".

According to "Russkaya Troyka" JSC representative, some problems arise due to the imbalance of export and import cargo flows. In fact, container flow structure and direction work so that the major volume of domestic and export transportation is destined from West to East when transit and import volumes are transported in reverse order - from East to West. Moreover, difference in their volumes makes 1.5-2 times. The Western direction is prevailing. "A possible solution here can become a scheme of registration and taxation of speeded containerized trains considering the opportunity for a cargo owner to redeem a container train as a whole that would allow a partial transportation of empty containers", Vladimir Chisnakov, head of "Russkaya Troyka" JSC offered. He also emphasized the issue of rolling stock and container back run. "This problem is important to consider in the process of changing transportation schemes. One of such transportation schemes can be the "block-train" model which supplies differentiated transportation of loaded and empty containers and envisages an opportunity of speeded back run for empty containers", V.Chisnakov added.

Summing up, it can be easily said that the market of container transportation longs for transfer from quantity to quality and is developing in a much more rapid way than it was expected.

Competitive environment has already formed and any competition stimulates development. To succeed in container market Russia must cooperate with every side interested. "Russkaya Troyka" JSC representative claims that in relation to creating a competition area with the biggest international operators' participating only well-thought approach can be applied. Any state tries to assert the rights of national carriers and participants of the national transport system. Speaking of quality aspect being developed at the moment, international operators can bring in a new culture of servicing, organization and technologies.



VICTORIA MERKUSHEVA
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Containers in Numbers

Container turnover made on the Russian market leaves the world market far behind in terms of growth rates. According to the results of 2004, container transportation market in Russia grew by 25% and amounted to 2.09 mln TEU (including transborder container transportation by railways). This year the growth is expected to reach about 500 thousand TEU (17-18%). 

Nevertheless, the share of containerized cargo in Russia amounts to 30%, and containers take only 1.5% in aggregate transportation volume (in developed European countries this figure fluctuates between 10% and 70%). The low level of containerization is explained by the nature of the country's economy, not by the market trend: the lion's share of the Russian export is raw materials, while container transportation is determined for produce. Moreover, the transport infrastructure of Russia does not help to improve the situation.

At the same time, according to the experts, the general potential of container transportation in the country is estimated at approximately100 mln tons and shows serious dynamics growth. For five recent years containerized cargo transportation volume has been growing by 15-20% annually. In particular, 2003 exceeded 2002 results by 17% (growth of foreign trade cargo transportation made 20.8%), results of 2004 - at 1.6 times (foreign trade cargo volume doubled). Last year added to the tendency with the increase by 18%, while in the ten months of 2005 the general volume of containerized cargo transportation boosted by 12.5%. 

Experts of the carrier company "Russkaya Troyka" believe that this sector has brilliant perspectives for development. Moreover, the problems with terminal infrastructure and liquidation of rolling stock deficit are solved, the annual increase of 20-25% for 2008-2010 period can be easily forecasted. 

It should be mentioned that now Russia can successfully compete on the transport services market making use of its unique geographical location. In fact, Russia can be regarded as a continental bridge between the countries of the Asian-Pacific region, Europe and Central Asia. Moreover, from the point of view of transport expenses, the minimization of this route is of most attractive sort for big cargo owners. According to the RF Ministry of Transport, the USA transport expenses for cargo delivery from Europe to the Asian-Pacific region make USD 658 bln, Japan spends on it about USD 340 bln, Germany - USD185 bln, and Great Britain - USD124 bln. If new transit routes are created, Russia could assist the world's leaders in reducing these expenditures. It is worth mentioning that the cargo turnover made between the USA and the countries of the Asian-Pacific region amounts to USD1 trillion, or about 14 mln containers per annum. 



Highly Competitive Environment

The geography of the Russian container transportation is rather spacious. The cargo flows are distributed for the continents as follows: Europe and Asian countries take the most part of them (about 40% and 30% respectively); countries of North America take little more than 10%, Central and South America less than 10%. The major tendency of the current year has become export growth accompanied with simultaneous transit cargo flows shortening. The growth of the Russian container export was provided by the increase of paper and cellulose volumes transportation, as well as non-ferrous metals (aluminum, in particular). Thus, last year the growth of paper volumes transported in containers made about 40%, the same results were indicated for non-ferrous metals transportation. 

The situation differs for transit. Vsevolod Goryainov, General Director of "VICS" JSC, says for the second half of the year all the Far-Eastern ports of Russia (those that handle transit cargo mostly) suffer a serious reduction of transit volumes by 30% in average. "This doesn't mean that Asian goods are not in demand anymore. There is still a great necessity in them, but cargo delivery via the TransSib is quite problematic. Consequently, railway has lost some part of transit", Mr.Goryainov stated. "Intercontainer Interfrigo" JSC noted that one of the factors restricting transit development is competition with sea carriers. "Nowadays it is practically impossible to get cargo following from Western Europe to South-Eastern Asia due to extraordinary low prices offered by sea carriers", Maxim Munkin, the company representative in Russia explained. 

Russia undergoes competition not only with sea rivals, but also with neighboring countries. China is actively developing its ports' activities and intends to compete in the area of railway cargo transportation. "Some years ago Chinese Government approved the programme of railways modernization, - Mr.Goryainov says. - So far China has completed the construction of modern railways on the border with Russia, Mongolia, and Uzbekistan. As soon as separate sectors are joined in the united net, Chinese railway will compete with the TranSib. Firstly, low tariffs on transportation will become a competitive advantage of the Chinese side". Thus, in the experts' opinion, such basic container terminals of the Russian Far East as "Vostochny International Container Services" JSC and "Vladivostok Container Terminal" JSC will face Chinese competition. The only question that remains is when the Chinese will decide to launch railway container service. At present China possesses free railway capacities that allow to transport containers to Siberia (by-passing the TransSib and Far-Eastern ports of Russia) and, thus, will be engaged soon. 

It's no secret that motor transportation is a serious competitor as well. At least some 45% of containerized cargo is transported by motor trucks, especially when destined for short distances. At present railways are the only mode of transport in the country where prices and tariffs are regulated by the state. Truckers work under more flexible conditions and set their prices independently. Consequently, motor transport is of more flexible sort for tariff building both for an ultimate client and forwarding companies. Surely, this is the most attractive factor for potential clients. 



Where Container Rivers Flow

"Transportation volumes via the TransSib are one of the most important criteria that allows to evaluate the functioning not only of the whole Russian transport complex, but of the international container system as well", Peter Baskakov, Director of "Transcontainer" of OAO RZD believes. In his words, for the last two years, the Russian railways have solved tactical problems of boosting cargo turnover via the TransSib. Heavy funds are invested into rolling stock and infrastructure, traffic control has been re-organized, customs procedures have been simplified, alternative services for cargo security are being developed. Thus, very attractive conditions to fasten cargo delivery, customs registration and reduce cost of transportation are being created. In fact, the TransSib is the most attractive, comfortable and shortest way to deliver containers from Asia to Europe. "For example, - Peter Baskakov says, - comparative analysis of 40ft container transportation cost from China to Europe via the transocean route port Shanghai-port Hamburg as opposed to the TransSib clearly shows that the latter is competitive for container delivery to Central and Eastern Europe (Germany, Poland, Hungary, Slovakia)". "Cargo flow from the countries of Asian-Pacific region is highly potential, - Vladimir Chisnakov, General Director of "Russkaya Troyka" JSC, states, - we can attract this cargo flow only playing on the major competitive advantage of Russia, i.e. period of delivery. With the help of its reduction, cargo owners can minimize warehouses reserves and working funds engaged in transportation. Our task is to minimize periods of cargo registration in cooperation with customs, ports, stevedoring companies and railway operators. One more competitive advantage can be found here: we should produce quality services and build up logistic of through transportation in both areas for container handling and for cargo owners providing them with information. Multimodal transit increase can also result in cargo flow growth". 

To shorten delivery time, containers are transported by speeded containerized trains. The basis for transit transportation makes up trains following the route Nakhodka Vostochnaya - Buslovskaya - Nakhodka Vostochnaya. Dispatches to the Middle and Central Asia, Moscow and Warsaw are also implemented. 

Surely, TransSib isn't the only transport corridor along which container rivers flow. All the trains mentioned above are just part of possible routes. We should mention other successful projects of block trains: "Eastern wind" (Berlin-Warsaw-Minsk-Moscow and further on towards Kazakhstan and Central Asia), "Mongolian vector" (Europe - CIS, Mongolia, China and back), "Baltica transit" (cargo transportation to/from/via the Baltic countries), China-Finland etc. This year three more trains have been launched: "Northern Lights" (Finland-Moscow), Muuga-Moscow, "Mercury" (Kaliningrad / Klaipeda (Lithuania)-Moscow). Many routes have attracted container cargo flows due to the integration of economic and technological potentials of railways and operator companies interested in developing this direction. The most far-sighted companies are joining their efforts to attract additional volumes of export-import and transit cargo to the Russian railways. This is the wisest step to make, considering the growth of such competitors as ocean carriers, railways of the countries- transport corridors participants that bypass Russia. Private companies of Germany, Iran and Russia are developing "North-South" international transport corridor. This will allow to provide independent transport links and attract additional cargo flows to transit via Russia. The corridor will also change the established container transportation routes and shorten delivery time, providing cargo delivery from India, Pakistan, countries of the Persian Gulf via the territory of Iran to Russia and also transit to the countries of Northern, Eastern and Central Europe. This route is three times shorter than the one servicing container transportation via the Suez Canal now. Nevertheless, to alter the traditional transport flows is not an easy task. It will make both the state bodies and private companies providing transportation in different countries unite their efforts. Today the forecasted transportation volume is estimated at 10 mln tons per year. 



To Risk is to Win

The rapid growth of container market in Russia stimulated a splash of business activities among transport process participants and attracted investors' attention in terms of infrastructure development. However, in V.Chisnakov's words, private stock is just watching now and doesn't invest heavily into the transportation process in container transportation segment. "Transportation needs heavy investment and the terms of covering outlay make 7-8 years. That is why not every investor is ready to offer money for such a term, considering the low level of business profitability in general", says Head of "Russkaya Troyka" JSC. 

Nevertheless, some bold heroes can be named. Such big players as "Transcontainer" JSC, "National Container Company" JSC, "Russkaya Troyka" JSC entered the market. Surely, a great number of small and big operator companies work in the sector of container transportation successfully, but the emergence of the above-mentioned powerful structures combining the state and private business interests has become a remarkable tendency and deserves special attention. 

The center for container cargo transportation "Transcontainer" was separated as OAO RZD affiliate in 2003. By now the company has managed to build up a vertically-integrated structure of container transportation management, container and rolling parks control and transport-forwarding services. "Such very structures possessing a wide range of technologies and property (including transport vehicles and equipment, terminals and warehouses capacities) are on demand by the international container system which comprises the Russian railways", - Peter Baskakov, Director of "Transcontainer" believes. The company takes about 16% on the container transportation market. "Transcontainer" JSC invests heavily into rolling stock purchase and containers (this year they acquired 2 thousand of fitting platforms of new type and 5 thousand of 40ft containers). In 2006 they plan to buy two thousand and 3,500 of the above-mentioned items respectively, to modernize their terminals (in particular, about RUR 3 bln was invested into that). The company possesses 17 departments in the Russian railways net, as well as in the agent net in the Baltic countries, Europe, Central and South-Eastern Asia, and it also dispatches containerized trains for 30 routes. Thus, on the basis of its own department and property OAO RZD is ready to leap forward and provide the whole range of container transportation services. "The key task of our department is to make the services level meet the world standards, - P.Baskakov emphasized. - First of all, this concerns joint information data base assisting in containerized cargo transportation and forwarding. Joining the unified information system of all our resources and, most importantly of our container sites in the cargo formation centers, will allow to establish the net of supporting transport-logistic junctions. Thus, we'll be able to provide our client with any complex transport service independently of the place of his application".

Having passed container transportation to its previous department, now affiliate company, OAO RZD went on and launched the carrier company "Russkaya Troyka" JSC on parity terms with "FESCO" JSC. Its major target is to boost Russia's and the TransSib's share in the general volume of container transportation for "Countries of Asian-Pacific Region - Western Europe" direction and to re-route container cargo flow from the ocean route via the Suez Canal to the TransSib. "Russkaya Troika" has already increased transportation volume by 1,342 TEU per month. In the nearest future the company plans to reach growth to 2,000 TEU per month. "This company launch is a result of the Russian railway strategic approach to competition with foreign container lines and the problem of through tariff rate optimization", P.Baskakov claims.



Fly in the Ointment

Speaking of problems that hinder further quality development of through intermodal container transportation, most market participants agree on the fact that the undeveloped transport infrastructure of the railways, joints "port-station", sea terminals, and old technological approach to transportation organization could become a serious restricting factor of Russia's economic growth. According to P.Baskakov, one of the major restricting factors of the TransSib development is inefficient equipment of the TSR's container terminals. They need to be equipped with reachstackers to handle 40ft containers. "In the industrial centers container terminals usually perform as logistic centers, - P.Basksov noticed. - To increase competition, we have to build up not only the national logistic system on the basis of our terminals, but integrate it into the transnational system. Most effectively it can be done by creating a big logistic center on the Russian-European border that would be connected with the system of the TransSib terminals".

According to "Russkaya Troyka" JSC representative, some problems arise due to the imbalance of export and import cargo flows. In fact, container flow structure and direction work so that the major volume of domestic and export transportation is destined from West to East when transit and import volumes are transported in reverse order - from East to West. Moreover, difference in their volumes makes 1.5-2 times. The Western direction is prevailing. "A possible solution here can become a scheme of registration and taxation of speeded containerized trains considering the opportunity for a cargo owner to redeem a container train as a whole that would allow a partial transportation of empty containers", Vladimir Chisnakov, head of "Russkaya Troyka" JSC offered. He also emphasized the issue of rolling stock and container back run. "This problem is important to consider in the process of changing transportation schemes. One of such transportation schemes can be the "block-train" model which supplies differentiated transportation of loaded and empty containers and envisages an opportunity of speeded back run for empty containers", V.Chisnakov added.

Summing up, it can be easily said that the market of container transportation longs for transfer from quantity to quality and is developing in a much more rapid way than it was expected.

Competitive environment has already formed and any competition stimulates development. To succeed in container market Russia must cooperate with every side interested. "Russkaya Troyka" JSC representative claims that in relation to creating a competition area with the biggest international operators' participating only well-thought approach can be applied. Any state tries to assert the rights of national carriers and participants of the national transport system. Speaking of quality aspect being developed at the moment, international operators can bring in a new culture of servicing, organization and technologies.



VICTORIA MERKUSHEVA
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Long Way to the Sea

Gazprom approved the plan of measures to construct the North European pipeline, which is to connect the Yuzhno-Russkoye field in the Yamalo-Nenetsky autonomous region with the Western Europe, in 2002. The construction of the first part of the pipeline's surface part Gryazovets-Vyborg began only on November 1, 2005. The project had not been realized, because Gazprom could not find partners in Europe, who could guarantee purchase of gas and provide an access to ultimate consumers. Since 2002, the top-managers of Gazprom held a lot of negotiations with representatives of European power companies such as E.ON Ruhrgas and BASF Wintershall, the British-Dutch Shell, the Norwegian Hydro, the French Total and the Dutch Gazunie. A number of cooperation agreements was signed with these companies, but no real steps were made. In September 2005, Gazprom managed to find partners in Europe: the German corporations E.ON Ruhrgas and BASF Wintershall guaranteed fuel purchase. Nevertheless, Gazprom decided to insure itself against the possible inconstancy of the foreign participants of the project. The company decided to construct an LNG-plant near the Finnish Gulf and a terminal in cooperation with Sovcomflot. In future it will make Gazprom independent of the foreign partners and the company will be able to transport liquefied natural gas (LNG) to any place by sea. 

The North-European pipeline is to provide Russian natural gas delivery to the Western Europe bypassing the territory of transit countries and to connect the Russian coast of the Baltic Sea (in the district of Vyborg) with the German coast. According to the preliminary data, the sea part of the pipeline will be connected with the onland one in Greifswald region. The route of the pipeline via the Baltic Sea will be defined more exactly in accordance with the results of the technical-economic analysis. The pipeline's length will exceed 1.2 thousand kilometers.

The North European pipeline is planned to be put into operation in 2010. On the first stage it is planned to construct one line with the annual capacity of 27.5 bln cub. m. of gas. The project also envisages construction of the second line after 2010, so the annual capacity of the North European pipeline will increase twice to 55 bln cub.m. According to the top-management of Gazprom, the total investments into the project of the two lines of the North European pipeline construction will exceed EUR 4 bln. The project's initiators do not conceal, they are going to attract private investors to the pipeline construction. 



ConstructionHas Started

Meanwhile, the general contractor of construction of a 50 km. part of the North European pipeline on the territory of the Boksitogorsky and Tikhvinsky districts of the Leningrad region - Northern Gas Lines CJSC - has already chosen sub-contractors for definite projects realization. The Russian companies did their best to take an active part in it. Northern Gas Lines CJSC (the general contractor of gas pipeline construction of the sector of 386-436 km.) decided that Smolensktruboprovodstroy OJSC, Krasnodargasstroy, Neftegas JSC, and Neftegasstroy CJSC would go in for pipeline construction there. According to the top-management of the company - general contractor of the project Yamalgasinvest CJSC (a subsidiary of Gasprom OJSC), pipes, reinforcement, about 2,000 employees and necessary equipment are being delivered to the place of construction. At the same time scientists are developing the optimal route of the underwater part of the North European pipeline, taking into account the importance of saving the ecological balance in the Baltic Sea. Construction of the object began in early autumn; still the ceremony of the gas pipeline junction is held on December 9. The members of the Russian Government participate in it.



Investors Do Not Believe in North European Pipeline

In spite of the fact that realization of the North European project has already started, international experts are sceptical about its investment prospects. At the last international forum "Transport infrastructure for oil and gas complex of Russia and the CIS", held in Moscow, where representatives of large investment funds were present, the Head of the Russian Energy Institute Vladimir Milov said, the North European pipeline's cost of EUR 4 bln was understated, and would increase in future. "If the project of the North European pipeline is realized, it will be the only line, not provided with export contracts. It is also not clear, where they will take the gas to fill the pipeline. Gazprom lacks investments for the further development of Yamal, and the developed fields are already exhausted. Development of the Yuzhno-Russkoye gas field also needs large investments", V.Milov stated.



The Baltics Suffer

Not so long ago the project of the North European pipeline was discussed as a project of a land pipeline, which was to cross the territory of Latvia, Lithuania, Kaliningrad region and Poland, bypassing Ukraine. Then the Russian authorities decided, it is unprofitable to pay so many transit countries for gas transit. Besides, in this case, the Baltic states and Poland would get additional instruments to put political pressure upon their partner. At the same time, the leaders of the Baltic states were offended since they were not informed about the changes of the North European pipeline construction.  Several days later after the contract for North European pipeline construction was signed, the Prime-Minister of Lithuania Algirdas Brauzauskas stated, construction of gas pipeline between Russia and Germany can turn into an ecocatastrophe for the Baltic Sea and the Baltic countries. Lithuania was supported by Latvia, Estonia and Poland.

The main complaint against the gas super project is the lack of the detailed ecological examination and of a clear plan, because, as ecologists think, during the construction, the underwater chemical disposals after the World War II can be damaged, which will have unpredictable consequents. The representatives of Gazprom say, they are going to make a detailed map of the chemical disposals and take precautions during work.

In spite of the fact that the authorities of the Baltic states and Poland criticized the North European pipeline project at first, the other day there appeared information that the Baltic states are interested in construction of a pipeline in the Baltic Sea. Such statements were made by the leaders of Estonia, Latvia and Lithuania - Arnold Ruutel, Vaira Vike-Freiberga and Valdas Adamkus - after their meeting in Tallinn. "This project is of vital importance for the Baltic states' economic development, and we want that our interests were also taken into account during the project's realization and implementation", the leader of Lithuania Valdas Adamkus underlined. Perhaps, the opinion of the Baltic states was influenced by the Gazprom's announcement in October, that the company is going to review the contract with Polish gas monopolist PGNiG, i.e. gas prices for Poland will increase. It used to be USD 120 for 1,000 cub.m., since January 1, 2006, it will be equal to the European price, i.e. USD 200 for 1,000 cub.m. As a result, the Baltic states had to submit that the "gas project" of the century bypassed them.



ILYA  SVERDLOV
    [~DETAIL_TEXT] => 

Long Way to the Sea

Gazprom approved the plan of measures to construct the North European pipeline, which is to connect the Yuzhno-Russkoye field in the Yamalo-Nenetsky autonomous region with the Western Europe, in 2002. The construction of the first part of the pipeline's surface part Gryazovets-Vyborg began only on November 1, 2005. The project had not been realized, because Gazprom could not find partners in Europe, who could guarantee purchase of gas and provide an access to ultimate consumers. Since 2002, the top-managers of Gazprom held a lot of negotiations with representatives of European power companies such as E.ON Ruhrgas and BASF Wintershall, the British-Dutch Shell, the Norwegian Hydro, the French Total and the Dutch Gazunie. A number of cooperation agreements was signed with these companies, but no real steps were made. In September 2005, Gazprom managed to find partners in Europe: the German corporations E.ON Ruhrgas and BASF Wintershall guaranteed fuel purchase. Nevertheless, Gazprom decided to insure itself against the possible inconstancy of the foreign participants of the project. The company decided to construct an LNG-plant near the Finnish Gulf and a terminal in cooperation with Sovcomflot. In future it will make Gazprom independent of the foreign partners and the company will be able to transport liquefied natural gas (LNG) to any place by sea. 

The North-European pipeline is to provide Russian natural gas delivery to the Western Europe bypassing the territory of transit countries and to connect the Russian coast of the Baltic Sea (in the district of Vyborg) with the German coast. According to the preliminary data, the sea part of the pipeline will be connected with the onland one in Greifswald region. The route of the pipeline via the Baltic Sea will be defined more exactly in accordance with the results of the technical-economic analysis. The pipeline's length will exceed 1.2 thousand kilometers.

The North European pipeline is planned to be put into operation in 2010. On the first stage it is planned to construct one line with the annual capacity of 27.5 bln cub. m. of gas. The project also envisages construction of the second line after 2010, so the annual capacity of the North European pipeline will increase twice to 55 bln cub.m. According to the top-management of Gazprom, the total investments into the project of the two lines of the North European pipeline construction will exceed EUR 4 bln. The project's initiators do not conceal, they are going to attract private investors to the pipeline construction. 



ConstructionHas Started

Meanwhile, the general contractor of construction of a 50 km. part of the North European pipeline on the territory of the Boksitogorsky and Tikhvinsky districts of the Leningrad region - Northern Gas Lines CJSC - has already chosen sub-contractors for definite projects realization. The Russian companies did their best to take an active part in it. Northern Gas Lines CJSC (the general contractor of gas pipeline construction of the sector of 386-436 km.) decided that Smolensktruboprovodstroy OJSC, Krasnodargasstroy, Neftegas JSC, and Neftegasstroy CJSC would go in for pipeline construction there. According to the top-management of the company - general contractor of the project Yamalgasinvest CJSC (a subsidiary of Gasprom OJSC), pipes, reinforcement, about 2,000 employees and necessary equipment are being delivered to the place of construction. At the same time scientists are developing the optimal route of the underwater part of the North European pipeline, taking into account the importance of saving the ecological balance in the Baltic Sea. Construction of the object began in early autumn; still the ceremony of the gas pipeline junction is held on December 9. The members of the Russian Government participate in it.



Investors Do Not Believe in North European Pipeline

In spite of the fact that realization of the North European project has already started, international experts are sceptical about its investment prospects. At the last international forum "Transport infrastructure for oil and gas complex of Russia and the CIS", held in Moscow, where representatives of large investment funds were present, the Head of the Russian Energy Institute Vladimir Milov said, the North European pipeline's cost of EUR 4 bln was understated, and would increase in future. "If the project of the North European pipeline is realized, it will be the only line, not provided with export contracts. It is also not clear, where they will take the gas to fill the pipeline. Gazprom lacks investments for the further development of Yamal, and the developed fields are already exhausted. Development of the Yuzhno-Russkoye gas field also needs large investments", V.Milov stated.



The Baltics Suffer

Not so long ago the project of the North European pipeline was discussed as a project of a land pipeline, which was to cross the territory of Latvia, Lithuania, Kaliningrad region and Poland, bypassing Ukraine. Then the Russian authorities decided, it is unprofitable to pay so many transit countries for gas transit. Besides, in this case, the Baltic states and Poland would get additional instruments to put political pressure upon their partner. At the same time, the leaders of the Baltic states were offended since they were not informed about the changes of the North European pipeline construction.  Several days later after the contract for North European pipeline construction was signed, the Prime-Minister of Lithuania Algirdas Brauzauskas stated, construction of gas pipeline between Russia and Germany can turn into an ecocatastrophe for the Baltic Sea and the Baltic countries. Lithuania was supported by Latvia, Estonia and Poland.

The main complaint against the gas super project is the lack of the detailed ecological examination and of a clear plan, because, as ecologists think, during the construction, the underwater chemical disposals after the World War II can be damaged, which will have unpredictable consequents. The representatives of Gazprom say, they are going to make a detailed map of the chemical disposals and take precautions during work.

In spite of the fact that the authorities of the Baltic states and Poland criticized the North European pipeline project at first, the other day there appeared information that the Baltic states are interested in construction of a pipeline in the Baltic Sea. Such statements were made by the leaders of Estonia, Latvia and Lithuania - Arnold Ruutel, Vaira Vike-Freiberga and Valdas Adamkus - after their meeting in Tallinn. "This project is of vital importance for the Baltic states' economic development, and we want that our interests were also taken into account during the project's realization and implementation", the leader of Lithuania Valdas Adamkus underlined. Perhaps, the opinion of the Baltic states was influenced by the Gazprom's announcement in October, that the company is going to review the contract with Polish gas monopolist PGNiG, i.e. gas prices for Poland will increase. It used to be USD 120 for 1,000 cub.m., since January 1, 2006, it will be equal to the European price, i.e. USD 200 for 1,000 cub.m. As a result, the Baltic states had to submit that the "gas project" of the century bypassed them.



ILYA  SVERDLOV
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Long Way to the Sea

Gazprom approved the plan of measures to construct the North European pipeline, which is to connect the Yuzhno-Russkoye field in the Yamalo-Nenetsky autonomous region with the Western Europe, in 2002. The construction of the first part of the pipeline's surface part Gryazovets-Vyborg began only on November 1, 2005. The project had not been realized, because Gazprom could not find partners in Europe, who could guarantee purchase of gas and provide an access to ultimate consumers. Since 2002, the top-managers of Gazprom held a lot of negotiations with representatives of European power companies such as E.ON Ruhrgas and BASF Wintershall, the British-Dutch Shell, the Norwegian Hydro, the French Total and the Dutch Gazunie. A number of cooperation agreements was signed with these companies, but no real steps were made. In September 2005, Gazprom managed to find partners in Europe: the German corporations E.ON Ruhrgas and BASF Wintershall guaranteed fuel purchase. Nevertheless, Gazprom decided to insure itself against the possible inconstancy of the foreign participants of the project. The company decided to construct an LNG-plant near the Finnish Gulf and a terminal in cooperation with Sovcomflot. In future it will make Gazprom independent of the foreign partners and the company will be able to transport liquefied natural gas (LNG) to any place by sea. 

The North-European pipeline is to provide Russian natural gas delivery to the Western Europe bypassing the territory of transit countries and to connect the Russian coast of the Baltic Sea (in the district of Vyborg) with the German coast. According to the preliminary data, the sea part of the pipeline will be connected with the onland one in Greifswald region. The route of the pipeline via the Baltic Sea will be defined more exactly in accordance with the results of the technical-economic analysis. The pipeline's length will exceed 1.2 thousand kilometers.

The North European pipeline is planned to be put into operation in 2010. On the first stage it is planned to construct one line with the annual capacity of 27.5 bln cub. m. of gas. The project also envisages construction of the second line after 2010, so the annual capacity of the North European pipeline will increase twice to 55 bln cub.m. According to the top-management of Gazprom, the total investments into the project of the two lines of the North European pipeline construction will exceed EUR 4 bln. The project's initiators do not conceal, they are going to attract private investors to the pipeline construction. 



ConstructionHas Started

Meanwhile, the general contractor of construction of a 50 km. part of the North European pipeline on the territory of the Boksitogorsky and Tikhvinsky districts of the Leningrad region - Northern Gas Lines CJSC - has already chosen sub-contractors for definite projects realization. The Russian companies did their best to take an active part in it. Northern Gas Lines CJSC (the general contractor of gas pipeline construction of the sector of 386-436 km.) decided that Smolensktruboprovodstroy OJSC, Krasnodargasstroy, Neftegas JSC, and Neftegasstroy CJSC would go in for pipeline construction there. According to the top-management of the company - general contractor of the project Yamalgasinvest CJSC (a subsidiary of Gasprom OJSC), pipes, reinforcement, about 2,000 employees and necessary equipment are being delivered to the place of construction. At the same time scientists are developing the optimal route of the underwater part of the North European pipeline, taking into account the importance of saving the ecological balance in the Baltic Sea. Construction of the object began in early autumn; still the ceremony of the gas pipeline junction is held on December 9. The members of the Russian Government participate in it.



Investors Do Not Believe in North European Pipeline

In spite of the fact that realization of the North European project has already started, international experts are sceptical about its investment prospects. At the last international forum "Transport infrastructure for oil and gas complex of Russia and the CIS", held in Moscow, where representatives of large investment funds were present, the Head of the Russian Energy Institute Vladimir Milov said, the North European pipeline's cost of EUR 4 bln was understated, and would increase in future. "If the project of the North European pipeline is realized, it will be the only line, not provided with export contracts. It is also not clear, where they will take the gas to fill the pipeline. Gazprom lacks investments for the further development of Yamal, and the developed fields are already exhausted. Development of the Yuzhno-Russkoye gas field also needs large investments", V.Milov stated.



The Baltics Suffer

Not so long ago the project of the North European pipeline was discussed as a project of a land pipeline, which was to cross the territory of Latvia, Lithuania, Kaliningrad region and Poland, bypassing Ukraine. Then the Russian authorities decided, it is unprofitable to pay so many transit countries for gas transit. Besides, in this case, the Baltic states and Poland would get additional instruments to put political pressure upon their partner. At the same time, the leaders of the Baltic states were offended since they were not informed about the changes of the North European pipeline construction.  Several days later after the contract for North European pipeline construction was signed, the Prime-Minister of Lithuania Algirdas Brauzauskas stated, construction of gas pipeline between Russia and Germany can turn into an ecocatastrophe for the Baltic Sea and the Baltic countries. Lithuania was supported by Latvia, Estonia and Poland.

The main complaint against the gas super project is the lack of the detailed ecological examination and of a clear plan, because, as ecologists think, during the construction, the underwater chemical disposals after the World War II can be damaged, which will have unpredictable consequents. The representatives of Gazprom say, they are going to make a detailed map of the chemical disposals and take precautions during work.

In spite of the fact that the authorities of the Baltic states and Poland criticized the North European pipeline project at first, the other day there appeared information that the Baltic states are interested in construction of a pipeline in the Baltic Sea. Such statements were made by the leaders of Estonia, Latvia and Lithuania - Arnold Ruutel, Vaira Vike-Freiberga and Valdas Adamkus - after their meeting in Tallinn. "This project is of vital importance for the Baltic states' economic development, and we want that our interests were also taken into account during the project's realization and implementation", the leader of Lithuania Valdas Adamkus underlined. Perhaps, the opinion of the Baltic states was influenced by the Gazprom's announcement in October, that the company is going to review the contract with Polish gas monopolist PGNiG, i.e. gas prices for Poland will increase. It used to be USD 120 for 1,000 cub.m., since January 1, 2006, it will be equal to the European price, i.e. USD 200 for 1,000 cub.m. As a result, the Baltic states had to submit that the "gas project" of the century bypassed them.



ILYA  SVERDLOV
    [~DETAIL_TEXT] => 

Long Way to the Sea

Gazprom approved the plan of measures to construct the North European pipeline, which is to connect the Yuzhno-Russkoye field in the Yamalo-Nenetsky autonomous region with the Western Europe, in 2002. The construction of the first part of the pipeline's surface part Gryazovets-Vyborg began only on November 1, 2005. The project had not been realized, because Gazprom could not find partners in Europe, who could guarantee purchase of gas and provide an access to ultimate consumers. Since 2002, the top-managers of Gazprom held a lot of negotiations with representatives of European power companies such as E.ON Ruhrgas and BASF Wintershall, the British-Dutch Shell, the Norwegian Hydro, the French Total and the Dutch Gazunie. A number of cooperation agreements was signed with these companies, but no real steps were made. In September 2005, Gazprom managed to find partners in Europe: the German corporations E.ON Ruhrgas and BASF Wintershall guaranteed fuel purchase. Nevertheless, Gazprom decided to insure itself against the possible inconstancy of the foreign participants of the project. The company decided to construct an LNG-plant near the Finnish Gulf and a terminal in cooperation with Sovcomflot. In future it will make Gazprom independent of the foreign partners and the company will be able to transport liquefied natural gas (LNG) to any place by sea. 

The North-European pipeline is to provide Russian natural gas delivery to the Western Europe bypassing the territory of transit countries and to connect the Russian coast of the Baltic Sea (in the district of Vyborg) with the German coast. According to the preliminary data, the sea part of the pipeline will be connected with the onland one in Greifswald region. The route of the pipeline via the Baltic Sea will be defined more exactly in accordance with the results of the technical-economic analysis. The pipeline's length will exceed 1.2 thousand kilometers.

The North European pipeline is planned to be put into operation in 2010. On the first stage it is planned to construct one line with the annual capacity of 27.5 bln cub. m. of gas. The project also envisages construction of the second line after 2010, so the annual capacity of the North European pipeline will increase twice to 55 bln cub.m. According to the top-management of Gazprom, the total investments into the project of the two lines of the North European pipeline construction will exceed EUR 4 bln. The project's initiators do not conceal, they are going to attract private investors to the pipeline construction. 



ConstructionHas Started

Meanwhile, the general contractor of construction of a 50 km. part of the North European pipeline on the territory of the Boksitogorsky and Tikhvinsky districts of the Leningrad region - Northern Gas Lines CJSC - has already chosen sub-contractors for definite projects realization. The Russian companies did their best to take an active part in it. Northern Gas Lines CJSC (the general contractor of gas pipeline construction of the sector of 386-436 km.) decided that Smolensktruboprovodstroy OJSC, Krasnodargasstroy, Neftegas JSC, and Neftegasstroy CJSC would go in for pipeline construction there. According to the top-management of the company - general contractor of the project Yamalgasinvest CJSC (a subsidiary of Gasprom OJSC), pipes, reinforcement, about 2,000 employees and necessary equipment are being delivered to the place of construction. At the same time scientists are developing the optimal route of the underwater part of the North European pipeline, taking into account the importance of saving the ecological balance in the Baltic Sea. Construction of the object began in early autumn; still the ceremony of the gas pipeline junction is held on December 9. The members of the Russian Government participate in it.



Investors Do Not Believe in North European Pipeline

In spite of the fact that realization of the North European project has already started, international experts are sceptical about its investment prospects. At the last international forum "Transport infrastructure for oil and gas complex of Russia and the CIS", held in Moscow, where representatives of large investment funds were present, the Head of the Russian Energy Institute Vladimir Milov said, the North European pipeline's cost of EUR 4 bln was understated, and would increase in future. "If the project of the North European pipeline is realized, it will be the only line, not provided with export contracts. It is also not clear, where they will take the gas to fill the pipeline. Gazprom lacks investments for the further development of Yamal, and the developed fields are already exhausted. Development of the Yuzhno-Russkoye gas field also needs large investments", V.Milov stated.



The Baltics Suffer

Not so long ago the project of the North European pipeline was discussed as a project of a land pipeline, which was to cross the territory of Latvia, Lithuania, Kaliningrad region and Poland, bypassing Ukraine. Then the Russian authorities decided, it is unprofitable to pay so many transit countries for gas transit. Besides, in this case, the Baltic states and Poland would get additional instruments to put political pressure upon their partner. At the same time, the leaders of the Baltic states were offended since they were not informed about the changes of the North European pipeline construction.  Several days later after the contract for North European pipeline construction was signed, the Prime-Minister of Lithuania Algirdas Brauzauskas stated, construction of gas pipeline between Russia and Germany can turn into an ecocatastrophe for the Baltic Sea and the Baltic countries. Lithuania was supported by Latvia, Estonia and Poland.

The main complaint against the gas super project is the lack of the detailed ecological examination and of a clear plan, because, as ecologists think, during the construction, the underwater chemical disposals after the World War II can be damaged, which will have unpredictable consequents. The representatives of Gazprom say, they are going to make a detailed map of the chemical disposals and take precautions during work.

In spite of the fact that the authorities of the Baltic states and Poland criticized the North European pipeline project at first, the other day there appeared information that the Baltic states are interested in construction of a pipeline in the Baltic Sea. Such statements were made by the leaders of Estonia, Latvia and Lithuania - Arnold Ruutel, Vaira Vike-Freiberga and Valdas Adamkus - after their meeting in Tallinn. "This project is of vital importance for the Baltic states' economic development, and we want that our interests were also taken into account during the project's realization and implementation", the leader of Lithuania Valdas Adamkus underlined. Perhaps, the opinion of the Baltic states was influenced by the Gazprom's announcement in October, that the company is going to review the contract with Polish gas monopolist PGNiG, i.e. gas prices for Poland will increase. It used to be USD 120 for 1,000 cub.m., since January 1, 2006, it will be equal to the European price, i.e. USD 200 for 1,000 cub.m. As a result, the Baltic states had to submit that the "gas project" of the century bypassed them.



ILYA  SVERDLOV
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In late October the RF President Vladimir Putting pointed out the fact that the Government had been unjustifiably protracting the Eastern Siberia - Pacific Ocean (ESPO) pipeline project agreement, after which Mikhail Fradkov took the project under his personal control and demanded the pipeline designing and construction schedule be immediately submitted to him, but now the terms of starting the construction turns on the Ministry of Nature. 

At the last meeting of the Ministry of Nature led by its head Yury Trutnev, it was decided to agree to the pipeline designing and construction schedule only after the Ministry's criticism is reflected in the document. The major disagreement is concerned with the dates of the feasibility study agreement, which is postponed by the minimum of two months. According to the schedule, the Ministry's divisions were to complete all the agreements before 10-11 November. But the commission to develop the RF Ministry of Natural Resources opinion on the pipeline feasibility study was formed only on 27 October. "The opinion will be ready in 30 days and submitted  for the state environmental expert examination to the RF Federal Service for Ecological, Technological and Nuclear Inspection (Rostechnadzor), informed the Ministry of Natural Resources, Therefore the schedule of operations needs to be adjusted". Thus, if the pipeline designing and construction schedule is to be kept up with, Rostechnadzor will only have a month for the environmental expert examination, which is to be completed according to the schedule by 28 December. 



ESPO construction plan

The decision on the construction of the first part of the Eastern Siberia - Pacific Ocean pipeline costing USD 6.5 bln was taken by the RF Government in late April. After commissioning it, the total throughput of the Taishet - Skovorodino pipeline will reach 80 mln tons of oil per annum. The pipeline will be used to deliver oil to the countries of the Asian-Pacific region, mainly to China and Japan. According to the developers calculations, the first line of 2350 km long, starting in the city of Taishet of Irkutsk oblast and ending in the city of Skovorodino of the Amur oblast near the Chinese border will start pumping 30 mln tons of oil a year already in the second half of 2008. This stage will also include linking in Taishet and Kazachinskoye of field pipelines from the Eastern Siberian deposits, in particular from the Yurubcheno-Takhomskoye, Kuyumbinskoye, Srednebotuobinskoye, Verhknechonskoye, and Talakanskoye fields already passed to large oil and gas companies.

Parallel to commissioning of the first branch of the pipeline to Skovorodino, there is to be launched the first complex of an oil terminal of similar capacity - 30 mln tons - in the Perevoznaya bay of the Primorskiy Kray. It means that the oil carried from the Eastern Siberian fields by the new pipeline will be then delivered from Skovorodino to China by rail. According to the chief economist of the Economic Research Institute of North-Eastern Asia (ERINA) Hisako Tsui, oil will first get to the port of Datsin, to be further distributed by internal pipelines to the refining plants. At that the oil products from the Datsin refinery will be delivered to various Chinese provinces by railway. 

The process of oil delivery to Japan before the completion of the second part of the pipeline will be more complicated - in Skovorodino the oil will be poured into cisterns to be repoured in the Perevoznaya bay in tankers and delivered further by sea. 



ESPO endpoint not determined yet

According to experts, the main reason for delay in the project realization consists in the lack of unanimity in respect to the question of the ESPO endpoint. Initially the Transneft project indicated the endpoint to be in the Perevoznaya bay. But the Minister Yury Trutnev declared that the Ministry of Natural Resources is against constructing an oil terminal in the Perevoznaya bay, "whose climate and biological conditions do not allow for carrying out the corresponding operations". "We believe it would be much more expedient, safe and efficient to construct the terminal, for example, near the Nakhodka port. Besides, there is all the necessary infrastructure, railway in particular, while the latter is yet to be constructed if we choose the Perevoznaya bay", said the Minister.  

This viewpoint was shared by the head of the Ministry of Economic Development and Trade German Gref and head of the Ministry of Transport Igor Levitin, who find it more expedient to make the Kozmino bay near the ports of Vostochny and port Nahkodka  the pipeline endpoint. The head of the Ministry of Transport agrees that constructing the pipeline endpoint near Nakhodka will be much cheaper. While the head of the Ministry of Economic Development and Trade German Gref said this wish of the Ministers will be passed to Transneft for them to introduce the necessary changes in the pipeline construction feasibility study.

Still, it will be Transneft to carry out the pipeline construction and exploitation. The company's vice president Sergey Grigoryev said that the pipeline feasibility study submitted for agreement to the Ministry of Natural Resources provides for only one endpoint - the Perevoznaya bay. To change it the Ministry will have to deny Transneft its agreement, which would seriously increase the lag from the initial schedule made by the Ministry of Industry and Energy. Therefore, S.Grigoryev said Transneft hopes for the schedule to be adhered to. The fact is the company already had to adjust it - the start of the project realization had been planned for mid-2005, but the initial estimated cost of the project of USD 16 bln did not satisfy the officials, who requested for it to be reduced. The Transneft experts then suggested a cheaper route for the pipeline with the estimated cost of USD 11.5 bln, but this was strongly criticized by the Primorsky Kray green movement, who claimed it unacceptable to lay the pipeline in 80 kilometers from the Baikal lake. The Transneft experts refuse to see what damage can be inflicted to the lake by the pipeline. S. Grigoryev suggested that the project opponents "wait for the Government decision", reminding, that "there is a railway passing along the Baikal coast, carrying trains with oil in particular, and noone sees any problem in this". 



In orderto diversify supply

Till recently Russia refused to give any concrete promises to China or Japan in respect to oil delivery by ESPO pipeline. The matter is to be resolved after the project approval by the RF Government and the negotiations between the Russian, Chinese and Japanese ministries of foreign policy. 

Clarity came from the President Vladimir Putin, who declared in October that the pipeline will be laid from Siberia first to China, and only then prolonged to the Pacific coast to Japan. "First there will be constructed the branch of pipeline to the Chinese city of Datsin, - said V.Putin, - But we shall also build a pipeline to Nakhodka". V.Putin said that pumping oil to Datsin Russia will be able to diversify its oil export routes and thus will not get dependent on some single consumer of its merchandize in the Asian-Pacific region.  



Waiting for investments

The construction of the ESPO pipeline will be financed by the general contractor Transneft by means of attracted resources. According to the Transneft head, the ESPO  project arose great interest on the part of foreign investors - a number of European, American, Japanese, and Chinese investment companies and banks were eager to finance the construction of the first part of the project costing USD 6.5 bln. But the protracted agreement process, lack of clarity with the endpoint and the Transneft monopolistic, in the eyes of other businessmen, policy negatively affect the project popularity.

"Basing on the sober economic calculation, the new pipelines should export oil from the Western Siberia, as the investigated resources there are relatively large and the carbohydrate material is located not very deep. But the Russian Government decided to construct a new pipeline to the Asian-Pacific region from the Eastern Siberia, most of fields being poorly investigated and developed there. At that the cost of oil delivery is expected to be quite high, even the initially suggested by Transneft price is unlikely to interest investors", thinks the head of the Russian Institute of Energy Research Vladimir Milov. Let us remind that in May Transneft suggested to set a tariff for pumping oil to Skovorodino in the amount of USD 49.9 per ton by delivering oil to China and a similar summed tariff to Skovorodino by pipe plus Skovorodino-Perevoznaya by rail. But in a few day there followed the RF Government reacted saying that "such a price does not correspond to the state interests". Neither did the OAO RZD agree with it, commenting that such a tariff for delivering oil from Skovorodino to Perevoznaya bay would not repay investments necessary to reconstruct the railway line and purchase new cisterns.

According to the Russian Institute of Energy Research experts, the ESPO pipeline construction was not supported by any of the Russian large oil companies. 



Oil for ESPO pipe

Analysts admit that without developing new rich oil fields the construction of the second part of the pipeline from Skovorodino to Perevoznaya bay may appear questionable. There will be no loading for the pipeline of 50 mln tons throughput  of oil per annum. But here another state company - Rosneft - comes to Transneft rescue. In early November the head of the oil company Sergey Bogdanchikov, having met with journalists in Hanty-Mansiysk, announced the necessity to take government measures aimed at ensuring the launch of the new ESPO pipeline by 2008. "We need the pipe by 2008, when the development of the Vankorskoye field of 15-20 mln t. of oil per annum is planned to be started",  Sergey Bogdanchikov said.  

Though, according to V.Milov, it is early to talk about developing the Vankorskoye field - despite its resources being truly large, it requires investment of the minimum of USD 4.5 bln.



ILYA SVERDLOV
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In late October the RF President Vladimir Putting pointed out the fact that the Government had been unjustifiably protracting the Eastern Siberia - Pacific Ocean (ESPO) pipeline project agreement, after which Mikhail Fradkov took the project under his personal control and demanded the pipeline designing and construction schedule be immediately submitted to him, but now the terms of starting the construction turns on the Ministry of Nature. 

At the last meeting of the Ministry of Nature led by its head Yury Trutnev, it was decided to agree to the pipeline designing and construction schedule only after the Ministry's criticism is reflected in the document. The major disagreement is concerned with the dates of the feasibility study agreement, which is postponed by the minimum of two months. According to the schedule, the Ministry's divisions were to complete all the agreements before 10-11 November. But the commission to develop the RF Ministry of Natural Resources opinion on the pipeline feasibility study was formed only on 27 October. "The opinion will be ready in 30 days and submitted  for the state environmental expert examination to the RF Federal Service for Ecological, Technological and Nuclear Inspection (Rostechnadzor), informed the Ministry of Natural Resources, Therefore the schedule of operations needs to be adjusted". Thus, if the pipeline designing and construction schedule is to be kept up with, Rostechnadzor will only have a month for the environmental expert examination, which is to be completed according to the schedule by 28 December. 



ESPO construction plan

The decision on the construction of the first part of the Eastern Siberia - Pacific Ocean pipeline costing USD 6.5 bln was taken by the RF Government in late April. After commissioning it, the total throughput of the Taishet - Skovorodino pipeline will reach 80 mln tons of oil per annum. The pipeline will be used to deliver oil to the countries of the Asian-Pacific region, mainly to China and Japan. According to the developers calculations, the first line of 2350 km long, starting in the city of Taishet of Irkutsk oblast and ending in the city of Skovorodino of the Amur oblast near the Chinese border will start pumping 30 mln tons of oil a year already in the second half of 2008. This stage will also include linking in Taishet and Kazachinskoye of field pipelines from the Eastern Siberian deposits, in particular from the Yurubcheno-Takhomskoye, Kuyumbinskoye, Srednebotuobinskoye, Verhknechonskoye, and Talakanskoye fields already passed to large oil and gas companies.

Parallel to commissioning of the first branch of the pipeline to Skovorodino, there is to be launched the first complex of an oil terminal of similar capacity - 30 mln tons - in the Perevoznaya bay of the Primorskiy Kray. It means that the oil carried from the Eastern Siberian fields by the new pipeline will be then delivered from Skovorodino to China by rail. According to the chief economist of the Economic Research Institute of North-Eastern Asia (ERINA) Hisako Tsui, oil will first get to the port of Datsin, to be further distributed by internal pipelines to the refining plants. At that the oil products from the Datsin refinery will be delivered to various Chinese provinces by railway. 

The process of oil delivery to Japan before the completion of the second part of the pipeline will be more complicated - in Skovorodino the oil will be poured into cisterns to be repoured in the Perevoznaya bay in tankers and delivered further by sea. 



ESPO endpoint not determined yet

According to experts, the main reason for delay in the project realization consists in the lack of unanimity in respect to the question of the ESPO endpoint. Initially the Transneft project indicated the endpoint to be in the Perevoznaya bay. But the Minister Yury Trutnev declared that the Ministry of Natural Resources is against constructing an oil terminal in the Perevoznaya bay, "whose climate and biological conditions do not allow for carrying out the corresponding operations". "We believe it would be much more expedient, safe and efficient to construct the terminal, for example, near the Nakhodka port. Besides, there is all the necessary infrastructure, railway in particular, while the latter is yet to be constructed if we choose the Perevoznaya bay", said the Minister.  

This viewpoint was shared by the head of the Ministry of Economic Development and Trade German Gref and head of the Ministry of Transport Igor Levitin, who find it more expedient to make the Kozmino bay near the ports of Vostochny and port Nahkodka  the pipeline endpoint. The head of the Ministry of Transport agrees that constructing the pipeline endpoint near Nakhodka will be much cheaper. While the head of the Ministry of Economic Development and Trade German Gref said this wish of the Ministers will be passed to Transneft for them to introduce the necessary changes in the pipeline construction feasibility study.

Still, it will be Transneft to carry out the pipeline construction and exploitation. The company's vice president Sergey Grigoryev said that the pipeline feasibility study submitted for agreement to the Ministry of Natural Resources provides for only one endpoint - the Perevoznaya bay. To change it the Ministry will have to deny Transneft its agreement, which would seriously increase the lag from the initial schedule made by the Ministry of Industry and Energy. Therefore, S.Grigoryev said Transneft hopes for the schedule to be adhered to. The fact is the company already had to adjust it - the start of the project realization had been planned for mid-2005, but the initial estimated cost of the project of USD 16 bln did not satisfy the officials, who requested for it to be reduced. The Transneft experts then suggested a cheaper route for the pipeline with the estimated cost of USD 11.5 bln, but this was strongly criticized by the Primorsky Kray green movement, who claimed it unacceptable to lay the pipeline in 80 kilometers from the Baikal lake. The Transneft experts refuse to see what damage can be inflicted to the lake by the pipeline. S. Grigoryev suggested that the project opponents "wait for the Government decision", reminding, that "there is a railway passing along the Baikal coast, carrying trains with oil in particular, and noone sees any problem in this". 



In orderto diversify supply

Till recently Russia refused to give any concrete promises to China or Japan in respect to oil delivery by ESPO pipeline. The matter is to be resolved after the project approval by the RF Government and the negotiations between the Russian, Chinese and Japanese ministries of foreign policy. 

Clarity came from the President Vladimir Putin, who declared in October that the pipeline will be laid from Siberia first to China, and only then prolonged to the Pacific coast to Japan. "First there will be constructed the branch of pipeline to the Chinese city of Datsin, - said V.Putin, - But we shall also build a pipeline to Nakhodka". V.Putin said that pumping oil to Datsin Russia will be able to diversify its oil export routes and thus will not get dependent on some single consumer of its merchandize in the Asian-Pacific region.  



Waiting for investments

The construction of the ESPO pipeline will be financed by the general contractor Transneft by means of attracted resources. According to the Transneft head, the ESPO  project arose great interest on the part of foreign investors - a number of European, American, Japanese, and Chinese investment companies and banks were eager to finance the construction of the first part of the project costing USD 6.5 bln. But the protracted agreement process, lack of clarity with the endpoint and the Transneft monopolistic, in the eyes of other businessmen, policy negatively affect the project popularity.

"Basing on the sober economic calculation, the new pipelines should export oil from the Western Siberia, as the investigated resources there are relatively large and the carbohydrate material is located not very deep. But the Russian Government decided to construct a new pipeline to the Asian-Pacific region from the Eastern Siberia, most of fields being poorly investigated and developed there. At that the cost of oil delivery is expected to be quite high, even the initially suggested by Transneft price is unlikely to interest investors", thinks the head of the Russian Institute of Energy Research Vladimir Milov. Let us remind that in May Transneft suggested to set a tariff for pumping oil to Skovorodino in the amount of USD 49.9 per ton by delivering oil to China and a similar summed tariff to Skovorodino by pipe plus Skovorodino-Perevoznaya by rail. But in a few day there followed the RF Government reacted saying that "such a price does not correspond to the state interests". Neither did the OAO RZD agree with it, commenting that such a tariff for delivering oil from Skovorodino to Perevoznaya bay would not repay investments necessary to reconstruct the railway line and purchase new cisterns.

According to the Russian Institute of Energy Research experts, the ESPO pipeline construction was not supported by any of the Russian large oil companies. 



Oil for ESPO pipe

Analysts admit that without developing new rich oil fields the construction of the second part of the pipeline from Skovorodino to Perevoznaya bay may appear questionable. There will be no loading for the pipeline of 50 mln tons throughput  of oil per annum. But here another state company - Rosneft - comes to Transneft rescue. In early November the head of the oil company Sergey Bogdanchikov, having met with journalists in Hanty-Mansiysk, announced the necessity to take government measures aimed at ensuring the launch of the new ESPO pipeline by 2008. "We need the pipe by 2008, when the development of the Vankorskoye field of 15-20 mln t. of oil per annum is planned to be started",  Sergey Bogdanchikov said.  

Though, according to V.Milov, it is early to talk about developing the Vankorskoye field - despite its resources being truly large, it requires investment of the minimum of USD 4.5 bln.



ILYA SVERDLOV
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In late October the RF President Vladimir Putting pointed out the fact that the Government had been unjustifiably protracting the Eastern Siberia - Pacific Ocean (ESPO) pipeline project agreement, after which Mikhail Fradkov took the project under his personal control and demanded the pipeline designing and construction schedule be immediately submitted to him, but now the terms of starting the construction turns on the Ministry of Nature. 

At the last meeting of the Ministry of Nature led by its head Yury Trutnev, it was decided to agree to the pipeline designing and construction schedule only after the Ministry's criticism is reflected in the document. The major disagreement is concerned with the dates of the feasibility study agreement, which is postponed by the minimum of two months. According to the schedule, the Ministry's divisions were to complete all the agreements before 10-11 November. But the commission to develop the RF Ministry of Natural Resources opinion on the pipeline feasibility study was formed only on 27 October. "The opinion will be ready in 30 days and submitted  for the state environmental expert examination to the RF Federal Service for Ecological, Technological and Nuclear Inspection (Rostechnadzor), informed the Ministry of Natural Resources, Therefore the schedule of operations needs to be adjusted". Thus, if the pipeline designing and construction schedule is to be kept up with, Rostechnadzor will only have a month for the environmental expert examination, which is to be completed according to the schedule by 28 December. 



ESPO construction plan

The decision on the construction of the first part of the Eastern Siberia - Pacific Ocean pipeline costing USD 6.5 bln was taken by the RF Government in late April. After commissioning it, the total throughput of the Taishet - Skovorodino pipeline will reach 80 mln tons of oil per annum. The pipeline will be used to deliver oil to the countries of the Asian-Pacific region, mainly to China and Japan. According to the developers calculations, the first line of 2350 km long, starting in the city of Taishet of Irkutsk oblast and ending in the city of Skovorodino of the Amur oblast near the Chinese border will start pumping 30 mln tons of oil a year already in the second half of 2008. This stage will also include linking in Taishet and Kazachinskoye of field pipelines from the Eastern Siberian deposits, in particular from the Yurubcheno-Takhomskoye, Kuyumbinskoye, Srednebotuobinskoye, Verhknechonskoye, and Talakanskoye fields already passed to large oil and gas companies.

Parallel to commissioning of the first branch of the pipeline to Skovorodino, there is to be launched the first complex of an oil terminal of similar capacity - 30 mln tons - in the Perevoznaya bay of the Primorskiy Kray. It means that the oil carried from the Eastern Siberian fields by the new pipeline will be then delivered from Skovorodino to China by rail. According to the chief economist of the Economic Research Institute of North-Eastern Asia (ERINA) Hisako Tsui, oil will first get to the port of Datsin, to be further distributed by internal pipelines to the refining plants. At that the oil products from the Datsin refinery will be delivered to various Chinese provinces by railway. 

The process of oil delivery to Japan before the completion of the second part of the pipeline will be more complicated - in Skovorodino the oil will be poured into cisterns to be repoured in the Perevoznaya bay in tankers and delivered further by sea. 



ESPO endpoint not determined yet

According to experts, the main reason for delay in the project realization consists in the lack of unanimity in respect to the question of the ESPO endpoint. Initially the Transneft project indicated the endpoint to be in the Perevoznaya bay. But the Minister Yury Trutnev declared that the Ministry of Natural Resources is against constructing an oil terminal in the Perevoznaya bay, "whose climate and biological conditions do not allow for carrying out the corresponding operations". "We believe it would be much more expedient, safe and efficient to construct the terminal, for example, near the Nakhodka port. Besides, there is all the necessary infrastructure, railway in particular, while the latter is yet to be constructed if we choose the Perevoznaya bay", said the Minister.  

This viewpoint was shared by the head of the Ministry of Economic Development and Trade German Gref and head of the Ministry of Transport Igor Levitin, who find it more expedient to make the Kozmino bay near the ports of Vostochny and port Nahkodka  the pipeline endpoint. The head of the Ministry of Transport agrees that constructing the pipeline endpoint near Nakhodka will be much cheaper. While the head of the Ministry of Economic Development and Trade German Gref said this wish of the Ministers will be passed to Transneft for them to introduce the necessary changes in the pipeline construction feasibility study.

Still, it will be Transneft to carry out the pipeline construction and exploitation. The company's vice president Sergey Grigoryev said that the pipeline feasibility study submitted for agreement to the Ministry of Natural Resources provides for only one endpoint - the Perevoznaya bay. To change it the Ministry will have to deny Transneft its agreement, which would seriously increase the lag from the initial schedule made by the Ministry of Industry and Energy. Therefore, S.Grigoryev said Transneft hopes for the schedule to be adhered to. The fact is the company already had to adjust it - the start of the project realization had been planned for mid-2005, but the initial estimated cost of the project of USD 16 bln did not satisfy the officials, who requested for it to be reduced. The Transneft experts then suggested a cheaper route for the pipeline with the estimated cost of USD 11.5 bln, but this was strongly criticized by the Primorsky Kray green movement, who claimed it unacceptable to lay the pipeline in 80 kilometers from the Baikal lake. The Transneft experts refuse to see what damage can be inflicted to the lake by the pipeline. S. Grigoryev suggested that the project opponents "wait for the Government decision", reminding, that "there is a railway passing along the Baikal coast, carrying trains with oil in particular, and noone sees any problem in this". 



In orderto diversify supply

Till recently Russia refused to give any concrete promises to China or Japan in respect to oil delivery by ESPO pipeline. The matter is to be resolved after the project approval by the RF Government and the negotiations between the Russian, Chinese and Japanese ministries of foreign policy. 

Clarity came from the President Vladimir Putin, who declared in October that the pipeline will be laid from Siberia first to China, and only then prolonged to the Pacific coast to Japan. "First there will be constructed the branch of pipeline to the Chinese city of Datsin, - said V.Putin, - But we shall also build a pipeline to Nakhodka". V.Putin said that pumping oil to Datsin Russia will be able to diversify its oil export routes and thus will not get dependent on some single consumer of its merchandize in the Asian-Pacific region.  



Waiting for investments

The construction of the ESPO pipeline will be financed by the general contractor Transneft by means of attracted resources. According to the Transneft head, the ESPO  project arose great interest on the part of foreign investors - a number of European, American, Japanese, and Chinese investment companies and banks were eager to finance the construction of the first part of the project costing USD 6.5 bln. But the protracted agreement process, lack of clarity with the endpoint and the Transneft monopolistic, in the eyes of other businessmen, policy negatively affect the project popularity.

"Basing on the sober economic calculation, the new pipelines should export oil from the Western Siberia, as the investigated resources there are relatively large and the carbohydrate material is located not very deep. But the Russian Government decided to construct a new pipeline to the Asian-Pacific region from the Eastern Siberia, most of fields being poorly investigated and developed there. At that the cost of oil delivery is expected to be quite high, even the initially suggested by Transneft price is unlikely to interest investors", thinks the head of the Russian Institute of Energy Research Vladimir Milov. Let us remind that in May Transneft suggested to set a tariff for pumping oil to Skovorodino in the amount of USD 49.9 per ton by delivering oil to China and a similar summed tariff to Skovorodino by pipe plus Skovorodino-Perevoznaya by rail. But in a few day there followed the RF Government reacted saying that "such a price does not correspond to the state interests". Neither did the OAO RZD agree with it, commenting that such a tariff for delivering oil from Skovorodino to Perevoznaya bay would not repay investments necessary to reconstruct the railway line and purchase new cisterns.

According to the Russian Institute of Energy Research experts, the ESPO pipeline construction was not supported by any of the Russian large oil companies. 



Oil for ESPO pipe

Analysts admit that without developing new rich oil fields the construction of the second part of the pipeline from Skovorodino to Perevoznaya bay may appear questionable. There will be no loading for the pipeline of 50 mln tons throughput  of oil per annum. But here another state company - Rosneft - comes to Transneft rescue. In early November the head of the oil company Sergey Bogdanchikov, having met with journalists in Hanty-Mansiysk, announced the necessity to take government measures aimed at ensuring the launch of the new ESPO pipeline by 2008. "We need the pipe by 2008, when the development of the Vankorskoye field of 15-20 mln t. of oil per annum is planned to be started",  Sergey Bogdanchikov said.  

Though, according to V.Milov, it is early to talk about developing the Vankorskoye field - despite its resources being truly large, it requires investment of the minimum of USD 4.5 bln.



ILYA SVERDLOV
    [~DETAIL_TEXT] => 

In late October the RF President Vladimir Putting pointed out the fact that the Government had been unjustifiably protracting the Eastern Siberia - Pacific Ocean (ESPO) pipeline project agreement, after which Mikhail Fradkov took the project under his personal control and demanded the pipeline designing and construction schedule be immediately submitted to him, but now the terms of starting the construction turns on the Ministry of Nature. 

At the last meeting of the Ministry of Nature led by its head Yury Trutnev, it was decided to agree to the pipeline designing and construction schedule only after the Ministry's criticism is reflected in the document. The major disagreement is concerned with the dates of the feasibility study agreement, which is postponed by the minimum of two months. According to the schedule, the Ministry's divisions were to complete all the agreements before 10-11 November. But the commission to develop the RF Ministry of Natural Resources opinion on the pipeline feasibility study was formed only on 27 October. "The opinion will be ready in 30 days and submitted  for the state environmental expert examination to the RF Federal Service for Ecological, Technological and Nuclear Inspection (Rostechnadzor), informed the Ministry of Natural Resources, Therefore the schedule of operations needs to be adjusted". Thus, if the pipeline designing and construction schedule is to be kept up with, Rostechnadzor will only have a month for the environmental expert examination, which is to be completed according to the schedule by 28 December. 



ESPO construction plan

The decision on the construction of the first part of the Eastern Siberia - Pacific Ocean pipeline costing USD 6.5 bln was taken by the RF Government in late April. After commissioning it, the total throughput of the Taishet - Skovorodino pipeline will reach 80 mln tons of oil per annum. The pipeline will be used to deliver oil to the countries of the Asian-Pacific region, mainly to China and Japan. According to the developers calculations, the first line of 2350 km long, starting in the city of Taishet of Irkutsk oblast and ending in the city of Skovorodino of the Amur oblast near the Chinese border will start pumping 30 mln tons of oil a year already in the second half of 2008. This stage will also include linking in Taishet and Kazachinskoye of field pipelines from the Eastern Siberian deposits, in particular from the Yurubcheno-Takhomskoye, Kuyumbinskoye, Srednebotuobinskoye, Verhknechonskoye, and Talakanskoye fields already passed to large oil and gas companies.

Parallel to commissioning of the first branch of the pipeline to Skovorodino, there is to be launched the first complex of an oil terminal of similar capacity - 30 mln tons - in the Perevoznaya bay of the Primorskiy Kray. It means that the oil carried from the Eastern Siberian fields by the new pipeline will be then delivered from Skovorodino to China by rail. According to the chief economist of the Economic Research Institute of North-Eastern Asia (ERINA) Hisako Tsui, oil will first get to the port of Datsin, to be further distributed by internal pipelines to the refining plants. At that the oil products from the Datsin refinery will be delivered to various Chinese provinces by railway. 

The process of oil delivery to Japan before the completion of the second part of the pipeline will be more complicated - in Skovorodino the oil will be poured into cisterns to be repoured in the Perevoznaya bay in tankers and delivered further by sea. 



ESPO endpoint not determined yet

According to experts, the main reason for delay in the project realization consists in the lack of unanimity in respect to the question of the ESPO endpoint. Initially the Transneft project indicated the endpoint to be in the Perevoznaya bay. But the Minister Yury Trutnev declared that the Ministry of Natural Resources is against constructing an oil terminal in the Perevoznaya bay, "whose climate and biological conditions do not allow for carrying out the corresponding operations". "We believe it would be much more expedient, safe and efficient to construct the terminal, for example, near the Nakhodka port. Besides, there is all the necessary infrastructure, railway in particular, while the latter is yet to be constructed if we choose the Perevoznaya bay", said the Minister.  

This viewpoint was shared by the head of the Ministry of Economic Development and Trade German Gref and head of the Ministry of Transport Igor Levitin, who find it more expedient to make the Kozmino bay near the ports of Vostochny and port Nahkodka  the pipeline endpoint. The head of the Ministry of Transport agrees that constructing the pipeline endpoint near Nakhodka will be much cheaper. While the head of the Ministry of Economic Development and Trade German Gref said this wish of the Ministers will be passed to Transneft for them to introduce the necessary changes in the pipeline construction feasibility study.

Still, it will be Transneft to carry out the pipeline construction and exploitation. The company's vice president Sergey Grigoryev said that the pipeline feasibility study submitted for agreement to the Ministry of Natural Resources provides for only one endpoint - the Perevoznaya bay. To change it the Ministry will have to deny Transneft its agreement, which would seriously increase the lag from the initial schedule made by the Ministry of Industry and Energy. Therefore, S.Grigoryev said Transneft hopes for the schedule to be adhered to. The fact is the company already had to adjust it - the start of the project realization had been planned for mid-2005, but the initial estimated cost of the project of USD 16 bln did not satisfy the officials, who requested for it to be reduced. The Transneft experts then suggested a cheaper route for the pipeline with the estimated cost of USD 11.5 bln, but this was strongly criticized by the Primorsky Kray green movement, who claimed it unacceptable to lay the pipeline in 80 kilometers from the Baikal lake. The Transneft experts refuse to see what damage can be inflicted to the lake by the pipeline. S. Grigoryev suggested that the project opponents "wait for the Government decision", reminding, that "there is a railway passing along the Baikal coast, carrying trains with oil in particular, and noone sees any problem in this". 



In orderto diversify supply

Till recently Russia refused to give any concrete promises to China or Japan in respect to oil delivery by ESPO pipeline. The matter is to be resolved after the project approval by the RF Government and the negotiations between the Russian, Chinese and Japanese ministries of foreign policy. 

Clarity came from the President Vladimir Putin, who declared in October that the pipeline will be laid from Siberia first to China, and only then prolonged to the Pacific coast to Japan. "First there will be constructed the branch of pipeline to the Chinese city of Datsin, - said V.Putin, - But we shall also build a pipeline to Nakhodka". V.Putin said that pumping oil to Datsin Russia will be able to diversify its oil export routes and thus will not get dependent on some single consumer of its merchandize in the Asian-Pacific region.  



Waiting for investments

The construction of the ESPO pipeline will be financed by the general contractor Transneft by means of attracted resources. According to the Transneft head, the ESPO  project arose great interest on the part of foreign investors - a number of European, American, Japanese, and Chinese investment companies and banks were eager to finance the construction of the first part of the project costing USD 6.5 bln. But the protracted agreement process, lack of clarity with the endpoint and the Transneft monopolistic, in the eyes of other businessmen, policy negatively affect the project popularity.

"Basing on the sober economic calculation, the new pipelines should export oil from the Western Siberia, as the investigated resources there are relatively large and the carbohydrate material is located not very deep. But the Russian Government decided to construct a new pipeline to the Asian-Pacific region from the Eastern Siberia, most of fields being poorly investigated and developed there. At that the cost of oil delivery is expected to be quite high, even the initially suggested by Transneft price is unlikely to interest investors", thinks the head of the Russian Institute of Energy Research Vladimir Milov. Let us remind that in May Transneft suggested to set a tariff for pumping oil to Skovorodino in the amount of USD 49.9 per ton by delivering oil to China and a similar summed tariff to Skovorodino by pipe plus Skovorodino-Perevoznaya by rail. But in a few day there followed the RF Government reacted saying that "such a price does not correspond to the state interests". Neither did the OAO RZD agree with it, commenting that such a tariff for delivering oil from Skovorodino to Perevoznaya bay would not repay investments necessary to reconstruct the railway line and purchase new cisterns.

According to the Russian Institute of Energy Research experts, the ESPO pipeline construction was not supported by any of the Russian large oil companies. 



Oil for ESPO pipe

Analysts admit that without developing new rich oil fields the construction of the second part of the pipeline from Skovorodino to Perevoznaya bay may appear questionable. There will be no loading for the pipeline of 50 mln tons throughput  of oil per annum. But here another state company - Rosneft - comes to Transneft rescue. In early November the head of the oil company Sergey Bogdanchikov, having met with journalists in Hanty-Mansiysk, announced the necessity to take government measures aimed at ensuring the launch of the new ESPO pipeline by 2008. "We need the pipe by 2008, when the development of the Vankorskoye field of 15-20 mln t. of oil per annum is planned to be started",  Sergey Bogdanchikov said.  

Though, according to V.Milov, it is early to talk about developing the Vankorskoye field - despite its resources being truly large, it requires investment of the minimum of USD 4.5 bln.



ILYA SVERDLOV
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Who won?

Naturally, it is the pipeline transport that is today in the most favourable situation. According to the fuel and energy complex companies, out of the 460 mln tons of oil produced in 2004, over 176 mln tons were pumped through the Transneft pipelines. And, despite the numerous experts' opinions that from this year on the carbohydrates output will be reducing, this is not going to tell on the pipeline transport turnover dynamics. Indeed, from the economic viewpoint, it is the most convenient, fastest and cheapest way of transportation.

Among the vivid proofs of the fact that oil giants tend to use pipelines is the intention announced by LUKOIL to cut down on its oil shipment via its own terminal in Vysotsk. The Baltic Pipeline System's (BTS) facilities to the Primorsk port are to be used as an alternative route. At the same time, the company had it calculated that at the present stage of the oil market development it is much more expedient to focus on the increased oil transportation in the domestic communication and fully employ its own oil-refining industry.

Generally speaking, from the very moment of its commissioning, BTS is striving to become the pipeline export leader. There is data that in 2004 it pumped 44.6 mln tons (the total turnover via the North-Western region comprised 58 mln tons, while the Azov-Black seas basin ports handled 100 mln tons, and the port of Novorossiysk (the leader in bulked cargoes handling) - almost 50 mln tons. Though the current year's dynamics shows that the southern ports are not going to give up their positions, it is logical to consider the Baltic sector as the most promising one. The problem of the Turkish straits received no solution in the recent years. Moreover, experts believe that Ankara is going to support the Kazakhstan and Azerbaijan oil producing companies in order to ensure loading for the Baku-Ceyhan pipeline.

Whatever the case, the struggle for the Caspian oil transit has been seriously affecting the cargo flows in the region for years. According to the "Oil and Capital" magazine, if 15 years ago Russia was the only oil exporter in the Black sea basin, in 1996, out of 46 mln tons of oil shipped via the Novorossiysk, Tuapse and Odessa terminals, 3.5 mln tons were comprised by Kazakhstan oil. The previous year Kazakhstan shipped in the transit mode via Russia over 40 mln tons of export oil, of which 33 mln tons were the share of the Azov-Black seas basin ports. And, although Russia benefits from the Kazakhstan transit, it is to the Russian companies that Transneft gives the most efficient transportation routes via Novorossiysk and Tuapse. At the same time, in order to increase the volume of export, the Russian oil industry has developed a scheme of leasing a certain part of the Russian quota of volumes to be pumped via the underloaded Caspian Pipeline Consortium (CTC).

Another prospective direction for the pipeline system development is the Eastern one. The construction of the Eastern Siberia - Pacific Ocean pipeline is being actively discussed at all levels (see "Eastern Siberia - Pacific Ocean project is waiting for investors", p.42 ). On the one hand, the huge investments in this route are absolutely justified, first of all, by the Transneft secure position, as well as by the favourable prices conjuncture on the external markets; and secondly, by the favourable economic situation in the Republic of China. Experts estimate China to become the world's largest oil importer in the few years to come. On the other hand, one needs to take into account the fact that since the beginning of the year slowing down of the oil production growth rate has become noticeable and in the nearest future the oil output is going to reduce. Besides, the world prices conjuncture is subject to fluctuations and no one can guarantee the high prices for carbohydrates to remain such in the long-term perspective. Finally, without developing new deposits in the Eastern Siberia, this pipeline is totally useless, as it will have no loading, while investment in the geological survey is mainly suggested to private companies, for which the question of risks advisability is most acute.



Vain hopesor logical results?

Railway and river modes of transport consider themselves as alternatives to the pipeline. But, in a certain sense, railway or river transportation of crude oil can be called nonsense. Traditionally these modes of transport have been responsible for large volumes of oil products. Nevertheless, both rail and river transport modes were wrong in making a stake on the high dynamics of both raw and processed carbohydrates shipment.

The inner water transport enterprises found itself in a worse situation. Despite the tariff preferences, the drop of bulked cargoes traffic on the river started as early as in 2004. Then the share of crude material comprised only 15%, the rest being black oil and vacuum gas-oil. But this year these are also expected to drop in volume.

"This navigation the volume of bulked cargoes carried by the Volgotanker vessels is expected to drop by 15-20%", says the company's president Andrey Kleimenov. "Even before the beginning of the navigation period, the bulked cargoes river transportation market was destabilized by the further attacks on Volgotanker by the tax and prosecutor services. As a result, the river transport grew unpredictable, first of all, for the consigners. Consequently, the flow of crude oil - the most attractive one in terms of profitability - is gone. Besides, the transportation structure is changed - the cargo flow has largely reoriented to the Northern route. In fact there remained on the river only the bulked cargoes that are impossible or inexpedient to carry by alternative transport modes - black oil and vacuum gas-oil. They are low-tariff cargoes. While taking into account the drastic increase of prices for fuel, communication and metal, all river shipping companies have to work on the marginal level of profitability, which does not allow them, by the way, to carry out long-term investment programs aimed at fleet renovation. Inner water transport is a capital-intensive long-term business that can only develop successfully in conditions of stability and predictability, which are largely lacking this year. And we can only hope that the bulked cargoes traffic in 2006 would remain the same as this year", he adds.

Railway transport is better off. First of all, it operates all year round and for many consigners this factor is the determining one in terms of long-term logistics planning. As to the river transport advantages - the best delivery terms and lowest tariffs - the railway is catching up with it in this respect, developing new efficient transportation schemes. The river transport cannot reduce the tariffs more, as with the increased prices for energy carriers this would make their business unprofitable.

But for the railway the bulked cargoes turnover dynamics is far from optimistic. According to OAO RZD, in the 9 months of 2005 the volume of bulked cargoes shipped by rail increased by 3.4% to the analogous period of the previous year. At the same time, the traffic structure changed towards a greater share of domestically-carried cargoes (growth by 3% up to 51.5%). Besides, crude oil is evidently abandoning the railway transport. If in 2002 and 2003 the volume of crude material carried in cisterns comprised 42.1% and 54.1% respectively, in 2004 the traffic decreased by 1.3% against the previous year. This year the tendency is even more vivid, with the share of crude oil in the total bulked cargoes turnover comprising 22.7% (4.1% less than in 2004). As to internationally-carried bulked cargoes, there was a noticeable decrease of export, the share of which comprised 46.3% (3.4% less than in 2004).

But the railway does not lose hope, foreseeing a 5%-increase of bulked cargoes traffic before the end of the year. Indeed, there is potential for the cargo flow increase. Firstly, the volume of oil products sent by producing companies to the Russian refineries is growing; secondly, there is the more promising segment of the oil industry focusing on the "lighter" and, consequently, more expensive on the external markets (as compared to the Urals) oil. Naturally, the exclusive product is not to be mixed in the pipe with other brands of oil and will have to be carried by rail.

Besides, the Chinese market appears most promising for the railway transport. In the 9 months of 2005, 27.7% of the total volume carried by the railway was the share of crude oil delivered to China. According to OAO RZD, in the framework of the Plan of Measures to Realize the Treaty of Friendship, Goodneighbour Policy and Cooperation signed by the RF and China on October 14, 2004, the parties, basing on the principle of mutual advantage, will do their best to inсrease the volume of crude oil delivered to China by rail to reach in 2005 the level of 10 mln tons, and in 2006 - not less than 15 mln tons a year.

The RF Government tariff policy also favours railway transportation. The railway can of course by no means catch up economically with the pipeline, or even seriously compete with it, but the level of the transportation constituent in railway delivery keeps going down.

According to OAO RZD, the producers' sale price for crude oil increased in August 2005 by the average of 77% to August 2004, and for oil products - by 63%. The dynamics of export prices for the crude and processed oil in the given period comprised +41.2% and +86.5% respectively. The transport constituent in delivering crude oil in the domestic communication comprised 19.5% (7.3% less than in 2004), and in the export trade to Russian seaports and land border crossing points - 5.9% and 20.1% respectively. As to oil products, the average railway transportation component in domestic communication did not exceed 8% (-1.8% to 2004), while by export via seaports the figure stayed at 14.4% (-2.7%) and via land border crossing points it was 20% (-1.9%).



Eternal conflict

In the 9 months of 2005 the bulked cargoes export via the Russian seaports increased by 8.5%, while via the land border crossing points it decreased. The volume of crude oil carried to the Baltic ports dropped two-fold, while the merchandise transportation to the Ukrainian terminals discontinued altogether. As to oil products delivery to the neighbouring states, their volume on the Baltic route increased by 7.6% and on the Ukrainian - by mere 2.3%.

It is quite clear that Russian consigner prefers Russian port terminals. Nevertheless, the interrelation of the two adjacent transport modes remains an issue for carriers. According to the Balttransservice company's experts, the terminal infrastructure development in Russia is still inadequate to the existing cargo flows, both in capacity and service rendered. The major problems are the imbalance of cargo flows and transshipment centers facilities, as well as the lack of cooperation between the carriers, consigners and terminals. The New Forwarding Company OJSC is of the same mind, adding to the list of issues the underdevelopment of by-port infrastructure, acute shortage of black oil handling facilities and lack of coordination in scheduling and serving tankers. "The port at present has no say in determining the schedule of trains arriving from various stations and various consigners, which results in jams on the railway-port junctions. Also the ports happen to confirm to consigners their accepting larger parties than they can in reality handle", comment the company representatives.

According to the Russian Seaports Association, in the 8 months of 2005 the country's seaports handled over 113.5 mln tons of crude oil (16.7% more than last year). Export grew by 13.8% to 101.2 mln tons. The greatest volume was handled by the ports of the Southern basin - 60.15 mln (+2%), though export here dropped slightly (-0.2%) to 52.4 mln tons. The North-Western basin terminals are the second: 51.6 mln tons (+42.3%), with export comprising 47.1 mln tons (+37%). The Far Eastern region's ports are traditionally the last: 1.7 mln tons, though with quite a considerable increase of turnover - +16.7% to the previous year.

As to oil products, it is the North-Western region that is the leader here: 17.5 mln tons after 8 months of operation (+7.3%), including 16.5 mln (+6%) of export. The Azov-Black seas basin is the second: 13.2 mln tons (+10.4%). The region's ports exported 12.4 mln tons of oil products (+8.5% to 2004). The Far Eastern ports handled 7.8 mln tons, 3.8% less than in the previous year. Export dropped by 9.4% to  5.3 mln tons. This totals 38.6 mln tons of oil products handled by the Russian ports in January-August 2005 (+5.8%).

If we analyze the structure of the railway transportation of bulked cargoes, we'll see that, according to the OAO RZD Center of Transport Services, the largest volumes are delivered to the ports of the North-Western basin - 50.5%; Southern and Far Eastern ones - 37.6% and 11.9% respectively. However, the ports' bulked cargoes handling facilities were exploited during the 9 months of the current year only to 82.3%, with most uneven ports loading.

Thus, if the ports of the North-Western basin were exploited to 92.3%, the St.Petersburg Commercial Seaport was used to 112.1% of its design capacity, Arkhangelsk - 213.3% and Kaliningrad - 416.7%. At the same time, the facilities of the following ports were underexploited: Murmansk - 22.0%, Vitino - 46.5%, Vysotsk - 78.9%. The facilities of the Southern basin ports were used to 85.7%. The most heavily used was the Sheskharis terminal of the Novorossiysk port - 214.3%, while the loading was not sufficient for the ports of Astrakhan - 9.2%, Makhachkala - 10.8%, Taganrog - 43.8%, Kavkaz - 58.5%. The ports of the Far East were exploited only to 51.7%. The loading of the Vladivostok port oil terminal "Pervaya Rechka" comprised 242.2% of the design capacity, while that of Nakhodka oil terminal "Krabovaya" and the Vanino seaport - only 44% and 39% respectively.

Thus, it is clear that there is no problem of port facilities shortage so far, taking into account the already intensive investment of the Russian ports into their own infrastructure development. The main issue for today is ensuring the adequate coordination of the adjacent transport modes operation.



Private operators

The work of the operator companies is one of the most interesting and promising trends in the railway transportation development. The oil transportation has long been the most dynamically developing segment of the market being formed. According to OAO RZD data, the company (owning the largest stock of cisterns of 78.7 thousand units) has recently fallen behind private companies. Thus, only 35.6% of the total traffic was carried in the OAO RZD rolling stock in 2005, while in 2002 this share was 65%.

It is important to note that working on the bulked cargoes transportation market, operators, striving to turn into full-fledged carriers in time, offer their customers quite a wide gamut of services and quality both in respect to optimally developed logistic routes and in solving other transportation tasks. In other words, their concern for the consigners is much greater than that of the railway monopolist.

First of all, the independent companies, varying the rolling stock component, can offer discounts from the current tariffs. Secondly, approaching the customer's problems individually, private companies are always able to suggest optimal solutions. As told by the OAO New Forwarding Company experts, when developing new routes the company's representatives go to the destination point and consider on location the whole complex of works. For example, the way the product is delivered from the deposit, reservoir stock capacity, the operation mode of the loading rack, yard locomotives, the state of the railway infrastructure of the station and the consigner, the location of the carriages repair facilities and so on. Further, they estimate the route's throughput, routing and large-capacity cars possibilities, etc. On the basis of this information, they prepare the technological project, presentation and the commercial offer. There are always reserves to attract in order to optimize the transportation, increase the complex throughput and, finally, to reduce the carriage turnover and the cost of services. For example, the analysis of the situation in the Novourengoysky region while preparing the project for OAO Rosneft allowed the New Forwarding Company OJSC to develop a set of offers to almost double the light oil products turnover via the terminal. An analogous project was realized for the Ritek company at the Sergino station of the Sverdlovskaya Railway. "Competition to be observed in the bulked cargoes forwarding market at present stimulates constant search for new ideas in the plane of technologies. And if there arise solutions allowing to reduce the carriages turnover by a few days, there emerges the possibility of offering the customer exclusive delivery terms", comment the company representatives.

Estimating the situation objectively, it can be noted that OAO RZD cannot offer such flexibility and efficiency. But if formerly the positive dynamics of the bulked cargoes transportation stimulated the operators emergence and development, the current slowing down dynamics can have quite a negative effect on the sector. In other words, the development of competitive market of railway transportation can be hampered by economic factors.



TATYANA  TOKAREVA
    [~DETAIL_TEXT] => 

Who won?

Naturally, it is the pipeline transport that is today in the most favourable situation. According to the fuel and energy complex companies, out of the 460 mln tons of oil produced in 2004, over 176 mln tons were pumped through the Transneft pipelines. And, despite the numerous experts' opinions that from this year on the carbohydrates output will be reducing, this is not going to tell on the pipeline transport turnover dynamics. Indeed, from the economic viewpoint, it is the most convenient, fastest and cheapest way of transportation.

Among the vivid proofs of the fact that oil giants tend to use pipelines is the intention announced by LUKOIL to cut down on its oil shipment via its own terminal in Vysotsk. The Baltic Pipeline System's (BTS) facilities to the Primorsk port are to be used as an alternative route. At the same time, the company had it calculated that at the present stage of the oil market development it is much more expedient to focus on the increased oil transportation in the domestic communication and fully employ its own oil-refining industry.

Generally speaking, from the very moment of its commissioning, BTS is striving to become the pipeline export leader. There is data that in 2004 it pumped 44.6 mln tons (the total turnover via the North-Western region comprised 58 mln tons, while the Azov-Black seas basin ports handled 100 mln tons, and the port of Novorossiysk (the leader in bulked cargoes handling) - almost 50 mln tons. Though the current year's dynamics shows that the southern ports are not going to give up their positions, it is logical to consider the Baltic sector as the most promising one. The problem of the Turkish straits received no solution in the recent years. Moreover, experts believe that Ankara is going to support the Kazakhstan and Azerbaijan oil producing companies in order to ensure loading for the Baku-Ceyhan pipeline.

Whatever the case, the struggle for the Caspian oil transit has been seriously affecting the cargo flows in the region for years. According to the "Oil and Capital" magazine, if 15 years ago Russia was the only oil exporter in the Black sea basin, in 1996, out of 46 mln tons of oil shipped via the Novorossiysk, Tuapse and Odessa terminals, 3.5 mln tons were comprised by Kazakhstan oil. The previous year Kazakhstan shipped in the transit mode via Russia over 40 mln tons of export oil, of which 33 mln tons were the share of the Azov-Black seas basin ports. And, although Russia benefits from the Kazakhstan transit, it is to the Russian companies that Transneft gives the most efficient transportation routes via Novorossiysk and Tuapse. At the same time, in order to increase the volume of export, the Russian oil industry has developed a scheme of leasing a certain part of the Russian quota of volumes to be pumped via the underloaded Caspian Pipeline Consortium (CTC).

Another prospective direction for the pipeline system development is the Eastern one. The construction of the Eastern Siberia - Pacific Ocean pipeline is being actively discussed at all levels (see "Eastern Siberia - Pacific Ocean project is waiting for investors", p.42 ). On the one hand, the huge investments in this route are absolutely justified, first of all, by the Transneft secure position, as well as by the favourable prices conjuncture on the external markets; and secondly, by the favourable economic situation in the Republic of China. Experts estimate China to become the world's largest oil importer in the few years to come. On the other hand, one needs to take into account the fact that since the beginning of the year slowing down of the oil production growth rate has become noticeable and in the nearest future the oil output is going to reduce. Besides, the world prices conjuncture is subject to fluctuations and no one can guarantee the high prices for carbohydrates to remain such in the long-term perspective. Finally, without developing new deposits in the Eastern Siberia, this pipeline is totally useless, as it will have no loading, while investment in the geological survey is mainly suggested to private companies, for which the question of risks advisability is most acute.



Vain hopesor logical results?

Railway and river modes of transport consider themselves as alternatives to the pipeline. But, in a certain sense, railway or river transportation of crude oil can be called nonsense. Traditionally these modes of transport have been responsible for large volumes of oil products. Nevertheless, both rail and river transport modes were wrong in making a stake on the high dynamics of both raw and processed carbohydrates shipment.

The inner water transport enterprises found itself in a worse situation. Despite the tariff preferences, the drop of bulked cargoes traffic on the river started as early as in 2004. Then the share of crude material comprised only 15%, the rest being black oil and vacuum gas-oil. But this year these are also expected to drop in volume.

"This navigation the volume of bulked cargoes carried by the Volgotanker vessels is expected to drop by 15-20%", says the company's president Andrey Kleimenov. "Even before the beginning of the navigation period, the bulked cargoes river transportation market was destabilized by the further attacks on Volgotanker by the tax and prosecutor services. As a result, the river transport grew unpredictable, first of all, for the consigners. Consequently, the flow of crude oil - the most attractive one in terms of profitability - is gone. Besides, the transportation structure is changed - the cargo flow has largely reoriented to the Northern route. In fact there remained on the river only the bulked cargoes that are impossible or inexpedient to carry by alternative transport modes - black oil and vacuum gas-oil. They are low-tariff cargoes. While taking into account the drastic increase of prices for fuel, communication and metal, all river shipping companies have to work on the marginal level of profitability, which does not allow them, by the way, to carry out long-term investment programs aimed at fleet renovation. Inner water transport is a capital-intensive long-term business that can only develop successfully in conditions of stability and predictability, which are largely lacking this year. And we can only hope that the bulked cargoes traffic in 2006 would remain the same as this year", he adds.

Railway transport is better off. First of all, it operates all year round and for many consigners this factor is the determining one in terms of long-term logistics planning. As to the river transport advantages - the best delivery terms and lowest tariffs - the railway is catching up with it in this respect, developing new efficient transportation schemes. The river transport cannot reduce the tariffs more, as with the increased prices for energy carriers this would make their business unprofitable.

But for the railway the bulked cargoes turnover dynamics is far from optimistic. According to OAO RZD, in the 9 months of 2005 the volume of bulked cargoes shipped by rail increased by 3.4% to the analogous period of the previous year. At the same time, the traffic structure changed towards a greater share of domestically-carried cargoes (growth by 3% up to 51.5%). Besides, crude oil is evidently abandoning the railway transport. If in 2002 and 2003 the volume of crude material carried in cisterns comprised 42.1% and 54.1% respectively, in 2004 the traffic decreased by 1.3% against the previous year. This year the tendency is even more vivid, with the share of crude oil in the total bulked cargoes turnover comprising 22.7% (4.1% less than in 2004). As to internationally-carried bulked cargoes, there was a noticeable decrease of export, the share of which comprised 46.3% (3.4% less than in 2004).

But the railway does not lose hope, foreseeing a 5%-increase of bulked cargoes traffic before the end of the year. Indeed, there is potential for the cargo flow increase. Firstly, the volume of oil products sent by producing companies to the Russian refineries is growing; secondly, there is the more promising segment of the oil industry focusing on the "lighter" and, consequently, more expensive on the external markets (as compared to the Urals) oil. Naturally, the exclusive product is not to be mixed in the pipe with other brands of oil and will have to be carried by rail.

Besides, the Chinese market appears most promising for the railway transport. In the 9 months of 2005, 27.7% of the total volume carried by the railway was the share of crude oil delivered to China. According to OAO RZD, in the framework of the Plan of Measures to Realize the Treaty of Friendship, Goodneighbour Policy and Cooperation signed by the RF and China on October 14, 2004, the parties, basing on the principle of mutual advantage, will do their best to inсrease the volume of crude oil delivered to China by rail to reach in 2005 the level of 10 mln tons, and in 2006 - not less than 15 mln tons a year.

The RF Government tariff policy also favours railway transportation. The railway can of course by no means catch up economically with the pipeline, or even seriously compete with it, but the level of the transportation constituent in railway delivery keeps going down.

According to OAO RZD, the producers' sale price for crude oil increased in August 2005 by the average of 77% to August 2004, and for oil products - by 63%. The dynamics of export prices for the crude and processed oil in the given period comprised +41.2% and +86.5% respectively. The transport constituent in delivering crude oil in the domestic communication comprised 19.5% (7.3% less than in 2004), and in the export trade to Russian seaports and land border crossing points - 5.9% and 20.1% respectively. As to oil products, the average railway transportation component in domestic communication did not exceed 8% (-1.8% to 2004), while by export via seaports the figure stayed at 14.4% (-2.7%) and via land border crossing points it was 20% (-1.9%).



Eternal conflict

In the 9 months of 2005 the bulked cargoes export via the Russian seaports increased by 8.5%, while via the land border crossing points it decreased. The volume of crude oil carried to the Baltic ports dropped two-fold, while the merchandise transportation to the Ukrainian terminals discontinued altogether. As to oil products delivery to the neighbouring states, their volume on the Baltic route increased by 7.6% and on the Ukrainian - by mere 2.3%.

It is quite clear that Russian consigner prefers Russian port terminals. Nevertheless, the interrelation of the two adjacent transport modes remains an issue for carriers. According to the Balttransservice company's experts, the terminal infrastructure development in Russia is still inadequate to the existing cargo flows, both in capacity and service rendered. The major problems are the imbalance of cargo flows and transshipment centers facilities, as well as the lack of cooperation between the carriers, consigners and terminals. The New Forwarding Company OJSC is of the same mind, adding to the list of issues the underdevelopment of by-port infrastructure, acute shortage of black oil handling facilities and lack of coordination in scheduling and serving tankers. "The port at present has no say in determining the schedule of trains arriving from various stations and various consigners, which results in jams on the railway-port junctions. Also the ports happen to confirm to consigners their accepting larger parties than they can in reality handle", comment the company representatives.

According to the Russian Seaports Association, in the 8 months of 2005 the country's seaports handled over 113.5 mln tons of crude oil (16.7% more than last year). Export grew by 13.8% to 101.2 mln tons. The greatest volume was handled by the ports of the Southern basin - 60.15 mln (+2%), though export here dropped slightly (-0.2%) to 52.4 mln tons. The North-Western basin terminals are the second: 51.6 mln tons (+42.3%), with export comprising 47.1 mln tons (+37%). The Far Eastern region's ports are traditionally the last: 1.7 mln tons, though with quite a considerable increase of turnover - +16.7% to the previous year.

As to oil products, it is the North-Western region that is the leader here: 17.5 mln tons after 8 months of operation (+7.3%), including 16.5 mln (+6%) of export. The Azov-Black seas basin is the second: 13.2 mln tons (+10.4%). The region's ports exported 12.4 mln tons of oil products (+8.5% to 2004). The Far Eastern ports handled 7.8 mln tons, 3.8% less than in the previous year. Export dropped by 9.4% to  5.3 mln tons. This totals 38.6 mln tons of oil products handled by the Russian ports in January-August 2005 (+5.8%).

If we analyze the structure of the railway transportation of bulked cargoes, we'll see that, according to the OAO RZD Center of Transport Services, the largest volumes are delivered to the ports of the North-Western basin - 50.5%; Southern and Far Eastern ones - 37.6% and 11.9% respectively. However, the ports' bulked cargoes handling facilities were exploited during the 9 months of the current year only to 82.3%, with most uneven ports loading.

Thus, if the ports of the North-Western basin were exploited to 92.3%, the St.Petersburg Commercial Seaport was used to 112.1% of its design capacity, Arkhangelsk - 213.3% and Kaliningrad - 416.7%. At the same time, the facilities of the following ports were underexploited: Murmansk - 22.0%, Vitino - 46.5%, Vysotsk - 78.9%. The facilities of the Southern basin ports were used to 85.7%. The most heavily used was the Sheskharis terminal of the Novorossiysk port - 214.3%, while the loading was not sufficient for the ports of Astrakhan - 9.2%, Makhachkala - 10.8%, Taganrog - 43.8%, Kavkaz - 58.5%. The ports of the Far East were exploited only to 51.7%. The loading of the Vladivostok port oil terminal "Pervaya Rechka" comprised 242.2% of the design capacity, while that of Nakhodka oil terminal "Krabovaya" and the Vanino seaport - only 44% and 39% respectively.

Thus, it is clear that there is no problem of port facilities shortage so far, taking into account the already intensive investment of the Russian ports into their own infrastructure development. The main issue for today is ensuring the adequate coordination of the adjacent transport modes operation.



Private operators

The work of the operator companies is one of the most interesting and promising trends in the railway transportation development. The oil transportation has long been the most dynamically developing segment of the market being formed. According to OAO RZD data, the company (owning the largest stock of cisterns of 78.7 thousand units) has recently fallen behind private companies. Thus, only 35.6% of the total traffic was carried in the OAO RZD rolling stock in 2005, while in 2002 this share was 65%.

It is important to note that working on the bulked cargoes transportation market, operators, striving to turn into full-fledged carriers in time, offer their customers quite a wide gamut of services and quality both in respect to optimally developed logistic routes and in solving other transportation tasks. In other words, their concern for the consigners is much greater than that of the railway monopolist.

First of all, the independent companies, varying the rolling stock component, can offer discounts from the current tariffs. Secondly, approaching the customer's problems individually, private companies are always able to suggest optimal solutions. As told by the OAO New Forwarding Company experts, when developing new routes the company's representatives go to the destination point and consider on location the whole complex of works. For example, the way the product is delivered from the deposit, reservoir stock capacity, the operation mode of the loading rack, yard locomotives, the state of the railway infrastructure of the station and the consigner, the location of the carriages repair facilities and so on. Further, they estimate the route's throughput, routing and large-capacity cars possibilities, etc. On the basis of this information, they prepare the technological project, presentation and the commercial offer. There are always reserves to attract in order to optimize the transportation, increase the complex throughput and, finally, to reduce the carriage turnover and the cost of services. For example, the analysis of the situation in the Novourengoysky region while preparing the project for OAO Rosneft allowed the New Forwarding Company OJSC to develop a set of offers to almost double the light oil products turnover via the terminal. An analogous project was realized for the Ritek company at the Sergino station of the Sverdlovskaya Railway. "Competition to be observed in the bulked cargoes forwarding market at present stimulates constant search for new ideas in the plane of technologies. And if there arise solutions allowing to reduce the carriages turnover by a few days, there emerges the possibility of offering the customer exclusive delivery terms", comment the company representatives.

Estimating the situation objectively, it can be noted that OAO RZD cannot offer such flexibility and efficiency. But if formerly the positive dynamics of the bulked cargoes transportation stimulated the operators emergence and development, the current slowing down dynamics can have quite a negative effect on the sector. In other words, the development of competitive market of railway transportation can be hampered by economic factors.



TATYANA  TOKAREVA
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Who won?

Naturally, it is the pipeline transport that is today in the most favourable situation. According to the fuel and energy complex companies, out of the 460 mln tons of oil produced in 2004, over 176 mln tons were pumped through the Transneft pipelines. And, despite the numerous experts' opinions that from this year on the carbohydrates output will be reducing, this is not going to tell on the pipeline transport turnover dynamics. Indeed, from the economic viewpoint, it is the most convenient, fastest and cheapest way of transportation.

Among the vivid proofs of the fact that oil giants tend to use pipelines is the intention announced by LUKOIL to cut down on its oil shipment via its own terminal in Vysotsk. The Baltic Pipeline System's (BTS) facilities to the Primorsk port are to be used as an alternative route. At the same time, the company had it calculated that at the present stage of the oil market development it is much more expedient to focus on the increased oil transportation in the domestic communication and fully employ its own oil-refining industry.

Generally speaking, from the very moment of its commissioning, BTS is striving to become the pipeline export leader. There is data that in 2004 it pumped 44.6 mln tons (the total turnover via the North-Western region comprised 58 mln tons, while the Azov-Black seas basin ports handled 100 mln tons, and the port of Novorossiysk (the leader in bulked cargoes handling) - almost 50 mln tons. Though the current year's dynamics shows that the southern ports are not going to give up their positions, it is logical to consider the Baltic sector as the most promising one. The problem of the Turkish straits received no solution in the recent years. Moreover, experts believe that Ankara is going to support the Kazakhstan and Azerbaijan oil producing companies in order to ensure loading for the Baku-Ceyhan pipeline.

Whatever the case, the struggle for the Caspian oil transit has been seriously affecting the cargo flows in the region for years. According to the "Oil and Capital" magazine, if 15 years ago Russia was the only oil exporter in the Black sea basin, in 1996, out of 46 mln tons of oil shipped via the Novorossiysk, Tuapse and Odessa terminals, 3.5 mln tons were comprised by Kazakhstan oil. The previous year Kazakhstan shipped in the transit mode via Russia over 40 mln tons of export oil, of which 33 mln tons were the share of the Azov-Black seas basin ports. And, although Russia benefits from the Kazakhstan transit, it is to the Russian companies that Transneft gives the most efficient transportation routes via Novorossiysk and Tuapse. At the same time, in order to increase the volume of export, the Russian oil industry has developed a scheme of leasing a certain part of the Russian quota of volumes to be pumped via the underloaded Caspian Pipeline Consortium (CTC).

Another prospective direction for the pipeline system development is the Eastern one. The construction of the Eastern Siberia - Pacific Ocean pipeline is being actively discussed at all levels (see "Eastern Siberia - Pacific Ocean project is waiting for investors", p.42 ). On the one hand, the huge investments in this route are absolutely justified, first of all, by the Transneft secure position, as well as by the favourable prices conjuncture on the external markets; and secondly, by the favourable economic situation in the Republic of China. Experts estimate China to become the world's largest oil importer in the few years to come. On the other hand, one needs to take into account the fact that since the beginning of the year slowing down of the oil production growth rate has become noticeable and in the nearest future the oil output is going to reduce. Besides, the world prices conjuncture is subject to fluctuations and no one can guarantee the high prices for carbohydrates to remain such in the long-term perspective. Finally, without developing new deposits in the Eastern Siberia, this pipeline is totally useless, as it will have no loading, while investment in the geological survey is mainly suggested to private companies, for which the question of risks advisability is most acute.



Vain hopesor logical results?

Railway and river modes of transport consider themselves as alternatives to the pipeline. But, in a certain sense, railway or river transportation of crude oil can be called nonsense. Traditionally these modes of transport have been responsible for large volumes of oil products. Nevertheless, both rail and river transport modes were wrong in making a stake on the high dynamics of both raw and processed carbohydrates shipment.

The inner water transport enterprises found itself in a worse situation. Despite the tariff preferences, the drop of bulked cargoes traffic on the river started as early as in 2004. Then the share of crude material comprised only 15%, the rest being black oil and vacuum gas-oil. But this year these are also expected to drop in volume.

"This navigation the volume of bulked cargoes carried by the Volgotanker vessels is expected to drop by 15-20%", says the company's president Andrey Kleimenov. "Even before the beginning of the navigation period, the bulked cargoes river transportation market was destabilized by the further attacks on Volgotanker by the tax and prosecutor services. As a result, the river transport grew unpredictable, first of all, for the consigners. Consequently, the flow of crude oil - the most attractive one in terms of profitability - is gone. Besides, the transportation structure is changed - the cargo flow has largely reoriented to the Northern route. In fact there remained on the river only the bulked cargoes that are impossible or inexpedient to carry by alternative transport modes - black oil and vacuum gas-oil. They are low-tariff cargoes. While taking into account the drastic increase of prices for fuel, communication and metal, all river shipping companies have to work on the marginal level of profitability, which does not allow them, by the way, to carry out long-term investment programs aimed at fleet renovation. Inner water transport is a capital-intensive long-term business that can only develop successfully in conditions of stability and predictability, which are largely lacking this year. And we can only hope that the bulked cargoes traffic in 2006 would remain the same as this year", he adds.

Railway transport is better off. First of all, it operates all year round and for many consigners this factor is the determining one in terms of long-term logistics planning. As to the river transport advantages - the best delivery terms and lowest tariffs - the railway is catching up with it in this respect, developing new efficient transportation schemes. The river transport cannot reduce the tariffs more, as with the increased prices for energy carriers this would make their business unprofitable.

But for the railway the bulked cargoes turnover dynamics is far from optimistic. According to OAO RZD, in the 9 months of 2005 the volume of bulked cargoes shipped by rail increased by 3.4% to the analogous period of the previous year. At the same time, the traffic structure changed towards a greater share of domestically-carried cargoes (growth by 3% up to 51.5%). Besides, crude oil is evidently abandoning the railway transport. If in 2002 and 2003 the volume of crude material carried in cisterns comprised 42.1% and 54.1% respectively, in 2004 the traffic decreased by 1.3% against the previous year. This year the tendency is even more vivid, with the share of crude oil in the total bulked cargoes turnover comprising 22.7% (4.1% less than in 2004). As to internationally-carried bulked cargoes, there was a noticeable decrease of export, the share of which comprised 46.3% (3.4% less than in 2004).

But the railway does not lose hope, foreseeing a 5%-increase of bulked cargoes traffic before the end of the year. Indeed, there is potential for the cargo flow increase. Firstly, the volume of oil products sent by producing companies to the Russian refineries is growing; secondly, there is the more promising segment of the oil industry focusing on the "lighter" and, consequently, more expensive on the external markets (as compared to the Urals) oil. Naturally, the exclusive product is not to be mixed in the pipe with other brands of oil and will have to be carried by rail.

Besides, the Chinese market appears most promising for the railway transport. In the 9 months of 2005, 27.7% of the total volume carried by the railway was the share of crude oil delivered to China. According to OAO RZD, in the framework of the Plan of Measures to Realize the Treaty of Friendship, Goodneighbour Policy and Cooperation signed by the RF and China on October 14, 2004, the parties, basing on the principle of mutual advantage, will do their best to inсrease the volume of crude oil delivered to China by rail to reach in 2005 the level of 10 mln tons, and in 2006 - not less than 15 mln tons a year.

The RF Government tariff policy also favours railway transportation. The railway can of course by no means catch up economically with the pipeline, or even seriously compete with it, but the level of the transportation constituent in railway delivery keeps going down.

According to OAO RZD, the producers' sale price for crude oil increased in August 2005 by the average of 77% to August 2004, and for oil products - by 63%. The dynamics of export prices for the crude and processed oil in the given period comprised +41.2% and +86.5% respectively. The transport constituent in delivering crude oil in the domestic communication comprised 19.5% (7.3% less than in 2004), and in the export trade to Russian seaports and land border crossing points - 5.9% and 20.1% respectively. As to oil products, the average railway transportation component in domestic communication did not exceed 8% (-1.8% to 2004), while by export via seaports the figure stayed at 14.4% (-2.7%) and via land border crossing points it was 20% (-1.9%).



Eternal conflict

In the 9 months of 2005 the bulked cargoes export via the Russian seaports increased by 8.5%, while via the land border crossing points it decreased. The volume of crude oil carried to the Baltic ports dropped two-fold, while the merchandise transportation to the Ukrainian terminals discontinued altogether. As to oil products delivery to the neighbouring states, their volume on the Baltic route increased by 7.6% and on the Ukrainian - by mere 2.3%.

It is quite clear that Russian consigner prefers Russian port terminals. Nevertheless, the interrelation of the two adjacent transport modes remains an issue for carriers. According to the Balttransservice company's experts, the terminal infrastructure development in Russia is still inadequate to the existing cargo flows, both in capacity and service rendered. The major problems are the imbalance of cargo flows and transshipment centers facilities, as well as the lack of cooperation between the carriers, consigners and terminals. The New Forwarding Company OJSC is of the same mind, adding to the list of issues the underdevelopment of by-port infrastructure, acute shortage of black oil handling facilities and lack of coordination in scheduling and serving tankers. "The port at present has no say in determining the schedule of trains arriving from various stations and various consigners, which results in jams on the railway-port junctions. Also the ports happen to confirm to consigners their accepting larger parties than they can in reality handle", comment the company representatives.

According to the Russian Seaports Association, in the 8 months of 2005 the country's seaports handled over 113.5 mln tons of crude oil (16.7% more than last year). Export grew by 13.8% to 101.2 mln tons. The greatest volume was handled by the ports of the Southern basin - 60.15 mln (+2%), though export here dropped slightly (-0.2%) to 52.4 mln tons. The North-Western basin terminals are the second: 51.6 mln tons (+42.3%), with export comprising 47.1 mln tons (+37%). The Far Eastern region's ports are traditionally the last: 1.7 mln tons, though with quite a considerable increase of turnover - +16.7% to the previous year.

As to oil products, it is the North-Western region that is the leader here: 17.5 mln tons after 8 months of operation (+7.3%), including 16.5 mln (+6%) of export. The Azov-Black seas basin is the second: 13.2 mln tons (+10.4%). The region's ports exported 12.4 mln tons of oil products (+8.5% to 2004). The Far Eastern ports handled 7.8 mln tons, 3.8% less than in the previous year. Export dropped by 9.4% to  5.3 mln tons. This totals 38.6 mln tons of oil products handled by the Russian ports in January-August 2005 (+5.8%).

If we analyze the structure of the railway transportation of bulked cargoes, we'll see that, according to the OAO RZD Center of Transport Services, the largest volumes are delivered to the ports of the North-Western basin - 50.5%; Southern and Far Eastern ones - 37.6% and 11.9% respectively. However, the ports' bulked cargoes handling facilities were exploited during the 9 months of the current year only to 82.3%, with most uneven ports loading.

Thus, if the ports of the North-Western basin were exploited to 92.3%, the St.Petersburg Commercial Seaport was used to 112.1% of its design capacity, Arkhangelsk - 213.3% and Kaliningrad - 416.7%. At the same time, the facilities of the following ports were underexploited: Murmansk - 22.0%, Vitino - 46.5%, Vysotsk - 78.9%. The facilities of the Southern basin ports were used to 85.7%. The most heavily used was the Sheskharis terminal of the Novorossiysk port - 214.3%, while the loading was not sufficient for the ports of Astrakhan - 9.2%, Makhachkala - 10.8%, Taganrog - 43.8%, Kavkaz - 58.5%. The ports of the Far East were exploited only to 51.7%. The loading of the Vladivostok port oil terminal "Pervaya Rechka" comprised 242.2% of the design capacity, while that of Nakhodka oil terminal "Krabovaya" and the Vanino seaport - only 44% and 39% respectively.

Thus, it is clear that there is no problem of port facilities shortage so far, taking into account the already intensive investment of the Russian ports into their own infrastructure development. The main issue for today is ensuring the adequate coordination of the adjacent transport modes operation.



Private operators

The work of the operator companies is one of the most interesting and promising trends in the railway transportation development. The oil transportation has long been the most dynamically developing segment of the market being formed. According to OAO RZD data, the company (owning the largest stock of cisterns of 78.7 thousand units) has recently fallen behind private companies. Thus, only 35.6% of the total traffic was carried in the OAO RZD rolling stock in 2005, while in 2002 this share was 65%.

It is important to note that working on the bulked cargoes transportation market, operators, striving to turn into full-fledged carriers in time, offer their customers quite a wide gamut of services and quality both in respect to optimally developed logistic routes and in solving other transportation tasks. In other words, their concern for the consigners is much greater than that of the railway monopolist.

First of all, the independent companies, varying the rolling stock component, can offer discounts from the current tariffs. Secondly, approaching the customer's problems individually, private companies are always able to suggest optimal solutions. As told by the OAO New Forwarding Company experts, when developing new routes the company's representatives go to the destination point and consider on location the whole complex of works. For example, the way the product is delivered from the deposit, reservoir stock capacity, the operation mode of the loading rack, yard locomotives, the state of the railway infrastructure of the station and the consigner, the location of the carriages repair facilities and so on. Further, they estimate the route's throughput, routing and large-capacity cars possibilities, etc. On the basis of this information, they prepare the technological project, presentation and the commercial offer. There are always reserves to attract in order to optimize the transportation, increase the complex throughput and, finally, to reduce the carriage turnover and the cost of services. For example, the analysis of the situation in the Novourengoysky region while preparing the project for OAO Rosneft allowed the New Forwarding Company OJSC to develop a set of offers to almost double the light oil products turnover via the terminal. An analogous project was realized for the Ritek company at the Sergino station of the Sverdlovskaya Railway. "Competition to be observed in the bulked cargoes forwarding market at present stimulates constant search for new ideas in the plane of technologies. And if there arise solutions allowing to reduce the carriages turnover by a few days, there emerges the possibility of offering the customer exclusive delivery terms", comment the company representatives.

Estimating the situation objectively, it can be noted that OAO RZD cannot offer such flexibility and efficiency. But if formerly the positive dynamics of the bulked cargoes transportation stimulated the operators emergence and development, the current slowing down dynamics can have quite a negative effect on the sector. In other words, the development of competitive market of railway transportation can be hampered by economic factors.



TATYANA  TOKAREVA
    [~DETAIL_TEXT] => 

Who won?

Naturally, it is the pipeline transport that is today in the most favourable situation. According to the fuel and energy complex companies, out of the 460 mln tons of oil produced in 2004, over 176 mln tons were pumped through the Transneft pipelines. And, despite the numerous experts' opinions that from this year on the carbohydrates output will be reducing, this is not going to tell on the pipeline transport turnover dynamics. Indeed, from the economic viewpoint, it is the most convenient, fastest and cheapest way of transportation.

Among the vivid proofs of the fact that oil giants tend to use pipelines is the intention announced by LUKOIL to cut down on its oil shipment via its own terminal in Vysotsk. The Baltic Pipeline System's (BTS) facilities to the Primorsk port are to be used as an alternative route. At the same time, the company had it calculated that at the present stage of the oil market development it is much more expedient to focus on the increased oil transportation in the domestic communication and fully employ its own oil-refining industry.

Generally speaking, from the very moment of its commissioning, BTS is striving to become the pipeline export leader. There is data that in 2004 it pumped 44.6 mln tons (the total turnover via the North-Western region comprised 58 mln tons, while the Azov-Black seas basin ports handled 100 mln tons, and the port of Novorossiysk (the leader in bulked cargoes handling) - almost 50 mln tons. Though the current year's dynamics shows that the southern ports are not going to give up their positions, it is logical to consider the Baltic sector as the most promising one. The problem of the Turkish straits received no solution in the recent years. Moreover, experts believe that Ankara is going to support the Kazakhstan and Azerbaijan oil producing companies in order to ensure loading for the Baku-Ceyhan pipeline.

Whatever the case, the struggle for the Caspian oil transit has been seriously affecting the cargo flows in the region for years. According to the "Oil and Capital" magazine, if 15 years ago Russia was the only oil exporter in the Black sea basin, in 1996, out of 46 mln tons of oil shipped via the Novorossiysk, Tuapse and Odessa terminals, 3.5 mln tons were comprised by Kazakhstan oil. The previous year Kazakhstan shipped in the transit mode via Russia over 40 mln tons of export oil, of which 33 mln tons were the share of the Azov-Black seas basin ports. And, although Russia benefits from the Kazakhstan transit, it is to the Russian companies that Transneft gives the most efficient transportation routes via Novorossiysk and Tuapse. At the same time, in order to increase the volume of export, the Russian oil industry has developed a scheme of leasing a certain part of the Russian quota of volumes to be pumped via the underloaded Caspian Pipeline Consortium (CTC).

Another prospective direction for the pipeline system development is the Eastern one. The construction of the Eastern Siberia - Pacific Ocean pipeline is being actively discussed at all levels (see "Eastern Siberia - Pacific Ocean project is waiting for investors", p.42 ). On the one hand, the huge investments in this route are absolutely justified, first of all, by the Transneft secure position, as well as by the favourable prices conjuncture on the external markets; and secondly, by the favourable economic situation in the Republic of China. Experts estimate China to become the world's largest oil importer in the few years to come. On the other hand, one needs to take into account the fact that since the beginning of the year slowing down of the oil production growth rate has become noticeable and in the nearest future the oil output is going to reduce. Besides, the world prices conjuncture is subject to fluctuations and no one can guarantee the high prices for carbohydrates to remain such in the long-term perspective. Finally, without developing new deposits in the Eastern Siberia, this pipeline is totally useless, as it will have no loading, while investment in the geological survey is mainly suggested to private companies, for which the question of risks advisability is most acute.



Vain hopesor logical results?

Railway and river modes of transport consider themselves as alternatives to the pipeline. But, in a certain sense, railway or river transportation of crude oil can be called nonsense. Traditionally these modes of transport have been responsible for large volumes of oil products. Nevertheless, both rail and river transport modes were wrong in making a stake on the high dynamics of both raw and processed carbohydrates shipment.

The inner water transport enterprises found itself in a worse situation. Despite the tariff preferences, the drop of bulked cargoes traffic on the river started as early as in 2004. Then the share of crude material comprised only 15%, the rest being black oil and vacuum gas-oil. But this year these are also expected to drop in volume.

"This navigation the volume of bulked cargoes carried by the Volgotanker vessels is expected to drop by 15-20%", says the company's president Andrey Kleimenov. "Even before the beginning of the navigation period, the bulked cargoes river transportation market was destabilized by the further attacks on Volgotanker by the tax and prosecutor services. As a result, the river transport grew unpredictable, first of all, for the consigners. Consequently, the flow of crude oil - the most attractive one in terms of profitability - is gone. Besides, the transportation structure is changed - the cargo flow has largely reoriented to the Northern route. In fact there remained on the river only the bulked cargoes that are impossible or inexpedient to carry by alternative transport modes - black oil and vacuum gas-oil. They are low-tariff cargoes. While taking into account the drastic increase of prices for fuel, communication and metal, all river shipping companies have to work on the marginal level of profitability, which does not allow them, by the way, to carry out long-term investment programs aimed at fleet renovation. Inner water transport is a capital-intensive long-term business that can only develop successfully in conditions of stability and predictability, which are largely lacking this year. And we can only hope that the bulked cargoes traffic in 2006 would remain the same as this year", he adds.

Railway transport is better off. First of all, it operates all year round and for many consigners this factor is the determining one in terms of long-term logistics planning. As to the river transport advantages - the best delivery terms and lowest tariffs - the railway is catching up with it in this respect, developing new efficient transportation schemes. The river transport cannot reduce the tariffs more, as with the increased prices for energy carriers this would make their business unprofitable.

But for the railway the bulked cargoes turnover dynamics is far from optimistic. According to OAO RZD, in the 9 months of 2005 the volume of bulked cargoes shipped by rail increased by 3.4% to the analogous period of the previous year. At the same time, the traffic structure changed towards a greater share of domestically-carried cargoes (growth by 3% up to 51.5%). Besides, crude oil is evidently abandoning the railway transport. If in 2002 and 2003 the volume of crude material carried in cisterns comprised 42.1% and 54.1% respectively, in 2004 the traffic decreased by 1.3% against the previous year. This year the tendency is even more vivid, with the share of crude oil in the total bulked cargoes turnover comprising 22.7% (4.1% less than in 2004). As to internationally-carried bulked cargoes, there was a noticeable decrease of export, the share of which comprised 46.3% (3.4% less than in 2004).

But the railway does not lose hope, foreseeing a 5%-increase of bulked cargoes traffic before the end of the year. Indeed, there is potential for the cargo flow increase. Firstly, the volume of oil products sent by producing companies to the Russian refineries is growing; secondly, there is the more promising segment of the oil industry focusing on the "lighter" and, consequently, more expensive on the external markets (as compared to the Urals) oil. Naturally, the exclusive product is not to be mixed in the pipe with other brands of oil and will have to be carried by rail.

Besides, the Chinese market appears most promising for the railway transport. In the 9 months of 2005, 27.7% of the total volume carried by the railway was the share of crude oil delivered to China. According to OAO RZD, in the framework of the Plan of Measures to Realize the Treaty of Friendship, Goodneighbour Policy and Cooperation signed by the RF and China on October 14, 2004, the parties, basing on the principle of mutual advantage, will do their best to inсrease the volume of crude oil delivered to China by rail to reach in 2005 the level of 10 mln tons, and in 2006 - not less than 15 mln tons a year.

The RF Government tariff policy also favours railway transportation. The railway can of course by no means catch up economically with the pipeline, or even seriously compete with it, but the level of the transportation constituent in railway delivery keeps going down.

According to OAO RZD, the producers' sale price for crude oil increased in August 2005 by the average of 77% to August 2004, and for oil products - by 63%. The dynamics of export prices for the crude and processed oil in the given period comprised +41.2% and +86.5% respectively. The transport constituent in delivering crude oil in the domestic communication comprised 19.5% (7.3% less than in 2004), and in the export trade to Russian seaports and land border crossing points - 5.9% and 20.1% respectively. As to oil products, the average railway transportation component in domestic communication did not exceed 8% (-1.8% to 2004), while by export via seaports the figure stayed at 14.4% (-2.7%) and via land border crossing points it was 20% (-1.9%).



Eternal conflict

In the 9 months of 2005 the bulked cargoes export via the Russian seaports increased by 8.5%, while via the land border crossing points it decreased. The volume of crude oil carried to the Baltic ports dropped two-fold, while the merchandise transportation to the Ukrainian terminals discontinued altogether. As to oil products delivery to the neighbouring states, their volume on the Baltic route increased by 7.6% and on the Ukrainian - by mere 2.3%.

It is quite clear that Russian consigner prefers Russian port terminals. Nevertheless, the interrelation of the two adjacent transport modes remains an issue for carriers. According to the Balttransservice company's experts, the terminal infrastructure development in Russia is still inadequate to the existing cargo flows, both in capacity and service rendered. The major problems are the imbalance of cargo flows and transshipment centers facilities, as well as the lack of cooperation between the carriers, consigners and terminals. The New Forwarding Company OJSC is of the same mind, adding to the list of issues the underdevelopment of by-port infrastructure, acute shortage of black oil handling facilities and lack of coordination in scheduling and serving tankers. "The port at present has no say in determining the schedule of trains arriving from various stations and various consigners, which results in jams on the railway-port junctions. Also the ports happen to confirm to consigners their accepting larger parties than they can in reality handle", comment the company representatives.

According to the Russian Seaports Association, in the 8 months of 2005 the country's seaports handled over 113.5 mln tons of crude oil (16.7% more than last year). Export grew by 13.8% to 101.2 mln tons. The greatest volume was handled by the ports of the Southern basin - 60.15 mln (+2%), though export here dropped slightly (-0.2%) to 52.4 mln tons. The North-Western basin terminals are the second: 51.6 mln tons (+42.3%), with export comprising 47.1 mln tons (+37%). The Far Eastern region's ports are traditionally the last: 1.7 mln tons, though with quite a considerable increase of turnover - +16.7% to the previous year.

As to oil products, it is the North-Western region that is the leader here: 17.5 mln tons after 8 months of operation (+7.3%), including 16.5 mln (+6%) of export. The Azov-Black seas basin is the second: 13.2 mln tons (+10.4%). The region's ports exported 12.4 mln tons of oil products (+8.5% to 2004). The Far Eastern ports handled 7.8 mln tons, 3.8% less than in the previous year. Export dropped by 9.4% to  5.3 mln tons. This totals 38.6 mln tons of oil products handled by the Russian ports in January-August 2005 (+5.8%).

If we analyze the structure of the railway transportation of bulked cargoes, we'll see that, according to the OAO RZD Center of Transport Services, the largest volumes are delivered to the ports of the North-Western basin - 50.5%; Southern and Far Eastern ones - 37.6% and 11.9% respectively. However, the ports' bulked cargoes handling facilities were exploited during the 9 months of the current year only to 82.3%, with most uneven ports loading.

Thus, if the ports of the North-Western basin were exploited to 92.3%, the St.Petersburg Commercial Seaport was used to 112.1% of its design capacity, Arkhangelsk - 213.3% and Kaliningrad - 416.7%. At the same time, the facilities of the following ports were underexploited: Murmansk - 22.0%, Vitino - 46.5%, Vysotsk - 78.9%. The facilities of the Southern basin ports were used to 85.7%. The most heavily used was the Sheskharis terminal of the Novorossiysk port - 214.3%, while the loading was not sufficient for the ports of Astrakhan - 9.2%, Makhachkala - 10.8%, Taganrog - 43.8%, Kavkaz - 58.5%. The ports of the Far East were exploited only to 51.7%. The loading of the Vladivostok port oil terminal "Pervaya Rechka" comprised 242.2% of the design capacity, while that of Nakhodka oil terminal "Krabovaya" and the Vanino seaport - only 44% and 39% respectively.

Thus, it is clear that there is no problem of port facilities shortage so far, taking into account the already intensive investment of the Russian ports into their own infrastructure development. The main issue for today is ensuring the adequate coordination of the adjacent transport modes operation.



Private operators

The work of the operator companies is one of the most interesting and promising trends in the railway transportation development. The oil transportation has long been the most dynamically developing segment of the market being formed. According to OAO RZD data, the company (owning the largest stock of cisterns of 78.7 thousand units) has recently fallen behind private companies. Thus, only 35.6% of the total traffic was carried in the OAO RZD rolling stock in 2005, while in 2002 this share was 65%.

It is important to note that working on the bulked cargoes transportation market, operators, striving to turn into full-fledged carriers in time, offer their customers quite a wide gamut of services and quality both in respect to optimally developed logistic routes and in solving other transportation tasks. In other words, their concern for the consigners is much greater than that of the railway monopolist.

First of all, the independent companies, varying the rolling stock component, can offer discounts from the current tariffs. Secondly, approaching the customer's problems individually, private companies are always able to suggest optimal solutions. As told by the OAO New Forwarding Company experts, when developing new routes the company's representatives go to the destination point and consider on location the whole complex of works. For example, the way the product is delivered from the deposit, reservoir stock capacity, the operation mode of the loading rack, yard locomotives, the state of the railway infrastructure of the station and the consigner, the location of the carriages repair facilities and so on. Further, they estimate the route's throughput, routing and large-capacity cars possibilities, etc. On the basis of this information, they prepare the technological project, presentation and the commercial offer. There are always reserves to attract in order to optimize the transportation, increase the complex throughput and, finally, to reduce the carriage turnover and the cost of services. For example, the analysis of the situation in the Novourengoysky region while preparing the project for OAO Rosneft allowed the New Forwarding Company OJSC to develop a set of offers to almost double the light oil products turnover via the terminal. An analogous project was realized for the Ritek company at the Sergino station of the Sverdlovskaya Railway. "Competition to be observed in the bulked cargoes forwarding market at present stimulates constant search for new ideas in the plane of technologies. And if there arise solutions allowing to reduce the carriages turnover by a few days, there emerges the possibility of offering the customer exclusive delivery terms", comment the company representatives.

Estimating the situation objectively, it can be noted that OAO RZD cannot offer such flexibility and efficiency. But if formerly the positive dynamics of the bulked cargoes transportation stimulated the operators emergence and development, the current slowing down dynamics can have quite a negative effect on the sector. In other words, the development of competitive market of railway transportation can be hampered by economic factors.



TATYANA  TOKAREVA
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Negative consequences of positive development

After the collapse of 1998, the positive changes in the world prices for energy carriers that followed were seen by analysts as a salvation for the Russian economy in crisis. The moment the price per barrel reached the level of USD 20 and the Russian Urals oil started to conquer world markets, experts envisaged three versions of further development. The most optimistic one was based on the assumption that the price for oil would remain on the level of USD 20-23 and bode the Russian economy high tax incomings. No one could foresee at the time that in 2005 the prices would go up to USD 60 per barrel. 

Thus, from 2000 on, the oil industry output started to grow. Working in the conditions of ruble devaluation and possibility to cut on costs, along with the use of infrastructure that remained in place from the USSR era, the Russian producers appeared quite competitive on the world market. Still, the intense growth (against the background of the preceding stagnation) revealed a series of problems. Firstly, the industry lacked almost entirely investments in explorations, production and founding refining facilities. Secondly, there emerged a drastic shortage of transportation facilities. The traditional pipeline could not satisfy the increasing crude export volume. The railway transport had to come to help. And from 2002 on, the crude oil traffic in cisterns was growing manifold, providing loading for the emerging independent operators. Finally, oil not only grew to become the basis for the state budget, but also determined the prospects of the railway transportation competitive market development.

In 2004 the oil industry in the country reached its major peak - there emerged, made a good showing and started to successfully operate large producing and refining companies. In general, experts believe them to have completed the formation of the optimal industrial structure, accumulated considerable funding and taken course on mass investments in the further development of the industry, i.e. development of new deposits, laying new pipelines, purchase of new rolling stock, and modernization of refining facilities. But there came no positive shifts. On the contrary, in 2004 for the first time in the last 5 years, there was registered a slowing down of the production growth rate, in some estimations from 11 to 8.9% per annum, coming down as low as 3% in the 1st quarter.

The effect on the transportation sector was similar. The growth dynamics of the bulked cargoes transportation by the analogous to the pipeline transport modes slowed down, while in respect to crude oil discontinued altogether.



Victory or loss

Several reasons for the above-described situation are being mentioned. Among external factors are the excessively high export dues on Russian crude oil set from October 1, 2005 in the amount of USD 179.9 per ton. This made direct export of crude oil profitable only for several large companies with strong political lobby, who can have their VAT and excise quickly recompensed. As opposed to them, those having no strong administrative resource have to bear with the additional costs that may only be remunerated in several years, if ever, whereas for the time being it means excluding large sums of money from the enterprise' capital turnover.

Thus, Russian producers in general cannot be happy with the situation created by the oil export taxes. Experts claim that oil companies have to transfer to the state 89% of their additional gains. As a result (also, considering the fact that until now the growth of prices for oil products inside Russia was not subject to any regulation), Russian oil industry companies chose a more efficient sale strategy, i.e. selling the product on the domestic market, with the monthly increasing prices for the refinery products. The growth of prices for the energy carriers, in its turn, has a negative effect on other industries. But, considering the fact that petrol is a product of deep refinery, even the state intervention is unlikely to prevent the price for it from rising.

As to the reasons of the internal nature, it would suffice here to recollect the notorious YUKOS case. The overwhelming majority believes that the most dynamically developing and promising Russian oil company was intentionally destroyed by the state. In fact, it was a demonstrative act showing that the state forbids private companies to independently resolve any matters of strategic importance. These political acts led to the re-evaluation of risks in this market, and large companies, despite the favourable market situation, started to reduce their investment activities, while the scale of geological survey has now reached its minimum in decades.

As for the transport market, the bulked cargoes traffic is characterized by positive, but slowing down dynamics. Dramatic changes are noticeable in the structure of this traffic distribution by transport modes. Crude oil is abandoning both the railway and the river. But if the former can sufficiently compensate the lost cargo flow by oil products (indirectly this is confirmed by the increased demand for specialized cisterns to carry non-mass cargoes and chemical products), the river transport is in a worse position, taking into account the seasonal nature of their navigation.

On the other hand, the pipeline system received a powerful impetus to development and at present its facilities are enough to serve crude oil flow. Moreover, new development and modernization projects are under way, which are to increase the pipeline throughput in the nearest future.



Use it or die?

Thus, the "vertigo" caused by their success in the world markets, combined with the instability and unpredictability of the Russian state policy, makes the oil producers focus on the momentary profits, which cannot serve as a guarantee of future prosperity.

In certain expert estimations, already by 2010, the Russian carbohydrates output may drop by 60% against the current level, due to equipment and technological facilities deterioration and exhaustion of the deposits. On the one hand, the oil businesses' reluctance to invest in developing new fields is explicable. On the other hand, in reality it can lead to an energy crisis. Unlike the United Arab Emirates, for example, who will not die having exhausted their oil resources, Russia will simply freeze to death. On the Barentsevo sea shelf there have been discovered over 40 new oil and gas fields, and the investment of some USD 46 bln will bring fivefold profit. This is the experts opinion, but what developer will be eager to risk such a sum?

Besides, some analysts note that the existing projects of new fields development (those of the Eastern Siberia and the northern seas shelves being the priority ones), firstly, require great investments and, secondly, can turn out to be far from as promising as it appears on the face of it. Thus, there emerges a far from optimistic situation: deposits get exhausted, while new ones cannot be developed.

As to the infrastructure development, the reason for reluctance of the Russian oil companies to initiate large investment projects is also on the surface: it is the gap between the real value of dollar inside the country and outside it. At present, it is much more profitable to run refining business in any of the European states.

The given situation can only be resolved by urgent state regulation of the oil export, experts claim. And they are not talking of generating conditions for getting maximum tax gains, but of the concrete market regulation. In other words, it is necessary to create the basis for the companies to operate successfully. This includes guaranties to the companies eager to invest in the new fields development and the possibility to stabilize their activity on both domestic and international markets. The more so, taking into account the prospects of operation in this segment.

The independence of the prices for energy carriers from the value of dollar is considered to be the major reason for their consistent growth. Despite the fact that the dollar has long become the basis for the world economy, it can be classified into two kinds: the American economy dollar and the international accounts dollar. The mistakes in the domestic economic policy are compensated by constant issues, but this cannot be applied to the international dollar, the success of which depends on stability. As a result, currency risks have to be hedged. The situation generates interest in other currencies, but they are also unstable. Thus, the only means of protection remains the growth of prices for Futures Contracts, oil being the most universal one. This is the root of the situation: the greater the instability of the international situation, the higher prices for oil. The political and situation factors also contribute to it (e.g. the Iraq war, unpredictability of the American expansions), as well as other objective factors (such as the Catherine hurricane that destroyed half of the USA oil producing infrastructure in the Gulf of Mexico, making the USA a promising importer of energy carriers). By the way, after the announcements of the American officials as to the bores operation renewal, the prices for oil went slightly down. Nevertheless, the drastic drop of prices can lead to such perturbances on the international currency markets which cannot be survived by any country or corporation of the world. As a result, many experts believe high prices for energy carriers will have to be maintained.



TATYANA  TOKAREVA
    [~DETAIL_TEXT] => 

Negative consequences of positive development

After the collapse of 1998, the positive changes in the world prices for energy carriers that followed were seen by analysts as a salvation for the Russian economy in crisis. The moment the price per barrel reached the level of USD 20 and the Russian Urals oil started to conquer world markets, experts envisaged three versions of further development. The most optimistic one was based on the assumption that the price for oil would remain on the level of USD 20-23 and bode the Russian economy high tax incomings. No one could foresee at the time that in 2005 the prices would go up to USD 60 per barrel. 

Thus, from 2000 on, the oil industry output started to grow. Working in the conditions of ruble devaluation and possibility to cut on costs, along with the use of infrastructure that remained in place from the USSR era, the Russian producers appeared quite competitive on the world market. Still, the intense growth (against the background of the preceding stagnation) revealed a series of problems. Firstly, the industry lacked almost entirely investments in explorations, production and founding refining facilities. Secondly, there emerged a drastic shortage of transportation facilities. The traditional pipeline could not satisfy the increasing crude export volume. The railway transport had to come to help. And from 2002 on, the crude oil traffic in cisterns was growing manifold, providing loading for the emerging independent operators. Finally, oil not only grew to become the basis for the state budget, but also determined the prospects of the railway transportation competitive market development.

In 2004 the oil industry in the country reached its major peak - there emerged, made a good showing and started to successfully operate large producing and refining companies. In general, experts believe them to have completed the formation of the optimal industrial structure, accumulated considerable funding and taken course on mass investments in the further development of the industry, i.e. development of new deposits, laying new pipelines, purchase of new rolling stock, and modernization of refining facilities. But there came no positive shifts. On the contrary, in 2004 for the first time in the last 5 years, there was registered a slowing down of the production growth rate, in some estimations from 11 to 8.9% per annum, coming down as low as 3% in the 1st quarter.

The effect on the transportation sector was similar. The growth dynamics of the bulked cargoes transportation by the analogous to the pipeline transport modes slowed down, while in respect to crude oil discontinued altogether.



Victory or loss

Several reasons for the above-described situation are being mentioned. Among external factors are the excessively high export dues on Russian crude oil set from October 1, 2005 in the amount of USD 179.9 per ton. This made direct export of crude oil profitable only for several large companies with strong political lobby, who can have their VAT and excise quickly recompensed. As opposed to them, those having no strong administrative resource have to bear with the additional costs that may only be remunerated in several years, if ever, whereas for the time being it means excluding large sums of money from the enterprise' capital turnover.

Thus, Russian producers in general cannot be happy with the situation created by the oil export taxes. Experts claim that oil companies have to transfer to the state 89% of their additional gains. As a result (also, considering the fact that until now the growth of prices for oil products inside Russia was not subject to any regulation), Russian oil industry companies chose a more efficient sale strategy, i.e. selling the product on the domestic market, with the monthly increasing prices for the refinery products. The growth of prices for the energy carriers, in its turn, has a negative effect on other industries. But, considering the fact that petrol is a product of deep refinery, even the state intervention is unlikely to prevent the price for it from rising.

As to the reasons of the internal nature, it would suffice here to recollect the notorious YUKOS case. The overwhelming majority believes that the most dynamically developing and promising Russian oil company was intentionally destroyed by the state. In fact, it was a demonstrative act showing that the state forbids private companies to independently resolve any matters of strategic importance. These political acts led to the re-evaluation of risks in this market, and large companies, despite the favourable market situation, started to reduce their investment activities, while the scale of geological survey has now reached its minimum in decades.

As for the transport market, the bulked cargoes traffic is characterized by positive, but slowing down dynamics. Dramatic changes are noticeable in the structure of this traffic distribution by transport modes. Crude oil is abandoning both the railway and the river. But if the former can sufficiently compensate the lost cargo flow by oil products (indirectly this is confirmed by the increased demand for specialized cisterns to carry non-mass cargoes and chemical products), the river transport is in a worse position, taking into account the seasonal nature of their navigation.

On the other hand, the pipeline system received a powerful impetus to development and at present its facilities are enough to serve crude oil flow. Moreover, new development and modernization projects are under way, which are to increase the pipeline throughput in the nearest future.



Use it or die?

Thus, the "vertigo" caused by their success in the world markets, combined with the instability and unpredictability of the Russian state policy, makes the oil producers focus on the momentary profits, which cannot serve as a guarantee of future prosperity.

In certain expert estimations, already by 2010, the Russian carbohydrates output may drop by 60% against the current level, due to equipment and technological facilities deterioration and exhaustion of the deposits. On the one hand, the oil businesses' reluctance to invest in developing new fields is explicable. On the other hand, in reality it can lead to an energy crisis. Unlike the United Arab Emirates, for example, who will not die having exhausted their oil resources, Russia will simply freeze to death. On the Barentsevo sea shelf there have been discovered over 40 new oil and gas fields, and the investment of some USD 46 bln will bring fivefold profit. This is the experts opinion, but what developer will be eager to risk such a sum?

Besides, some analysts note that the existing projects of new fields development (those of the Eastern Siberia and the northern seas shelves being the priority ones), firstly, require great investments and, secondly, can turn out to be far from as promising as it appears on the face of it. Thus, there emerges a far from optimistic situation: deposits get exhausted, while new ones cannot be developed.

As to the infrastructure development, the reason for reluctance of the Russian oil companies to initiate large investment projects is also on the surface: it is the gap between the real value of dollar inside the country and outside it. At present, it is much more profitable to run refining business in any of the European states.

The given situation can only be resolved by urgent state regulation of the oil export, experts claim. And they are not talking of generating conditions for getting maximum tax gains, but of the concrete market regulation. In other words, it is necessary to create the basis for the companies to operate successfully. This includes guaranties to the companies eager to invest in the new fields development and the possibility to stabilize their activity on both domestic and international markets. The more so, taking into account the prospects of operation in this segment.

The independence of the prices for energy carriers from the value of dollar is considered to be the major reason for their consistent growth. Despite the fact that the dollar has long become the basis for the world economy, it can be classified into two kinds: the American economy dollar and the international accounts dollar. The mistakes in the domestic economic policy are compensated by constant issues, but this cannot be applied to the international dollar, the success of which depends on stability. As a result, currency risks have to be hedged. The situation generates interest in other currencies, but they are also unstable. Thus, the only means of protection remains the growth of prices for Futures Contracts, oil being the most universal one. This is the root of the situation: the greater the instability of the international situation, the higher prices for oil. The political and situation factors also contribute to it (e.g. the Iraq war, unpredictability of the American expansions), as well as other objective factors (such as the Catherine hurricane that destroyed half of the USA oil producing infrastructure in the Gulf of Mexico, making the USA a promising importer of energy carriers). By the way, after the announcements of the American officials as to the bores operation renewal, the prices for oil went slightly down. Nevertheless, the drastic drop of prices can lead to such perturbances on the international currency markets which cannot be survived by any country or corporation of the world. As a result, many experts believe high prices for energy carriers will have to be maintained.



TATYANA  TOKAREVA
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Negative consequences of positive development

After the collapse of 1998, the positive changes in the world prices for energy carriers that followed were seen by analysts as a salvation for the Russian economy in crisis. The moment the price per barrel reached the level of USD 20 and the Russian Urals oil started to conquer world markets, experts envisaged three versions of further development. The most optimistic one was based on the assumption that the price for oil would remain on the level of USD 20-23 and bode the Russian economy high tax incomings. No one could foresee at the time that in 2005 the prices would go up to USD 60 per barrel. 

Thus, from 2000 on, the oil industry output started to grow. Working in the conditions of ruble devaluation and possibility to cut on costs, along with the use of infrastructure that remained in place from the USSR era, the Russian producers appeared quite competitive on the world market. Still, the intense growth (against the background of the preceding stagnation) revealed a series of problems. Firstly, the industry lacked almost entirely investments in explorations, production and founding refining facilities. Secondly, there emerged a drastic shortage of transportation facilities. The traditional pipeline could not satisfy the increasing crude export volume. The railway transport had to come to help. And from 2002 on, the crude oil traffic in cisterns was growing manifold, providing loading for the emerging independent operators. Finally, oil not only grew to become the basis for the state budget, but also determined the prospects of the railway transportation competitive market development.

In 2004 the oil industry in the country reached its major peak - there emerged, made a good showing and started to successfully operate large producing and refining companies. In general, experts believe them to have completed the formation of the optimal industrial structure, accumulated considerable funding and taken course on mass investments in the further development of the industry, i.e. development of new deposits, laying new pipelines, purchase of new rolling stock, and modernization of refining facilities. But there came no positive shifts. On the contrary, in 2004 for the first time in the last 5 years, there was registered a slowing down of the production growth rate, in some estimations from 11 to 8.9% per annum, coming down as low as 3% in the 1st quarter.

The effect on the transportation sector was similar. The growth dynamics of the bulked cargoes transportation by the analogous to the pipeline transport modes slowed down, while in respect to crude oil discontinued altogether.



Victory or loss

Several reasons for the above-described situation are being mentioned. Among external factors are the excessively high export dues on Russian crude oil set from October 1, 2005 in the amount of USD 179.9 per ton. This made direct export of crude oil profitable only for several large companies with strong political lobby, who can have their VAT and excise quickly recompensed. As opposed to them, those having no strong administrative resource have to bear with the additional costs that may only be remunerated in several years, if ever, whereas for the time being it means excluding large sums of money from the enterprise' capital turnover.

Thus, Russian producers in general cannot be happy with the situation created by the oil export taxes. Experts claim that oil companies have to transfer to the state 89% of their additional gains. As a result (also, considering the fact that until now the growth of prices for oil products inside Russia was not subject to any regulation), Russian oil industry companies chose a more efficient sale strategy, i.e. selling the product on the domestic market, with the monthly increasing prices for the refinery products. The growth of prices for the energy carriers, in its turn, has a negative effect on other industries. But, considering the fact that petrol is a product of deep refinery, even the state intervention is unlikely to prevent the price for it from rising.

As to the reasons of the internal nature, it would suffice here to recollect the notorious YUKOS case. The overwhelming majority believes that the most dynamically developing and promising Russian oil company was intentionally destroyed by the state. In fact, it was a demonstrative act showing that the state forbids private companies to independently resolve any matters of strategic importance. These political acts led to the re-evaluation of risks in this market, and large companies, despite the favourable market situation, started to reduce their investment activities, while the scale of geological survey has now reached its minimum in decades.

As for the transport market, the bulked cargoes traffic is characterized by positive, but slowing down dynamics. Dramatic changes are noticeable in the structure of this traffic distribution by transport modes. Crude oil is abandoning both the railway and the river. But if the former can sufficiently compensate the lost cargo flow by oil products (indirectly this is confirmed by the increased demand for specialized cisterns to carry non-mass cargoes and chemical products), the river transport is in a worse position, taking into account the seasonal nature of their navigation.

On the other hand, the pipeline system received a powerful impetus to development and at present its facilities are enough to serve crude oil flow. Moreover, new development and modernization projects are under way, which are to increase the pipeline throughput in the nearest future.



Use it or die?

Thus, the "vertigo" caused by their success in the world markets, combined with the instability and unpredictability of the Russian state policy, makes the oil producers focus on the momentary profits, which cannot serve as a guarantee of future prosperity.

In certain expert estimations, already by 2010, the Russian carbohydrates output may drop by 60% against the current level, due to equipment and technological facilities deterioration and exhaustion of the deposits. On the one hand, the oil businesses' reluctance to invest in developing new fields is explicable. On the other hand, in reality it can lead to an energy crisis. Unlike the United Arab Emirates, for example, who will not die having exhausted their oil resources, Russia will simply freeze to death. On the Barentsevo sea shelf there have been discovered over 40 new oil and gas fields, and the investment of some USD 46 bln will bring fivefold profit. This is the experts opinion, but what developer will be eager to risk such a sum?

Besides, some analysts note that the existing projects of new fields development (those of the Eastern Siberia and the northern seas shelves being the priority ones), firstly, require great investments and, secondly, can turn out to be far from as promising as it appears on the face of it. Thus, there emerges a far from optimistic situation: deposits get exhausted, while new ones cannot be developed.

As to the infrastructure development, the reason for reluctance of the Russian oil companies to initiate large investment projects is also on the surface: it is the gap between the real value of dollar inside the country and outside it. At present, it is much more profitable to run refining business in any of the European states.

The given situation can only be resolved by urgent state regulation of the oil export, experts claim. And they are not talking of generating conditions for getting maximum tax gains, but of the concrete market regulation. In other words, it is necessary to create the basis for the companies to operate successfully. This includes guaranties to the companies eager to invest in the new fields development and the possibility to stabilize their activity on both domestic and international markets. The more so, taking into account the prospects of operation in this segment.

The independence of the prices for energy carriers from the value of dollar is considered to be the major reason for their consistent growth. Despite the fact that the dollar has long become the basis for the world economy, it can be classified into two kinds: the American economy dollar and the international accounts dollar. The mistakes in the domestic economic policy are compensated by constant issues, but this cannot be applied to the international dollar, the success of which depends on stability. As a result, currency risks have to be hedged. The situation generates interest in other currencies, but they are also unstable. Thus, the only means of protection remains the growth of prices for Futures Contracts, oil being the most universal one. This is the root of the situation: the greater the instability of the international situation, the higher prices for oil. The political and situation factors also contribute to it (e.g. the Iraq war, unpredictability of the American expansions), as well as other objective factors (such as the Catherine hurricane that destroyed half of the USA oil producing infrastructure in the Gulf of Mexico, making the USA a promising importer of energy carriers). By the way, after the announcements of the American officials as to the bores operation renewal, the prices for oil went slightly down. Nevertheless, the drastic drop of prices can lead to such perturbances on the international currency markets which cannot be survived by any country or corporation of the world. As a result, many experts believe high prices for energy carriers will have to be maintained.



TATYANA  TOKAREVA
    [~DETAIL_TEXT] => 

Negative consequences of positive development

After the collapse of 1998, the positive changes in the world prices for energy carriers that followed were seen by analysts as a salvation for the Russian economy in crisis. The moment the price per barrel reached the level of USD 20 and the Russian Urals oil started to conquer world markets, experts envisaged three versions of further development. The most optimistic one was based on the assumption that the price for oil would remain on the level of USD 20-23 and bode the Russian economy high tax incomings. No one could foresee at the time that in 2005 the prices would go up to USD 60 per barrel. 

Thus, from 2000 on, the oil industry output started to grow. Working in the conditions of ruble devaluation and possibility to cut on costs, along with the use of infrastructure that remained in place from the USSR era, the Russian producers appeared quite competitive on the world market. Still, the intense growth (against the background of the preceding stagnation) revealed a series of problems. Firstly, the industry lacked almost entirely investments in explorations, production and founding refining facilities. Secondly, there emerged a drastic shortage of transportation facilities. The traditional pipeline could not satisfy the increasing crude export volume. The railway transport had to come to help. And from 2002 on, the crude oil traffic in cisterns was growing manifold, providing loading for the emerging independent operators. Finally, oil not only grew to become the basis for the state budget, but also determined the prospects of the railway transportation competitive market development.

In 2004 the oil industry in the country reached its major peak - there emerged, made a good showing and started to successfully operate large producing and refining companies. In general, experts believe them to have completed the formation of the optimal industrial structure, accumulated considerable funding and taken course on mass investments in the further development of the industry, i.e. development of new deposits, laying new pipelines, purchase of new rolling stock, and modernization of refining facilities. But there came no positive shifts. On the contrary, in 2004 for the first time in the last 5 years, there was registered a slowing down of the production growth rate, in some estimations from 11 to 8.9% per annum, coming down as low as 3% in the 1st quarter.

The effect on the transportation sector was similar. The growth dynamics of the bulked cargoes transportation by the analogous to the pipeline transport modes slowed down, while in respect to crude oil discontinued altogether.



Victory or loss

Several reasons for the above-described situation are being mentioned. Among external factors are the excessively high export dues on Russian crude oil set from October 1, 2005 in the amount of USD 179.9 per ton. This made direct export of crude oil profitable only for several large companies with strong political lobby, who can have their VAT and excise quickly recompensed. As opposed to them, those having no strong administrative resource have to bear with the additional costs that may only be remunerated in several years, if ever, whereas for the time being it means excluding large sums of money from the enterprise' capital turnover.

Thus, Russian producers in general cannot be happy with the situation created by the oil export taxes. Experts claim that oil companies have to transfer to the state 89% of their additional gains. As a result (also, considering the fact that until now the growth of prices for oil products inside Russia was not subject to any regulation), Russian oil industry companies chose a more efficient sale strategy, i.e. selling the product on the domestic market, with the monthly increasing prices for the refinery products. The growth of prices for the energy carriers, in its turn, has a negative effect on other industries. But, considering the fact that petrol is a product of deep refinery, even the state intervention is unlikely to prevent the price for it from rising.

As to the reasons of the internal nature, it would suffice here to recollect the notorious YUKOS case. The overwhelming majority believes that the most dynamically developing and promising Russian oil company was intentionally destroyed by the state. In fact, it was a demonstrative act showing that the state forbids private companies to independently resolve any matters of strategic importance. These political acts led to the re-evaluation of risks in this market, and large companies, despite the favourable market situation, started to reduce their investment activities, while the scale of geological survey has now reached its minimum in decades.

As for the transport market, the bulked cargoes traffic is characterized by positive, but slowing down dynamics. Dramatic changes are noticeable in the structure of this traffic distribution by transport modes. Crude oil is abandoning both the railway and the river. But if the former can sufficiently compensate the lost cargo flow by oil products (indirectly this is confirmed by the increased demand for specialized cisterns to carry non-mass cargoes and chemical products), the river transport is in a worse position, taking into account the seasonal nature of their navigation.

On the other hand, the pipeline system received a powerful impetus to development and at present its facilities are enough to serve crude oil flow. Moreover, new development and modernization projects are under way, which are to increase the pipeline throughput in the nearest future.



Use it or die?

Thus, the "vertigo" caused by their success in the world markets, combined with the instability and unpredictability of the Russian state policy, makes the oil producers focus on the momentary profits, which cannot serve as a guarantee of future prosperity.

In certain expert estimations, already by 2010, the Russian carbohydrates output may drop by 60% against the current level, due to equipment and technological facilities deterioration and exhaustion of the deposits. On the one hand, the oil businesses' reluctance to invest in developing new fields is explicable. On the other hand, in reality it can lead to an energy crisis. Unlike the United Arab Emirates, for example, who will not die having exhausted their oil resources, Russia will simply freeze to death. On the Barentsevo sea shelf there have been discovered over 40 new oil and gas fields, and the investment of some USD 46 bln will bring fivefold profit. This is the experts opinion, but what developer will be eager to risk such a sum?

Besides, some analysts note that the existing projects of new fields development (those of the Eastern Siberia and the northern seas shelves being the priority ones), firstly, require great investments and, secondly, can turn out to be far from as promising as it appears on the face of it. Thus, there emerges a far from optimistic situation: deposits get exhausted, while new ones cannot be developed.

As to the infrastructure development, the reason for reluctance of the Russian oil companies to initiate large investment projects is also on the surface: it is the gap between the real value of dollar inside the country and outside it. At present, it is much more profitable to run refining business in any of the European states.

The given situation can only be resolved by urgent state regulation of the oil export, experts claim. And they are not talking of generating conditions for getting maximum tax gains, but of the concrete market regulation. In other words, it is necessary to create the basis for the companies to operate successfully. This includes guaranties to the companies eager to invest in the new fields development and the possibility to stabilize their activity on both domestic and international markets. The more so, taking into account the prospects of operation in this segment.

The independence of the prices for energy carriers from the value of dollar is considered to be the major reason for their consistent growth. Despite the fact that the dollar has long become the basis for the world economy, it can be classified into two kinds: the American economy dollar and the international accounts dollar. The mistakes in the domestic economic policy are compensated by constant issues, but this cannot be applied to the international dollar, the success of which depends on stability. As a result, currency risks have to be hedged. The situation generates interest in other currencies, but they are also unstable. Thus, the only means of protection remains the growth of prices for Futures Contracts, oil being the most universal one. This is the root of the situation: the greater the instability of the international situation, the higher prices for oil. The political and situation factors also contribute to it (e.g. the Iraq war, unpredictability of the American expansions), as well as other objective factors (such as the Catherine hurricane that destroyed half of the USA oil producing infrastructure in the Gulf of Mexico, making the USA a promising importer of energy carriers). By the way, after the announcements of the American officials as to the bores operation renewal, the prices for oil went slightly down. Nevertheless, the drastic drop of prices can lead to such perturbances on the international currency markets which cannot be survived by any country or corporation of the world. As a result, many experts believe high prices for energy carriers will have to be maintained.



TATYANA  TOKAREVA
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    [DETAIL_TEXT] => In September 2005, the Board of OAO RZD discussed the issue of heavy freight trains, weighing 7 thousand tons, 8 thousand tons and 9 thousand tons, running from Kuzbass, where coal is loaded, to the ports along the Dalnevostochnaya Railway (Far-Eastern Railway), the Oktyabrskaya (October) Railway and the Severo-Kavkazskaya (North-Caucasian) Railway. According to OAO RZD's development strategy, the trains will have standard weight and length to run along the basic transport corridors, including the Transsiberian railway. 

One of the present-day problems of the rail transport is the increase of train's weight. By using heavy freight trains, with the locomotive park and the amount of the locomotive crews remaining the same, it will be possible to reduce the expenses of the railway. 

On August 29, the first test train, weighing 7 thousand tons, ran along the Krasnoyarskaya railway from the Buynaya station to the Bazaikha station. The train included 76 wagons, loaded with coal (usually, there are 64 wagons in a train). On August 31, the second test train, weighing 8 thousand tons, ran along the Krasnoyarskaya Railway on the same route. The train included 87 wagons, loaded with coal.

The trains ran according to the schedule. The cargo was delivered to heating and power plant ?1 on time.

To operate such trains, special conditions are required, such as extension of receiving-departure tracks, strengthening of the upper part of the tracks, improved automatics, a modern locomotive repair depot etc.



OAO RZD Increased Transportation Volumes

In January-October 2005, OAO RZD increased freight transportation volumes by 4.1% year-on-year, the first vice president of OAO RZD said at the III International Conference "OAO RZD on the Transport Services Market: Cooperation and Partnership".

Vadim Morozov marked the positive dynamics of fulfillment the company's exploitation results in January-October 2005. Thus, the volumes of cargo dispatch increased by 4.1%, the throughput grew by 2.5%, the passenger turnover increased by 12.5%. The container transportation grew by 12.5%.

"The data confirm that OAO RZD successfully fulfills its main target - freight and passenger transportation. OAO RZD satisfies the demand for transport services. The company did not lack the rolling tock or carrying capacities", V.Morozov reported.

At the same time, he marked the necessity of solving the problems, connected with improvement of cooperation with the company's partners at the transport services market. According to him, because of the lack of necessary capacities in the sea ports, the ports declined over 6.1 mln tons of export freight, and the port oil terminals declined over 3 mln tons of oil and products. Another deterrent was the carrying capacities of foreign railways. They declined over 7.9 mln tons of export cargo.



New Oil Port of Kazakhstan

The deputy director of the Kazgiproneftetrans Engineering Company (Republic of Kazakhstan) Gennady Tarasov said at the 1st international practical conference "Ports, terminals, tanker fleet", that the currently constructed sea port Kuryk is to become one of the main oil ports of Kazakhstan.

The project is being carried out by KazMunaiGas in the framework of state programmes aimed at development of the Kazakh part of the Caspian Sea and creation of a national commercial sea fleet, as well as Kazakhstan's joining the Baku-Tbilisi-Ceyhan project. 

In 2010-2015, Kazakhstan plans to transport about 20 mln. tons of oil via the Kurdyk port. In the near future, KazMunaiGas will actively develop three sectors, with the total area of 795 hectares, on the port's territory.

According to G.Tarasov, the development of the port's infrastructure envisages construction of an oil terminal with the annual capacity of 30 mln tons of oil, of a dockyard and a ship-building yard, of an oil pipeline "Zhetybai - oil terminal", of an oil pipeline "Iskene-Kuryk", of a sea supporting base, and of a railway from the Yeraliyevo station to the sea supporting base. 

The terminal is to be built in the Southern part of the Kuryk gulf. The first stage envisages an annual throughput of 5 mln tons. The first stage of the sea port construction is evaluated at USD327 mln. On the whole, USD581 mln is to be invested into the construction of the sea infrastructure.



Sovcomflot Signed Contract for Transporting Oil from Varandey

On 9 November 2005, the Russian shipping company "Sovcomflot" and "Narianmarneftegaz", the joint venture of "Lukoil" and "ConocoPhillips", signed a long-term contract for transporting oil from Varandey loading terminal.

Thus, "Sovcomflot's" victory in the tender announced in August 2005 by "Narianmarneftegaz" has been officially registered. The terms and conditions of the Agreement signed on November 9 envisage the operation of three ice-class tankers of 70 thousand DWT each. The vessels are to be registered in Russia and will be flying the country's flag.



Coal Transportation Reduces

Since October 2005, there has appeared a tendency of reducing coal loading into private wagons as compared to the same period of the previous year.

Thus, coal loading reduced from 1,621 wagons to 1,418 wagons daily, or by 203 wagons daily (decrease made 12.5%) on the railways of Russia. Daily coal loading at the Zapadno-Sibirskaya (Weastern-Siberian) Railway reduced from 717 to 497 wagons (-30.7%), the one of the Krasnoyarskaya Railway decreased from 474 to 404 wagons (-14.8%), and the one of the Vostochno-Sibirskaya (Eastern-Siberian) Railway fell from 225 to 138 wagons (-38.7%).

The main reason for it is the low profitability of coal transportation. Nowadays, the coal-transportation income rate does not exceed RUR1.42 for 10 t/km, which is half as much as the average net income rate. 



Russia to Increase Railway Oil Supplies to china

Russia is planning to supply 10 mln metric tons of oil to China this year and 15 mln tons next year by railway, Russian Prime Minister Mikhail Fradkov said at a government session on November 6.

"The main thing is not to link all export prospects to railroads", M.Fradkov said. 

Deputy Prime Minister Alexander Zhukov mentioned the target of increasing Russia's oil supplies to China, whose rapidly developing economy and demand for oil is expected to increase by 5%-7% a year.



New Box Service Rotterdam-St.-Petersburg

North-Western Line of St. Petersburg, a general charter agency of "North-Western Shipping Company", started operating a weekly box service connecting Rotterdam with the carrier's homeport, accepting both local and feeder cargo. 

Cargo from/to Antwerp will be moved by barge to Rotterdam. Burger Liner Agencies, part of the Royal Burger Group, represents the line in Rotterdam. Earlier, North-Western Line of St.-Petersburg serviced the line St.-Petersburg - Antwerp. Now the route has been prolonged to Rotterdam. The freight from the Netherlands is handled at the First Container Terminal (FCT). Vessels of "Rusich" type (267 TEU) service the line. Delivery time is 5 days.



Ferry Ust-Luga-Baltiysk-Germany: Departure in July

"If the project is financed according to the schedule, the test ferry will run on the route Ust-Luga-Baltiysk - ports of Germany in July 2006", the Head of the Federal Agency of Sea and River Transport Alexander Davydenko said at the meeting held in the commercial sea port ofUst-Luga.

At the meeting they discussed the problem of putting into operation the first line of the motor-railway ferry complex (Ust-Luga-Baltiysk-ports of Germany).

According to the data of the Federal Agency of Sea and River Transport, the total capital investment volume given by the Federal budget in 2005 is RUR1.150 bln. In 2006 the state capital investment volume will make RUR1.535 bln. 

Construction of the motor-railway ferry complex in the port of Ust-Luga started in 2003. Its annual planned throughput is 4 mln tons, the railway constituent of the ferry complex is 1.2 mln tons, and the motor constituent is 2.8 mln tons. 



Hyundai Wants to Construct Railway in Kazakhstan

The Southern Korean company Hyundai is interested in developing its business in Kazakhstan, the corporation's director general Jun Myun Khun said. "The corporation is ready to invest into interesting projects in Kazakhstan", he said at the press-conference in Almaty.

Among the possible directions of cooperation, the corporation's head named the oil and gas sector, construction of railways and railway transport delivery.



Transit Projects Are Coming True in Sillamae

The growth of cargo flows between Russia and Europe guarantees a stable loading of new port terminals in Estonia, the chairperson of the Board of Directors of "Port Sillamae" Tijta Vyakhi said.

According to T.Vyakhi, the forecasts made during the port's construction will become reality.

"It turns out that we forecasted the events that are happening now: the throughput between Europe and Russia is now about 200 mln tons, but by 2030 it will increase to 400 mln tons. This freight is to be serviced. I believe, all cargoes cannot be handled by three ports - Murmansk, Ust-Luga and St.-Petersburg - only. It is natural, that some alternative transport networks will be needed. I mean, we started the construction, because we were sure that our forecast would prove correct", T.Vyakhi said.

Sillamae is the last eastern port of the European Union. 

"I think, it can also be called the last western port of Russia, because there is 50% of the Russian capital", T.Vyakhi said, characterizing the port as the largest private port in Europe. Its territory is 600 hectares, the depth is 16 m. Besides, the port owns a railway station, locomotives and a thermoelectric power station.

According to T.Vyakhi, the company will be handling 10 mln tons annually in three years, and 20 mln tons annually in five years. "It depends on the transit policy of Russia", T. Vyakhi said. "If Russia wants to close its borders and not to let goods in, we will not invest into the project. The port has been created to provide transit streams between Russia and Europe".

    [~DETAIL_TEXT] => In September 2005, the Board of OAO RZD discussed the issue of heavy freight trains, weighing 7 thousand tons, 8 thousand tons and 9 thousand tons, running from Kuzbass, where coal is loaded, to the ports along the Dalnevostochnaya Railway (Far-Eastern Railway), the Oktyabrskaya (October) Railway and the Severo-Kavkazskaya (North-Caucasian) Railway. According to OAO RZD's development strategy, the trains will have standard weight and length to run along the basic transport corridors, including the Transsiberian railway. 

One of the present-day problems of the rail transport is the increase of train's weight. By using heavy freight trains, with the locomotive park and the amount of the locomotive crews remaining the same, it will be possible to reduce the expenses of the railway. 

On August 29, the first test train, weighing 7 thousand tons, ran along the Krasnoyarskaya railway from the Buynaya station to the Bazaikha station. The train included 76 wagons, loaded with coal (usually, there are 64 wagons in a train). On August 31, the second test train, weighing 8 thousand tons, ran along the Krasnoyarskaya Railway on the same route. The train included 87 wagons, loaded with coal.

The trains ran according to the schedule. The cargo was delivered to heating and power plant ?1 on time.

To operate such trains, special conditions are required, such as extension of receiving-departure tracks, strengthening of the upper part of the tracks, improved automatics, a modern locomotive repair depot etc.



OAO RZD Increased Transportation Volumes

In January-October 2005, OAO RZD increased freight transportation volumes by 4.1% year-on-year, the first vice president of OAO RZD said at the III International Conference "OAO RZD on the Transport Services Market: Cooperation and Partnership".

Vadim Morozov marked the positive dynamics of fulfillment the company's exploitation results in January-October 2005. Thus, the volumes of cargo dispatch increased by 4.1%, the throughput grew by 2.5%, the passenger turnover increased by 12.5%. The container transportation grew by 12.5%.

"The data confirm that OAO RZD successfully fulfills its main target - freight and passenger transportation. OAO RZD satisfies the demand for transport services. The company did not lack the rolling tock or carrying capacities", V.Morozov reported.

At the same time, he marked the necessity of solving the problems, connected with improvement of cooperation with the company's partners at the transport services market. According to him, because of the lack of necessary capacities in the sea ports, the ports declined over 6.1 mln tons of export freight, and the port oil terminals declined over 3 mln tons of oil and products. Another deterrent was the carrying capacities of foreign railways. They declined over 7.9 mln tons of export cargo.



New Oil Port of Kazakhstan

The deputy director of the Kazgiproneftetrans Engineering Company (Republic of Kazakhstan) Gennady Tarasov said at the 1st international practical conference "Ports, terminals, tanker fleet", that the currently constructed sea port Kuryk is to become one of the main oil ports of Kazakhstan.

The project is being carried out by KazMunaiGas in the framework of state programmes aimed at development of the Kazakh part of the Caspian Sea and creation of a national commercial sea fleet, as well as Kazakhstan's joining the Baku-Tbilisi-Ceyhan project. 

In 2010-2015, Kazakhstan plans to transport about 20 mln. tons of oil via the Kurdyk port. In the near future, KazMunaiGas will actively develop three sectors, with the total area of 795 hectares, on the port's territory.

According to G.Tarasov, the development of the port's infrastructure envisages construction of an oil terminal with the annual capacity of 30 mln tons of oil, of a dockyard and a ship-building yard, of an oil pipeline "Zhetybai - oil terminal", of an oil pipeline "Iskene-Kuryk", of a sea supporting base, and of a railway from the Yeraliyevo station to the sea supporting base. 

The terminal is to be built in the Southern part of the Kuryk gulf. The first stage envisages an annual throughput of 5 mln tons. The first stage of the sea port construction is evaluated at USD327 mln. On the whole, USD581 mln is to be invested into the construction of the sea infrastructure.



Sovcomflot Signed Contract for Transporting Oil from Varandey

On 9 November 2005, the Russian shipping company "Sovcomflot" and "Narianmarneftegaz", the joint venture of "Lukoil" and "ConocoPhillips", signed a long-term contract for transporting oil from Varandey loading terminal.

Thus, "Sovcomflot's" victory in the tender announced in August 2005 by "Narianmarneftegaz" has been officially registered. The terms and conditions of the Agreement signed on November 9 envisage the operation of three ice-class tankers of 70 thousand DWT each. The vessels are to be registered in Russia and will be flying the country's flag.



Coal Transportation Reduces

Since October 2005, there has appeared a tendency of reducing coal loading into private wagons as compared to the same period of the previous year.

Thus, coal loading reduced from 1,621 wagons to 1,418 wagons daily, or by 203 wagons daily (decrease made 12.5%) on the railways of Russia. Daily coal loading at the Zapadno-Sibirskaya (Weastern-Siberian) Railway reduced from 717 to 497 wagons (-30.7%), the one of the Krasnoyarskaya Railway decreased from 474 to 404 wagons (-14.8%), and the one of the Vostochno-Sibirskaya (Eastern-Siberian) Railway fell from 225 to 138 wagons (-38.7%).

The main reason for it is the low profitability of coal transportation. Nowadays, the coal-transportation income rate does not exceed RUR1.42 for 10 t/km, which is half as much as the average net income rate. 



Russia to Increase Railway Oil Supplies to china

Russia is planning to supply 10 mln metric tons of oil to China this year and 15 mln tons next year by railway, Russian Prime Minister Mikhail Fradkov said at a government session on November 6.

"The main thing is not to link all export prospects to railroads", M.Fradkov said. 

Deputy Prime Minister Alexander Zhukov mentioned the target of increasing Russia's oil supplies to China, whose rapidly developing economy and demand for oil is expected to increase by 5%-7% a year.



New Box Service Rotterdam-St.-Petersburg

North-Western Line of St. Petersburg, a general charter agency of "North-Western Shipping Company", started operating a weekly box service connecting Rotterdam with the carrier's homeport, accepting both local and feeder cargo. 

Cargo from/to Antwerp will be moved by barge to Rotterdam. Burger Liner Agencies, part of the Royal Burger Group, represents the line in Rotterdam. Earlier, North-Western Line of St.-Petersburg serviced the line St.-Petersburg - Antwerp. Now the route has been prolonged to Rotterdam. The freight from the Netherlands is handled at the First Container Terminal (FCT). Vessels of "Rusich" type (267 TEU) service the line. Delivery time is 5 days.



Ferry Ust-Luga-Baltiysk-Germany: Departure in July

"If the project is financed according to the schedule, the test ferry will run on the route Ust-Luga-Baltiysk - ports of Germany in July 2006", the Head of the Federal Agency of Sea and River Transport Alexander Davydenko said at the meeting held in the commercial sea port ofUst-Luga.

At the meeting they discussed the problem of putting into operation the first line of the motor-railway ferry complex (Ust-Luga-Baltiysk-ports of Germany).

According to the data of the Federal Agency of Sea and River Transport, the total capital investment volume given by the Federal budget in 2005 is RUR1.150 bln. In 2006 the state capital investment volume will make RUR1.535 bln. 

Construction of the motor-railway ferry complex in the port of Ust-Luga started in 2003. Its annual planned throughput is 4 mln tons, the railway constituent of the ferry complex is 1.2 mln tons, and the motor constituent is 2.8 mln tons. 



Hyundai Wants to Construct Railway in Kazakhstan

The Southern Korean company Hyundai is interested in developing its business in Kazakhstan, the corporation's director general Jun Myun Khun said. "The corporation is ready to invest into interesting projects in Kazakhstan", he said at the press-conference in Almaty.

Among the possible directions of cooperation, the corporation's head named the oil and gas sector, construction of railways and railway transport delivery.



Transit Projects Are Coming True in Sillamae

The growth of cargo flows between Russia and Europe guarantees a stable loading of new port terminals in Estonia, the chairperson of the Board of Directors of "Port Sillamae" Tijta Vyakhi said.

According to T.Vyakhi, the forecasts made during the port's construction will become reality.

"It turns out that we forecasted the events that are happening now: the throughput between Europe and Russia is now about 200 mln tons, but by 2030 it will increase to 400 mln tons. This freight is to be serviced. I believe, all cargoes cannot be handled by three ports - Murmansk, Ust-Luga and St.-Petersburg - only. It is natural, that some alternative transport networks will be needed. I mean, we started the construction, because we were sure that our forecast would prove correct", T.Vyakhi said.

Sillamae is the last eastern port of the European Union. 

"I think, it can also be called the last western port of Russia, because there is 50% of the Russian capital", T.Vyakhi said, characterizing the port as the largest private port in Europe. Its territory is 600 hectares, the depth is 16 m. Besides, the port owns a railway station, locomotives and a thermoelectric power station.

According to T.Vyakhi, the company will be handling 10 mln tons annually in three years, and 20 mln tons annually in five years. "It depends on the transit policy of Russia", T. Vyakhi said. "If Russia wants to close its borders and not to let goods in, we will not invest into the project. The port has been created to provide transit streams between Russia and Europe".

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    [DETAIL_TEXT] => In September 2005, the Board of OAO RZD discussed the issue of heavy freight trains, weighing 7 thousand tons, 8 thousand tons and 9 thousand tons, running from Kuzbass, where coal is loaded, to the ports along the Dalnevostochnaya Railway (Far-Eastern Railway), the Oktyabrskaya (October) Railway and the Severo-Kavkazskaya (North-Caucasian) Railway. According to OAO RZD's development strategy, the trains will have standard weight and length to run along the basic transport corridors, including the Transsiberian railway. 

One of the present-day problems of the rail transport is the increase of train's weight. By using heavy freight trains, with the locomotive park and the amount of the locomotive crews remaining the same, it will be possible to reduce the expenses of the railway. 

On August 29, the first test train, weighing 7 thousand tons, ran along the Krasnoyarskaya railway from the Buynaya station to the Bazaikha station. The train included 76 wagons, loaded with coal (usually, there are 64 wagons in a train). On August 31, the second test train, weighing 8 thousand tons, ran along the Krasnoyarskaya Railway on the same route. The train included 87 wagons, loaded with coal.

The trains ran according to the schedule. The cargo was delivered to heating and power plant ?1 on time.

To operate such trains, special conditions are required, such as extension of receiving-departure tracks, strengthening of the upper part of the tracks, improved automatics, a modern locomotive repair depot etc.



OAO RZD Increased Transportation Volumes

In January-October 2005, OAO RZD increased freight transportation volumes by 4.1% year-on-year, the first vice president of OAO RZD said at the III International Conference "OAO RZD on the Transport Services Market: Cooperation and Partnership".

Vadim Morozov marked the positive dynamics of fulfillment the company's exploitation results in January-October 2005. Thus, the volumes of cargo dispatch increased by 4.1%, the throughput grew by 2.5%, the passenger turnover increased by 12.5%. The container transportation grew by 12.5%.

"The data confirm that OAO RZD successfully fulfills its main target - freight and passenger transportation. OAO RZD satisfies the demand for transport services. The company did not lack the rolling tock or carrying capacities", V.Morozov reported.

At the same time, he marked the necessity of solving the problems, connected with improvement of cooperation with the company's partners at the transport services market. According to him, because of the lack of necessary capacities in the sea ports, the ports declined over 6.1 mln tons of export freight, and the port oil terminals declined over 3 mln tons of oil and products. Another deterrent was the carrying capacities of foreign railways. They declined over 7.9 mln tons of export cargo.



New Oil Port of Kazakhstan

The deputy director of the Kazgiproneftetrans Engineering Company (Republic of Kazakhstan) Gennady Tarasov said at the 1st international practical conference "Ports, terminals, tanker fleet", that the currently constructed sea port Kuryk is to become one of the main oil ports of Kazakhstan.

The project is being carried out by KazMunaiGas in the framework of state programmes aimed at development of the Kazakh part of the Caspian Sea and creation of a national commercial sea fleet, as well as Kazakhstan's joining the Baku-Tbilisi-Ceyhan project. 

In 2010-2015, Kazakhstan plans to transport about 20 mln. tons of oil via the Kurdyk port. In the near future, KazMunaiGas will actively develop three sectors, with the total area of 795 hectares, on the port's territory.

According to G.Tarasov, the development of the port's infrastructure envisages construction of an oil terminal with the annual capacity of 30 mln tons of oil, of a dockyard and a ship-building yard, of an oil pipeline "Zhetybai - oil terminal", of an oil pipeline "Iskene-Kuryk", of a sea supporting base, and of a railway from the Yeraliyevo station to the sea supporting base. 

The terminal is to be built in the Southern part of the Kuryk gulf. The first stage envisages an annual throughput of 5 mln tons. The first stage of the sea port construction is evaluated at USD327 mln. On the whole, USD581 mln is to be invested into the construction of the sea infrastructure.



Sovcomflot Signed Contract for Transporting Oil from Varandey

On 9 November 2005, the Russian shipping company "Sovcomflot" and "Narianmarneftegaz", the joint venture of "Lukoil" and "ConocoPhillips", signed a long-term contract for transporting oil from Varandey loading terminal.

Thus, "Sovcomflot's" victory in the tender announced in August 2005 by "Narianmarneftegaz" has been officially registered. The terms and conditions of the Agreement signed on November 9 envisage the operation of three ice-class tankers of 70 thousand DWT each. The vessels are to be registered in Russia and will be flying the country's flag.



Coal Transportation Reduces

Since October 2005, there has appeared a tendency of reducing coal loading into private wagons as compared to the same period of the previous year.

Thus, coal loading reduced from 1,621 wagons to 1,418 wagons daily, or by 203 wagons daily (decrease made 12.5%) on the railways of Russia. Daily coal loading at the Zapadno-Sibirskaya (Weastern-Siberian) Railway reduced from 717 to 497 wagons (-30.7%), the one of the Krasnoyarskaya Railway decreased from 474 to 404 wagons (-14.8%), and the one of the Vostochno-Sibirskaya (Eastern-Siberian) Railway fell from 225 to 138 wagons (-38.7%).

The main reason for it is the low profitability of coal transportation. Nowadays, the coal-transportation income rate does not exceed RUR1.42 for 10 t/km, which is half as much as the average net income rate. 



Russia to Increase Railway Oil Supplies to china

Russia is planning to supply 10 mln metric tons of oil to China this year and 15 mln tons next year by railway, Russian Prime Minister Mikhail Fradkov said at a government session on November 6.

"The main thing is not to link all export prospects to railroads", M.Fradkov said. 

Deputy Prime Minister Alexander Zhukov mentioned the target of increasing Russia's oil supplies to China, whose rapidly developing economy and demand for oil is expected to increase by 5%-7% a year.



New Box Service Rotterdam-St.-Petersburg

North-Western Line of St. Petersburg, a general charter agency of "North-Western Shipping Company", started operating a weekly box service connecting Rotterdam with the carrier's homeport, accepting both local and feeder cargo. 

Cargo from/to Antwerp will be moved by barge to Rotterdam. Burger Liner Agencies, part of the Royal Burger Group, represents the line in Rotterdam. Earlier, North-Western Line of St.-Petersburg serviced the line St.-Petersburg - Antwerp. Now the route has been prolonged to Rotterdam. The freight from the Netherlands is handled at the First Container Terminal (FCT). Vessels of "Rusich" type (267 TEU) service the line. Delivery time is 5 days.



Ferry Ust-Luga-Baltiysk-Germany: Departure in July

"If the project is financed according to the schedule, the test ferry will run on the route Ust-Luga-Baltiysk - ports of Germany in July 2006", the Head of the Federal Agency of Sea and River Transport Alexander Davydenko said at the meeting held in the commercial sea port ofUst-Luga.

At the meeting they discussed the problem of putting into operation the first line of the motor-railway ferry complex (Ust-Luga-Baltiysk-ports of Germany).

According to the data of the Federal Agency of Sea and River Transport, the total capital investment volume given by the Federal budget in 2005 is RUR1.150 bln. In 2006 the state capital investment volume will make RUR1.535 bln. 

Construction of the motor-railway ferry complex in the port of Ust-Luga started in 2003. Its annual planned throughput is 4 mln tons, the railway constituent of the ferry complex is 1.2 mln tons, and the motor constituent is 2.8 mln tons. 



Hyundai Wants to Construct Railway in Kazakhstan

The Southern Korean company Hyundai is interested in developing its business in Kazakhstan, the corporation's director general Jun Myun Khun said. "The corporation is ready to invest into interesting projects in Kazakhstan", he said at the press-conference in Almaty.

Among the possible directions of cooperation, the corporation's head named the oil and gas sector, construction of railways and railway transport delivery.



Transit Projects Are Coming True in Sillamae

The growth of cargo flows between Russia and Europe guarantees a stable loading of new port terminals in Estonia, the chairperson of the Board of Directors of "Port Sillamae" Tijta Vyakhi said.

According to T.Vyakhi, the forecasts made during the port's construction will become reality.

"It turns out that we forecasted the events that are happening now: the throughput between Europe and Russia is now about 200 mln tons, but by 2030 it will increase to 400 mln tons. This freight is to be serviced. I believe, all cargoes cannot be handled by three ports - Murmansk, Ust-Luga and St.-Petersburg - only. It is natural, that some alternative transport networks will be needed. I mean, we started the construction, because we were sure that our forecast would prove correct", T.Vyakhi said.

Sillamae is the last eastern port of the European Union. 

"I think, it can also be called the last western port of Russia, because there is 50% of the Russian capital", T.Vyakhi said, characterizing the port as the largest private port in Europe. Its territory is 600 hectares, the depth is 16 m. Besides, the port owns a railway station, locomotives and a thermoelectric power station.

According to T.Vyakhi, the company will be handling 10 mln tons annually in three years, and 20 mln tons annually in five years. "It depends on the transit policy of Russia", T. Vyakhi said. "If Russia wants to close its borders and not to let goods in, we will not invest into the project. The port has been created to provide transit streams between Russia and Europe".

    [~DETAIL_TEXT] => In September 2005, the Board of OAO RZD discussed the issue of heavy freight trains, weighing 7 thousand tons, 8 thousand tons and 9 thousand tons, running from Kuzbass, where coal is loaded, to the ports along the Dalnevostochnaya Railway (Far-Eastern Railway), the Oktyabrskaya (October) Railway and the Severo-Kavkazskaya (North-Caucasian) Railway. According to OAO RZD's development strategy, the trains will have standard weight and length to run along the basic transport corridors, including the Transsiberian railway. 

One of the present-day problems of the rail transport is the increase of train's weight. By using heavy freight trains, with the locomotive park and the amount of the locomotive crews remaining the same, it will be possible to reduce the expenses of the railway. 

On August 29, the first test train, weighing 7 thousand tons, ran along the Krasnoyarskaya railway from the Buynaya station to the Bazaikha station. The train included 76 wagons, loaded with coal (usually, there are 64 wagons in a train). On August 31, the second test train, weighing 8 thousand tons, ran along the Krasnoyarskaya Railway on the same route. The train included 87 wagons, loaded with coal.

The trains ran according to the schedule. The cargo was delivered to heating and power plant ?1 on time.

To operate such trains, special conditions are required, such as extension of receiving-departure tracks, strengthening of the upper part of the tracks, improved automatics, a modern locomotive repair depot etc.



OAO RZD Increased Transportation Volumes

In January-October 2005, OAO RZD increased freight transportation volumes by 4.1% year-on-year, the first vice president of OAO RZD said at the III International Conference "OAO RZD on the Transport Services Market: Cooperation and Partnership".

Vadim Morozov marked the positive dynamics of fulfillment the company's exploitation results in January-October 2005. Thus, the volumes of cargo dispatch increased by 4.1%, the throughput grew by 2.5%, the passenger turnover increased by 12.5%. The container transportation grew by 12.5%.

"The data confirm that OAO RZD successfully fulfills its main target - freight and passenger transportation. OAO RZD satisfies the demand for transport services. The company did not lack the rolling tock or carrying capacities", V.Morozov reported.

At the same time, he marked the necessity of solving the problems, connected with improvement of cooperation with the company's partners at the transport services market. According to him, because of the lack of necessary capacities in the sea ports, the ports declined over 6.1 mln tons of export freight, and the port oil terminals declined over 3 mln tons of oil and products. Another deterrent was the carrying capacities of foreign railways. They declined over 7.9 mln tons of export cargo.



New Oil Port of Kazakhstan

The deputy director of the Kazgiproneftetrans Engineering Company (Republic of Kazakhstan) Gennady Tarasov said at the 1st international practical conference "Ports, terminals, tanker fleet", that the currently constructed sea port Kuryk is to become one of the main oil ports of Kazakhstan.

The project is being carried out by KazMunaiGas in the framework of state programmes aimed at development of the Kazakh part of the Caspian Sea and creation of a national commercial sea fleet, as well as Kazakhstan's joining the Baku-Tbilisi-Ceyhan project. 

In 2010-2015, Kazakhstan plans to transport about 20 mln. tons of oil via the Kurdyk port. In the near future, KazMunaiGas will actively develop three sectors, with the total area of 795 hectares, on the port's territory.

According to G.Tarasov, the development of the port's infrastructure envisages construction of an oil terminal with the annual capacity of 30 mln tons of oil, of a dockyard and a ship-building yard, of an oil pipeline "Zhetybai - oil terminal", of an oil pipeline "Iskene-Kuryk", of a sea supporting base, and of a railway from the Yeraliyevo station to the sea supporting base. 

The terminal is to be built in the Southern part of the Kuryk gulf. The first stage envisages an annual throughput of 5 mln tons. The first stage of the sea port construction is evaluated at USD327 mln. On the whole, USD581 mln is to be invested into the construction of the sea infrastructure.



Sovcomflot Signed Contract for Transporting Oil from Varandey

On 9 November 2005, the Russian shipping company "Sovcomflot" and "Narianmarneftegaz", the joint venture of "Lukoil" and "ConocoPhillips", signed a long-term contract for transporting oil from Varandey loading terminal.

Thus, "Sovcomflot's" victory in the tender announced in August 2005 by "Narianmarneftegaz" has been officially registered. The terms and conditions of the Agreement signed on November 9 envisage the operation of three ice-class tankers of 70 thousand DWT each. The vessels are to be registered in Russia and will be flying the country's flag.



Coal Transportation Reduces

Since October 2005, there has appeared a tendency of reducing coal loading into private wagons as compared to the same period of the previous year.

Thus, coal loading reduced from 1,621 wagons to 1,418 wagons daily, or by 203 wagons daily (decrease made 12.5%) on the railways of Russia. Daily coal loading at the Zapadno-Sibirskaya (Weastern-Siberian) Railway reduced from 717 to 497 wagons (-30.7%), the one of the Krasnoyarskaya Railway decreased from 474 to 404 wagons (-14.8%), and the one of the Vostochno-Sibirskaya (Eastern-Siberian) Railway fell from 225 to 138 wagons (-38.7%).

The main reason for it is the low profitability of coal transportation. Nowadays, the coal-transportation income rate does not exceed RUR1.42 for 10 t/km, which is half as much as the average net income rate. 



Russia to Increase Railway Oil Supplies to china

Russia is planning to supply 10 mln metric tons of oil to China this year and 15 mln tons next year by railway, Russian Prime Minister Mikhail Fradkov said at a government session on November 6.

"The main thing is not to link all export prospects to railroads", M.Fradkov said. 

Deputy Prime Minister Alexander Zhukov mentioned the target of increasing Russia's oil supplies to China, whose rapidly developing economy and demand for oil is expected to increase by 5%-7% a year.



New Box Service Rotterdam-St.-Petersburg

North-Western Line of St. Petersburg, a general charter agency of "North-Western Shipping Company", started operating a weekly box service connecting Rotterdam with the carrier's homeport, accepting both local and feeder cargo. 

Cargo from/to Antwerp will be moved by barge to Rotterdam. Burger Liner Agencies, part of the Royal Burger Group, represents the line in Rotterdam. Earlier, North-Western Line of St.-Petersburg serviced the line St.-Petersburg - Antwerp. Now the route has been prolonged to Rotterdam. The freight from the Netherlands is handled at the First Container Terminal (FCT). Vessels of "Rusich" type (267 TEU) service the line. Delivery time is 5 days.



Ferry Ust-Luga-Baltiysk-Germany: Departure in July

"If the project is financed according to the schedule, the test ferry will run on the route Ust-Luga-Baltiysk - ports of Germany in July 2006", the Head of the Federal Agency of Sea and River Transport Alexander Davydenko said at the meeting held in the commercial sea port ofUst-Luga.

At the meeting they discussed the problem of putting into operation the first line of the motor-railway ferry complex (Ust-Luga-Baltiysk-ports of Germany).

According to the data of the Federal Agency of Sea and River Transport, the total capital investment volume given by the Federal budget in 2005 is RUR1.150 bln. In 2006 the state capital investment volume will make RUR1.535 bln. 

Construction of the motor-railway ferry complex in the port of Ust-Luga started in 2003. Its annual planned throughput is 4 mln tons, the railway constituent of the ferry complex is 1.2 mln tons, and the motor constituent is 2.8 mln tons. 



Hyundai Wants to Construct Railway in Kazakhstan

The Southern Korean company Hyundai is interested in developing its business in Kazakhstan, the corporation's director general Jun Myun Khun said. "The corporation is ready to invest into interesting projects in Kazakhstan", he said at the press-conference in Almaty.

Among the possible directions of cooperation, the corporation's head named the oil and gas sector, construction of railways and railway transport delivery.



Transit Projects Are Coming True in Sillamae

The growth of cargo flows between Russia and Europe guarantees a stable loading of new port terminals in Estonia, the chairperson of the Board of Directors of "Port Sillamae" Tijta Vyakhi said.

According to T.Vyakhi, the forecasts made during the port's construction will become reality.

"It turns out that we forecasted the events that are happening now: the throughput between Europe and Russia is now about 200 mln tons, but by 2030 it will increase to 400 mln tons. This freight is to be serviced. I believe, all cargoes cannot be handled by three ports - Murmansk, Ust-Luga and St.-Petersburg - only. It is natural, that some alternative transport networks will be needed. I mean, we started the construction, because we were sure that our forecast would prove correct", T.Vyakhi said.

Sillamae is the last eastern port of the European Union. 

"I think, it can also be called the last western port of Russia, because there is 50% of the Russian capital", T.Vyakhi said, characterizing the port as the largest private port in Europe. Its territory is 600 hectares, the depth is 16 m. Besides, the port owns a railway station, locomotives and a thermoelectric power station.

According to T.Vyakhi, the company will be handling 10 mln tons annually in three years, and 20 mln tons annually in five years. "It depends on the transit policy of Russia", T. Vyakhi said. "If Russia wants to close its borders and not to let goods in, we will not invest into the project. The port has been created to provide transit streams between Russia and Europe".

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The idea of establishing a railway administration based on the European model was first mentioned by the Cabinet Ministers of Ukraine in September 2001. The key task of Ukrzaliznytsya must become the control over the whole railway complex of the state (including six regional railways). Initially, it was created as a structure having no rights to interfere in the economic activities of subordinate subjects. By 2001, Ukrzaliznytsya was gradually reformed into the structure with a tough centralized control, which made it possible to accumulate financial flows successfully and played the part of the "locomotive" dragging not only the railway sector of Ukraine, but the whole transport sector of the state out of crisis. 

This November, five years later, the Board of the Ministry of Transport and Communications of Ukraine, following the next positive wave, revived the idea of the state control and economic activities separation, this time on a new basis, which is to become the establishment of the State Joint Stock Company based on Ukrzaliznytsya's property. According to the Board's projects, the process of restructuring will have to be completed by 2007. 

It should be said that the idea of Ukrzaliznytsya turning into a business unit was also shared by the previous Board of the Ministry of Transport and Communication headed by the highly authoritative Georgy Kirpa. It was under his control that Ukrzaliznytsya promoted itself as one of the most ambitious in respect of financial activities projects. However, the greatest contribution made at that stage was the liquidation of the branched system of barter and mediator schemes previously functioning in the railway transport and, in fact, blocking the sector's development. The fact that it was reached only with President and Counsil on National Safety and Defense interference clearly shows what sort of powerful barriers had been overcome. By that time the barter share in Ukrzaliznytsya cargo transportation amounted to 85%! 

As a result, by 2000, the railway sector overcame the border of unprofitability, having shown transportation profitability at the level of 0.61% in 2000, and 15.7% in 2001. For the sake of comparison, in 2001 the profitability of Ukrainian economy amounted to 5.9% in general, and the transport sector (including water and motor trucks) made it to 12.1%. However, Ukrzaliznytsya failed with keeping that rate, as there followed energy carriers cost growth and basic assets wear-and-tear increase. In 2005, the railway sector reached the profitability of 8.6%, then it dropped and amounted to 6.8%. We can not state for sure what results Ukrzaliznytsya will achieve in 2005, as tariff growth and other negative factors influence the company's functioning. 



Rail Transport To Compete

According to the data of the Ministry of Transport and Communication, by 2010 some 60% of car park of Ukrzaliznytsya will have been amortized (today the average age is 25 years), as well as some 80% of main line electric and diesel locomotives (30 years respectively). At present, due to rolling stock wear-and-tear, the deficit of cargo cars exceeded 11 thousand units, while that of passenger ones - 3.5 thousand units. For four recent years gauge wear has resulted in shortening the general length of Ukrainian railways by 1 thousand kilometers (-4.5% of aggregate length). 

During the independent Ukraine existence, railway authorities haven't renewed cargo park and implemented only major repairs. This year the situation got worse, as the expenses budget of Ukrzaliznytsya shortened by 40%. There is no hope to renew the rolling stock under such conditions, even if it is declared by the sector's representatives. 

In general, to restore and renew its railway infrastructure, Ukrzaliznytsya should find USD 1.52 bln. For the sake of comparison, for 9 months of 2005 Ukrzaliznytsya's basic assets renewal (including rolling stock and infrastructure) took USD 398 mln, which does not exceed 14% of total volume of budget expenses for this period. 

Now the company has completed developing its "Complex programme of railway transport of Ukraine rolling stock renewal for the period 2006-2010". According to this document, Ukrzaliznytsya plans to purchase 5 thousand gondola cars, 25 main line electric locomotives, 200 cars for diesel and electric locomotives, 156 passenger carriages. Considering the claimed volumes, the level of the company's funds to be spent (USD 600 mln) is nothing but a signal to attract investors. However, under these very conditions Ukrzaliznytsya will need to enhance its own financial revenue in order to cover its own share of participation, as today's volume of aggregate profit for railways does not surpass USD 540 mln (financial plan for 2005). 

Nevertheless, in the middle of 2005, the company launched the project of investment (leasing) transport company with share participation of both Ukrainian and foreign investors (as it was outlined, without state guarantees). Ukrzaliznytsya's participation envisages a long-term (10-15 years) investment contract. At the same time, Ukrzaliznytsya's authorities claim that they possess respective offers produced by financial structures specializing in leasing. Whether these projects will be launched after the transport sector and whether Ukrzaliznytsya's authorities will change is an issue open to discussion. 



Transit Myth, Tariff Reef

Since the positive changes of2000-2004, there has been indicated a stable growth of Ukrzaliznytsya's load. Among reasons that influenced the situation the following ones can be given: the relative resurrection of the Ukrainian economy and the growth of CIS partners' (Russian, first of all) demand on transport services. Nevertheless, despite the idea of "transit potential of the countries" frequently mentioned by Ukraine, the Ukrainian transport policy didn't allow to obtain the advantages of that period. In particular, the Ukrainian container carriers' statement that container transportation volume growth via the ports of Ukraine was possible to achieve not due but contrary to the national state' efforts has become a common place. 

The first call was closing down the most part of Ukrainian ports for taking excised cargo (2001), which resulted in the situation when Ukraine was cut off from container transit (first of all, from the countries of the Mediterranean region to Russia and Europe). Other factors that influenced the situation negatively were unprofitable pricing (20% VAT for transit, customs tax for transit cargoes introduction) and also the imperfect customs legislation of Ukraine. 

However, the most negative factor became the growth of Ukrainian railway tariffs. At the beginning of 2004, Ukrzaliznytsya made a decision to increase tariffs for oil transit significantly (over 70%), which is why oil flows were rerouted to the alternative Baltic and Black Sea routes. As a result, in 2004 Ukraine lost over 8 mln tons of transit oil. During the period of 2004-2005 tariff growth continued and amounted to 67.3% (Q3 2005 compared to the analogous period of 2003). At the same time tariff growth was indicated for all the classes of cargo, including oil bulk, ferrous metals, fertilizers, grain and coal. 

As a target of such an initiative there was declared an urgent need to compensate the growing expenses on spare parts and energy carriers and also to find funds for rolling stock renewal. According to Ukrzaliznytsya, even the latest price growth (April, 2005) couldn't help to reach the expected result though. An additional source for losing profits was clients switching towards alternative water and motor routes. 

As a result, at the end of 2005 Ukrzaliznytsya initiated tariffs reconsideration in order to adjust them to the WTO demands. At the same time, this initiative isn't considered as a tariff increase by the company, since it will focus on cargo tariffs only. In particular, cargo tariffs will be increased for the mining-metallurgical sector of economy. Tariffs for socially important cargo, such as liquefied gas, fertilizers, food etc will be decreased. However, considering the fact that raw materials and the produce of the mining-metallurgical complex (MMC) take the lion's share of export cargo flows of Ukraine, this tariffs increase will cover the major part of cargo transportation volumes as a result. 

"Tariff voluntarism" of Ukrainian railways triggered protests on behalf of the MMC representatives of Ukraine, who are worried about the growth of transport component in raw materials and production by 8% and more. Such Associations as "Metallurgprom" and "Ukrrudprom", as well as part of Deputy Corpus of Ukraine, protested against Ukrzaliznytsya's intention to increase tariffs by 10%. Industrial representatives warn about losing foreign trade markets. Last April it happened to Poltava Mining Complex which lost the Polish market and half of Romanian market. 



Shipping Potential

Besides the "transit potential", the second base of Ukraine is its Sea Power status reasoned by inheriting the Black Sea shipping capacities and its sea commercial ports. However, we can not regard the Black Sea Shipping Company as a modern powerful brand, as it lost its magnificence due to technical reasons - its fleet has been ruined. 

Ukraine attempted to revive the national shipping within the Black Sea Shipping Company, though these efforts were rather of declarative sort. Recent initiative was the President's of Ukraine order issued on April, 15 to stop the separation of assets of the company (already non-core ones) and to renew its functioning as a shipping company. Among certain steps made in this direction and sounded by the Board of the state-run "Black Sea Shipping Company", the following ones can be mentioned: concluding conciliatory agreements with the company's creditors (proved debt worth USD 11.2 mln); cessation of bankrupt case of the company (already third one). In order to restart the shipping business, cancellation of the ban on foreign trade activities was planned (as a result, it is planned to renew the functioning of a container terminal in Vietnam) and also negotiations with the Far East Shipping Company about launching a joint-stock company.

Among other attempts to create a national sea carrier is an effort of the Ministry of Transport of Ukraine to accumulate shipping capacities under the control of "Ukrainian Commercial Fleet" holding, though this project wasn't developed. Approved in 2001, the National Programme of revival of ship building and commercial fleet of Ukraine didn't find financial support either. 

At present, the biggest shipping companies of the country are the state-run "Danube Shipping Company of Ukraine" JSC, "Ukrferry" JSC and "Ukrrechflot" JSC. The first company mentioned develops its shipping capacities at the expense of state subsiding, though in little volumes, the second one - out of its own resources (its last purchase is a motor truck ferry in autumn), the third one attracts the funds of European Bank for Reconstruction and Development. All the companies complain about the national carrier status being unprofitable, about the high rate of Ukrainian taxation and the absence of real preferences given to the national carrier.









Nevertheless, in spite of the fact that aggregate deadweight of Ukrainian commercial fleet amounts to only 2.182 mln tons (in comparison to the Russian one worth 15.762 mln), its share in the total cargo transportation of Ukraine has been growing from the very year of 2000 considered as a "starting" year for business. At the same time, the river sector dominates in terms of both growth rates and volumes that clearly shows the problem of Ukrainian absence in sea shipping business. Thus, if the national commercial fleet share in foreign cargo transportation amounts to 7-8%, then the transport share of Ukraine in forming the national GDP takes not less than 10%, when basic assets of the transport sector make 8% of basic state funds. According to shipping business experts, transfer of even 50% of foreign trade cargo to the national carrier would bring some USD 500 mln of annual profit and vessels getting back load would give USD 100 mln more. Unfortunately, this potential isn't activated yet.



Ports: Which Wayto Follow?

As opposed to its sea transport, the ports of independent Ukraine have kept the potential of their capacities. Today's aggregate capacity of the Ukrainian state port complex (20 sea commercial ports) amounts to 177 mln tons; their forecasted load volume for 2010 is 185 mln. At the same time, the major problem of the ports is basic assets wear and falling behind modern technical parameters. 

Hopes for development at the expense of accumulation and re-distribution of financial resources within the state port controlling body "Ukrmorport" JSC cherished by the ports didn't come true and, moreover, led to its liquidation in November, 2005. In particular, last year ports received investment worth USD 3.3 mln, or 0.55% of aggregate annual investment volume allocated by the Ministry of Transport for the whole transport sector. For the sake of comparison, investment volume for "Ukrmorport" JSC establishment amounted to USD 9.5 mln.

Speaking of non-state financing, the practice showed private entrepreneurs do not hurry to invest into ports being under the state's control. Even the successful experience of collaboration of the state-run port with private stevedoring company in the mode of the so-called partnership (with share participation of investment allocated by port and private business) in the national biggest port of Odessa can't solve the problem of renewing the company's basic assets. Firstly, berths and water areas - the most expensive infrastructure component of the port do not attract the investors' attention. Secondly, the stevedoring company feels certain pressure from the state (in the area of tariff policy, for example). Inner collisions between the partners are also inevitable, with the sides having a different understanding of expenditures priorities in respect of handling equipment, as it was in the port of Odessa during container terminal functioning. Nevertheless, the port of Odessa experience will probably spread further on the other ports. In particular, the port of Nikolayevsk, being the leader in cargo turnover within the second group of ports of Ukraine, promoted the same initiative. Obviously, in modern conditions the form of partnership is considered by the Ministry of Transport as a compromise between stability of the state form of ports' property and a chance of private business entering their territory. Quite probably, the brightest illustration of this unclear approach by the state is the example of Ilyichevsk port which is the second biggest container port of Ukraine. The port of Ilyichevsk concluded an agreement on partnership with "Ukrtranscontainer" JSC and the latter attracted Russian "National Container Company" JSC as an investor into the container terminal's capacities of the port. 

When the authorities of the Ministry of Transport and Communication changed, they initiated a revising of the agreement, which can't add any investment attractiveness to Ukraine renowned for re-considering the terms on which investors can operate on the territory of a free economic zone. The absence of Law on ports of Ukraine creates a greater stress in relations between the state and private business. In particular, the issue of private port terminals waters when located out of the state ports' territory and also that of their status in general is still unsolved. This problem is crucial, because, compared to the state port sector's decreasing cargo turnover (tendency outlined with transit oil leaving the market), the private sector is actively developing now. 

Maybe, these very reasons made The Ministry of Transport consider the idea of the port sector restructuring by separation of controlling and economic activities functions. According to Viktor Bondar, the Ministry will be authorized with Sea Administration of Ukraine rights; local sea administrations of the ports will be established that will provide safe functioning of the enterprises.

The major task of the reform is to enhance the ports' economic activities. At the same time, the Ministry keeps its functions on normative regulation and, opportunities of this regulation being amended, ports will become independent in their commercial activities.


 
Bottlenecks Still Remain

The share of motor truck transportation in the Ukrainian transport system is quite large and takes the second place in the total cargo turnover, following railways. This sector's peculiarity is the unstable nature of loading. The reason for that is a greater dependence of motor truck transportation (100% of private sort), compared to other modes of transport, on market conjuncture. Moreover, it is also influenced by the specific nature of motor truck flows, mainly container ones. In particular, volumes' decrease indicated in recent years is connected with the general decrease of container transit via Ukraine.

One more factor that destabilizes the situation is the prices growth for combustive-lubricating materials and spare parts, as well as ecological norms in motor sector toughening (transfer to Euro-2 and Euro-3 standards). One of the most important problems to remember is non-transparency of the system of the state regulation and control within international motor truck transportation. The system of crediting for motor park renewal needs reorganization and procedures of crossing the state borders should be simplified.

All these issues should form a basis for motor sector restructuring by the Ministry of Transport and Communication. In particular, the incumbent authorities declared their intention to attract powerful European banks to crediting the motor sector (including state and private transport projects) The Ministry follows the course of strengthening the Ukrainian carriers protection. Thus, parity for trucks of Euro-0 standard allowed to the Ukrainian and Polish territories has been restored. Earlier it was broken in favour of Poland.

On the other hand, a key direction developed by the previous transport authorities was contrailer (motor truck - railway) transportation. This sector is developing by joint efforts of the Ministry of Transport, Ukrzaliznytsya and foreign partners, in particular, "KLASCO" JSC (Klaipeda) - Lithuanian operator of contrailer route "Viking" (Ilyichevsk/Odessa-Klaipeda).

However, the aggregate share of contrailer cargo via Ukraine doesn't exceed 0.1% of foreign trade turnover (not more than USD 35 mln per year). In the opinion of Ukrainian experts, contrailer transportation development in Ukraine hasn't been supported by a sufficient cargo flow. Moreover, insufficient interaction of Ukrzaliznytsya and Ukrainian customs officials prevents the sector from effective functioning, as well as a lack of activity for cargo flows attraction. Thus, answering the question why Ukraine stopped contrailer route "Yaroslav" (Kiev-Slavkuv) at the beginning of 2005, commercial director of "KLASCO" JSC Vitautas Kaunas said, "I think, "Yaroslav" train is a good joint project for Poland and Ukraine. The only problem I can mention is that this project wasn't given enough time to be implemented in practice. I believe, cargo re-routing takes time to make cargo consignors believe it is a stable and effective route. Some two-three years were needed to show that to the client. Patience and patience again".



VLADIMIR  KATKEVICH
    [~DETAIL_TEXT] => 

The idea of establishing a railway administration based on the European model was first mentioned by the Cabinet Ministers of Ukraine in September 2001. The key task of Ukrzaliznytsya must become the control over the whole railway complex of the state (including six regional railways). Initially, it was created as a structure having no rights to interfere in the economic activities of subordinate subjects. By 2001, Ukrzaliznytsya was gradually reformed into the structure with a tough centralized control, which made it possible to accumulate financial flows successfully and played the part of the "locomotive" dragging not only the railway sector of Ukraine, but the whole transport sector of the state out of crisis. 

This November, five years later, the Board of the Ministry of Transport and Communications of Ukraine, following the next positive wave, revived the idea of the state control and economic activities separation, this time on a new basis, which is to become the establishment of the State Joint Stock Company based on Ukrzaliznytsya's property. According to the Board's projects, the process of restructuring will have to be completed by 2007. 

It should be said that the idea of Ukrzaliznytsya turning into a business unit was also shared by the previous Board of the Ministry of Transport and Communication headed by the highly authoritative Georgy Kirpa. It was under his control that Ukrzaliznytsya promoted itself as one of the most ambitious in respect of financial activities projects. However, the greatest contribution made at that stage was the liquidation of the branched system of barter and mediator schemes previously functioning in the railway transport and, in fact, blocking the sector's development. The fact that it was reached only with President and Counsil on National Safety and Defense interference clearly shows what sort of powerful barriers had been overcome. By that time the barter share in Ukrzaliznytsya cargo transportation amounted to 85%! 

As a result, by 2000, the railway sector overcame the border of unprofitability, having shown transportation profitability at the level of 0.61% in 2000, and 15.7% in 2001. For the sake of comparison, in 2001 the profitability of Ukrainian economy amounted to 5.9% in general, and the transport sector (including water and motor trucks) made it to 12.1%. However, Ukrzaliznytsya failed with keeping that rate, as there followed energy carriers cost growth and basic assets wear-and-tear increase. In 2005, the railway sector reached the profitability of 8.6%, then it dropped and amounted to 6.8%. We can not state for sure what results Ukrzaliznytsya will achieve in 2005, as tariff growth and other negative factors influence the company's functioning. 



Rail Transport To Compete

According to the data of the Ministry of Transport and Communication, by 2010 some 60% of car park of Ukrzaliznytsya will have been amortized (today the average age is 25 years), as well as some 80% of main line electric and diesel locomotives (30 years respectively). At present, due to rolling stock wear-and-tear, the deficit of cargo cars exceeded 11 thousand units, while that of passenger ones - 3.5 thousand units. For four recent years gauge wear has resulted in shortening the general length of Ukrainian railways by 1 thousand kilometers (-4.5% of aggregate length). 

During the independent Ukraine existence, railway authorities haven't renewed cargo park and implemented only major repairs. This year the situation got worse, as the expenses budget of Ukrzaliznytsya shortened by 40%. There is no hope to renew the rolling stock under such conditions, even if it is declared by the sector's representatives. 

In general, to restore and renew its railway infrastructure, Ukrzaliznytsya should find USD 1.52 bln. For the sake of comparison, for 9 months of 2005 Ukrzaliznytsya's basic assets renewal (including rolling stock and infrastructure) took USD 398 mln, which does not exceed 14% of total volume of budget expenses for this period. 

Now the company has completed developing its "Complex programme of railway transport of Ukraine rolling stock renewal for the period 2006-2010". According to this document, Ukrzaliznytsya plans to purchase 5 thousand gondola cars, 25 main line electric locomotives, 200 cars for diesel and electric locomotives, 156 passenger carriages. Considering the claimed volumes, the level of the company's funds to be spent (USD 600 mln) is nothing but a signal to attract investors. However, under these very conditions Ukrzaliznytsya will need to enhance its own financial revenue in order to cover its own share of participation, as today's volume of aggregate profit for railways does not surpass USD 540 mln (financial plan for 2005). 

Nevertheless, in the middle of 2005, the company launched the project of investment (leasing) transport company with share participation of both Ukrainian and foreign investors (as it was outlined, without state guarantees). Ukrzaliznytsya's participation envisages a long-term (10-15 years) investment contract. At the same time, Ukrzaliznytsya's authorities claim that they possess respective offers produced by financial structures specializing in leasing. Whether these projects will be launched after the transport sector and whether Ukrzaliznytsya's authorities will change is an issue open to discussion. 



Transit Myth, Tariff Reef

Since the positive changes of2000-2004, there has been indicated a stable growth of Ukrzaliznytsya's load. Among reasons that influenced the situation the following ones can be given: the relative resurrection of the Ukrainian economy and the growth of CIS partners' (Russian, first of all) demand on transport services. Nevertheless, despite the idea of "transit potential of the countries" frequently mentioned by Ukraine, the Ukrainian transport policy didn't allow to obtain the advantages of that period. In particular, the Ukrainian container carriers' statement that container transportation volume growth via the ports of Ukraine was possible to achieve not due but contrary to the national state' efforts has become a common place. 

The first call was closing down the most part of Ukrainian ports for taking excised cargo (2001), which resulted in the situation when Ukraine was cut off from container transit (first of all, from the countries of the Mediterranean region to Russia and Europe). Other factors that influenced the situation negatively were unprofitable pricing (20% VAT for transit, customs tax for transit cargoes introduction) and also the imperfect customs legislation of Ukraine. 

However, the most negative factor became the growth of Ukrainian railway tariffs. At the beginning of 2004, Ukrzaliznytsya made a decision to increase tariffs for oil transit significantly (over 70%), which is why oil flows were rerouted to the alternative Baltic and Black Sea routes. As a result, in 2004 Ukraine lost over 8 mln tons of transit oil. During the period of 2004-2005 tariff growth continued and amounted to 67.3% (Q3 2005 compared to the analogous period of 2003). At the same time tariff growth was indicated for all the classes of cargo, including oil bulk, ferrous metals, fertilizers, grain and coal. 

As a target of such an initiative there was declared an urgent need to compensate the growing expenses on spare parts and energy carriers and also to find funds for rolling stock renewal. According to Ukrzaliznytsya, even the latest price growth (April, 2005) couldn't help to reach the expected result though. An additional source for losing profits was clients switching towards alternative water and motor routes. 

As a result, at the end of 2005 Ukrzaliznytsya initiated tariffs reconsideration in order to adjust them to the WTO demands. At the same time, this initiative isn't considered as a tariff increase by the company, since it will focus on cargo tariffs only. In particular, cargo tariffs will be increased for the mining-metallurgical sector of economy. Tariffs for socially important cargo, such as liquefied gas, fertilizers, food etc will be decreased. However, considering the fact that raw materials and the produce of the mining-metallurgical complex (MMC) take the lion's share of export cargo flows of Ukraine, this tariffs increase will cover the major part of cargo transportation volumes as a result. 

"Tariff voluntarism" of Ukrainian railways triggered protests on behalf of the MMC representatives of Ukraine, who are worried about the growth of transport component in raw materials and production by 8% and more. Such Associations as "Metallurgprom" and "Ukrrudprom", as well as part of Deputy Corpus of Ukraine, protested against Ukrzaliznytsya's intention to increase tariffs by 10%. Industrial representatives warn about losing foreign trade markets. Last April it happened to Poltava Mining Complex which lost the Polish market and half of Romanian market. 



Shipping Potential

Besides the "transit potential", the second base of Ukraine is its Sea Power status reasoned by inheriting the Black Sea shipping capacities and its sea commercial ports. However, we can not regard the Black Sea Shipping Company as a modern powerful brand, as it lost its magnificence due to technical reasons - its fleet has been ruined. 

Ukraine attempted to revive the national shipping within the Black Sea Shipping Company, though these efforts were rather of declarative sort. Recent initiative was the President's of Ukraine order issued on April, 15 to stop the separation of assets of the company (already non-core ones) and to renew its functioning as a shipping company. Among certain steps made in this direction and sounded by the Board of the state-run "Black Sea Shipping Company", the following ones can be mentioned: concluding conciliatory agreements with the company's creditors (proved debt worth USD 11.2 mln); cessation of bankrupt case of the company (already third one). In order to restart the shipping business, cancellation of the ban on foreign trade activities was planned (as a result, it is planned to renew the functioning of a container terminal in Vietnam) and also negotiations with the Far East Shipping Company about launching a joint-stock company.

Among other attempts to create a national sea carrier is an effort of the Ministry of Transport of Ukraine to accumulate shipping capacities under the control of "Ukrainian Commercial Fleet" holding, though this project wasn't developed. Approved in 2001, the National Programme of revival of ship building and commercial fleet of Ukraine didn't find financial support either. 

At present, the biggest shipping companies of the country are the state-run "Danube Shipping Company of Ukraine" JSC, "Ukrferry" JSC and "Ukrrechflot" JSC. The first company mentioned develops its shipping capacities at the expense of state subsiding, though in little volumes, the second one - out of its own resources (its last purchase is a motor truck ferry in autumn), the third one attracts the funds of European Bank for Reconstruction and Development. All the companies complain about the national carrier status being unprofitable, about the high rate of Ukrainian taxation and the absence of real preferences given to the national carrier.









Nevertheless, in spite of the fact that aggregate deadweight of Ukrainian commercial fleet amounts to only 2.182 mln tons (in comparison to the Russian one worth 15.762 mln), its share in the total cargo transportation of Ukraine has been growing from the very year of 2000 considered as a "starting" year for business. At the same time, the river sector dominates in terms of both growth rates and volumes that clearly shows the problem of Ukrainian absence in sea shipping business. Thus, if the national commercial fleet share in foreign cargo transportation amounts to 7-8%, then the transport share of Ukraine in forming the national GDP takes not less than 10%, when basic assets of the transport sector make 8% of basic state funds. According to shipping business experts, transfer of even 50% of foreign trade cargo to the national carrier would bring some USD 500 mln of annual profit and vessels getting back load would give USD 100 mln more. Unfortunately, this potential isn't activated yet.



Ports: Which Wayto Follow?

As opposed to its sea transport, the ports of independent Ukraine have kept the potential of their capacities. Today's aggregate capacity of the Ukrainian state port complex (20 sea commercial ports) amounts to 177 mln tons; their forecasted load volume for 2010 is 185 mln. At the same time, the major problem of the ports is basic assets wear and falling behind modern technical parameters. 

Hopes for development at the expense of accumulation and re-distribution of financial resources within the state port controlling body "Ukrmorport" JSC cherished by the ports didn't come true and, moreover, led to its liquidation in November, 2005. In particular, last year ports received investment worth USD 3.3 mln, or 0.55% of aggregate annual investment volume allocated by the Ministry of Transport for the whole transport sector. For the sake of comparison, investment volume for "Ukrmorport" JSC establishment amounted to USD 9.5 mln.

Speaking of non-state financing, the practice showed private entrepreneurs do not hurry to invest into ports being under the state's control. Even the successful experience of collaboration of the state-run port with private stevedoring company in the mode of the so-called partnership (with share participation of investment allocated by port and private business) in the national biggest port of Odessa can't solve the problem of renewing the company's basic assets. Firstly, berths and water areas - the most expensive infrastructure component of the port do not attract the investors' attention. Secondly, the stevedoring company feels certain pressure from the state (in the area of tariff policy, for example). Inner collisions between the partners are also inevitable, with the sides having a different understanding of expenditures priorities in respect of handling equipment, as it was in the port of Odessa during container terminal functioning. Nevertheless, the port of Odessa experience will probably spread further on the other ports. In particular, the port of Nikolayevsk, being the leader in cargo turnover within the second group of ports of Ukraine, promoted the same initiative. Obviously, in modern conditions the form of partnership is considered by the Ministry of Transport as a compromise between stability of the state form of ports' property and a chance of private business entering their territory. Quite probably, the brightest illustration of this unclear approach by the state is the example of Ilyichevsk port which is the second biggest container port of Ukraine. The port of Ilyichevsk concluded an agreement on partnership with "Ukrtranscontainer" JSC and the latter attracted Russian "National Container Company" JSC as an investor into the container terminal's capacities of the port. 

When the authorities of the Ministry of Transport and Communication changed, they initiated a revising of the agreement, which can't add any investment attractiveness to Ukraine renowned for re-considering the terms on which investors can operate on the territory of a free economic zone. The absence of Law on ports of Ukraine creates a greater stress in relations between the state and private business. In particular, the issue of private port terminals waters when located out of the state ports' territory and also that of their status in general is still unsolved. This problem is crucial, because, compared to the state port sector's decreasing cargo turnover (tendency outlined with transit oil leaving the market), the private sector is actively developing now. 

Maybe, these very reasons made The Ministry of Transport consider the idea of the port sector restructuring by separation of controlling and economic activities functions. According to Viktor Bondar, the Ministry will be authorized with Sea Administration of Ukraine rights; local sea administrations of the ports will be established that will provide safe functioning of the enterprises.

The major task of the reform is to enhance the ports' economic activities. At the same time, the Ministry keeps its functions on normative regulation and, opportunities of this regulation being amended, ports will become independent in their commercial activities.


 
Bottlenecks Still Remain

The share of motor truck transportation in the Ukrainian transport system is quite large and takes the second place in the total cargo turnover, following railways. This sector's peculiarity is the unstable nature of loading. The reason for that is a greater dependence of motor truck transportation (100% of private sort), compared to other modes of transport, on market conjuncture. Moreover, it is also influenced by the specific nature of motor truck flows, mainly container ones. In particular, volumes' decrease indicated in recent years is connected with the general decrease of container transit via Ukraine.

One more factor that destabilizes the situation is the prices growth for combustive-lubricating materials and spare parts, as well as ecological norms in motor sector toughening (transfer to Euro-2 and Euro-3 standards). One of the most important problems to remember is non-transparency of the system of the state regulation and control within international motor truck transportation. The system of crediting for motor park renewal needs reorganization and procedures of crossing the state borders should be simplified.

All these issues should form a basis for motor sector restructuring by the Ministry of Transport and Communication. In particular, the incumbent authorities declared their intention to attract powerful European banks to crediting the motor sector (including state and private transport projects) The Ministry follows the course of strengthening the Ukrainian carriers protection. Thus, parity for trucks of Euro-0 standard allowed to the Ukrainian and Polish territories has been restored. Earlier it was broken in favour of Poland.

On the other hand, a key direction developed by the previous transport authorities was contrailer (motor truck - railway) transportation. This sector is developing by joint efforts of the Ministry of Transport, Ukrzaliznytsya and foreign partners, in particular, "KLASCO" JSC (Klaipeda) - Lithuanian operator of contrailer route "Viking" (Ilyichevsk/Odessa-Klaipeda).

However, the aggregate share of contrailer cargo via Ukraine doesn't exceed 0.1% of foreign trade turnover (not more than USD 35 mln per year). In the opinion of Ukrainian experts, contrailer transportation development in Ukraine hasn't been supported by a sufficient cargo flow. Moreover, insufficient interaction of Ukrzaliznytsya and Ukrainian customs officials prevents the sector from effective functioning, as well as a lack of activity for cargo flows attraction. Thus, answering the question why Ukraine stopped contrailer route "Yaroslav" (Kiev-Slavkuv) at the beginning of 2005, commercial director of "KLASCO" JSC Vitautas Kaunas said, "I think, "Yaroslav" train is a good joint project for Poland and Ukraine. The only problem I can mention is that this project wasn't given enough time to be implemented in practice. I believe, cargo re-routing takes time to make cargo consignors believe it is a stable and effective route. Some two-three years were needed to show that to the client. Patience and patience again".



VLADIMIR  KATKEVICH
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    [NAME] => Wheels of Ukrainian economy
    [~NAME] => Wheels of Ukrainian economy
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    [DETAIL_TEXT] => 

The idea of establishing a railway administration based on the European model was first mentioned by the Cabinet Ministers of Ukraine in September 2001. The key task of Ukrzaliznytsya must become the control over the whole railway complex of the state (including six regional railways). Initially, it was created as a structure having no rights to interfere in the economic activities of subordinate subjects. By 2001, Ukrzaliznytsya was gradually reformed into the structure with a tough centralized control, which made it possible to accumulate financial flows successfully and played the part of the "locomotive" dragging not only the railway sector of Ukraine, but the whole transport sector of the state out of crisis. 

This November, five years later, the Board of the Ministry of Transport and Communications of Ukraine, following the next positive wave, revived the idea of the state control and economic activities separation, this time on a new basis, which is to become the establishment of the State Joint Stock Company based on Ukrzaliznytsya's property. According to the Board's projects, the process of restructuring will have to be completed by 2007. 

It should be said that the idea of Ukrzaliznytsya turning into a business unit was also shared by the previous Board of the Ministry of Transport and Communication headed by the highly authoritative Georgy Kirpa. It was under his control that Ukrzaliznytsya promoted itself as one of the most ambitious in respect of financial activities projects. However, the greatest contribution made at that stage was the liquidation of the branched system of barter and mediator schemes previously functioning in the railway transport and, in fact, blocking the sector's development. The fact that it was reached only with President and Counsil on National Safety and Defense interference clearly shows what sort of powerful barriers had been overcome. By that time the barter share in Ukrzaliznytsya cargo transportation amounted to 85%! 

As a result, by 2000, the railway sector overcame the border of unprofitability, having shown transportation profitability at the level of 0.61% in 2000, and 15.7% in 2001. For the sake of comparison, in 2001 the profitability of Ukrainian economy amounted to 5.9% in general, and the transport sector (including water and motor trucks) made it to 12.1%. However, Ukrzaliznytsya failed with keeping that rate, as there followed energy carriers cost growth and basic assets wear-and-tear increase. In 2005, the railway sector reached the profitability of 8.6%, then it dropped and amounted to 6.8%. We can not state for sure what results Ukrzaliznytsya will achieve in 2005, as tariff growth and other negative factors influence the company's functioning. 



Rail Transport To Compete

According to the data of the Ministry of Transport and Communication, by 2010 some 60% of car park of Ukrzaliznytsya will have been amortized (today the average age is 25 years), as well as some 80% of main line electric and diesel locomotives (30 years respectively). At present, due to rolling stock wear-and-tear, the deficit of cargo cars exceeded 11 thousand units, while that of passenger ones - 3.5 thousand units. For four recent years gauge wear has resulted in shortening the general length of Ukrainian railways by 1 thousand kilometers (-4.5% of aggregate length). 

During the independent Ukraine existence, railway authorities haven't renewed cargo park and implemented only major repairs. This year the situation got worse, as the expenses budget of Ukrzaliznytsya shortened by 40%. There is no hope to renew the rolling stock under such conditions, even if it is declared by the sector's representatives. 

In general, to restore and renew its railway infrastructure, Ukrzaliznytsya should find USD 1.52 bln. For the sake of comparison, for 9 months of 2005 Ukrzaliznytsya's basic assets renewal (including rolling stock and infrastructure) took USD 398 mln, which does not exceed 14% of total volume of budget expenses for this period. 

Now the company has completed developing its "Complex programme of railway transport of Ukraine rolling stock renewal for the period 2006-2010". According to this document, Ukrzaliznytsya plans to purchase 5 thousand gondola cars, 25 main line electric locomotives, 200 cars for diesel and electric locomotives, 156 passenger carriages. Considering the claimed volumes, the level of the company's funds to be spent (USD 600 mln) is nothing but a signal to attract investors. However, under these very conditions Ukrzaliznytsya will need to enhance its own financial revenue in order to cover its own share of participation, as today's volume of aggregate profit for railways does not surpass USD 540 mln (financial plan for 2005). 

Nevertheless, in the middle of 2005, the company launched the project of investment (leasing) transport company with share participation of both Ukrainian and foreign investors (as it was outlined, without state guarantees). Ukrzaliznytsya's participation envisages a long-term (10-15 years) investment contract. At the same time, Ukrzaliznytsya's authorities claim that they possess respective offers produced by financial structures specializing in leasing. Whether these projects will be launched after the transport sector and whether Ukrzaliznytsya's authorities will change is an issue open to discussion. 



Transit Myth, Tariff Reef

Since the positive changes of2000-2004, there has been indicated a stable growth of Ukrzaliznytsya's load. Among reasons that influenced the situation the following ones can be given: the relative resurrection of the Ukrainian economy and the growth of CIS partners' (Russian, first of all) demand on transport services. Nevertheless, despite the idea of "transit potential of the countries" frequently mentioned by Ukraine, the Ukrainian transport policy didn't allow to obtain the advantages of that period. In particular, the Ukrainian container carriers' statement that container transportation volume growth via the ports of Ukraine was possible to achieve not due but contrary to the national state' efforts has become a common place. 

The first call was closing down the most part of Ukrainian ports for taking excised cargo (2001), which resulted in the situation when Ukraine was cut off from container transit (first of all, from the countries of the Mediterranean region to Russia and Europe). Other factors that influenced the situation negatively were unprofitable pricing (20% VAT for transit, customs tax for transit cargoes introduction) and also the imperfect customs legislation of Ukraine. 

However, the most negative factor became the growth of Ukrainian railway tariffs. At the beginning of 2004, Ukrzaliznytsya made a decision to increase tariffs for oil transit significantly (over 70%), which is why oil flows were rerouted to the alternative Baltic and Black Sea routes. As a result, in 2004 Ukraine lost over 8 mln tons of transit oil. During the period of 2004-2005 tariff growth continued and amounted to 67.3% (Q3 2005 compared to the analogous period of 2003). At the same time tariff growth was indicated for all the classes of cargo, including oil bulk, ferrous metals, fertilizers, grain and coal. 

As a target of such an initiative there was declared an urgent need to compensate the growing expenses on spare parts and energy carriers and also to find funds for rolling stock renewal. According to Ukrzaliznytsya, even the latest price growth (April, 2005) couldn't help to reach the expected result though. An additional source for losing profits was clients switching towards alternative water and motor routes. 

As a result, at the end of 2005 Ukrzaliznytsya initiated tariffs reconsideration in order to adjust them to the WTO demands. At the same time, this initiative isn't considered as a tariff increase by the company, since it will focus on cargo tariffs only. In particular, cargo tariffs will be increased for the mining-metallurgical sector of economy. Tariffs for socially important cargo, such as liquefied gas, fertilizers, food etc will be decreased. However, considering the fact that raw materials and the produce of the mining-metallurgical complex (MMC) take the lion's share of export cargo flows of Ukraine, this tariffs increase will cover the major part of cargo transportation volumes as a result. 

"Tariff voluntarism" of Ukrainian railways triggered protests on behalf of the MMC representatives of Ukraine, who are worried about the growth of transport component in raw materials and production by 8% and more. Such Associations as "Metallurgprom" and "Ukrrudprom", as well as part of Deputy Corpus of Ukraine, protested against Ukrzaliznytsya's intention to increase tariffs by 10%. Industrial representatives warn about losing foreign trade markets. Last April it happened to Poltava Mining Complex which lost the Polish market and half of Romanian market. 



Shipping Potential

Besides the "transit potential", the second base of Ukraine is its Sea Power status reasoned by inheriting the Black Sea shipping capacities and its sea commercial ports. However, we can not regard the Black Sea Shipping Company as a modern powerful brand, as it lost its magnificence due to technical reasons - its fleet has been ruined. 

Ukraine attempted to revive the national shipping within the Black Sea Shipping Company, though these efforts were rather of declarative sort. Recent initiative was the President's of Ukraine order issued on April, 15 to stop the separation of assets of the company (already non-core ones) and to renew its functioning as a shipping company. Among certain steps made in this direction and sounded by the Board of the state-run "Black Sea Shipping Company", the following ones can be mentioned: concluding conciliatory agreements with the company's creditors (proved debt worth USD 11.2 mln); cessation of bankrupt case of the company (already third one). In order to restart the shipping business, cancellation of the ban on foreign trade activities was planned (as a result, it is planned to renew the functioning of a container terminal in Vietnam) and also negotiations with the Far East Shipping Company about launching a joint-stock company.

Among other attempts to create a national sea carrier is an effort of the Ministry of Transport of Ukraine to accumulate shipping capacities under the control of "Ukrainian Commercial Fleet" holding, though this project wasn't developed. Approved in 2001, the National Programme of revival of ship building and commercial fleet of Ukraine didn't find financial support either. 

At present, the biggest shipping companies of the country are the state-run "Danube Shipping Company of Ukraine" JSC, "Ukrferry" JSC and "Ukrrechflot" JSC. The first company mentioned develops its shipping capacities at the expense of state subsiding, though in little volumes, the second one - out of its own resources (its last purchase is a motor truck ferry in autumn), the third one attracts the funds of European Bank for Reconstruction and Development. All the companies complain about the national carrier status being unprofitable, about the high rate of Ukrainian taxation and the absence of real preferences given to the national carrier.









Nevertheless, in spite of the fact that aggregate deadweight of Ukrainian commercial fleet amounts to only 2.182 mln tons (in comparison to the Russian one worth 15.762 mln), its share in the total cargo transportation of Ukraine has been growing from the very year of 2000 considered as a "starting" year for business. At the same time, the river sector dominates in terms of both growth rates and volumes that clearly shows the problem of Ukrainian absence in sea shipping business. Thus, if the national commercial fleet share in foreign cargo transportation amounts to 7-8%, then the transport share of Ukraine in forming the national GDP takes not less than 10%, when basic assets of the transport sector make 8% of basic state funds. According to shipping business experts, transfer of even 50% of foreign trade cargo to the national carrier would bring some USD 500 mln of annual profit and vessels getting back load would give USD 100 mln more. Unfortunately, this potential isn't activated yet.



Ports: Which Wayto Follow?

As opposed to its sea transport, the ports of independent Ukraine have kept the potential of their capacities. Today's aggregate capacity of the Ukrainian state port complex (20 sea commercial ports) amounts to 177 mln tons; their forecasted load volume for 2010 is 185 mln. At the same time, the major problem of the ports is basic assets wear and falling behind modern technical parameters. 

Hopes for development at the expense of accumulation and re-distribution of financial resources within the state port controlling body "Ukrmorport" JSC cherished by the ports didn't come true and, moreover, led to its liquidation in November, 2005. In particular, last year ports received investment worth USD 3.3 mln, or 0.55% of aggregate annual investment volume allocated by the Ministry of Transport for the whole transport sector. For the sake of comparison, investment volume for "Ukrmorport" JSC establishment amounted to USD 9.5 mln.

Speaking of non-state financing, the practice showed private entrepreneurs do not hurry to invest into ports being under the state's control. Even the successful experience of collaboration of the state-run port with private stevedoring company in the mode of the so-called partnership (with share participation of investment allocated by port and private business) in the national biggest port of Odessa can't solve the problem of renewing the company's basic assets. Firstly, berths and water areas - the most expensive infrastructure component of the port do not attract the investors' attention. Secondly, the stevedoring company feels certain pressure from the state (in the area of tariff policy, for example). Inner collisions between the partners are also inevitable, with the sides having a different understanding of expenditures priorities in respect of handling equipment, as it was in the port of Odessa during container terminal functioning. Nevertheless, the port of Odessa experience will probably spread further on the other ports. In particular, the port of Nikolayevsk, being the leader in cargo turnover within the second group of ports of Ukraine, promoted the same initiative. Obviously, in modern conditions the form of partnership is considered by the Ministry of Transport as a compromise between stability of the state form of ports' property and a chance of private business entering their territory. Quite probably, the brightest illustration of this unclear approach by the state is the example of Ilyichevsk port which is the second biggest container port of Ukraine. The port of Ilyichevsk concluded an agreement on partnership with "Ukrtranscontainer" JSC and the latter attracted Russian "National Container Company" JSC as an investor into the container terminal's capacities of the port. 

When the authorities of the Ministry of Transport and Communication changed, they initiated a revising of the agreement, which can't add any investment attractiveness to Ukraine renowned for re-considering the terms on which investors can operate on the territory of a free economic zone. The absence of Law on ports of Ukraine creates a greater stress in relations between the state and private business. In particular, the issue of private port terminals waters when located out of the state ports' territory and also that of their status in general is still unsolved. This problem is crucial, because, compared to the state port sector's decreasing cargo turnover (tendency outlined with transit oil leaving the market), the private sector is actively developing now. 

Maybe, these very reasons made The Ministry of Transport consider the idea of the port sector restructuring by separation of controlling and economic activities functions. According to Viktor Bondar, the Ministry will be authorized with Sea Administration of Ukraine rights; local sea administrations of the ports will be established that will provide safe functioning of the enterprises.

The major task of the reform is to enhance the ports' economic activities. At the same time, the Ministry keeps its functions on normative regulation and, opportunities of this regulation being amended, ports will become independent in their commercial activities.


 
Bottlenecks Still Remain

The share of motor truck transportation in the Ukrainian transport system is quite large and takes the second place in the total cargo turnover, following railways. This sector's peculiarity is the unstable nature of loading. The reason for that is a greater dependence of motor truck transportation (100% of private sort), compared to other modes of transport, on market conjuncture. Moreover, it is also influenced by the specific nature of motor truck flows, mainly container ones. In particular, volumes' decrease indicated in recent years is connected with the general decrease of container transit via Ukraine.

One more factor that destabilizes the situation is the prices growth for combustive-lubricating materials and spare parts, as well as ecological norms in motor sector toughening (transfer to Euro-2 and Euro-3 standards). One of the most important problems to remember is non-transparency of the system of the state regulation and control within international motor truck transportation. The system of crediting for motor park renewal needs reorganization and procedures of crossing the state borders should be simplified.

All these issues should form a basis for motor sector restructuring by the Ministry of Transport and Communication. In particular, the incumbent authorities declared their intention to attract powerful European banks to crediting the motor sector (including state and private transport projects) The Ministry follows the course of strengthening the Ukrainian carriers protection. Thus, parity for trucks of Euro-0 standard allowed to the Ukrainian and Polish territories has been restored. Earlier it was broken in favour of Poland.

On the other hand, a key direction developed by the previous transport authorities was contrailer (motor truck - railway) transportation. This sector is developing by joint efforts of the Ministry of Transport, Ukrzaliznytsya and foreign partners, in particular, "KLASCO" JSC (Klaipeda) - Lithuanian operator of contrailer route "Viking" (Ilyichevsk/Odessa-Klaipeda).

However, the aggregate share of contrailer cargo via Ukraine doesn't exceed 0.1% of foreign trade turnover (not more than USD 35 mln per year). In the opinion of Ukrainian experts, contrailer transportation development in Ukraine hasn't been supported by a sufficient cargo flow. Moreover, insufficient interaction of Ukrzaliznytsya and Ukrainian customs officials prevents the sector from effective functioning, as well as a lack of activity for cargo flows attraction. Thus, answering the question why Ukraine stopped contrailer route "Yaroslav" (Kiev-Slavkuv) at the beginning of 2005, commercial director of "KLASCO" JSC Vitautas Kaunas said, "I think, "Yaroslav" train is a good joint project for Poland and Ukraine. The only problem I can mention is that this project wasn't given enough time to be implemented in practice. I believe, cargo re-routing takes time to make cargo consignors believe it is a stable and effective route. Some two-three years were needed to show that to the client. Patience and patience again".



VLADIMIR  KATKEVICH
    [~DETAIL_TEXT] => 

The idea of establishing a railway administration based on the European model was first mentioned by the Cabinet Ministers of Ukraine in September 2001. The key task of Ukrzaliznytsya must become the control over the whole railway complex of the state (including six regional railways). Initially, it was created as a structure having no rights to interfere in the economic activities of subordinate subjects. By 2001, Ukrzaliznytsya was gradually reformed into the structure with a tough centralized control, which made it possible to accumulate financial flows successfully and played the part of the "locomotive" dragging not only the railway sector of Ukraine, but the whole transport sector of the state out of crisis. 

This November, five years later, the Board of the Ministry of Transport and Communications of Ukraine, following the next positive wave, revived the idea of the state control and economic activities separation, this time on a new basis, which is to become the establishment of the State Joint Stock Company based on Ukrzaliznytsya's property. According to the Board's projects, the process of restructuring will have to be completed by 2007. 

It should be said that the idea of Ukrzaliznytsya turning into a business unit was also shared by the previous Board of the Ministry of Transport and Communication headed by the highly authoritative Georgy Kirpa. It was under his control that Ukrzaliznytsya promoted itself as one of the most ambitious in respect of financial activities projects. However, the greatest contribution made at that stage was the liquidation of the branched system of barter and mediator schemes previously functioning in the railway transport and, in fact, blocking the sector's development. The fact that it was reached only with President and Counsil on National Safety and Defense interference clearly shows what sort of powerful barriers had been overcome. By that time the barter share in Ukrzaliznytsya cargo transportation amounted to 85%! 

As a result, by 2000, the railway sector overcame the border of unprofitability, having shown transportation profitability at the level of 0.61% in 2000, and 15.7% in 2001. For the sake of comparison, in 2001 the profitability of Ukrainian economy amounted to 5.9% in general, and the transport sector (including water and motor trucks) made it to 12.1%. However, Ukrzaliznytsya failed with keeping that rate, as there followed energy carriers cost growth and basic assets wear-and-tear increase. In 2005, the railway sector reached the profitability of 8.6%, then it dropped and amounted to 6.8%. We can not state for sure what results Ukrzaliznytsya will achieve in 2005, as tariff growth and other negative factors influence the company's functioning. 



Rail Transport To Compete

According to the data of the Ministry of Transport and Communication, by 2010 some 60% of car park of Ukrzaliznytsya will have been amortized (today the average age is 25 years), as well as some 80% of main line electric and diesel locomotives (30 years respectively). At present, due to rolling stock wear-and-tear, the deficit of cargo cars exceeded 11 thousand units, while that of passenger ones - 3.5 thousand units. For four recent years gauge wear has resulted in shortening the general length of Ukrainian railways by 1 thousand kilometers (-4.5% of aggregate length). 

During the independent Ukraine existence, railway authorities haven't renewed cargo park and implemented only major repairs. This year the situation got worse, as the expenses budget of Ukrzaliznytsya shortened by 40%. There is no hope to renew the rolling stock under such conditions, even if it is declared by the sector's representatives. 

In general, to restore and renew its railway infrastructure, Ukrzaliznytsya should find USD 1.52 bln. For the sake of comparison, for 9 months of 2005 Ukrzaliznytsya's basic assets renewal (including rolling stock and infrastructure) took USD 398 mln, which does not exceed 14% of total volume of budget expenses for this period. 

Now the company has completed developing its "Complex programme of railway transport of Ukraine rolling stock renewal for the period 2006-2010". According to this document, Ukrzaliznytsya plans to purchase 5 thousand gondola cars, 25 main line electric locomotives, 200 cars for diesel and electric locomotives, 156 passenger carriages. Considering the claimed volumes, the level of the company's funds to be spent (USD 600 mln) is nothing but a signal to attract investors. However, under these very conditions Ukrzaliznytsya will need to enhance its own financial revenue in order to cover its own share of participation, as today's volume of aggregate profit for railways does not surpass USD 540 mln (financial plan for 2005). 

Nevertheless, in the middle of 2005, the company launched the project of investment (leasing) transport company with share participation of both Ukrainian and foreign investors (as it was outlined, without state guarantees). Ukrzaliznytsya's participation envisages a long-term (10-15 years) investment contract. At the same time, Ukrzaliznytsya's authorities claim that they possess respective offers produced by financial structures specializing in leasing. Whether these projects will be launched after the transport sector and whether Ukrzaliznytsya's authorities will change is an issue open to discussion. 



Transit Myth, Tariff Reef

Since the positive changes of2000-2004, there has been indicated a stable growth of Ukrzaliznytsya's load. Among reasons that influenced the situation the following ones can be given: the relative resurrection of the Ukrainian economy and the growth of CIS partners' (Russian, first of all) demand on transport services. Nevertheless, despite the idea of "transit potential of the countries" frequently mentioned by Ukraine, the Ukrainian transport policy didn't allow to obtain the advantages of that period. In particular, the Ukrainian container carriers' statement that container transportation volume growth via the ports of Ukraine was possible to achieve not due but contrary to the national state' efforts has become a common place. 

The first call was closing down the most part of Ukrainian ports for taking excised cargo (2001), which resulted in the situation when Ukraine was cut off from container transit (first of all, from the countries of the Mediterranean region to Russia and Europe). Other factors that influenced the situation negatively were unprofitable pricing (20% VAT for transit, customs tax for transit cargoes introduction) and also the imperfect customs legislation of Ukraine. 

However, the most negative factor became the growth of Ukrainian railway tariffs. At the beginning of 2004, Ukrzaliznytsya made a decision to increase tariffs for oil transit significantly (over 70%), which is why oil flows were rerouted to the alternative Baltic and Black Sea routes. As a result, in 2004 Ukraine lost over 8 mln tons of transit oil. During the period of 2004-2005 tariff growth continued and amounted to 67.3% (Q3 2005 compared to the analogous period of 2003). At the same time tariff growth was indicated for all the classes of cargo, including oil bulk, ferrous metals, fertilizers, grain and coal. 

As a target of such an initiative there was declared an urgent need to compensate the growing expenses on spare parts and energy carriers and also to find funds for rolling stock renewal. According to Ukrzaliznytsya, even the latest price growth (April, 2005) couldn't help to reach the expected result though. An additional source for losing profits was clients switching towards alternative water and motor routes. 

As a result, at the end of 2005 Ukrzaliznytsya initiated tariffs reconsideration in order to adjust them to the WTO demands. At the same time, this initiative isn't considered as a tariff increase by the company, since it will focus on cargo tariffs only. In particular, cargo tariffs will be increased for the mining-metallurgical sector of economy. Tariffs for socially important cargo, such as liquefied gas, fertilizers, food etc will be decreased. However, considering the fact that raw materials and the produce of the mining-metallurgical complex (MMC) take the lion's share of export cargo flows of Ukraine, this tariffs increase will cover the major part of cargo transportation volumes as a result. 

"Tariff voluntarism" of Ukrainian railways triggered protests on behalf of the MMC representatives of Ukraine, who are worried about the growth of transport component in raw materials and production by 8% and more. Such Associations as "Metallurgprom" and "Ukrrudprom", as well as part of Deputy Corpus of Ukraine, protested against Ukrzaliznytsya's intention to increase tariffs by 10%. Industrial representatives warn about losing foreign trade markets. Last April it happened to Poltava Mining Complex which lost the Polish market and half of Romanian market. 



Shipping Potential

Besides the "transit potential", the second base of Ukraine is its Sea Power status reasoned by inheriting the Black Sea shipping capacities and its sea commercial ports. However, we can not regard the Black Sea Shipping Company as a modern powerful brand, as it lost its magnificence due to technical reasons - its fleet has been ruined. 

Ukraine attempted to revive the national shipping within the Black Sea Shipping Company, though these efforts were rather of declarative sort. Recent initiative was the President's of Ukraine order issued on April, 15 to stop the separation of assets of the company (already non-core ones) and to renew its functioning as a shipping company. Among certain steps made in this direction and sounded by the Board of the state-run "Black Sea Shipping Company", the following ones can be mentioned: concluding conciliatory agreements with the company's creditors (proved debt worth USD 11.2 mln); cessation of bankrupt case of the company (already third one). In order to restart the shipping business, cancellation of the ban on foreign trade activities was planned (as a result, it is planned to renew the functioning of a container terminal in Vietnam) and also negotiations with the Far East Shipping Company about launching a joint-stock company.

Among other attempts to create a national sea carrier is an effort of the Ministry of Transport of Ukraine to accumulate shipping capacities under the control of "Ukrainian Commercial Fleet" holding, though this project wasn't developed. Approved in 2001, the National Programme of revival of ship building and commercial fleet of Ukraine didn't find financial support either. 

At present, the biggest shipping companies of the country are the state-run "Danube Shipping Company of Ukraine" JSC, "Ukrferry" JSC and "Ukrrechflot" JSC. The first company mentioned develops its shipping capacities at the expense of state subsiding, though in little volumes, the second one - out of its own resources (its last purchase is a motor truck ferry in autumn), the third one attracts the funds of European Bank for Reconstruction and Development. All the companies complain about the national carrier status being unprofitable, about the high rate of Ukrainian taxation and the absence of real preferences given to the national carrier.









Nevertheless, in spite of the fact that aggregate deadweight of Ukrainian commercial fleet amounts to only 2.182 mln tons (in comparison to the Russian one worth 15.762 mln), its share in the total cargo transportation of Ukraine has been growing from the very year of 2000 considered as a "starting" year for business. At the same time, the river sector dominates in terms of both growth rates and volumes that clearly shows the problem of Ukrainian absence in sea shipping business. Thus, if the national commercial fleet share in foreign cargo transportation amounts to 7-8%, then the transport share of Ukraine in forming the national GDP takes not less than 10%, when basic assets of the transport sector make 8% of basic state funds. According to shipping business experts, transfer of even 50% of foreign trade cargo to the national carrier would bring some USD 500 mln of annual profit and vessels getting back load would give USD 100 mln more. Unfortunately, this potential isn't activated yet.



Ports: Which Wayto Follow?

As opposed to its sea transport, the ports of independent Ukraine have kept the potential of their capacities. Today's aggregate capacity of the Ukrainian state port complex (20 sea commercial ports) amounts to 177 mln tons; their forecasted load volume for 2010 is 185 mln. At the same time, the major problem of the ports is basic assets wear and falling behind modern technical parameters. 

Hopes for development at the expense of accumulation and re-distribution of financial resources within the state port controlling body "Ukrmorport" JSC cherished by the ports didn't come true and, moreover, led to its liquidation in November, 2005. In particular, last year ports received investment worth USD 3.3 mln, or 0.55% of aggregate annual investment volume allocated by the Ministry of Transport for the whole transport sector. For the sake of comparison, investment volume for "Ukrmorport" JSC establishment amounted to USD 9.5 mln.

Speaking of non-state financing, the practice showed private entrepreneurs do not hurry to invest into ports being under the state's control. Even the successful experience of collaboration of the state-run port with private stevedoring company in the mode of the so-called partnership (with share participation of investment allocated by port and private business) in the national biggest port of Odessa can't solve the problem of renewing the company's basic assets. Firstly, berths and water areas - the most expensive infrastructure component of the port do not attract the investors' attention. Secondly, the stevedoring company feels certain pressure from the state (in the area of tariff policy, for example). Inner collisions between the partners are also inevitable, with the sides having a different understanding of expenditures priorities in respect of handling equipment, as it was in the port of Odessa during container terminal functioning. Nevertheless, the port of Odessa experience will probably spread further on the other ports. In particular, the port of Nikolayevsk, being the leader in cargo turnover within the second group of ports of Ukraine, promoted the same initiative. Obviously, in modern conditions the form of partnership is considered by the Ministry of Transport as a compromise between stability of the state form of ports' property and a chance of private business entering their territory. Quite probably, the brightest illustration of this unclear approach by the state is the example of Ilyichevsk port which is the second biggest container port of Ukraine. The port of Ilyichevsk concluded an agreement on partnership with "Ukrtranscontainer" JSC and the latter attracted Russian "National Container Company" JSC as an investor into the container terminal's capacities of the port. 

When the authorities of the Ministry of Transport and Communication changed, they initiated a revising of the agreement, which can't add any investment attractiveness to Ukraine renowned for re-considering the terms on which investors can operate on the territory of a free economic zone. The absence of Law on ports of Ukraine creates a greater stress in relations between the state and private business. In particular, the issue of private port terminals waters when located out of the state ports' territory and also that of their status in general is still unsolved. This problem is crucial, because, compared to the state port sector's decreasing cargo turnover (tendency outlined with transit oil leaving the market), the private sector is actively developing now. 

Maybe, these very reasons made The Ministry of Transport consider the idea of the port sector restructuring by separation of controlling and economic activities functions. According to Viktor Bondar, the Ministry will be authorized with Sea Administration of Ukraine rights; local sea administrations of the ports will be established that will provide safe functioning of the enterprises.

The major task of the reform is to enhance the ports' economic activities. At the same time, the Ministry keeps its functions on normative regulation and, opportunities of this regulation being amended, ports will become independent in their commercial activities.


 
Bottlenecks Still Remain

The share of motor truck transportation in the Ukrainian transport system is quite large and takes the second place in the total cargo turnover, following railways. This sector's peculiarity is the unstable nature of loading. The reason for that is a greater dependence of motor truck transportation (100% of private sort), compared to other modes of transport, on market conjuncture. Moreover, it is also influenced by the specific nature of motor truck flows, mainly container ones. In particular, volumes' decrease indicated in recent years is connected with the general decrease of container transit via Ukraine.

One more factor that destabilizes the situation is the prices growth for combustive-lubricating materials and spare parts, as well as ecological norms in motor sector toughening (transfer to Euro-2 and Euro-3 standards). One of the most important problems to remember is non-transparency of the system of the state regulation and control within international motor truck transportation. The system of crediting for motor park renewal needs reorganization and procedures of crossing the state borders should be simplified.

All these issues should form a basis for motor sector restructuring by the Ministry of Transport and Communication. In particular, the incumbent authorities declared their intention to attract powerful European banks to crediting the motor sector (including state and private transport projects) The Ministry follows the course of strengthening the Ukrainian carriers protection. Thus, parity for trucks of Euro-0 standard allowed to the Ukrainian and Polish territories has been restored. Earlier it was broken in favour of Poland.

On the other hand, a key direction developed by the previous transport authorities was contrailer (motor truck - railway) transportation. This sector is developing by joint efforts of the Ministry of Transport, Ukrzaliznytsya and foreign partners, in particular, "KLASCO" JSC (Klaipeda) - Lithuanian operator of contrailer route "Viking" (Ilyichevsk/Odessa-Klaipeda).

However, the aggregate share of contrailer cargo via Ukraine doesn't exceed 0.1% of foreign trade turnover (not more than USD 35 mln per year). In the opinion of Ukrainian experts, contrailer transportation development in Ukraine hasn't been supported by a sufficient cargo flow. Moreover, insufficient interaction of Ukrzaliznytsya and Ukrainian customs officials prevents the sector from effective functioning, as well as a lack of activity for cargo flows attraction. Thus, answering the question why Ukraine stopped contrailer route "Yaroslav" (Kiev-Slavkuv) at the beginning of 2005, commercial director of "KLASCO" JSC Vitautas Kaunas said, "I think, "Yaroslav" train is a good joint project for Poland and Ukraine. The only problem I can mention is that this project wasn't given enough time to be implemented in practice. I believe, cargo re-routing takes time to make cargo consignors believe it is a stable and effective route. Some two-three years were needed to show that to the client. Patience and patience again".



VLADIMIR  KATKEVICH
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