TRANSPORT-RUSSIA: Bold Vision of Linking East To West

By IPS Correspondents Reprint | | Print |

Sergei Blagov

MOSCOW, Aug 7 2000 (IPS) - Russia’s ambitious plans to further develop the legendary Trans-Siberian Railway may remain a bold vision – particularly since the country’s railway sector is short of investment.

Russian officials say the Trans-Siberian Railway, the longest continuous rail line on earth, could become a major transport link between Western Europe and Eastern Asia.

However, plans for a transcontinental railway have yet to materialise.

“Technically, it is not a big problem for us to launch a passenger or freight service between Western Europe and South East Asia,” argues Railways Minister, Nikolai Aksyonenko.

“The real issue is how to make the route economically viable,” he told IPS.

Russia’s Trans-Siberian Railway, which runs from Moscow to Vladivostok for almost 6 000 miles (or about 10 000 kilometres), over one-third of the globe, takes seven days or more to travel.

The rail link is also connected to the north-flowing rivers of the Russian Arctic, an inland waterway of great importance to the movement of cargo and passengers throughout the interior of Siberia.

To the West, connections are available through Moscow to Berlin and from there to Paris, as well as to St. Petersburg and from there to Helsinki.

However, Russia’s railway network is still viewed as a potential link between Western Europe and South-East Asia.

Three years ago a rail link between Vietnam and China was restored – it was declared that Ho Chi Minh city, in southern Vietnam, was now accessible by train from London.

With only one relatively short section (some 250 kilometres between Phnom Penh-Ho Chi Minh) missing, reconnecting Vietnam with Thailand via Cambodia would allow train-lovers to travel from Singapore to Europe for the first time.

The Moscow-Hanoi Trans Siberian train service existed around 1966. It was abandoned due to conflicts between the former Union of Socialist Soviet Republic (USSR)and China and between China and Vietnam.

Experts say Russian railways’ major potential could be in developing the scheme to funnel freight between Asia and Europe through the Trans-Siberian railway.

However, so far the scheme has not been a success with only an average of 10,000 containers moved annually. Trans-Siberian Railway’s cargo and passenger transportation plummeted by some 200 percent since the Soviet collapse in 1991, according to the Railways Ministry.

Apart from the Trans-Siberian, Russia has yet another gateway to Asia-Pacific, known as the BAM (Baikal-Amur Mainline).

The 3,800 kilometre-long route runs about 700 kilometres north of and parallel with the Trans-Siberian – it was built to provide an alternative route.

The BAM railway – from Vanino Port on the Pacific Coast to Taishet on the main freight line to Moscow – is some 700 kilometres shorter than the equivalent section on the Trans- Siberian from Nakhodka Port on the Pacific Ocean near Vladivostok.

Nonetheless, the BAM is hemorrhaging red ink due to high operating costs which are about 1.5 times the average of all Russia’s railways.

The major contributors to the operating costs are debt servicing, and inefficient rail operations. Both Trans-Siberian and BAM need to be upgraded to become competitive, according to the Railways Ministry.

Furthermore, the freight, forwarded from Russia to European destinations, need the transfer to broad gauge rail (1,520mm) at Brest, in Belarus.

Experts argue that the Asia-Europe scheme also needs a major expansion of rail services between western European gateways and the inland Russian terminals, so as to give rail a competitive edge against long-haul trucks on major routes.

At the moment Russia’s both ends of the would-be transcontinental route are controlled by intermediaries – whose charges make the link economically non-viable, Aksyonenko told IPS.

“We have to reassert state control and to get rid of private intermediaries to lower tariffs,” he said.

The Railways Ministry, saying that it is losing money and is short of investment, is talking of incorporating itself as a state- owned business and issuing bonds to fund its activities.

President Vladimir Putin supported a restructuring plan to launch a 100 percent state-owned railway company, said Aksyonenko after meeting the Russian leader on Aug. 4.

The restructuring plan involves setting up the GAK Russian Railways – the GAK is Russian acronym for GosAktsyonernaya Kompaniya, or State Stock Company – which would own all existing trains, rails and train stations, and also 17 state-owned regional railway companies.

That would create a major corporation with an annual turnover of about 10 billion US dollars.

Aksyonenko’s plan has its antecedents: Gazprom used to be the government’s Gas Industry Ministry, but it became Russia’s biggest private company after spinning off the gas business and leaving behind the government regulatory functions.

However, Aksyonenko said incorporating the ministry would not be the same as privatising the railway sector. He argued that GAK Russian Railways would forever remain 100 percent state-owned.

Russian legislation needs to be amended so as to ban new emissions of GAK’s shares and not to allow these shares to be traded on the stock exchanges, Aksyonenko said.

The Russian railways account for more than three quarters of national freight turnover and roughly a half of passenger transportation.

But in the wake of the Soviet collapse in 1991 Russian railways have been hit by the country’s economic turmoil – just within the past two years the Railway Ministry cut 320,000 jobs.

Railway officials complain that they are forced to lose money on passenger trains, because the government sets price ceilings but does not provide sufficient subsidies.

Some train tickets are 10 times cheaper than air fares to the same destinations. And even those subsidies the state does allocate in federal and local budgets have fallen into arrears of more than 500 million dollars.

The incorporation of the Railways Ministry is being offered as a solution to these financing woes. According to the Railways Research Institute, GAK Russian Railways, unlike a ministry, would have more opportunities to raise money on financial markets.

Given the current uncertainty related to restructuring plans, the relevance of transcontinental freight and passenger railway services remains a matter of debate.

However, for the moment the Russian railways are not earning enough to finance their day-to-day activities and desperately need investment in new trains, rails and other infrastructure. Until that happens the plans of transcontinental link will remain a distant dream.