Abstract. The authors discuss the major advantages of overland routes running across Russian territory and look at outside and domestic obstacles hindering integration of the Russian transportation network into the system of international transit corridors. They also consider the likely ways and options available for integrating the Russian Federation into the international transportation system and expanding its involvement in international freight traffic between the APR and European countries.
The world economy looks like it has stopped growing on its historic home grounds as fast as it has used to and started shifting its focus toward the Asia- Pacific Region (APR) where a new international economic center is on the rise and is gradually taking over from the Old World the role of the globe’s biggest producer and trader. The 21 countries that have joined together in the Asia-Pacific Economic Cooperation (APEC) forum overshadowing all other regional Pacific Rim organizations and associations account for almost 57% of world GDP, over 43% of total foreign direct investments, around 50% of world trade, and 40% of the population inhabiting the Earth.1 Li Keqiang, Premier of China’s State Council, said in his address at the opening ceremony of the annual conference of the Boao Forum for Asia in 2014 that Asia and China are turning into the most powerful engine driving the recovery and growth of the world economy. Leading Western experts and analysts are at one that the APR countries will be setting the pace for world development within the next few years.
In September 2013, China’s President Xi Jinping on a visit to Kazakhstan put forward an idea of a Silk Road Economic Belt to be opened and operated by modernizing Asian and European continental routes to increase significantly the trade between APR countries and Europe.2 Over the previous ten years, China’s trade with countries on both sides of the projected route had been growing at an annual rate of approximately 19%. It capped $1 trillion, rising to 25% of China’s total trade, in 2013. Within the next five years, China is planning to import $8 trillion of goods from Asian and European countries and invest over $450 billion in these regions.3
International analysts agree that Asian infrastructure will be booming with construction in the coming decade at an annual rate of 7% to 8% in the infrastructure development market.4 It is expected to reach $5.3 trillion, or 60% of the world infrastructure development market in 2025. Most significantly, they say, is that China will provide over a half of the total investments to be put into infrastructure development.5 On recommendations drawn up by experts of the Asian Development Bank (ADB), the Asian countries must invest over $8 trillion to get their infrastructure into shape over the two decades, 2010 to 2030. On their part, World Bank analysts suggested in 2014 that South Asian countries would have to invest $250 billion every one of the next ten years to develop their transportation networks to take constraints off their infrastructures, as compared to $600 billion a year East Asian countries will have to invest to be on a par with the rest of the world.6 Apart from recommendations and projections, neither the World Bank nor the ADB have spare funds to assist the two regions’ countries to follow through – both focus their efforts on smaller investment projects in countries with low living standards.
On the sidelines of the 21st informal meeting of APEC leaders in 2014, President Xi Jinping said China was ready to have a part in promoting partnership between governments, private national businesses, and international organizations to raise funds for investment in regional infrastructure. He spoke out for establishment of an Asian Infrastructure Investment Bank (AIIB),7 an institution that, the Chinese leaders believe, would give an incentive to regional infrastructure development, reduce capital outflow from Asia, and reinvigorate economic growth in APR countries and in the world at large.8 Premier Li Keqiang said at the Boao Forum in 2014 that an AIIB with a startup authorized capital of $100 billion would be a for-profit institution only, open to all countries, even those outside the APR. It would be different, the Chinese premier said, from both the ADB and the World Bank, both “politics-heavy institutions acting as government agents.”9 China’s Finance Minister Lou Jiwei announced that his country would contribute $50 billion to the AIIB’s authorized capital. AIIB’s authorized capital.
In October 2014, representatives of 21 Asian countries (Laos, Cambodia, Myanmar, Thailand, Vietnam, Malaysia, Singapore, Brunei, the Philippines, Indonesia, Kazakhstan, Uzbekistan, Kuwait, Nepal, Oman, South Korea, Mongolia, India, Pakistan, Sri Lanka, and Bangladesh) signed a memorandum on AIIB establishment in Beijing. It is expected that through 2015 to early 2016, following ratification of the agreement by all signatories, the new bank, with headquarters in Beijing, will begin operation.
The APEC Finance Ministers met in Beijing in October 2014 to discuss a program, the central subject of the meeting, to finance infrastructure projects that could whip up demand and speed up economic growth. In November 2014, China made public its intention to give a soft loan of $20 billion – $10 billion to be provided by the country’s government and another $10 billion issued by the China Development Bank – to several APEC countries in assistance to develop their transportation infrastructure.
A Russian Transportation Corridor from Europe to the APR
By most estimates, the heaviest trade has been carried on in the early 21st century between the APR and European markets. The Russian transit routes running along the shortest geographic lines, this country could offer a straight path between the points of origin and destination of freight shipments between these macroeconomic regions. The Russian transit traffic system has several theoretical advantages today. It provides an effective network of transit corridors (even if short of standby throughput capacity). Overland transit routes running across Russian territory offer many practical advantages over sea shipping as well. UNCTAD reported that almost 80% of world trade in 2013 was conducted through the world’s 30 biggest and busiest seaports operating at maximum capacity.10 The high risks of pirate attacks raise the carriers’ insurance premiums and costs of container shipments. The alternative route around the Cape of Good Hope lengthens the time in transit and raises shipment costs accordingly. These considerations give freight shipments across Russian territory a competitive edge in shipment transit time that affects the quality and price of many goods at the consumer end.
Factors Working against Russia’s Full Integration into the Eurasian Transit Freightage Market
The breakup of the U.S.S.R. and a succession of crises in the Russian economy that followed in its wake, and disintegration on the former U.S.S.R. territory led virtually to the collapse of the Russian transportation infrastructure in the last few decades and it is in bad repair today, and continues to deteriorate because of the shortage of funds to restore, maintain, and repair it. The infrastructure of the Trans-Siberian Railway and Baikal-Amur Mainline fails to meet the growing demands of the freightage market – a majority of track sections are severely overused. In the last ten years, the strain on the tracks in the eastern leg of the Trans-Siberian Railway rose from 340 billion ton/km to 570 billion ton/km a year, and is still going up, even though overall freightage fell in 2013 and 2014.11 In 2013, the total length of sections of limited throughput capacity in the eastern leg of the Trans-Siberian Railway network added up to 3,200 kilometers. Unless adequate funds are allocated to repair and modernize them, the total length of these sections will reach 8,100 kilometers, or 75% of the total length of the eastern leg of the railroad, by 2018.12 The railroad infrastructure is severely worn out. In 2013, the wear of the fixed assets reached 86% of their useful life. Shortages of funds to have tracks repaired carry the threat of still lower speeds and more frequent accidents in the network.
To make a few comparisons, capital investments into transportation development in China have been steadily above 8% of its GDP (they have been under 2% of GDP in Russia) since early in the 21st century, and lately China has started, within its “going out” policy, building up transit infrastructure capabilities as a top priority. Over this period, China has invested more than 6 trillion yuan (around $1 trillion) into the continental railroad network development, over a half of this amount having been spent on speed routes. Completion of speed railroads has helped to double train speeds and raise the throughput of ordinary railroads, including the backbone of the Eurasian transit routes. China’s railroads are a real competition to the Trans-Siberian Railway, primarily because of the relatively low freightage costs. V. Yakunin, CEO of Russian Railways, has admitted that “the rolling stock in China today costs less than a half of Russia’s and has been designed to operate at speeds of up to 160 kilometers per hour.”13
Russian Railways’ inconsistent and overcharged freightage and its rudimentary freight insurance system are yet another significant reason for the operation of the Trans-Siberian Railway under capacity. It is still twice as expensive (up from $4,000) for Europe to export its goods to China and other APR countries through Russian Far Eastern seaports where the goods are delivered by the Trans-Siberian Railway as by sea. For this reason, a significant proportion of imports is delivered to this country by a tortuous sea route through the Suez Canal and European ports instead of the short route through Russian Far Eastern seaports and the Trans-Siberian Railway.14 The Trans-Siberian Railway and Baikal-Amur Mainline and the Northeast Passage (along Russia’s Arctic fringe) are still used mostly for transportation within Russian borders.
In 2013, over 70% of containerized goods in the world were handled in the APR. The region has nine of the world’s ten biggest container handling seaports, six of which are in China.15Also in 2013, China’s seaports handled over 190 million TEUs (twenty-foot equivalent units), and its share of the world’s container shipping reached over 30%. Even though new container carriers, such as large container ships, are to enter the world container shipping market within the next few years, demand for containers will still be leading supply by a large margin. World Bank experts predict an average 7% to 8% annual growth in the world’s containerized cargo handling at seaports in 2014 and 2015.16 The sea route running through the Suez Canal built in 1869 (and used by 95% of international shipping) is the principal route followed in foreign trade between APR countries and Europe. When Egypt opens a new canal 35 kilometers long built parallel to the old canal to shipping in 2015, the Suez Canal’s throughput will increase significantly. The Panama Canal, too, has a role significant by any measure, handling 4% of international Eurasian freightage and mostly the bilateral trade between its major users – China and the United States. Work to modernize the canal started in 2007 (at a projected cost of around $5.3 million)17 to double the throughput of the Panama Canal in 2016 and allow ships carrying 12,000 containers to go through. The cargo-carrying capacity of large container ships used on these two routes has risen significantly of late, with considerable cutbacks on shipping costs.
China has invested more than 5 trillion yuan to expand its seaport infrastructure and build seagoing ships over the last 15 years. In 2013, all seaports in China handled 10.7 billion tons of total freightage, which added up to 40% of the world’s total tonnage of bulk freight that was carried by the Chinese merchant ships.18 Of the 20 biggest freight-handling seaports in the world, 17 were in Asia, and seven Chinese seaports ranked among the world’s ten largest seaports.19 Today, 20 biggest seaports in China handle over 100 million tons of freight a year. China’s seaports handle almost 100 times as much freight as do the Russian Far Eastern seaports.20 The Russian Far Eastern seaports handle around 20% of Russian freight carried through all Russian seaports in international trade, and nearly 80% of all freight carried through this country’s Far Eastern seaports is transshipped by the seaports on the southern Primorye Territory seaboard (Vostochny, Nakhodka, and Vladivostok).21 All together, they can handle around 50 million tons of freight a year and between 300,000 and 350,000 TEUs. In experts’ estimates, for Russia to have a significant role in the Eurasian freight transit corridor, these seaports must transship together at least 10 million TEUs a year.22
Customs at seaports in the Russian Far Eastern Federal District may take weeks to allow import freight in, while a single day on average is needed to get imports through the customs anywhere across the world. A single standard container is unloaded at the Chinese seaports of Shanghai and Ningbo-Zhoushan within a short quarter-hour (a world record) at $50, while it costs $140 to do the unloading at Vostochny in Russia.23All these negatives combined to reduce transit freightage between Europe and APR countries across Russian territory to a trickle. In official statistics, the total Eurasian transit freightage across Russian territory in 2013 was a mere 0.2% of the current trade between European and Asian countries and no more than 50,000 containers a year, less than 1% of the transit capacity of the Trans-Siberian Railroad.24 On its part, China has been telling the Russian authorities it was ready to bring its transit freightage across Kazakhstan and Russia up to between 300,000 and 400,000 containers a year and raise the share of transcontinental freightage in China’s total cargo carriage to Europe from 1% today to 7% in 2020.25
Almost 40 million containers (loaded with over 1 billion tons of cargo valued at $800 billion in all)26 are moved between the European Union (EU) and APR countries every year, almost 95% of this flood of cargo carried by foreign merchant marines through foreign seaports bypassing Russian territory. Taking advantage of the Russian authorities’ wait-and-see attitude long overdue for a decision, China and other APR sea powers have actually elbowed Russia from the Eurasian transit freightage market. From the strategic viewpoint, China’s undivided domination on the transit freightage market can project a negative impact on the Russian authorities’ plans to perform a significant role in transit freightage between Europe and the APR. Waiting until all APR countries suddenly change their mind and seize the opportunity to carry their goods overland through Russia and China sends “voluntarily” a hefty share of its freight off its own transportation corridor across Russia has an appropriate phrase for it – wishful thinking.
Transportation Infrastructure in Russia and Its Far Eastern Federal district in the System of Regional and Eurasian Transportation corridors
Russia is waning progressively in significance as a major partner for anyone in the APR, while the region is gaining weight for Russia, with the world’s center of economic activity shifting to the Pacific Rim (abandoning Russia one on one with the economic sanctions the West has imposed against it). The Russian government authorities would do well to stop thinking up dreams of geopolitical, natural wealth, transportation convenience or any other advantages according it automatically, they are certain, the role of a power held in profound respect in either East or West. It has squandered many of its long-held advantages, while others have lost much of their erstwhile significance. The prospects for Russia to be welcome with an open embrace to the APR family are sustained on its ability to develop a national high-tech transit transportation system and to use the few opportunities before they are lost for good. Marking time with modernization of the Trans-Siberian and Baikal-Amur railroads and Russian Far Eastern seaports poses potential challenges to Russia and makes a striking contrast with the fast expansion of an advanced transportation network next door, in China.
The reason why Russia has not been making as much money on transit transportation as it might have been is primarily that the Trans-Siberian Railway is no longer today the international Eurasian transportation thoroughfare it has been since its tracks were first put on its roadbed. It cannot be offered now as a readymade national transportation product that is a good sell on the world market. A transcontinental corridor with the Trans-Siberian Railway as its core is certainly in high demand. Considering the high cost of the project, even as simple as the latest upgrade, though, the accent on international two-way transit freightage between Europe and Asia takes the backseat – the potential freightage might prove to be less significant for the likely gains it can bring (approximately $2 billion) as a windfall for the Russian government’s budget.
The transit option for the Russian territory being capitalized on as an intermodal transportation pathway is not without its strategic and economic risks. China and ASEAN countries bet on domestic demand as a driving force of economic growth, which has become a trend voiced by Li Keqiang, Premier of China’s State Council, at the Boao Forum in 2014. Zhang Gaoli, Vice Premier of China’s State Council, said in an address at the international China-ASEAN Expo in Nanning in September 2014: “… Chinese direct investments in ASEAN countries will go up to over $500 billion within the next five years, and China will import $10 trillion in goods from the region.”27 If the ASEAN countries succeed in making their region a consumer-centered economy as well as a manufacturing center within the next five to ten years, the transit flow of Eurasian freight will likely thin out, and Russian investments into the transportation infrastructure development will bring in few returns.
China’s geopolitics has acquired many dimensions. China’s plans for the Silk Road Economic Belt and the Maritime Silk Road for the 21st Century anticipate charting of parallel and alternative routes to Europe across Russian territory, Central Asia, Southeast Asian countries, and the Middle East to lessen the possibility of infrastructure risks it may run on any route.
The future of Russia’s Far Eastern region is tied closer to China and Northeast Asia than it is bound to the country’s European part, mostly because of its geographic proximity to both. The Russian Far Eastern Federal District and Northeast Asia are “a natural geographic and economic belt.” Close economic ties with China (a first priority) and Southeast Asian countries, Japan, and South Korea may prove for Russia’s Far Eastern region to be as rewarding as they are with the European part of the Russian Federation. The existing international and national barriers that cast a dark shadow over reciprocally beneficial cooperation can be overcome through effective regional integration of Russian and Chinese transportation systems. The government’s targeted and adequate support for transportation development in the Far Eastern Federal District could help integrate the local infrastructure network in a natural way into the operating Chinese and international transportation corridors and join them to the Russian transportation system. Russia and China could act as leading regional integration backbones capable, under inordinate circumstances, of turning the integrated cross-border infrastructure into a multipolar regional framework. All APR countries can gain significantly by joining it and using its synergistic effect.
The railroad network in Central and Western China is operated under considerable overstrain today and has difficulty delivering export-bound cargoes to seaports on the country’s East Coast for shipment to Europe. Efforts must be stepped up to complete construction of the transportation corridor from Beijing to Moscow (its first section 770 kilometers long between Moscow and Kazan is to be completed by 2018). When the Moscow-Beijing railroad corridor goes into operation it will boost the throughput capacity of the western leg of the Trans- Siberian Railroad, build up freight tonnages originating in China’s central and western provinces, and send them by rail across Kazakhstan and Russia to Western Europe.
On the other extreme, the transportation infrastructure in areas of China’s northeastern provinces closest to the Russian border and the section of the Trans- Siberian Railroad leading from the major Russian Asian border crossings at Zabaikalsk-Manzhouli and Grodekovo-Suifenhe to the Russian Far Eastern seaports is operated under capacity. The top priority of Russo-Chinese transportation integration is, therefore, switching a significant proportion of freight originating in China’s northeastern and central provinces on to the section of the Russian Far Eastern Railroad between Zabaikalsk and the Russian Pacific seaports for delivery westward to Europe and to China’s East Coast seaports and Southeast Asian countries. And in the reverse direction, some of the freight can be switched back to the Chinese railroads heading west, away from the Trans- Siberian Railway that still has a limited throughput today.
A rapid increase in the transit potential of the Far Eastern Federal District could give a strong push to regional infrastructure integration within the framework of the Eurasian Economic Union (EAEU) treaty and the plan to build a Silk Road Economic Belt. Freight transportation must also be invigorated in the international Primorye 1 transportation corridor (from Harbin to Suifenhe, Grodekovo, Vostochny seaport, to APR countries).
Development of interregional freightage will benefit China’s Northeastern provinces that will gain access to the seaports of the Russian southern Primorye Territory, and also Japan, South Korea, and ASEAN countries. Today, this is the most realistic, and probably the last remaining, option for regional transit plans to be followed through, provided that the throughput capacity of the Trans-Siberian Railroad and the Russian Far Eastern seaports is increased significantly. The Far Eastern Railway (FER), the last leg of the Trans-Siberian Railway, has been given the decisive role in plans to boost the national transit transportation potential and win a niche for Russia on the Chinese and Southeast Asian countries’ markets. The FER has a significant capacity for building up the freightage of export and import cargoes between Russia and China and other APR countries, while an increase in the standby throughput capacity of the railroad crossings at Zabaikalsk-Manzhouli, Grodekovo-Suifenhe, and Khasan-Tumangang-Rajin and the reopening of the Makhalino-Hunchun border crossing will stimulate growth in regional trade and increase significantly the revenues of the local budgets on both sides of the border.
The FER chief admitted that oil transportation by rail dropped by 12 million tons in 2013 following the completion of the project to pipe oil from East Siberia to the Pacific coast and more oil being moved in the Russo-Chinese pipeline from Skovorodino to Daqing. The quantity of crude oil transported daily through the Zabaikalsk-Manzhoui border crossing for the needs of the Harbin Railroad had fallen, giving the Russian seaports, and railroads in particular, a unique opportunity to diversify gas deliveries from Russia. Compressed natural gas (CNG) delivered in containers by sea and by rail can become an alternative to future deliveries of natural gas by the projected Power of Siberia gas pipeline and liquefied natural gas (LNG) from Russian seaports by sea. LNG containers are convenient for overland deliveries to areas having no gas pipelines in service. LNG cylinders are designed to withstand pressure of 200 to 250 bar, and many cylinders are bound together into modules (containers), making them easy to transport with large quantities of gas inside on a single rail flatcar.
The practice used to transport LNG in the Dongbei Pingyuan (Manchuria) region (three northeastern provinces) is very effective and simple to be applied on Russian railroads. It does not require investments to be made to build railroad infrastructure as it uses the operating Russian railroad network close to the China border to carry LNG. The potential of logistics companies available to draw on, the gas fields in Russia and gas compression units can be connected to Chinese users.
After the Skovorodino-Daqing oil pipeline was put into operation, and the strain of handling petroleum products was taken off the railroads of the Far Eastern Federal District, they could be used to transport large quantities of LNG and begin developing Dongbei Pingyuan’s enormous natural gas market. The plan to ship LNG to China may have a macroeconomic effect on Russia as well – with the Russian-Chinese gas pipeline brought into service, LNG shipments can easily be delivered to China’s southeastern provinces and APR countries by sea.
The Trans-Baikal Territory has a significant transit potential. In addition to Zabaikalsk, the Russo-Chinese border has another crossing point, at Priargunsk, joined to the Russian railroad network as well. On the Chinese side of the border, a railroad section has been laid from Hailar to Heishantou facing the Priargunsk crossing point across the Amur River. The two crossing points are separated, apart from the river, by a patch of land where a federal highway 20 kilometers long and a railroad bridge across the Amur have to be built. Chinese investment could be tapped to put up a new modern railroad crossing on the border between Russia and China.
Russia can gain considerable benefit from the Primorye 2 international transportation corridor project developed by a team of Far Eastern scholars in the 1990s for transporting goods manufactured in Dongbei Pingyuan through sea- ports of the Khasan District, Primorye Territory. Until today, the goods manufactured in China’s three northeastern provinces (historical name Dongbei Pingyuan or Manchuria), which have a total area of 1.45 million square kilometers and a population over 120 million, and no access to the Sea of Japan, are carried over long distances for export through China’s seaports. Freight originating in Hunchun, as an example, is transported to Dalian, the nearest Chinese seaport, almost fifteen hundred kilometers away. Much closer at hand, a mere 75 kilometers away and five days shorter, is the Russian seaport Zarubino. Another Russian seaport, Posyet, is 42 kilometers from Hunchun, and a third seaport, Slavyanka, is 200 kilometers away. To make matters even worse, the railroad network in China’s northeastern provinces is overstrained with regional freightage and has difficulty handling international trade freight – in 2013, the three provinces failed to take out 86 million tons of outbound freight because of the limited throughput of Dongbei Pingyuan’s infrastructure network. The landlocked region’s troubles can be surmounted by modernizing the Khasan District’s railroad infrastructure (two double-track passing sections built at Pozharsky and Barsky and the Makhalino-Hunchun border crossing renovated). In 2015, the container traffic between Makhalino and Hunchun can reach 2 million tons of cargo and 3,000 TEUs, and increase to 8 million tons of cargo and over 23,000 TEUs by 2017.28
The Zarubino seaport is to become the centerpiece of the Primorye 2 international transportation corridor project. It lies 80 kilometers to the northwest of the Vladivostok seaport and is just 18 kilometers from the Russo-Chinese border. It must serve as an alternative to the railroad delivering Chinese freight by rail to that country’s seaport at Dalian. The authorities of the Jilin province are going to invest $3 billion into a project to raise the annual freight handling capacity of the unfreezing Zarubino seaport to 60 million tons, to be increased to 100 million tons in the longer term.29 The seaport comprises a grain terminal capable of handling 40 million tons of grain a year, a container terminal for 2 million TEUs to be turned around, a ro-ro (roll-on roll-off) terminal for 1.5 million units a year, and an intermodal terminal for general cargo (over 25 million tons). Under the seaport renovation project, the number of berths is to be increased from four today to 12 or up to 15. The renovations made will use 60% of the Russian seaport’s capacity to take cargo from Dongbei Pingyuan’s provinces to China’s southern areas and another 30% to export products originating in these provinces to APR countries and North America.30
In 2014, the authorities of the Jilin province agreed to lease 310 hectares of land in Hunchun to the Russian Summa group for 50 years for a logistics center to be built to handle up to 40 million tons a year of Chinese freight arriving in Hunchun to be graded and sorted out into shipments. Chinese companies have entered into agreements with Summa on transshipments of their freight through Zarubino. The Jilin Grain Group Company Ltd wants 10 million tons of cereals (wheat, corn, and soy) to be transshipped a year through the seaport. Hengda company is ready to have at least 5 million tons of water to be transshipped every year, beginning in 2018, likely to rise eightfold by 2025. The car plant in Changchun (Volkswagen company’s biggest assembly facility in the world) intends to import 40,000 TEUs of car components a year from Europe and America through Zarubino. Summa plans to invest between $300 million and $350 million into logistics center construction and modernize the Russian section of the railroad to the Zarubino seaport (laying second tracks and using electric traction) and to approach the National Welfare Fund for a loan of up to 46 billion rubles to carry out a Greater Zarubino Seaport project. It also considers inviting Chinese and Russian banks as coinvestors.31
In 2014, the Far Eastern Railroad arranged a trial run of heavyweight containers from Hunchun to Zarubino, and the seaport authorities have announced their readiness to take up to 5,000 TEUs over from the Russian railroad operators a year, without increasing their own freight handling capacities anymore. Chinese experts believe that after Zarubino has been linked to the Trans-Siberian Railway, its freight handling capacity raised, and the throughput of the Makhalino-Hunchun railroad section increased, this Russian seaport will be able to compete against the Chinese seaport at Dalian or Shanghai within a decade.32 To add to the Zarubino seaport’s logistical opportunities, the authorities of the Jilin province spoke out about their interest in having a speed railroad built between Vladivostok and Hunchun and linking it up with the Chinese railroad network.
Russian President Vladimir Putin’s idea (voiced at the SCO Summit in 2014) that the fullest possible use be made of the transit potential of the Trans-Siberian and Baikal-Amur railroads could be turned into reality only if the quality of the Russian transportation system as a whole is improved, seaport developed, and the throughput of the railroad network in the Far Eastern Federal District is expanded significantly. The Russian seaports in Primorye Territory could certainly handle freight more efficiently than they do now under plans discussed repeatedly with the Chinese to build railroads from the Heilongjiang province to Primorye Territory, one starting out from Dongning in China and heading for Poltavka and Ussuriysk in Russia, and the other leading from Mishan to Turiy Rog. Railroad bridges are also to be built between Heihe and Blagoveshchensk and from Hulin to Lesozavodsk.
Modernization of the railroad running from Khasan in Russia to the city port Rajin in North Korea was completed in 2013. Russian Railways will use it to step up international container traffic by 4 million tons at the first stage, to go up to 17 million tons in the long term. At a later stage, predictions are made for still more freight and a broader range of freight handling services, including transshipment of containers (up to 100,000 tons a year), to be provided.33 As their part of the project, the Chinese have built a highway from Hunchun to Rajin to deliver freight originating in China to the railroad reaching out from Rajin to Tumangang and on to Khasan in Russia or carry some Russian freight bound for western China and Kazakhstan. For these plans to materialize, the bottlenecks have to be cleared on Russian territory, such as a major renovation undertaken on infrastructure of the section between Baranovsky and Khasan that is a connecting link between the Trans-Korean and Trans-Siberian railways.
It is more than a coincidence that the greatest economic powers are located in the Northern Hemisphere and that, with the focus of the world economy moving from West to East, the largest economies – Russia, China, and Southeast Asia – will attempt to make the most of the Arctic fringe to move their goods around the world. Russian and Chinese icebreakers and merchant ships, seaports, and safe systems to support navigation both ways in the Northeast Passage (or Arctic Sea Route) could give freighters an opportunity to reach Northeast Asian countries at any time of the year. Unrestricted navigation on the eastern leg of this route is a strategic task of making the Arctic Sea Route (ASR) a national transportation asset – the ASR ports transship the freighters’ cargo on to the Sabetta-Bovanenkovo railroad that takes it down to the operating Obskaya- Bovanenkovo railroad connected to the Northern and Sverdlovsk railroads, and further down to the Trans-Siberian Railway.
In late 2013, the merchant ship Yongsheng displacing 19,461 tons made her first 33-day voyage almost 2,936 nautical miles long traveling the Arctic Sea Route from Dalian through the Bering Strait to Rotterdam. Chinese shipping companies are showing far greater interest toward the ASR than toward the Northwest Passage extending through Canadian and American waters.34 The only reason for their preference is that the Northwest Passage, even though it has the same length as the Northeast Passage (or ASR), poses far greater ice field problems than the ASR. Plans have been sketched for a joint Russian-Chinese shipping company to explore the ASR while carrying commercial cargo. According to Wang Hexun, Director of the Donghai Navigation Safety Administration, China’s Ministry of Transport, ships traveling the ASR cut the distance to destination by between 25% and 55% in comparison with the traditional corridors they use traveling from China’s East Coast seaports to seaports in Western Europe and in the North and Baltic seas.35 Interest toward voyages through the ASR are likely to be shown by the seaports of Dandong, Yingkou, Qinhuandao, Tianjin, Shanghai, and particularly the seaports in Manchuria (Dongbei Pingyuan).36 All of them, though, complain of significant difficulties they face voyaging in the ASR because of the lack of shore infrastructure and poor quality logistics.
Chinese experts believe that Russia cannot develop, all by itself in the circumstances it is in today, the Arctic Sea Route, and its desire to find partners ready to give it a helping hand opens new opportunities for China.37 In its turn, confronted with problems trying to navigate its ships through the ASR, China wants to study Russia’s experience of navigation in high latitudes and to join forces with Russia to develop Arctic routes. In the estimates made by Polar Research Institute of China (PRIC), China’s foreign trade can reach $7.6 trillion in 2020. With 90% of the country’s foreign trade carried by sea, 10% of its foreign trade cargoes carried by Chinese shipping companies through the ASR is likely to be valued at $683 billion. Close cooperation between Russia and China in ASR development can change the structure of Eurasian freightage by sea beyond recognition.38
Where building a regional corridor across Russian territory is hard to complete on a fixed schedule through lack of funds, every opportunity must be seized to do the job a bit at a time. Prioritizing a railroad section connecting two industrial centers, one in China and the other in Russia, can be the point to start out at the first stage. The section can be built within a relatively short time frame and prove profitable to operate long before construction of the corridor as a whole has been completed – in these circumstances, the rail tracks can be a few hundred kilometers long only. A railroad between Harbin and Irkutsk could be one of the many sections linked up together into a regional transportation corridor. It is good policy for a new railroad transportation corridor to be built together with highways, overhead power transmission lines, utility lines, and all other vital lines. A large regional airport and inland waterways will help turn the transportation route into a zone converging on a major center exporting goods originating in China and other APR countries to customers in Russia’s European regions.With Harbin as the nearest intake for export-bound freight, an all-in-one infrastructure corridor could provide an incentive for economic growth in major regional centers – Chita and Ulan-Ude – in Russia (Daqing, Hailar, and Qiqihar in China) and serve as the groundwork for the growth of an economic belt of industrial centers sited along the railroad.
The Russian Far Eastern seaports have an enormous potential of cooperation with the nearest seaports in China’s Liaoning province – Dalian, Dandong, and Yingkou. In 2008, China’s State Council ruled to have a customs zone established in the Dalian Wan Bay, near the Dalian seaport, a major step in promoting the openness strategy of the Liaoning province. This is the area where one of the biggest international seaports in Southeast Asia is to arise soon. The provincial authorities are going to invest over 20 billion yuan into 35 projects to build new berths and develop railroad and highway infrastructure in the seaport area before 2015 is out. Toward the end of the current, 12th five-year period, the province will have five large seaports in operation, each capable of handling over 100 million tons of freight, and the overall freight handling capacity of all seaports in the Liaoning province will rise to 1.1 billion tons.39
The most inviting prospects are open for cooperation between the Russian Far Eastern seaports and the fast-growing seaport of Dandong sitting on the northernmost fringe of China’s continental shoreline. In 2013, it transshipped 120 million tons of freight and over 1.5 million TEUs. The seaport has a convenient geographical position between China and North Korea, next door to Russia, Japan, the Republic of Korea, and Mongolia, straddling the sea crossroads leading to 90 seaports in seventy countries. Work is rushed at a berth for big ships displacing up to 300,000 tons to carry iron ore. Within two to three years, foodstuffs, rolled steel, coal, and iron ore from 14 cities in the eastern areas of Northeastern China alone can boost Dandong seaport’s freight handling capacity by 100 million tons a year. Access to the sea the seaport gives to enterprises in Northeastern China will help them cut down their logistical costs by 6 billion yuan a year. By some estimates, over 60 deep-water berths more are to be built until the end of the current five-year period, and the seaport’s freight handling capacity will rise to 400 million tons a year.40
The upbeat tenor over the mutually beneficial and pragmatic economic cooperation, including expanding regional integration in the transportation industry, between the two neighboring great powers was demonstrated by their leaders, Xi Jinping and Vladimir Putin, meeting on the sidelines of the 14th Summit of the Shanghai Cooperation Organization (SCO) in Dushanbe, Tajikistan, in September 2014.
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Translated by Gennady Khmelev