Through the Sea and the Desert: How the First Train Bypassing Russia was Launched

A container train has departed on a trial run on the Trans-Caspian corridor (Ukraine-China), through Georgia, Azerbaijan, and Kazakhstan. We visit the Illichivsk port to find whether this is just a public-relations move or a real business project.
Sergey Lyalikov 22 January 2016 16:25

Almost all the key executives in the country’s transport industry and the Odesa region –Infrastructure Minister Andrii Pyvovarskyi, Minister of Economic Development Aivaras Abromavicius, the Ukrainian Railways Public Joint-Stock Company’s acting head Oleksandr Zavhorodnyi, and the Odesa region’s Governor Mikheil Saakashvili – gathered at the ferry complex of the state-owned Illichivsk Commercial Seaport (the former Illichivsk-Varna ferry) on 15 January.

"Everyone told me that this was an unrealistic project. It is, but I like to implement unrealistic projects," Saakashvili said. He expressed great satisfaction with what was happening. Against the backdrop of a grim facial expressions of all the other officials (because of the unpleasant weather conditions), it seemed like a personal celebration for the former president of Georgia.

Read more: The New Silk Road and Ukraine: Five Key Questions

A train with 20 containers had earlier pulled up to a Bulgarian Navy ferry with the symbolic name "Heroes of Sevastopol." One of the trains is covered completely by a map of the route. From this map, it is perfectly clear to everyone how logistically difficult the Trans-Caspian corridor is. It is necessary to cross the two seas (the Black and Caspian seas) and go through four seaports and three countries before reaching the Chinese border.

"This is a test train. The train is carrying 20 containers (some with metal blanks, some empty). "The blanks will be unloaded in Georgia and some of the empty wagons will go to China for loading and return. The travel time is 11.5 days, but there are realistic prospects of shortening it to 10 days," said Pyvovarskyi.

However, everyone present is interested in the main question - what are the tariffs? Officials evaded the question. “We will definitely be able to compete with Russian routes," Pyvovarskyi said without disclosing the size of the tariff.

However, rumors soon began to spread. Citing a source within the Ukrzaliznytsia management, Volodymyr Shemaev, a representatives of the Odesa regional administration’s Agency for Investment and Development, said that the cost of chartering a 40-foot container (FEU) from Ukraine to the Chinese border (the Dostyk railway hub) would be USD 5,000. However, the Ministry of Infrastructure and Ukrzaliznytsia cautioned against hasty publication of these data because the final tariff will be determined only at the end of January or even in February.

It was reported on 14 January that Azerbaijan, Kazakhstan, Georgia, and Ukraine had signed a protocol on establishment of competitive preferential tariffs for cargo transportation on the Trans-Caspian international transport route. According to the Azerbaijani Railways’ head Javid Gurbanov, the four countries will agree a common tariff policy for cargo transportation on the Trans-Caspian international transport route by mid-February.

They will be able to compete with the route that passes through Russia if they actually manage to lower the tariff to USD 5,000, but the problem of time remains because the Caspian Sea is often stormy and transshipment of goods at four seaports on the route has a negative impact on the speed of delivery. However, if Russia bans transit of Ukrainian goods through its territory, the Trans-Caspian corridor is Ukraine’s only alternative for delivery of goods to Central Asia. In that case, the speed of travel is not so important.

Pushed by Russia

Russian sanctions – an almost complete blockade of Ukrainian goods on transit to Asia – were an important reason for Ukraine’s active push for the launching of trains on this route. In early January, the Ministry of Infrastructure proposed that carriers transport transit goods on routes bypassing Russia.

Speaking to the people gathered at the ferry complex, Minister of Economic Development and Trade Aivaras Abromavicius focused on the fact that the agreement on a free trade area between Ukraine and the European Union has already entered into force. However, he noted that the country has to operate under conditions of the Russian political decisions to restrict the transit of Ukrainian goods and impose an embargo on their import. "Russia, as a WTO member, has behaved unfairly by restricting our transit to third countries – the Caucasus, Central Asia, and China. Therefore, we are now diversifying the routes for delivery of our products to other countries. We are forced to take this step, but it is a necessary and important step," he said.

The project involves many countries and organizations, but customers will ultimately have a single route and a single tariff. According to Ukrzaliznytsia’s acting head Zavhorodnyi, this single project involves four railways (Ukrainian, Georgian, Azerbaijani, and Kazakh), the ports of Poti, Batumi, Alat, and Aktau, the Caspian Shipping Company, and even a section of a private railway in Kazakhstan. "But customers, having loaded trains in Europe and Ukraine, will receive their goods at the Dostyk station – or already in China – without changes to the documents," he said.

Saakashvili was traditionally expressive. "This is creating a new geopolitical reality. The USSR was created in a way to ensure that all economic flows, including transport flows, went through Russia. However, we – Ukraine, Georgia, Azerbaijan, and Kazakhstan – should show that we can work better and that we have more advantages than the Customs Union. Ukraine is obliged to use its trump cards – its association with the European Union and its geographical location – and be capable of reaching agreements," he said. Pointing at the lines of wagons ready to go into the ferry’s holds, he added: "And here it is – Putin’s nightmare! We can live without him!"

A "Pilot" with high hopes

The train’s travel time on the route, including its maritime segments, is 11-12 days (if there are no logistical delays or storms at sea). It is possible to reduce the travel time to 10 days. The ferry is capable of carrying 108 railcars, but the "pilot" train will consist of twenty. It will depart with some of its railcars empty and some loaded with metal blanks. The metal blanks will be unloaded in Georgia. Empty wagons will go to China, where they will be loaded with goods for transportation back to Ukraine. Thanks to the agreements that were signed, the train will go without inspection and on a single tariff "from point to point" - from the border of China to the port of Illichivsk.

The logistics will be fine-tuned and any problems solved during the first train journey, and a fully loaded train may depart after three to four weeks. "We expect to be able to send up to eight pairs of trains per month. It will be very good if we are able to send 1 million tons per year," said the minister of infrastructure.

According to Deputy Prime Minister Hennadii Zubko, the project has two main objectives: the first is export of Ukrainian goods to the east and import of East Asian goods and the second is participation of Ukraine in the "New Silk Road" project as a transit state.

A significant bid for China to note Ukraine as one of the viable options for the “New Silk Road” has been made. However, for the train to transform from a pilot train into a regular train, it is necessary to definitively resolve the issues of competitive tariffs, customs, and the time of delivery of goods.