Yurii Vaskov: What Needs To Be Done To Launch Alternative Transit Routes

Yurii Vaskov 24 February 2016 10:18

Ukraine could become a transit country for delivery of raw materials from the Southern Hemisphere to Europe, through ports and by rail to the country’s western border crossings. If Ukraine manages to establish quality and competitive logistics to Europe, cargo volumes can be comparable with those that passed through Ukraine from its northern neighbors. In an exclusive column for the CFTS portal, Deputy Infrastructure Minister Yurii Vaskov explains what needs to be done to achieve this.

The dynamics of reduction of transit cargo volumes are threatening. The reasons for this are both political and economic. However, at the same time, the potential to attract new transit cargoes exists. The Ministry of Infrastructure has instructed all enterprises, including the Ukrzaliznytsia public railway company, to adopt a set of urgent measures to attract these cargoes.

Ukraine can become a transit country for delivery of raw materials from the southern hemisphere to Europe, through ports and by rail to the country’s western border crossings. If Ukraine manages to establish quality and competitive logistics to Europe, these cargo volumes can be comparable to those that passed through Ukraine from its northern neighbors.

In addition, we can transport finished products in the opposite direction, but that depends on European enterprises’ sales markets as well as on whether logistics through Ukrainian railways and ports benefits cargo owners, taking account of freight. We are considering alternative cargo flows from Kazakhstan, Uzbekistan, Azerbaijan, Belarus, and Moldova.

Related: Alternative to Russia: Which New Transit Cargoes Can Ukraine Expect

However, for a cargo owner to become interested in transporting its cargo on transit through Ukraine, it needs to be granted favorable economic conditions, both on the railways and in ports.

An experiment that began in ports on 1 January involves granting vessels carrying most transit goods a 50% discount on all types of port dues. Ukrzaliznytsia should also set the corresponding tariffs, possibly for specific volumes of cargo, to make it economically justified.

The railway also introduced a number of coefficients on 1 January. However, Ukrzaliznytsia should analyze the extent to which these coefficients are effective and which cargo owners are currently not covered by these preferences. Those coefficients that applied on the railways largely focused on cargo flows and the routes of previous years. If we are talking about transportation of goods from the Illichivsk port to the western borders of Ukraine, then I am sure that reduction coefficients currently do not apply on this route.

We recently asked a cargo owner what needed to be done for him to redirect his cargoes through Ukraine. He replied very frankly that he would consider such a possibility if our rates were lower

We have many documents containing beautiful phrases and stating that Ukraine is a transit country and that we need to facilitate transit of goods without providing specifics. However, cargo owners need specific conditions, in addition to simplicity at the borders. We have largely ensured simplicity at the borders. Practically all corruption issues have been resolved as a result of deregulation in ports. The main issue now is the economic issue. It needs to be conveyed to specific cargo owners. Because they have not seen concrete steps for many years, cargo owners have long found transshipment locations where they feel comfortable. Therefore, they will change their logistics only if conditions are more favorable. For example, we recently asked a cargo owner what needed to be done for him to redirect his cargoes through Ukraine. He replied very frankly that he would consider such a possibility if our rates were lower.

Transit loves stable and comfortable conditions. We are currently performing targeted work with every potential cargo owner and trying to let them know that we are working to lower rates and that we are creating favorable conditions for operations. This is a long process, but I would like to see the results in March-April.

Related: ArcelorMittal Interested In Transit Of Goods Through Ukrainian Ports To Europe