Ukrzaliznytsia intends to start transporting some cargo along the Trans-Caspian International Transport Route (TITR), in particular, on the section from the Georgian port of Poti to Chornomorsk with further transit through Ukraine. Two ferries, which have been on the balance of the railway company for ten years, are planned to be used on the sea section.
On the one hand, it is very good that UZ is once again trying to start working on the Trans-Caspian route, which is an alternative to transiting goods between China and the EU through Russia. On the other hand, there is a certain amount of skepticism as to whether, at least this time, the railroad company will be able to make good use of its existing two vessels.
It is worth recalling that the ferries "Hero Plevna" and "Hero Shipka" were transferred to the management of UZ at the end of 2015. After that, a long epic began regarding the repair of the ferries and their possible use by Ukrzaliznytsia. In particular, it was expected that the vessels would be able to perform transportation within the framework of the TITR on the Chornomorsk - Poti/Batumi line. Among the variants considered was the possibility of transferring the ferries to a bareboat charter to another company. Finally, in 2019, UZ asked the Ministry of Infrastructure to consider the issue of transferring both vessels to another operator, since operating the fleet is not a direct activity of Ukrzaliznytsia.
It is clear that over all these years, considerable funds have also been spent on the repair of the two vessels. Thus, as of the beginning of 2022, according to official information, the railway company had spent UAH 114 million on current repairs and the purchase of consumables. At the same time, since 2014, the ferries have not gone to sea and have been constantly at the berths of the port of Chornomorsk or the local ship repair plant.
Finally, in July 2024, UZ decided to transfer two of its sea ferries to the State Property Fund of Ukraine. But suddenly something changed and now UZ says that the ferries can be used. However, the vessels currently need repairs and renewal of all permits.
UZ intends to transport container trains with cargo from Asia from Poti to Chornomorsk. “The ultimate goal is to create a corridor that will provide turnkey services to our customers from China to Europe,” said Tymofiy Murakhovsky, director of commercial and logistics at Ukrzaliznytsia. According to him, the ferries will transport at least two container trains per day, “which will make it possible to significantly increase the cargo turnover between China and Europe.”
CFTS tried to get a more detailed comment on this issue directly from UZ. However, the company responded with a standard response that the project “is in the final stages of finalizing and studying the best models of work and development of this initiative,” and that “after the project is agreed and approved, its details will be announced publicly.”
So, in the lack of an official position, let's try to analyze what factors are currently favorable or could hinder the new initiative of UZ, what cargo flows can be expected, and whether it is realistic to establish direct ferry service with Georgia in the current war.
Eastern intricacies of the Middle Corridor
When a test container train was launched from Chornomorsk in 2016 via the TITR, it turned out to be expensive, and all participants on the route had to reduce tariffs. And most importantly, there was no necessary cargo traffic at the time. This is against the background of the fact that containers between western China and Europe were actively traveling along the northern route, through the territory of Russia. However, after the start of Russia's aggression in Ukraine, many companies decided to stay away from it and international sanctions.
It was exactly at this time when the so-called Middle Corridor “got a second wind,” as evidenced by the statistics. In 2022, there was a 153% jump (1.5 million tons), followed by 86% (2.8 million tons) growth in 2023, and a more modest 21% in 2024 (3.3 million tons). And according to the World Bank's forecast, by 2030, the turnover may increase to 11 million tons.
A significant portion of Kazakhstan's exports, including petrochemicals, metals, coal, ferroalloys, grains, fertilizers, etc., are destined for the Middle Corridor. “Batumi Sea Port recently agreed with KazPhosphate to transship 50 thousand tons of ammophos this year.
Andriy Kuzmenko, Director of International Trade and Business Development at Abu Dhabi Ports Group, who recently attended the "Black and Caspian Freight Forum 2024" in Azerbaijan, is surprised that although all major customers, forwarders, lines, ports, and regulatory bodies were represented but the discussion focused on the Middle Corridor's development and the presenters and panelists mentioned only transit traffic of the corridor. “But basically, no one dared to notice tremendous volumes of the original Central Asia exports, which belong to the same corridor just as well, if not much more. It's remarkable - to discuss potential 10-50 thousand TEUs while avoiding talk about real millions of tons,” he says.
Tajik fertilisers, bauxite and aluminium, which used to go through Turkmenistan, have switched to the TITR due to the discounts offered. In addition, Chinese lithium has appeared, which was pushed onto the TITR by Russia's ban on its transit through its territory.
Nevertheless, according to Gaidar Abdikerimov, Secretary General of the Trans-Caspian International Transport Route International Association, the corridor is currently about half full. According to him, the capacity of the TITR is currently about 80,000 containers per year, but there is an opportunity to increase it to 110,000 containers and in the future to increase it to 300,000 TEU. And the delivery time is planned to be reduced from 18-23 days to 10-15 days.
All participants in the corridor naturally became more active. In 2023, the railways of Kazakhstan, Azerbaijan, and Georgia established a joint venture, Middle Corridor Multimodal, to serve customers on a single-window principle with guaranteed delivery times and costs.
By the way, in 2017, there was talk of a joint venture between Ukrainian, Georgian and Azerbaijani railways to operate UZ ferries. And now it is planned to register UZ Cargo East in Kazakhstan. According to UZ's Director of Commercial and Logistics, the creation of the new legal entity was approved by the Supervisory Board on 17 February.
In fact, joining the TITR is not so much about logistics as it is about geopolitics, says logistics expert Oleksandr Lysenko. ‘The TITR is essentially a part of the Chinese Silk Road, which is focused on expansion. On the other hand, from the European side, we have the TRACECA project. Accordingly, the development of the corridor is about influence, technology, and investment in the economies of the countries through which it runs,’ he commented.
Speaking about the use of ferries, Lysenko advises to put aside geopolitics and return to logistics. He recommends focusing on such key elements of logistics as price, speed and reliability. ‘Does TITR meet these criteria? The price is high, as freight owners themselves have stated more than once. They are trying to speed up the speed, but the problems with the infrastructure are hindering them, so certain trains that have demonstrated faster delivery do not change the whole picture. We cannot talk about reliability here either. Let's mention such a ‘bottleneck’ as the port of Baku, where downtime is unknown. And if we move further, there is Georgia, which is currently under Russian influence,’ the expert noted.
The fact that TITR is at the epicentre of tensions is already causing concern in the sector. As Сaspianlife.kz recently wrote, both the US-China relationship and the domestic political situation in Georgia could negatively affect the financing and implementation of TITR's projects.
“To cross the Black Sea, a ferry under the Ukrainian flag must actually get Russia's “permission”. That is, in our case, we can even see the following geopolitical aspect: if Ukrzaliznytsia undertakes to organise such transportation, it is counting on the end of the war in the near future, on different relations with Russia,” Lysenko says.
He also talks about the dangers of navigation in the Black Sea and the inoperative international law. “If it is necessary to make a voyage, it is necessary to use coastal waters, which makes the route longer, increases the time and cost of transportation,” Lysenko told CFTS.
Half a loaf is better than none
What kind of freight can UZ ferries expect? Whether it will be trains from China? Experts are currently in doubt. On the one hand, the cargo can pass through our territory to Poland, which was the main destination on the northern route before the war and from which cargo can be distributed further across the EU. In addition, the TITR map used by the European Commission shows Odesa ports as one of the branches of the Trans-Caspian route.
On the other hand, container routes to Europe already go through Constanta, Romania, and this branch is currently considered the most optimal. Most containers go this way rather than through Turkey. ‘This is indeed a proven route without passing through the war zone. Constanta is the main gateway to Europe on this route. And even if not through Romania, there is another option to safely send a container train through neighbouring Bulgaria,' reckons Colonel Lysenko.
At the same time, there is a potential to deliver some cargo directly to Ukraine from the countries through which this route passes. In fact, not all container trains run along the entire length of the TITR. For example, in 2022, out of 33,600 TEUs that crossed the Caspian Sea, only 18,000 TEUs reached Europe.
Let's not forget about Ukrainian exporters, who may not supply goods along the entire TITR, but, for example, to Kazakhstan or closer Georgia. And not necessarily by container. Earlier, the CCC has already talked to market participants, and they have shown interest in resuming ferry services between the ports of Ukraine and Georgia.
‘This logistics scheme means no transshipment when delivering our products to customers in the Transcaucasus and Central Asia and, as a result, reducing the risk of product damage,’ said Evgeny Anikin, Head of Logistics at Interpipe.
‘Speaking of TITR, we have to think in these terms. It should be a kind of bus that stumbles. After all, this is an analogy with container lines, when container ships call at different ports according to a pre-announced schedule,’ explains one of the experts.
And it is possible to get cargoes to Ukraine itself that will go by rail using a ferry line. However, only if there are reasonable tariffs, market stakeholders emphasise.
Dmytro Kazanin, director and owner of "TEUS" logistics company, called UZ's intention to operate sea ferries and establish a branch in Kazakhstan a strategically important step. It can ‘significantly expand the possibilities of multimodal logistics and improve transport links between Ukraine, Europe, Central Asia and the Middle East’.
He believes that this project will open up prospects for exporting Ukrainian products and importing goods to Ukraine. And that the development of the ferry service ‘can become an additional transport corridor that will provide more flexible and efficient logistics between Ukraine, the Caucasus, Turkey, the Middle East, and even China.’
However, it is important to pay attention to several key aspects, he says. ‘Firstly, the competitiveness of tariffs: even if there is a container service from Georgia, transportation by bulk carriers from Poti can be more cost-effective, so it is important to critically assess the economic feasibility of the route. Secondly, security issues: although transit cargo can pass through Ukraine, European partners may be wary of the risks until the situation stabilises. And, crucially, the issue of sanctions control should be taken into account. Cooperation with companies under sanctions can create both reputational and legal risks for market participants,’ he commented.
“Therefore, each component of this logistics chain should be carefully considered to ensure not only the efficiency of transportation, but also its compliance with international standards and Ukraine's sanctions policy. If these aspects are taken into account, the development of ferry service can become a powerful tool to strengthen Ukraine's position in international logistics and facilitate its integration into global transportation networks,” summarizes Dmitry Kazanin.
“The task of attracting cargo flows of the Trans-Caspian route through Ukraine is not an easy one. Perhaps UZ has some new vision. Perhaps it could be promising after the war is over - in the future. But these ferries are already very old, morally and physically outdated,” Roman Morgenstern, Ukrferry's Director of Development and Marketing, said in a comment to the CFTS.
It was Ukrferry that operated the ferries for many years before returning them to the state. And in 2017, after UZ's unsuccessful attempt to enter the TITR, Ukrferry said that “alternative route options” are promoted to the market through joint ventures and consortia established either directly by ministries or railway administrations. And such an administrative-command model “is not able to function effectively in market conditions.”
Currently, Ukrferry ferries do not operate on the lines between Ukraine and Georgia, as they did before the war, but are involved in Mediterranean routes. In January of this year, the company launched a ferry service between Varna (Bulgaria) and Batumi (Georgia). According to Roman Morgenstern, the ferry showed good utilization from the very first voyage. At the same time, Ukrferry intends to return to routes that will be operated directly from Chornomorsk.
Too early for scrap again
Earlier, industry stakeholders expressed doubts that UZ would be able to operate ferries because it lacks the relevant specialists and experience. In fact, it had a lot of time before the full-scale invasion to demonstrate otherwise, but this did not happen. In 2019, UZ itself stated that fleet management was not its profile activity.
In addition, these vessels are 46 years old and require substantial investments in repairs and upgrades, which raises doubts as to whether UZ can afford it, and the costs may be unreasonable, with no one to take responsibility for it.
The ferries “Heroes of Plevna” and “Heroes of Shipka”, which UZ has kept on its balance for ten years, have not been put to sea during this time. As already mentioned, in July last year, UZ planned to transfer these ferries to the State Property Fund of Ukraine as non-core assets. UZ even assured the CFTS that the process of transferring the ferries “with equipment and component materials necessary for their operation” to the Fund's management was already underway. The only thing UZ was waiting for was the adoption of a corresponding order by the Cabinet of Ministers of Ukraine.
Currently, UZ says that the ferries were not damaged by the Russian attacks, but now require expensive repairs, modernization, and renewal of all permits. Nevertheless, Victoria Bashynska, deputy director of the Liski Transport Service Center branch of Ukrzaliznytsia, assures that the ferries are planned to be repaired “in the near future.”
