by John Helmer, Moscow
@bears_with
There have been many revolutions in the technology and the geography of global cargo transportation. The Portuguese design of caravels to cross the Atlantic and Indian Oceans from the 15th century; the replacement of wind with coal-fired steam in the shipping of the British empire which followed; and the invention of the petroleum engine for automobiles and aircraft to replace horse and bullock-drawn road carts – these are well known.
The time taken for each revolution from invention to full-capacity operation was not less than one generation.
The geographic switch of Russia’s export and import trade from west to east, and also from north to south – this too is a revolution in cargo logistics; its scale, speed, and money cost have not been rivaled before. In Russian terms, it is faster than Joseph Stalin’s Five-Year schemes of industrialization from 1928 to 1942, and has not required force for implementation nor inflicted Stalin’s human casualties. For speed over time, the current Russian logistics revolution will take five years.
It remains to be seen whether in requiring vast state spending and direct management this new Russian revolution will turn out to be the second nail in the coffin of the oligarch system created by Boris Yeltsin and preserved by Vladimir Putin (lead image). The first nail has been the US and NATO sanctions: they have cut the Russian oligarchs off from the international flow of funds they had designed to move their capital out of Russia, and keep it offshore, untaxed.
President Putin’s peacetime scheme of deoffshoreization not only failed in returning the oligarchs’ capital, as the archive demonstrates. It was designed to fail by the legal loopholes which the Kremlin authorized, and by the capital decontrols managed by Central Bank Governor Elvira Nabiullina and her patron Alexei Kudrin, Putin’s longtime appointees.
The transportation revolution now under way was not intended by those oligarchs who have controlled parts of the transportation system, including sea ports, airports, cargo terminals, rail rolling stock and networks, pipelines, road construction, truck and car manufacture, and the like. The story of the failure of the oligarchs to capture state shipping, despite Putin’s encouragement, isn’t yet recognized for the bellwether it is today, after the sanctions war has intensified. Read the book.
The big picture of Russian cargo shift is plain to view. Less obvious are the bottlenecks in the transportation network, such as the rail lines and ports, and the fierce competition for access to the means of loading, unloading, and movement of cargo across Russia from one market to another. For every cargo bottleneck, the state is now obliged to decide between competing interests and to plan, then produce, the increased carrying capacities required for the lines moving east and south instead of west and north.
In this newly published analysis of the bottleneck of containers, InfraNews, a leading Russian publication on all forms of transportation, reports what is happening and what is needed to solve the problems of container supply and demand in the short and long term. Note the tone of optimism that solutions will be found shortly, and the lack of political or economic ideology – liberal, corporatist, statist, communist — on how this will be managed.
Destroying Russian logistics by cutting off export-import flows is not a new form of US warfare. Sanctions, followed by armed interception or sinking of cargo ships; bombing ports, rail lines and roads; and mining seaways were American weapons against Japan, Korea and Vietnam; as they had been weapons against Germany in the two world wars of the 20th century, and British weapons against France during the Napoleonic wars of the 19th century.
Russia’s capacities to resist, fight back, and defeat the current western war are greater than any adversary which the Americans, British, Germans or French have ever attempted to subdue. The conventional; macro-economic statistics tell the story of the war so far, as do the data on each of the transportation sectors.
Russian Customs reports show that in 2023 exports fell by 28.3% compared to 2022, from $592.5 billion to $425.1 billion. The reason for the drop was the collapse in the volume of the export trade to the European countries. In 2022 this had been $265.6 billion; in 2023 it dwindled to $84.9 billion, a fall of 68%).
Russia’s exports increased to Asian countries as Moscow began its reorientation to alternative markets but not by large enough margins to offset the declines in the western direction. The Asian export trade rose by almost 6% from $290.4 billion to $306.6 billion. Such a modest increase is also explained by the fall of the oil price between 2022 and 2023. China’s customs data show that in volume Russian oil supplies to China in 2023 increased by 24% (to 107 million tonnes), while Beijing paid only 3.5% more than the year before ($60.7 billion).
In physical movement of trade, the balance between west and east is now transformed — the share of Asian countries in the total volume of Russian exports by the end of 2023 amounted to 72%, compared to just 20% for Europe. The remaining 8% of Russia’s exports went to Africa ($21.2 billion, an increase of 43%). The flow of Russian exports to the Americas has fallen by 40% to $12.2 billion.
In battlefield terms, the losses of Russia’s export value are not victories for the western allies. Their attempts to cut Russian trade flows are failing, as can be seen from the rise in the volume and value of imports. According to the Federal Customs Service, in 2023 the import value increased by 11.7% to $285.1 billion. This was due to the ncrease in the volume of imports of goods from Asia by 29.2%, to $ 187.5 billion, of which $111 billion (59%) was accounted for by imports from China. Shipments from Europe decreased by 12.3% to $78.5 billion; from the US by 11% to $15 billion. Imports from Africa increased by 8.6% to $3.4 billion.
Counting the combination of export and import flows, Russia had become the second largest surplus trader in the world in 2022. The size of this surplus has now fallen.
Source: https://www.statista.com/
A report by the semi-official security analysis medium Vzglyad explains the dynamics. “The main reason is the price of oil as Russia’s main export commodity. In 2023, oil prices were very high…in the range of $75-$80 per barrel for the exporting countries. At the same time, due to the restrictions of the West and the policy of import substitution, Russia began to import less than in previous years.
Sanctions limit both export revenues and import opportunities in differing degrees, but imports in 2022-2023 turned out to be more sensitive to the restrictions. Russia’s record foreign trade surplus was $315 billion in 2022, which was facilitated by high commodity prices and a reduction in imports, and in 2023 the surplus decreased to $121 billion.”
URALS CRUDE OIL PRICE MARKER, 2019-2024
USD per barrel
Source: https://tradingeconomics.com/
“However, there is a fly in the ointment in this,” Vzglyad comments. “In Russia, up to 2022, the economic model assumed growth mainly due to income from the export of raw materials, which were either immediately spent on imports or postponed for a rainy day in a piggybank – first in the Stabilization Fund, and then in the National Wealth Fund. This model hindered Russia’s development of its own manufacturing industry. Just as the United States developed the oil-for–food model for poor oil-exporting countries in Africa and Asia at the end of the 20th century, Russia, unfortunately, has lived on the basis of its own model for a long time — oil and gas to the West in exchange for engineering products and consumer goods.”
Unstated in Vzglyad is the fundamental power shift which the “change of model”, forced by the war, is causing for the oligarchs who for twenty-five years have controlled resource exports, disinvested in the domestic economy, bought political and other havens in the US, UK and other hostile states, and in Russia fought both their domestic commercial competitors and the state. This power shift is revolutionary – just as the capture of the Russian state by the oligarchs from 1995 was revolutionary.
Geography before politics — the impact of the geographic shift of trade on each of the transportation segments can be summarized briefly. In examining the detail of each segment, however, what can be seen is the fight between the oligarch interests, their Russian rivals, and the state, including the President. This is not the civil war or coup which the US and NATO have been trying to stimulate since the Yeltsin takeover of 1991; it continues today with Donald Trump.
How the oligarchs tried to capture Sovcomflot, the state shipping conglomerate; were backed in their plan by the Kremlin; but then failed is the story of this book. The maritime sector – ships, ports, and cargo terminals – remains the largest feature of Russian logistics by far. Rail, road, and air transportation follow.
Source: https://www.vedomosti.ru/
The west-to-east revolution is impacting each of these transportation modes differently.
In a July 11 report by a Sberbank publication, it was noted that the volume of rail traffic between Russia and partner countries increased by 23% in 2022. In the first quarter of 2023, this growth rate had accelerated to 66%. “The seaports of our country in the first quarter of 2023 showed an increase in transshipment by 10% compared to January-March 2022, having handled 220.2 million tonnes of cargo…The operators who left the market have been successfully replaced by others, among them many domestic, South Korean, and Chinese carriers. During peak periods, queues for loading and unloading even form in the Far Eastern ports, since their capacity is not enough to handle such a large number of incoming ships…In total, according to research by Infranews and SeaLogic, in the first quarter of 2023 there were more than 50 companies in Russian ports offering over 100 regular line services. According to experts, the total volume of foreign trade shipping by the end of 2023 will increase by 10%-15%.”
Three trends in the logistics revolution were identified in the report. The first is the establishment of new land-sea routes: “In 2022, transport companies were forced to look for non-standard solutions. So, in logistics from China, in addition to the usual railway-to-truck chain, a scheme for delivering goods to Zabaikalsk by trucks and then by rail across the country began to operate. A new route through Blagoveshchensk has also appeared for this direction, the first link of which was the delivery of goods by sea to the Chinese port of Dalian.”
“There is also a sea leg on the Trans-Caspian route of the North-South transit corridor; the volume of traffic along this route tripled in the first quarter of 2023… At the same time, excessive overloading from one type of transport to another increases the risk of damage to consignments, so transportation along the overland routes of this corridor is also growing: along the eastern route through Kazakhstan and Turkmenistan by 33 times; along the western route through Armenia or Azerbaijan, twofold.”
THE NORTH-SOUTH ROUTE, RUSSIA TO INDIA VIA IRAN
Source: https://sber.pro/
As the existing route, port and carrier capacities reach their limits, there are shifts in cargo movements from the bigger ports to smaller ones, while new capacities are being built in both. “Thus, in the first quarter of 2023, the ports of the Far East increased transshipment by 6.6%, according to PortNews …The most significant increase in indicators in the south of the country is 18.6% growth in the Azov and Black Seas, 28.5% in the Caspian Sea, where the North-South corridor is developing due to strengthening logistical ties with India and Iran. There are also changes in the foreign ports newly in demand by Russian logistics. Thus, the Moroccan ports of Tangier and Casablanca are considered promising for the transit of goods from West Africa and South America.”
Note that with each significant change in these international cargo route maps come changes in Russian political priorities reinforced by military presence, weapons supply deals, training schemes, and the like. The US-NATO war response shifts in parallel, as the war becomes a world war, and globalization is replaced by hostile trading blocs — and the western allies repeat Napoleon’s mistake.
Source: https://www.fruitnet.com/
A second trend in the Russian revolution is diversification. “In conditions when the main activity has become less profitable, diversification or re-profiling may be the right move for a company. For example, in ports with reduced cargo turnover [from Europe], terminals will continue to operate, but the main format will become cargo handling and storage for further transportation to the southern harbours of Russia. Many major players in the logistics market have tried not to limit themselves to one type of service, testing different formats of freight and passenger transportation, discovering new niches. So, despite their specialization in low-tonnage transportation, they recently began to provide tow-truck services and carry out LTL [less than truckload] operations; that is, to work with consolidating cargoes from different customers. This trend is about three years old, but in comparison with FTL [full truck load] transportation, the share of LTL remains small.”
For road and truck movement, the war-driven shift from FTL to LTL, 3PL (third-party logistics) and other logistic modes is the third of the trends identified in current Russian thinking and planning.
CHANGE IN RUSSIAN ROAD LOGISTICS BY TYPE OF CARGO
Source: https://strategy.ru/
Full Truckload (FTL) continues to be the principal line of business in the Russian market but in the new conditions, Less Than Truckload (LTL) and third-party logistics (3PL) - are growing at a faster rate. Overall, the road transport market is growing by 5% to 8% annually. In 2022, the market volume of FTL traffic showed an increase of 5% and amounted to 1.9 trillion rubles. According to the published expert forecast, the LTL market in Russia will grow faster than FTL, but FTL will retain the largest market share.
CHANGE IN RUSSIAN LOGISTICS BY GEOGRAPHY
Source: https://strategy.ru/
Internationally, the new geography includes the launch of ferry crossings through Novorossiysk to Turkey and Astrakhan to Azerbaijan; the launch of the M12 highway and extension of the M7 highway; and expansion of the capacities of border crossings with Kazakhstan and China.
CHANGE IN RUSSIAN ROAD LOGISTICS BY LEADING COMPANY
Source: https://strategy.ru/
“The Russian market is at an earlier stage of development than the US market,” reports Strategy Partners, “and the largest players are FTL. Players with a significant presence in 3PL are either captive or niche players.”
The principal link in the logistics chain between ship, rail, and road is the cargo container, so it is the current supply and demand for boxes which indicates how the revolutionary shifts now under way are causing system strain, and thus logjams, chokepoints, bottlenecks.
InfraNews, written and directed by Alexei Bezborodov in Moscow, leads in the analysis of this line of Russian business. Because of the war conditions, however, he, like other transportation sources consulted for this story, will not answer questions or engage in discussions with foreign media.
Translated verbatim without permission, read this analysis of the container problem; pictures and maps have been added.
Read in Russian: https://www.infranews.ru/
July 11, 2024
Container terminals in the Far East are clogged with imports again
As it was two years ago, the port and inland terminals in the Far East have turned out to be overflowing with loaded containers which have arrived in Russia through seaports. The system of exporting imported containers using gondola carss failed in May, container operators report, and Russian Railways does not allow fitting platforms from the centre of the country to the Far East, considering it ineffective for the overall network capacity. However, Russian Railways does not consider the situation critical, issuing assurances that there are enough gondola cars to export all imported containers from the Far East.
Left, the standard railway gondola car; right, fitting platform.
As InfraNews has learned, a new crisis of overstocked container terminals is brewing in the Far East. According to several major participants in the stevedoring market, imports arriving at the ports of the Far East have clogged almost all container storage capacities at the maritime and inland terminals of Primorsk krai, and the situation is only getting worse. The main reason is the acute shortage of railway wagons for loading: there are not enough fitting platforms or gondola cars to send loaded containers to the centre of the country. “Another half a month of such work, and in general everything will be as it was two years ago,” concluded one of the sources of InfraNews from among the sea terminals in Vladivostok. According to stevedores, fitting platforms with exports do not reach the Far East in the right quantity, and gondola cars for the export of all imports have become critically scarce.
MAIN CARGO PORTS IN THE RUSSIAN FAREAST
Source: https://www.cockettgroup.com/
The Delo Group of companies manages the largest railway operator Transcontainer and container terminals, in particular, in Primorsk and Zabaikalsk. Delo has confirmed to InfraNews that the accumulation of imported containers and an increase in their average shelf life at terminals has been observed since May 2024. “This is due to an imbalance of imports and exports due to restrictions on sending export trains towards the Far East,” a representative of Delo Group told InfraNews, adding that this imbalance “has existed for a long time, but in recent months the indicator has increased by one and a half times” and “to offset the difference between incoming and outgoing cargo flows” the available technologies no longer allow it. “The key tool to overcome the problem is the shipment in gondola wagons, but that is already at the limit of its capabilities. The transshipment stations in Western Siberia are overloaded due to infrastructure constraints and a shortage of fitting platforms,” the company explained. Delo Group believes that it is necessary to increase the number of export container trains to the Far East and increase the priority of container loading in the rules of non-discriminatory access to Russian Railways infrastructure “to the level of transit and subsidized cargo.”
The Sukhoi Port Nakhodka company, which manages the portside container terminal, confirmed to InfraNews that its capacity is almost 100% full and there is a shortage of gondola cars for loading, calling this, however, “not very critical.” “Difficulties are present due to the number of abandoned gondola cars on the West Siberian and Far Eastern railways, but the main problems are the stations for transshipment of containers from gondolas to [fitting] platforms on the West Siberian Railway. These stations are clogged with containers and are in short supply due to the under-availability of the fitting platforms,” the company explained to InfraNews. Moreover, according to the representative of the terminal, “the owners of gondola cars are aware of the situation and do not provide their wagons for loading containers, worrying that they will end up in an abandoned state at the entrances to these transshipment stations.”
An InfraNews source from the coal industry confirmed to InfraNews that the owners of gondolas are already reluctant to divert their rolling stock for the export of Far Eastern containers. According to him, in order to pick up a container from the port, take it to the transshipment station in Siberia, wait for unloading and return to the place of the next coal loading, the turnover time for the wagon increases by at least 20 days. In a situation where coal transportation also periodically has problems, and gondola wagons with containers are also delayed at stations in Siberia waiting for empty platforms, such transportation becomes unprofitable and irrational.
Terminals of the Moscow transport hub, where since the beginning of the year, by contrast, not only empty containers from the declines in imported cargo, but also from loaded exports, have already recorded a sharp decrease in imports from the Far East.
MAP OF MOSCOW CARGO TERMINALS
As InfraNews was told at the Ecodor terminal adjacent to the Moscow Silikatnaya station, in just six months of 2024 the decrease in import volumes amounted to 11% compared to last year’s level, and in the second quarter the drop increased to 15%. A source of InfraNews at another terminal near Moscow reported that due to problems at the Eastern Polygon and Russian Railways restrictions, the decrease in imports has already reached 50% or more.
According to RTSB RUS estimates, there are currently about 10,000 40-foot containers in Vladivostok awaiting loading onto the railway, about 7,000 units in Nakhodka, and about 3,000 more containers are idle at the border crossing in Zabaikalsk. “The consequences are extremely sensitive: contractual obligations are burning up, freight forwarders receive large penalties from customers and, in general, the reputation of rail transportation suffers,” the company shared with InfraNews its attitude to the problem. “The solution may be to provide additional rolling stock and unhindered movement of the export flow, since it was delays and restrictions on export shipments that led to such a severe shortage of wagons at the border,” RTSB RUS believes.
Meanwhile, Russian Railways does not consider the situation with overstocking of Far Eastern terminals to be critical, although it records an increase in the volume of transportation of imported containers through terminals in the Far East. According to InfraNews, from the press service of Russian Railways, in June import growth amounted to 11.2% compared to the same period last year; in the first days of July, growth was 5.3%. “The workload of the marine terminals is about 75%, and of the rear terminals – 60%. During earlier peak periods, these figures were significantly higher,” the company stressed.
Russian Railways insists that the supply of empty fitting platforms from the European part of the country for container loading in the ports of the Far East “will lead to inefficient use of the capacity” of the Eastern Polygon, and “the most optimal use of wagons seems to be for dual operations.” Among the “technological reserves” for further increasing the export of containers from the Far East in gondola cars, Russian Railways mentioned the possibility of transferring the procedures for technical and commercial inspection of wagons and their preparation for loading on to the internal railway tracks of terminals, which “will free up station capacity for the composition of trains.”
THE EASTERN POLYGON
Source: https://thecoalhub.com/
At the same time, Russian Railways denied to InfraNews information that the coal companies had lost interest in transporting containers in their wagons. “The owners of gondola cars have appreciated the advantages of reloading containers and provide rolling stock on an ongoing basis,” the Russian Railways press service stressed, adding that they themselves in every possible way “contribute to increasing the volume of such transportation.” “Every day in the ports of the Far East, after unloading coal, more than 2,500 gondola cars are released which are suitable for container transportation, and on June 30, a historical maximum of 15 container trains was set for such shipments,” Russian Railways told InfraNews.
The Eurasian Union of Freight Rail Carriers (ESP) has confirmed the problem of container congestion in the ports of the Far East, promising to provide InfraNews readers with a comment “on the causes and consequences of the current situation in the near future.”
Nevertheless, the operators interviewed by InfraNews are convinced that the surplus of import containers in the Far East is a direct consequence of a series of restrictions by Russian Railways on sending container trains along the Eastern Polygon in the opposite direction – with export containers from the centre of the country. As InfraNews has written previously, since December last year, Russian Railways has strengthened control over compliance with the requirements for loading container trains — the train must consist of at least 71 conventional wagons and be loaded to 92% [capacity] — as a result of which it has become more difficult for operators to assemble a large export shipment from the central and western regions to the Far East.
And at the beginning of 2024, preferences for shipping container trains along the Eastern Polygon, which were in effect in 2022-2023 on behalf of the Russian president, were canceled. (Two years ago, a similar collapse already occurred in the Far East due to the sharp redistribution of cargo flows to the Eastern Polygon, for which Russian Railways urgently increased the volume of container exports from Far Eastern ports, massively using gondola cars transferred from exporting coal for this purpose. As a result of the cancellation of previous priorities in 2024, the number of “work orders” for sending container trains from the centre of the country to the east decreased by half, according to operators, which only increased the imbalance in the volume of export and import cargo flows.
So, at the end of May, the head of the Fininvest container holding, Alexander Kakhidze, noted that container shipments from “all roads” at the Far Eastern Railway station had decreased by 50%, and the decline on the Sverdlovsk railroad was twice as strong. He recalled that the imbalance of imports and exports tends to a ratio of 3 to 1 in favour of imports, warning the industry that “with a reduction in shipments of fitting platforms, there will be no other way but to develop the shipment of containers from the Far East in gondola cars.” At the same time, only in words is it easy to load a container into a gondola car,” Alexander Baskakov, General Director of RTSB RUS, told InfraNews in June: the real speed of loading a container on to a platform is several times higher than loading and securing it in a gondola wagon, especially in difficult weather conditions.
Alexei Bezborodov, Managing Partner of INFRA PROJECTS, notes that in such a complex system as Russian Railways, it is almost impossible to organize a fine balancing of cargo flows and at the same time predict what real consequences the regulatory decisions will have. “Neither artificial intelligence, nor even a team of professional railway workers, can probably cope with such a task,” the expert is convinced, drawing attention to the lack of initial data for qualified analysis and forecasting of traffic volumes, citing as an example the lack of statistics, in particular, on road freight transportation.
“Those seasonal fluctuations in cargo flows, to which container operators have managed to accustom themselves, no longer operate since 2022. Therefore, now it is necessary to closely monitor both import and export cargo flows, as well as the flows of empty containers and platforms, preventing accumulation emergencies or at least eliminating them in time. In the meantime, everyone wants to solve only their own problems – unfortunately, this applies to container workers, coal miners, and the heads of Russian Railways responsible for traffic. Such situations will happen more than once,” Bezborodov believes. The current “collapse” in the Far East, through the joint efforts of operators and Russian Railways, will be overcome “quickly enough”, he is sure. But the problem will make itself felt “for another two or three years” until the main work on the third stage of modernization of the BAM and Transsib is completed.
Leave a Reply