Trans-Siberian railway – expectations and realities

The Trans-Siberia Railway (Transsib) transport corridor is fast becoming a new point of trade growth between China and Europe. How is this possible in a highly competitive global environment, and at a time when the tariffs for sea freight have reached an historic minimum? 

The answer is obvious – railway container transportation is faster. But major problems and obstacles remain and for the last decade changes have been insignificant. Fundamental problems linger, such as unconfirmed and non-unified legal norms, complicated customs clearance, differences in gauge (railway track width), undeveloped infrastructure and insufficient electrification of railways etc.

A photo showing the 26th Congress of the Trans-Siberian Transportation (CCTT) Plenary Meeting held in Beijing. [Photo provided by Timofey Bakhvalov]

More than 250 delegates from 22 countries and regions took part in the 26th Congress of the Trans-Siberian Transportation (CCTT) Plenary Meeting which was recently held in Beijing. They were heads and representatives of transport ministries, railways, seaports, shipping companies, leading transport, logistics, insurance, security and IT companies and key international transport organizations – UNECE, CIT, UIC, FIATA etc.

Top of the agenda was the functioning and development of the Trans-Siberian transport corridor and improvements in container transportation efficiency between the countries of Europe, Baltic, Central Asia and the Asia-Pacific Region.

Alexander Misharin, first vice-president of the Russian Railways Company, said that the volume of railway transportation between China and Europe is constantly growing mainly because of rapid e-commerce development. By 2020 global e-commerce volume will exceed 4 trillion US Dollars. So there's a huge demand for new systems and instruments: electronic trains, electronic customs declarations, etc. It's now not just about delivery from point to point, but about providing "all-in-one" services including "last mile" delivery.

In 2016, the transit flow of China-Russia-Europe through all customs checkpoints increased by 89% – up to 154 thousand TEU. 25% of all containers passing through Transsib is China-Europe-China traffic. For the first 8 months of 2017, 482 thousand TEU were already transported. This is 1.5 times more than in the same period of 2016.

As we see, the volume dynamics of the Transsib transit seems positive. But the increase in volume is not a result of efficient performance and new business models. It is a result of huge subsidies provided by the central and local governments of China. Notice – not Russia, but the Chinese government. But subsidies will not last forever…

To make Transsib more efficient it's necessary to improve infrastructure, increase the diversity and quality of services, introduce flexible tariffs, etc. Russian Railways plans the modernization to increase Transsib's total capacity by 60 million tons in 2018. 

Alexander Misharin said that the future of China-Russia-Europe transit lies in increasing the speeds of the Trans-Siberian Railways segment. By reaching speeds of 200-250 km/h or even 300-350 km/h, cargo could be delivered from anywhere in China to any point in Europe within 3 days. By the year 2025 the rise of transit traffic must be 7 – 10 million tons year after year.

Transforming Transsib to high speed in 7 years? Surely we can consider such a statement as some kind of "far-reaching designs and plans". But let's see the truth – Transsib will never be "High-Speed". And here's why.

Let's take a well-known project – the "Moscow and Kazan" high-speed railway, with a length of 762 km. The project was announced by President of Russia, Vladimir Putin, on May 27th 2013. As yet it's still in the design stage and it's planned that construction will start in 2018 and will be commissioned in 2023. It's important to note that the "Moscow – Kazan" region is well developed and the climate is relatively mild for Russia. But the costs of high speed rail have already been put at at least USD 23 million per kilometer. Also, the total length of the Transsib is 9289 km. High-Speed Transsib is simply unfeasible. USD 260 billion was the total on-budget expenditure of Russia in 2017.

The deputy general director of "Chinese Railways," Wu Yuntian, called Transsib a key element of the "One belt, one road" initiative. After 5 years of development, trains to Europe depart from 33 cities of China. But the rapid growth of goods supply from China to Europe is a certain threat to the EU market. Balance is very hard to achieve because of protectionism and the unwillingness of certain European countries to have a constructive dialogue and lack of reforms. It is a bottleneck for the efficiency of the whole Transsib. The gauge remains a key problem, and there will never be a unified standard for Eurasian transportation for objective reasons.

The development of the Transsib transportation corridor is possible only by improving and digitizing services. The electronic workflow system of the Transsib is already connected with the national systems of 12 countries. But it is still not integrated with the systems of Mongolia and China – another big task.

The whole route of rail container transportation must be optimized according to local and international schedules. Transsib needs "seamless" transit corridors and integration with national railway networks, logistics centers and intermodal terminals. The future of the China-Russia-Asia direction through Transsib is also in the development of a multimodal transportation system – combining railroads, sea, air and roads. It's vitally important to provide comprehensive services (including financial) and improve the "last mile" delivery.

It will require huge investments and resources – economical and political. Experts of CCTT admit that achieving those goals "at a basic level" will take at least 10 years.

(Timofey Bakhvalov, LLM, Business consultant and analyst)