Mine
How Russia sees Mongolia as gateway to the southern seas
2016-10-07
The Mongolian Mining Journal /September 2016. /094/
E.Odjargal
Last June, Russia celebrated the 125th anniversary of the longest rail line in the world. It was indeed an event to celebrate, as 70 per cent of the country’s rail freight is carried along these tracks through the Siberian landscape, an area with a huge amount of natural resources. This railway is crucial to the Russian economy, as it serves the area which produces 80 per cent of the country’s total industrial products, 45 per cent of its mined coal, and 20 per cent of its total oil products. No wonder President Putin announced in 2014 a plan to modernise the Trans-Siberian rail line to make it an integral component of the proposed Eurasian economic corridor between Russia, Mongolia, and China. We give below an overview of the progress of certain parts of the plan.
The 500-billion ruble project to modernize the Baikal-Amur and the Trans-Siberian lines is expected to be completed in 2018. Results of the work so far have been promising, for as at the end of 2015, the Trans-Siberian line carried 113 million tonnes of transit cargo, a 3.9 per cent increase year-on-year. The volume of container freight increased by 57 per cent year-on-year. The railway also carried 60 per cent of the total freight from China to Europe. Last year 98.240 TEU shipping from China was done through the railway, an increase of 79 per cent year-on-year.
Russia has decided that increased transit transport capacity is the key to making the railway more competitive. Accordingly, it is developing its potential to reach cargo to Europe through coastal ports around the Sea of Azov and the Black Sea. Work on expansion of Taman port has already started, using part of a $50-billion loan Russia is promised from the Asian Infrastructure Investment Bank. The total cost of the Taman port project has been put at $3.5 billion or 228 billion ruble, and this would increase the port’s total capacity to 91.4 million tonnes per year.
The project will end only in 2025 but the port will be ready to handle exports when the first stage is finished in 2019. The land route to Murmansk port will also be developed, and the Russian Government believes this route will make Europe-Asia trade faster than the traditional one through the Suez Canal.
Another part of the development of the Trans-Siberian network has seen the commissioning of the Rajin-Khasan line to connect to North Korea. A trial transport of 32 million tons of coal was successfully conducted through that line in 2015. Now Russia is working on a project to connect the 1520-mm-gauge line to Bratislava and Vienna. Transit transport has already started from the Chinese port of Dalian to Kalugin state and from China’s Yingkou port and the Japanese port of Yokohama to Moscow. With the expansion and modernization of the BAM and the Trans-Siberian main line, mineral products exports from Siberia to countries in the Asia-Pacific region will increase significantly, which is the goal of the Russian state policy.
CCTT meeting in Ulaanbaatar
The 25th plenary meeting of the Coordinating Council on Trans-Siberian Transportation (CCTT), which coordinates trans-national transit freight operations, was for the first time in 23 years held in Ulaanbaatar some time ago.
CCTT is a non-profit international transport organization and has over 100 member countries. It deals with sea transport, logistics, ports, and security of freight from 23 countries in Europe and Asia and the Commonwealth of Independent States. Since 2005, the President of the Russian Railways has been the ex officio head of the council. The present incumbent, O.V. Belozerov, attended the meeting in Mongolia, met Premier J. Erdenebat, Parliament Speaker M. Enkhbold, and Roads and Transportation minister D. Ganbat.
In his opening speech at the meeting, Belozerov highlighted the strategically important location of Mongolia, thus supporting the oft-expressed claim of Mongolia that it was the most convenient link to connect Asia and Europe on the one hand and, on the other, it could be a major corridor of trade between Russia and China.
In an interview to Russian Railways TV during the meeting, Belozerov disclosed that by 2020, Russia’s rail freight turnover was expected to increase by 33.6 million tons, a surge of 60 per cent. This entails comprehensive technical upgrading to connect Russian railways to the international transit transport corridor networks. This, Belozerov said, cannot be possible if the neighbouring countries’ rail capacities are not increased as well.
Noting that mostly container freight is transported through Mongolia, he revealed that Russia has plans to transport up to 100 million tons of material, including mineral products, especially petroleum products, through Mongolia. To make that possible, Ulaanbaatar Railway is working hard to increase its capacity, but Belozerov felt that would not be enough. Other kinds of technical reforms were also needed to enable smooth transit through Mongolian territory.
He mentioned that Mongolian transit tariff rate was higher than Kazakhstan’s. China prefers transit through the territory of Kazakhstan to the Russian Trans-Siberian route. “We are losing there, as trans-Siberian transit through Mongolia can save 1000 km in distance,” Belozerov felt.
Before his visit to Mongolia, speaking at the Eastern Economic Forum, Belozerov had emphasized Russia’s intention to use a transit route passing through Mongolia and Kazakhstan. The forum was discussing the development policy of the Russian Far East, and several participants felt that export cargo from China, South Korea, Japan and other North-East Asian countries could be transported through BAM and the Trans-Siberian railway at lower cost.
How the world wants to access the huge market of China and profit from its economic growth was once again made clear at the CCTT meeting. Some 20 countries, including Austria, Belarus, Germany, Poland, Kazakhstan, South Korea, Latvia, Norway, France, the Czech Republic, Switzerland, Estonia, and Japan sent 180 representatives to it. There were over 30 presentations, with those from European countries focusing on transport and logistics, but even as they expressed their need and desire to establish links with the Chinese market, most made no mention of Mongolia’s position as connecting the Chinese and European markets. Only the Polish and the German participants wondered why the freight volume passing through Kazakhstan and Manjuur kept rising while the route through Mongolia did not develop.
A sort of answer was provided by the General Secretary of CCTT, G.I. Bessonov. He said transit costs through Mongolia were higher than those in Kazakhstan, and it is up to Mongolia to resolve the anomaly. Ulaanbaatar Railway also needs to modernise. Russia has special tariff agreements with Kazakhstan and Belarus, but this stems from all three countries belonging to the Eurasian Economic Union. Transit costs in the Zabaikal region, bordering with Mongolia, are $20 per km while in Mongolia they are $28 per km. “This 30 per cent difference is not small,” he explained.
Ulaanbaatar Railway was the general organizer of the meeting and its head, L. Purevbaatar, said in response to these comments that his railway, part of the trans-Siberian railway, can currently move 24-25 million tons of freight a year. Technical upgrading is expected to raise the capacity to 34 million tons by 2018, to 48 million tons by 2020, and to 76 million tons by 2030. Along with this, the signalling and despatching systems will be completely automatic and thus more secure and efficient.
Mongolia aims to export to Southeast Asian countries minerals from its southern region. This will require new lines and transit corridors. A recent agreement with the Chinese Government has given Mongolia access to seven Chinese ports, including Tianjin, Yingkou, and Dalian. Cargo booked with the Trans-Siberian Railway can thus pass through Mongolia and go on to the southern part of China or the coastal ports there.
Purevbaatar also said Mongolia has suggested establishing a Northeast Asian railway association where the same tariff will apply in all member countries. He called for a branch of the CCTT in Ulaanbaatar.
Mongolia stands to earn quite a lot if a certain amount of the Eurasian countries’ freight as also part of the China-Russia 100 million tons of freight pass through it. President Putin felt an economic corridor passing through Mongolia would benefit Russia and that is why he included Primorye-1 and Primorye-2 among the 32 projects under the program for building the Mongolia-Russia-China Economic Corridor. Russia wants to access ports in the Chinese south by passing through Mongolia. Mongolia would then be Russia’s gateway to world sea transport.