Russia’s interests beyond ‘silk’ projects

Much attention was paid to the ‘eastward turn’ and ‘New Silk Road’ issues at the St. Petersburg International Economic Forum (SPIEF-2015). Meanwhile, draft amendments into the federal special-purpose programme “Development of Russia’s Transport System” give the top priority to domestic transport projects while providing for reduction of ‘silk’ related allocations. 

As Russian Deputy Prime Minister Igor Shuvalov said at the St. Petersburg International Economic Forum (SPIEF-2015), it is not about the ‘eastward turn’ – Russia is interested in the development of collaboration with all its partners though the partnership with the West has become difficult due to geopolitical situation and sanctions. Nevertheless, the New Silk Road project was under lively discussion at the Forum. It is a promising project, first of all for China itself, as it ensures diversification of the country’s ways to supply its products to Europe. Kazakhstan is also interested in the project as the economic gain from the Chinese transit is much higher for Kazakhstan than for Russia. 

No wonder that SPIEF participants from China and Kazakhstan urged to invest into the New Silk Road projects. As Rakhim Oshakbayev, Chairman of the Board of the Kazakhstan's National Chamber of Entrepreneurs, said at the Forum, Russia should take an active part in the project on creation of a two-level railway for container transportation under Eurasian Transcontinental Corridor. According to him, Kazakhstan is ready to build a railway up to Jezkazgan and to create a logistic hub.

As for Russia, its interest in the New Silk Road project is dubious – on the one hand, it would be economically beneficial for the regions to be crossed, while, on the other hand, it could leave the Far East out of work. 

Besides, too much attention to ‘silk’ projects threatens with strengthening of China’s position and more dependence of Russia’s economy on China as well as loosing part of geopolitical influence in the post-Soviet region to China. Meanwhile, Russia has its own transit projects that are more in compliance with the well-balanced regional development strategy and the plans to use the Northern Sea Route as a transit way. Russia’s priority is to develop its own export terminals rather than to facilitate the development of transit routes in favour of China.

In this context, recently published draft amendments into the federal special-purpose programme “Development of Russia’s Transport System (2010 - 2020)” provide for redirection of financing from the project on international transport corridor Europe-Western China to the project on comprehensive development of Murmansk Transport Hub. Also, resources intended for the development of international transport corridor Transsib (Transsib container bridge: Europe-Russia-Japan with the links to Kazakhstan, China, Mongolia and Korean peninsula) are to be reduced in favour of boosting the capacity of BAM and Transsib.

Limit of financing under MTH in 2015-2017 is to be increased to facilitate the project implementation.  Besides, deflator index is to be applied to recover federal allocations of RUB 36.38. 

Resources envisaged for Transsib container bridge are be reduced by RUB 4.79 bln in favour of BAM and Transsib modernization to boost their capacity.

MTH project is aimed at creation of new export facilities on the western coast of the Kola Bay and implies the construction of a coal, oil and container terminals as well as railway infrastructure development. This project is also targeted at the development of port and production facilities needed for oil and gas projects on the Arctic shelf, in the Kara Sea in particular. Of course, these tasks are more important for Russia as compared with the help to China and Russia-Europe trade development.

BAM and Transsib development is focused on the Far Eastern ports of Russia engaged in exports of resources, mostly coal. Moreover, it will contribute to the development of container transit via the Far Eastern ports, of course.

Killing two birds with one stone

If deciding to help our eastern neighbors diversify their supply lines, this should be done with consideration of our own interests. Svijazhsk Interregional Multimodal Logistic Center (Svijazhsk IMLC, Tatarstan) is an interesting project in this context.

Svijazhsk IMLC located on the way of Europe-Western China transport corridor will let accumulate export goods produced in Russia. Meanwhile, the development of domestic transport corridors linking hinterland logistic centers with the sea terminals is an important target of infrastructure development in Russia. Such a corridor could link Tatarstan based Svijazhsk with port Bronka (Saint-Petersburg).

MMPK Bronka – as a deepwater outer port located in Saint-Petersburg, the main ‘sea gate’ of Russia, and having a convenient access to railway infrastructure – will be able to ensure smooth handling of containers delivered by trains from the central Russia to Saint-Petersburg and back.  Svijazhsk IMLC linked, in its turn, to trunk railways, railway junction “Svijazhsk” and freight distribution station “Yudino”, will ensure accumulation and repacking of freight delivered by the above mentioned corridor as well as freight from industrially developed area of the country’s central part. The negotiations between the sides are in the process.

Draft amendments into the federal special-purpose programme provide for the increase of budget allocations for Svijazhsk IMLC by RUB 292.8 mln in 2015.

Generally speaking, there is a temptation to rush into the arms of our eastern neighbor amid the budget deficit and western sanctions. However, it is important to remember that China is focused on its own tasks that are not the same as Russia’s interests and priorities.

Vitaly Chernov