• 2014 September 8

    Baikal-Amur Mainline vs priority development areas

    Financing priorities of the Far East infrastructure development is a matter of hot disputes at the top level. Russian Railways claim that reduction of BAM and Transsib modernization programmes is inadmissible while the Ministry for the Development of the Russian Far East insists on the necessity to reallocate resources in favour of the local projects. Vladimir Putin gives the Government a free hand in handling the issue.

    The Ministry for the Development of the Russian Far East suggests partial reallocation of resources intended for the modernization of the Baikal-Amur Mainline (BAM) and Trans-Siberian Railway (Transsib) so that they could be spent for the regional projects including those within the priority development areas (PDAs). In its turn, Russian Railways considers underfunding of railway projects to be a short-sighted decision.

    The meeting in Yakutsk chaired by Vladimir Putin saw the struggle of the two positions and the President empowered the Government to settle the dispute.

    “We suggest that the resources intended for BAM and Transsib modernization ... be allocated in 2015, 2016 and in 2017 for the support of investment projects and the creation of priority development areas, - Alexander Galushka, Minister for the Development of the Russian Far East, said at the meeting. BAM and Transsib will in their turn be financed by Russian Railways and National Wealth Fund (which are supposed to be the sources of financing) with additional financing under transport system development programme to be allocated in 2017. These are our proposals. If they are supported, we will surely be able to start the Far East development projects in 2015.”

    The Ministry for the Development of the Russian Far East was also supported by Yury Trutnev, Deputy Prime Minister and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

    “I am not in doubt about the project (BAM and Transsib modernization – ed.) – the project should be implemented – Yury Trutnev said. – But if we implement it a year later but launch 32 projects in all constituent entities of the Russian Federation we will win. If we just build the railway but suspend implementation of the projects this opportunity will not be used.”

    According to the data provided at the meeting, investment programme on modernization of BAM and Transsib has become more expensive, from RUB 560 bln to RUB 600 bln. This difference is the amount needed for the state financing of 32 projects in the Far East. The key argument in favour of reallocation of resources is the following: only 20% of BAM and Transsib work for the Far East while “bare” railway is not to give much without projects around it.

    Vladimir Yakunin, President of Russian Railways, however says that the development of regional approaches is useless without the development of mainlines.

    No final decision on reallocation of resources was made at the meeting. Vladimir Putin gave the Government a free hand in handling this issue having underlined that there would be no additional financing anyway.

    Insufficient capacity of BAM and Transsib were earlier named to be the key factors hindering the development of export via the Far East ports of Russia where numerous stevedoring projects (mostly coal transshipment project) have been announced recently.

    Meanwhile, Leisana Korabeinikova, senior analyst at the Research and Production Corporation “United Wagon Company” notes the changes in the structure of export coal supplies. According to her, coal purchase by China and Korea is decreasing while import by Japan, UK, Turkey and Finland is growing. China forecasts coal consumption to decline by 1-2% in 2014 (in 2012 in increased by 8.6%, year-on-year). On the contrary, Japan is building up coal consumption amid the changing structure of its energy industry following the Fukushima nuclear disaster. 

    Anyway, the markets of the Asia Pacific Region are among the most fast growing areas and many of the projects announced in the ports of Russian Far East risk frustration without timely expansion of BAM and Transsib capacity. Meanwhile, Russia is not a monopolist at the Asian markets and a delay can cost Russia too much.

    Vitaly Chernov