• 2015 March 25

    From financial rivers to monetary trickles

    Economic troubles which hit Russia amid rouble devaluation and sanctions lead to the budget curtailment. This will directly influence the sector of marine and river transport, the development of port infrastructure. As new projects are ‘frozen’ the challenging issues of inland water ways will be discussed by the State Council chaired by RF President Vladimir Putin.

    The financial sea

    On March 16, RF Government submitted a Bill to the State Duma to curtail the federal budget of 2015 by 10% in compliance with the anti-crisis plan.

    The budget cutting will have a direct impact on the development of port infrastructure. As Andrei Lavrishchev, Executive Director of FSUE Rosmorport said at the meeting of Rosmorrechflot’s Expert Council in March 2015, a decision was taken to ‘freeze’ federal financing of new projects on the creation and development of port facilities as well as the projects at the initial phase of implementation. 

    Aleksandr Davydenko, head of Rosmorrechflot (Federal Marine and River Transport Agency), said in his turn at the expanded meeting of the Agency’s Board held on March 19, 2015,  amid this challenging financial situation the state will concentrate on implementation of the key projects in the sector including port Sabetta (Yamal) and outer port Bronka (Saint-Petersburg). The first one is needed to provide a foothold in the market of liquefied natural gas (LNG), the second one – to ensure competitiveness when it comes to transshipment of high-yield containerized and Ro-Ro cargo at their strategic area, the Baltic region, as we wrote earlier >>>>.

    According to Rosmorport representative, there will be no federal allocations for creation, maintenance and modernization of Vessel Tracking Management Systems (VTMS) in Russian seaports. Federal budget earlier allocated about RUB 1-1.5 bln per year. VTMS will now be fully financed by the companies.

    Amid the growing expenses and rouble devaluation, Rosmorport suggests looking into possible denomination of RF port charges in U.S. dollars. According to Andrei Lavrishchev, the majority of services provided in ports (cargo transshipment, bunkering etc.) are denominated in dollars. Moreover, several years ago port charges used to be denominated in foreign currency and now, as rouble is weak, it is reasonable to resume that practice, Rosmorport thinks.   Andrei Lavrishchev says the share of port charges in total revenues of Rosmorport makes about 85% and sharp devaluation of the national currency affects strongly the Agency’s budget. According to him, some costs of the Agency directly depend on the exchange rate. In particular, expenses for construction and repair of vessels and Vessel Tracking Management Systems.

    However, Deputy Minister of Transport Victor Olersky told journalists that one can speak only about indexation of port charge rates but not about linking them with foreign currency.

    Low water amid lack of money

    Budget curtailment will also affect inland water ways. Victor Olersky says financing of inland water ways will not be cut in 2015, but the increase of financing can hardly be expected. The state will focus on the problem areas of inland water ways. To considerably improve the situation, considerable investments are required. For example, the construction of Nizhni Novgorod low-head water facilities is estimated at RUB 42-70 bln, Bagayevsky waterworks facility – RUB 38 bln. Private investors can hardly be attracted for such projects due to long payback periods.

    Meanwhile, such projects are essential for efficient functioning of water ways.

    In 2014, Rf Government approved new norms for maintenance of inland water ways. Victor Olersky named it to be a ‘breakthrough’ decision. Initially, financing of inland water ways under new maintenance norms was supposed to reach 100% by 2018. However it is doubtful now.

    At the same time, the Ministry of Transport thinks there is a disbalance between different types of transport. Automobile transport prevails while river transport is more environmentally friendly and is able to unload the network of highways and city roads and this should not be neglected.

    In view of this challenge, the issues related to inland water ways will be brought in April 2015 at the meeting of the State Council chaired by RF President Vladimir Putin. 

    Generally speaking, the age of ‘phantom’ projects requiring huge state investments into controversial, ill grounded plans in the port sector seems to be nearly over. 

    Vitaly Chernov