• 2022 April 1

    From Russia with energy: impact of sanctions on export logistics

    Zabaikalsk transport and logistics facility. Image source: press center of Zabaikalye Government

    The impact of sanctions on export flows of Russian energy resources is not dramatic. So far, they have caused some logistic problems amid the sabotage of Russian cargo in some neighboring countries.

    As of today, there are no crucial problems with exports of Russian energy sources amid sanctions. As Sergey Biryukov, Head of Customs Control Service, Central Energy Customs, said at the conference “Digitalization of transport industry in new reality: sanctions, risks and efficiency”, “there were rejections of calling Russian ports from foreign charterers but not many: over the entire period of time the energy customs registered 12 rejections... Within a short period of time, up to three days, this cargo was taken over by a different ship to be delivered to the same or a different customer”.

    According to him, there are problems with shipment of coal produced by companies the owners of which are under sanctions.

    “There are no issues with coal in general, except for SUEK, which deals with the North and Norway. The owner has made a decision which should have been made. The first bulker was loaded already, so, I think, we will go”, said Sergey Biryukov.

    No changes have been observed in the segment of pipeline transport while railway and road transportation used to face sabotage from the side of neighboring states.

    “Railways are blocked under a variety of pretexts (repair, malfunction of information systems) leading to non-delivery of cargo which is accumulated in border areas and registered as not delivered. We cannot say it blocks us, that is a routine issue... Therefore, a permanent dialogue with cargo owners is underway ... There is no other way except for redirecting the flow of products to another customer or to the internal market. The issues are being resolved promptly and I see no problems to prevent us from resolving this situation,” explained the customs representative.

    Nevertheless, the energy customs statistics says that the export flow of Russian energy resources on Russian railways totaled about 10 million tonnes in the first quarter which is similar to the result of the same period last year.

    “In the first quarter of the current year, export flow of Russian energy resources by railways totaled about 10 million tonnes, which is similar to the result of the same period last year”

    There were cases of sabotage in transportation of transit cargo bound for the Kaliningrad Region crossing Lithuania. In this context, it was decided to add one more RO-RO ship to Ust-Luga – Baltiysk line. The newly built Marshall Rokossovsky ferry joined the line in March with its sister ship Marshall Chernyakhovsky to be put into operation in autumn.

    Marshall Rokossovsky' ferry. Image source: USC

    “We can say that sanctions affect not the energy segment but logistics. Unfriendly actions of neighboring states lead to delays in resolving some issues faced by our manufacturers in delivery of their products,” said Sergey Biryukov.

    There are no problems related to software used by customs: major information systems are of Russian origin.

    “As for the need to use local products we are in a favorable situation: Federal Customs Service uses no software of foreign origin in decision-making processes. All of them are domestically produced. The information system is ours, the system of products export is ours, etc ...,” said the official.

    Nevertheless, in view of sharp changing of logistic routes and schemes as well as western carriers’ rejection of operation in Russia it is crucial to be quick with creation of a network of light warehouses and with ordering of new ships. That is the opinion expressed at the Smart Ports conference by transport logistics expert Maria Nikitina, founder of N.Trans Lab.

    Our key problems are associated with ships since 90% of the freight market will be within the sanction control area. It will be necessary to change the contacts, strengthen FOB, attract investments into shipbuilding ... specialized shipbuilding is also essential, particularly when it comes to liquefied natural gas,” believes Maria Nikitina.

    According to the expert, it is required to acquire ships, to find friendly carriers not covered by sanctions, order ships in China for carrying cargo with unique characteristics.

    Opening of transport and logistics facility. Image source: RZD

    As for the storage infrastructure, Maria Nikitina considers it reasonable to build light and less cost-intensive temporary facilities near ports, border crossings and manufacturing facilities.

    In this context it should be noted that a transport and logistics facility was opened on 28 March 2022 at the border station Zabaikalsk. “Now, almost all cargoes delivered from China can be handled here. We considerable accelerate each railcar handling and reduce handling time by almost a quarter,” Oleg Belozerov, head of Russian Railways commented on the opening of the facility.

    The transport and logistics facility is intended for handling of containers, coal, wheeled equipment, long and overweight cargo.

    Anyway, it is essential to facilitate the expansion of the Eastern Operating Domain capacity. Obviously, Russia’s foreign trade is finally turning towards Asia although this trend seen long before the conflict in Ukraine. His has just intensified now. Moreover, the capacity of railways running to the Far East is especially crucial for coal since infrastructure will apparently be overloaded with containers delivering Chinese goods to replace the western ones.

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Vitaliy Chernov