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2020 November 23

Industry masters on development of Russia’s water transport

The development of water transport in Russia depends on prompt resolving of problems accumulated over decades. In the segment of inland transport they are to be addressed through a new dedicated national project, in the segment of seaborne transport – through creation of attractive conditions for domestic ship owners and national flagged ships.

Inland segment

Modernization of the fleet and construction of new hydrosystems are among the key tasks for inland water transport of Russia. They are to be fulfilled through the new national project on IWW development the work on which is underway. As Aleksandr Poshivai, head of the Federal Marine and River Transport Agency, said at the Transport Week 2020 held in Moscow, cargo traffic on inland water ways of Russia is expected to grow 1.7 times to 200 million tonnes per year by 2030. He says there should remain no bottlenecks or segments failing to meet the requirements of shipping.

 

“By 2030, cargo traffic on inland water ways of Russia is expected to grow 1.7 times to 200 million tonnes per year”


191 hydraulic engineering structures are to undergo repairs. The system of Russian IWW numbers 741 HES with over 42% of them older than 76 years.

Read more about the national project in the interview with Aleksandr Poshivai on IAA PortNews’ website >>>>

Yet, those are only plans and forecasts so far. For the moment being, financing of inland water ways is below the norm, the project of Nizhny Novgorod hydrosystem has been put on hold, the project of Bagayevsky hydrosystem has went up in price. Rosmorrechflot head says the preliminary adjusted value of the Bagayevsky hydrosystem is as high as RUB 29 billion with the state expert approval expected next February. Normal financing of IWW maintenance is only expected from 2023 provided that everything proceeds according to a plan.

It's not all that simple with the fleet either. Although state support measures such as subsidizing of interest rates on loans and lease payments and scrapping grant have brought an appreciable effect, the situation with modernization of IWW fleet is still acute. Rosmorrechflot estimates the demand for newbuilds to join Russia’s inland water transport by 2030 is estimated at about 900 units. This number includes 680-700 cargo ships (including at least 300 self-propelled ships), 40-45 passenger ships and 175 technical ships.
According to the Federal Marine and River Transport Agency, average age of IWW ships exceeds 40 years today. A total number of operational ships is 23,194.

Besides, there is a plan to charge ship owners for using inland water ways. Aleksandr Poshivai explains that would be applicable to sectors subject for large-scale infrastructure modernization. Moreover, obtaining of electronic navigational charts will be charged at about RUB 50,000-100,000 per ship.

Seaborne segment

Seaborne transport is also in a challenging situation. Among the major problems here are construction of Russian-flagged ships by domestic shipyards, the pandemic consequences including crew rotation problems, plunge of passenger traffic and the need to finance seaport projects with low investment prospects. Meanwhile, the growth of cargo flow on the Northern Sea Route can lead to the deficit of icebreakers.

As for construction of Russian-flagged ships, the share of Russia’s foreign trade cargo carried by the domestic fleet is negligibly small - less than 2% of the total throughput of Russian ports. In the Soviet times, 40% was considered to be normal. Aleksey Klyavin, President of the Russian Chamber of Shipping, says this share should be raised to at least to 10-15%.

 

“The share of Russia’s foreign trade cargo carried by the domestic fleet should be raised to at least 10-15%”


“We have lots of excessive and overlapping requirements under Russian legislation that are hindering the activities of ship owners. We actually have to work in a non-competitive environment... Worryingly, foreign ships are offered more favorable conditions than Russian ones and that is a fact... There should be sound encouraging measures and incentives with no excessive legislative requirements”, said Aleksey Klyavin.

According to him, it is crucial to analyze the causes and make correct legislative decisions.

Aleksey Klyavin emphasized the necessity to take remedial actions to overcome the consequences of the COVID-19 pandemic at the seaborne and inland water transport having paid attention to creation the environment enhancing the competitiveness of the Russian-flagged ships.

The President of the Russian Chamber of Shipping also considers it crucial to immediately resolve the issue of crew rotation and extend measures on support of cruise shipping companies as the most affected by the pandemic.

It is an acute problem, indeed. Igor Tonkovidov, President and CEO of sf SCF Group, says IMO recommendations on ensuring a 'green corridor' for seafarers are often ignored with local authorities imposing additional requirements on seafarers. Igor Tonkovidov believes unified repatriation mechanisms are needed on the global, regional and national levels with preliminary development of executive decisions.

While on the topic of sea-going fleet, we should note the growth of cargo traffic on the Northern Sea Route. According to Vyacheslav Ruksha, Deputy Director of Rosatom - Director of Rosatom’s Northern Sea Route Directorate, annual cargo traffic on the Northern Sea Route (NSR) is expected to reach 110-120 million tonnes by 2030 including 60-70 million tonnes to be transported eastwards.

 

“Annual cargo traffic on the Northern Sea Route (NSR) is expected to reach 110-120 million tonnes by 2030”

 

According to him, the forecast is based on the expected flow of liquefied natural gas (LNG) from the Gulf of Ob which is estimated at 60-70 million tonnes per year, crude oil including that from Vostok Oil project and Norilsk Nickel cargo.

Meanwhile, the speaker says the Arctic can face lack of powerful icebreakers by that time. Although five LK-60 icebreakers will operate in the region by 2027 and a Leader icebreaker will join them later, operation of three icebreakers will be terminated.

“Icebreakers of less than 45-50 MW are useless in the Arctic as they cannot ensure commercial speed for large vessels ... At least six icebreakers are needed for the Gulf of Ob and the Gulf Yenisey alone... I am afraid, this task (annual shipment of 110-120 million tonnes by NSR - Ed.) cannot be physically supported by our icebreakers in full”, said Vyacheslav Ruksha.

As for the development of seaport infrastructure, there is a problem of financing port projects in remote areas which are not very attractive for private investments. An investment charge For this purpose С этой целью с 2021 года в морских портах предполагается взимать инвестиционный сбор.

Yury Tsvetkov, Deputy Transport Minister of Russia, commented on the issue: “It (introduction of investment charges – Ed.) has little if any impact on ship owners or attractiveness of Russian ports. The resources we will collect will be forwarded for federal purposes under a strict control of the federal services. We hope that will work. And we understand the concerns of our colleagues. If anything really occurs during the first year we will see what it is, either a high burden or something else … A discount mechanism is also foreseen…”.

Neither passenger shipping companies nor passenger terminals most affected by the pandemic have succeeded in getting subsidies yet.

Will one find a helping hand at the end of one’s arm?

As a summary, we can say that Russia’s water transport is still in a challenging situation aggravated by the pandemic. Although an ambitious plan has been announced to develop inland water transport under a new national project and a comprehensive plan for upgrading and expanding core infrastructure, the market players will partly bear the burden of financing those initiatives by paying for using inland water ways and investment charges.

In their turn, shipping companies and sea terminals are eligible for a state support, both in terms of post-pandemic recovery and in terms of ceasing the preferential treatment of foreign ships.

By Vitaly Chernov news@portnews.ru

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