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The Eurasian corridor: yesterday, today, tomorrow

According to Hans-Georg Werner, Member of the Management Board for Region East of DB Schenker Rail, "Rail freight transportation will take a leading role by 2020".

Time is money

– Mr. Werner, according to some experts, only 2% of containers from Europe are being transported to Asia through Russia. What is your opinion of the potential of the Eurasian corridor?

– According to analysts in Western Europe, the volume is even less – about 1%. The main reason for this is the cost of transporting containers. For example, westbound transportation of a 20-foot container by sea costs two thousand USD, by land four thousand USD. Prices are increasing all the time. But the main advantage of rail freight transportation is speed. It takes about 40 days to deliver a container by sea, by land it can be delivered within 20–25 days. This is especially important for expensive goods, for example electronics. The transportation time of these goods (i.e. the time they are not on sale) is more expensive than the cost of rail transportation. Rail transportation can also be more effective, provided improvements are made at border stations and customs clearance.

– What can be done to make customs clearance more effective? Would it make sense to reduce the cost of transportation or develop the infrastructure?

– Fast customs clearance is one of the most important factors that influence the attractiveness of the Eurasian corridor.  Unfortunately, CIM/SMGS consignment notes in both directions are only used in 26–27% of cases.  But their use reduces the standing time of rolling stock at borders from three days to 1.5 hours. This considerably increases the competitiveness of rail freight transportation.

Although the paperwork now requires less time, there is one more problem. Sometimes you have to wait for rolling stock at the border, because there are no cars available at the right time. The reason for this is that the maximum permissible length of a train is about one kilometer in Russia and CIS, but only 600 meters in Poland. As a result, the train needs to be separated after crossing the border into Europe. We are currently trying to find a solution to this problem. One possibility we suggest is that special permissions be granted for such trains so that they can enter EU territory without having to be separated.

– In what Eurasian transportation projects are you involved?

– First of all, I think it is a good idea to create the United Transport and Logistics Company (UTLC) with Russian, Belarusian and Kazakhstan railways. It will help the development of the corridor. This company will not only combine resources, but also terminals and loading hubs. This will increase the frequency of transportation through these countries. But when we compare this with sea transportation, we have to admit that ship services between countries offer a more regular connection. The situation of land transportation is different. Increasing the frequency of transportation by land would mean an additional competitive advantage.

We have a joint venture with RZD JSC and TransContainer JSC – the Trans Eurasia Logistics company (TEL). We would also like to work with UTLC. TEL and UTLC plan to organize transportation along the corridors of China, Kazakhstan, Russia, Belarus and our company– on the territories of Western European countries.

– Does the infrastructure of the countries of the Customs Union allow for increased train frequency?

– If competitive services offered to clients are in demand, the increase will have to be made possible. It is similar to the German question: What came first, the chicken or egg?

– The train from China passes through several countries: China, Kazakhstan, Russia, Belarus, Poland and Germany. Kazakhstan, Russia and Belarus are really interested in rail transportation. Is there a need to develop rail transportation in China, Germany and Poland?

– Even today the automotive industry delivers goods to China by rail. The problem, however, is that the trains are unequally loaded depending on the direction. Containers that are full on their way from Germany to China are normally empty when they come back. It is important that we find a way to return the containers full. Some suggestions have already been made. One possibility would be to transport the containers to a place in China where they can be loaded and then returned to Europe, but this would expensive.

– Have clients recently changed their opinion about this corridor? What are their main fears and doubts?

– The fact that the regular connection between Europe and China has been adjusted in both directions is an indication of the increased interest in this corridor. Clients want to use this route, but not all of them are willing to pay. It is necessary that we convince them and highlight the advantages of transportation by land. The main advantage is speed. We recommend to clients that they should calculate: If you take out a loan for two million euros, what would the total percentage be for the additional days of the credit? Usually the client agrees with our arguments. Besides, land transportation is safe. Trains are accompanied by guards and the goods are insured.

– Green logistics is becoming increasingly popular in Europe. Market participants in Russia are also talking about it. China, having faced a number of ecological disasters, must also become actively involved. Will this trend help to expand the Eurasian corridor? Is this aspect important to your clients?

– For the automotive industry, it is one of the most important topics. In Germany, for example, a lot of manufacturers have started producing environmentally friendly cars.  We have also recognized the increased demand for environmentally friendly transportation among our own customers. Even as we are speaking our locomotives are running on renewable energy, e.g. energy generated from wind power. We are also certified accordingly.

– There are strategic system risks on the Eurasian transport corridor. One example is the import of new-generation containers with greater capacity. What other technical and legal difficulties exist?

– One of the biggest challenges is winter. How can we transport equipment through Kazakhstan, Mongolia and Russia during this period? It is clear that laptops suffer under such low temperatures. There have been attempts to transport electronic equipment in the winter in heated containers, but technical problems still exist and we are working hard to find a solution.

– Is it promising to develop transportation on alternative routes, for example, on the Northern Sea Route?

– Each consignment has its own route. For example, freight can be sent to Europe from Turkey through four corridors:  by ship to Southern Italy and then over the Alps or across the Black Sea, and then through Romania, and also on rail through Serbia or Bulgaria and Romania. If a route does not have its own client and product, it won't be sustainable. Corridors that were created together with RZD JSC are in demand today, despite that fact that they are only two years old.

– What do you think of the cooperation between RZD JSC and its subsidiaries?

– There are three levels of cooperation. The first is between our railroads. The next is at the level of forwarding. And the third level is between operators. At all these levels we cooperate very well. I think that partnership is built on human relations not companies. For years our cooperation has been based on trust and understanding and we try to meet the wishes of each other.

– You said that your project is two years old. What do you think the situation will be in eight years? What are your main goals?

– Actually, the rail transportation project between Europe and China is about five years old, but only over the last two years has it been actively pursued. Personally, I would like to see two-kilometer long double-decker trains, but that's unrealistic at the moment. But I believe that in eight years there will be three daily departures in both directions. Clients will then be able to dispatch goods in the morning, afternoon or evening either toward the East or Europe. If the trains operate at the same frequency as the Moscow subway, we would be really competitive. The cost of regular transportation will decrease. What is more, in eight years air transportation won't be able to compete with rail transportation, because fuel prices will be very high. I feel confident about the future and we will do everything to ensure that rail freight transportation will take a leading role by 2020.