These are early days of an era when quality, positive game-changing “brick and mortar” investments such as this are few and far between.
This post first appeared on Russia Insider
The 300km per hour high-speed Eurasia rail link running from China to Western Europe through Russia took a major stride forward this past November when Russia and Kazakhstan agreed to the route for the tracks across the two country’s territories.
This will see the high-speed land bridge service run from Moscow to Aktynol which is close to the dry port of Khorgos on the Kazakh-Chinese border, and pass through 12 cities in Russia on its path.
Both Moscow and Beijing see a bright future for the project, calculating that the volume of cargo will rise from 6.4m tons by 2030 to over 12m tons by 2050. China is even more optimistic, expecting to reach 15m tons by 2050.
China has already agreed to invest the equivalent of $7bn in the project, with around 25% of that to be used for the Moscow-Kazan leg of the rail link. A German consortium has also invested more than $3bn just for the Moscow-Kazan section, with construction expected to begin in 2018.
China and Russia have wanted for some time to develop their inland regions. For China it was to push industry to “go west”, and Russia to “go east”. Manufacturers have been slow to catch on, mostly due to the high cost of moving goods to where they could be efficiently exported. Developing a rail-freight network to and from Europe is an important part of both Russia’s and China’s Eurasian development, or the “One Belt One Road” project.
Just consider, a container ship, even via the Suez canal must make a 24,000km trip to reach Europe. Trains must travel no more than 11,000km to reach the same destination quickly. Time, cost and distance are all pretty much halved. In addition, the route passes through regions which historically haven’t had cost-effective access to routes allowing them to develop their industrial capabilities for export opportunities.
The volume of freight moving between China and Europe by rail is rising steadily. Between 2013 and 2016 cargo traffic increased four times. In the first half of 2017, the value of goods sent by train rose by 144% compared with the same period in 2016. Many companies both in the west and east are increasingly receptive to switching to rail freight because it helps them to lower costs, and can be settled in Yuan, Rubles or other currencies.
Last year, 180,000 tons of cargo traveled on trains to western Europe through Russia from China. That is still a small fraction of what was moved by sea, but a large part of the 700,000 tons that was shipped by air. Much of that air cargo could switch to rail in the not too distant future. These are early days of an era when quality, positive game-changing “brick and mortar” investments such as this are few and far between. It has the added quality of being rooted in common sense, and well worth keeping an eye on.
In the late 1970s, during the detente period between Moscow and Washington, a plan was developed for a possible rail/pipeline link between the then USSR and the United States (Alaska) over the Bering Strait, using the various islands in between. The plan made sense commercially, and may have brought benefit to the USA, Canada and the USSR at the time of its consideration, certainly afterwards, if it hadn't been dismissed as politically unrealistic at the time.
The idea of a developed land bridge between China, Russia and Europe would have also been laughed at with equal disbelief at that time. Maybe when all of today's political and media fluff about leaks, gates, demonizing, voting, brainwashing and posturing fade into their own unimportance, then perhaps the Alaska-Russia land bridge concept might be ready to be revisited, who can say?
This post first appeared on Russia Insider
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