Belarus’ comprehensive Transit Potential Development Strategy for 2011-2015 was recently adopted, covering the spheres of energy transit, air transportation, railway and automobile transport and Internet traffic. The Government expects the implementation of this programme to bring a rise in transit revenue – reaching $3.1bn by 2015. The figure is comparable with that of potash fertiliser exports but, unlike the potassium market (which is rather limited for obvious reasons), our transit potential is far from exhausted.Last year saw $2bn in revenue from various types of transit, with considerable growth forecast for the next five years. However, the economic crisis has affected our transit revenue, reducing it by $0.5bn in 2009 alone. The country lost out on $83m from gas transit and $72m from railway transit. Comparing trade figures with those of 2008 – the most successful year to date – our 2015 target seems reasonable.
“Our transport system is competitive. If it were not for the crisis we would have expanded even further,” noted Pavel Bozhanov, the Head of the Belarusian Transport and Communications Ministry’s Department for Strategic Development, Co-ordination and Investments of Transport Systems, at a press conference in Minsk. “The crisis has affected demand for goods and services, which has led to a fall in transit volumes and revenue from transit activity. However, the crisis is passing and our rivals are ready to fight for their portion of the transit ‘cake’.”
Exact calculations, stipulated in Belarus’ Transit Potential Development Strategy for 2011-2015, enable us to correctly set priorities. For example, the document forecasts that, in 2015, revenue from foreign aircraft transiting Belarus is set to total $74m; that from international automobile carriage should bring in $392m while railway cargo and passenger transit could generate $691m. These are significant sums but roadside services should create revenue of $1.2bn – more than the other three together. The question is which modes of transit are most advantageous to develop and which areas’ potential for growth is limited?
The bugle sounds
Energy transit is a sphere which traditionally receives enhanced attention. Pipelines laid during Soviet times connect Russian oil and gas deposits with European consumers. When the USSR collapsed, intermediary transit states were born. This fact wasn’t understood immediately, which may be the underlying cause of recent oil and gas conflicts…
Belarus has been a key player in transporting Russian energy supplies to the West, pumping around 25 percent of Russian gas to Europe, in addition to about 30 percent of exported Russian oil. In 2010, Belarus plans to earn around $220m from transporting Russian oil and double this sum for transiting Russian gas.
From 2011-2015, the Russian energy supply situation looks set to change, with Belarus diversifying its supplies. Meanwhile, Russia is to construct new pipelines to reduce its dependence on transit states. The Belarusian Government forecasts that, in 2012, as Russian oil pipeline BTS-2 comes into operation, the transit of Russian oil via Belarus will fall by 25 percent.
Russian oil transit through Belarus has been steadily falling over the past decade. In early 2000, around 85m tonnes were pumped annually but, by 2006, Russia had stopped pumping to Lithuania and oil transit via Belarus fell to just 70m tonnes per year.
Economist Leonid Zlotnikov believes, “The volume of Russian oil transit via Belarus will depend on economic and political factors. If our relations with Russia remain steady, Moscow probably won’t use the BTS-2 oil pipeline to its full capacity, since it’s a shorter route through Belarus.”
The Government is expecting Russian oil transit volumes to continue to fall over the next five years, since new pipelines are due to come into operation: the Nord Stream (along the bottom of the Baltic Sea, directly to Germany); and the South Stream (in the south of Europe). However, the latter is of more concern to Ukraine than Belarus.
Currently, gas is delivered through Belarus to Ukraine, Germany, Poland, Lithuania and Kaliningrad region, via the Belarusian section of the Yamal-Europe gas pipeline (owned by Gazprom) and via Beltransgas pipes (owned equally by Gazprom and Belarus).
The Nord Stream pipeline, due to open next year, will be able to transport 55bn cubic metres of gas – currently the entire amount shipped via Belarus. It seems unlikely that Moscow will decide to stop using this route completely, since it would leave them wholly dependent on the Ukraine pipeline (which can tackle a maximum of 120bn cubic metres). Moreover, the transport distance via Belarus is the shortest. If Gazprom is guided by economic considerations, it can’t ignore the favourable geographical location of our country. Perhaps, we should be prepared for the worst, but hope for the best…
The long road
In terms of its number of automobile roads, Belarus is ranked 16th in the world – while being 8th among potato growing countries. At the last Olympic Games in Beijing, the Belarusian national team came 17th in the team standings. It’s our duty to wisely manage our strategic resources – of which roads can be counted.
Roads represent the face of the country; moreover, a well-developed transport network brings economic wellbeing. Recently the Belarusian President announced the creation of four-lane motorways between Minsk and every regional centre as a top priority for coming years. At present, only one transport artery – the M-1/E30 (‘Moscow highway’) – has four lanes. By 2015, budgetary funds for the road should reach $79m – up 65 percent on today’s figure.
The 2006-2015 Roads of Belarus governmental programme envisages the modernisation of highways, allowing use by trucks bearing up to 11.5 tonnes per axle. To bring our roads to international level, funds are needed. Accordingly, Minsk is addressing Beijing, with a framework agreement already signed with China to modernise and construct a republican road network. “We haven’t come to an agreement yet. China insists that half of the work should be performed by its own specialists while we insist that 85 percent should be conducted by our Belarusian road organisations, since they aren’t currently operating at full capacity,” notes Mr. Bozhanov, the Head of the Transport and Communications Ministry’s Department for Strategic Development, Co-ordination and Investments of Transport Systems.
Other investors are also waiting in the wings, such as the World Bank, which has already collaborated with us in previous road construction. Moreover, the former President of Ukraine proposed to ask the EU’s Eastern Partnership for a loan to construct a contemporary Minsk-Kiev motorway. This is a central axe of the 9th Transport Corridor of Europe, starting in Scandinavia and finishing in Greece. It is often referred to as the ‘Varangians to the Greeks’ route.
Where is logic, where are logistics?
Our roads may be used by foreign cargo trucks but they haven’t yet brought in great amounts of revenue. By 2015, budgetary contributions to public highways will stand at $11m. Transit logistic centres in Holland account for 40 percent of revenue generated by the country’s transport complex while this figure stands at about 30 percent, on average, in Central and Eastern Europe, including the Baltic States. Sadly, our country boasts just 12 percent and, if we subtract forwarding services, the figure is near zero. This is because we don’t yet have an international level of transport and logistics centres, which would lead to hundreds of millions of US dollars of profit annually.
Our transport corridor could generate so much more money if there were adequate logistic centres to process cargoes, packaging and storing. The construction of transport logistics is a priority for Belarus’ economic development, with 18 transport and logistics centres due to be set up in the republic over coming years. Prilesie in Minsk district is being financed by an Iranian investor, with a Belgian investor planning to establish a similar centre near Minsk’s National Airport. An investor from Hong Kong is eager to build a logistics centre in Orsha, at the Aircraft Repair Plant, which will help our country meet its full potential, bringing it to EU levels.
“Unfortunately, neither Belarusian nor Russian forwarding companies can rival leading global forwarding organisations,” stresses Sergey Zhelanov – the Vice President of the International Federation of Freight Forwarders Associations. He is convinced that European forwarders and logisticians earn 50-60bn euros per year; to successfully compete with them we need to ‘reduce prices slightly while keeping quality a top priority’. He explains, “Logically, goods from South-East Asia coming to Europe should cross Russia and Belarus, since the route is shorter and quicker. However, for some reason, cargo is travelling by sea, taking 40 days instead of a fortnight.” He notes that most European enterprises don’t have warehouses, so are keen for goods to arrive just on time, to avoid the need for storage. “It’s one of the most important factors affecting the work of forwarders and carriers,” Mr. Zhelanov asserts.
According to specialists’ calculations, if Belarus were to implement everything envisaged by its state logistics development programme, running until 2015, it would generate an additional 20 percent of its current GDP. Of course, some obstacles lie ahead and time is of the essence. “Belarus’ plan to create a system of transport and logistics centres is facing extremely difficult competitive conditions even before it begins,” notes the Head of Apply Logistic’s Department for Development, Dmitry Chernomorets. “The commercial initiative of our neighbours, primarily the Baltic States, could quickly match all our geopolitical advantages, as is happening now. The ‘northern byroad’ is only a few dozen kilometres longer than the shortest route from the EU to Russia via Belarus. Additionally, Lithuania boasts not only a well-developed network of terminals, but a seaport on the Baltic Sea, enabling it to process large amounts of sea freight.”
Developing logistics centres involves more than updating transport infrastructure; serious liberalisation of legislation is also required. Without this, we cannot participate fully. “Without the participation of the entrepreneurial sector, including foreign investors, we won’t be able to meet our targets,” emphasises economist Georgy Grits. “We need an immediate legal basis to unite the resources and efforts of the state and private sector.”
This undoubtedly refers to other spheres of the economy too, since development and public welfare depends on the success of liberalisation, initiated only recently. We need new enterprises to start up and for the volume of foreign investments to rise.
Expert opinion
Leonid Zaiko, Head of the Strategy Analytical Centre:
Poland, Lithuania and Ukraine once thought, wrongly, that they were irreplaceable, playing a vital role in the transit process. In the early days of independence, each built its own mythology regarding its importance. Exports of Belarusian milk to Russia bring in more revenue than that generated from annual transit across Belarusian territory. The earlier we rid ourselves of this ‘transit mythology’, the better. Attempts by Ukraine and Belarus to ‘sit on the pipe’ have resulted in Russia adhering to a strategic scheme of shifting its movement of energy supplies to Europe – southward and northward.
The only possible way forward is for Belarus to move from light transit to true European transit. We need to decide which roads will be the major ones, with a good 4-6-lane motorway running from the Baltic Sea to the Black Sea.
Secondly, we also need to set up a system of warehouses, as well as freight-handling and sorting centres to store, classify and re-direct cargo. This is being done in neighbouring states and is as vital as manufacturing itself. State and private capital may take part in creating infrastructure, since individuals have around $10bn of capital and are looking for places to invest it.
Reverse oil transit is also important; Unecha-Ventspils oil pipeline can work in reverse, pumping oil to the Baltic Sea ports. This would transform Belarus into a fully-fledged transit country, with all the ensuing benefits.
By Igor Kolchenko
