New Silk Road: Cherished dream or real transport corridor for Ukraine?

Ukraine’s Infrastructure Ministry says it has opened a new Silk Road – an alternative route from Ukraine to China bypassing Russia. If everything works out, on Feb 15-20 the Ukrainian Railways will start sending to China ferries with container trains (1-2 trains a month).

Petrol is yours – ideas are ours

The political map of the new route is Ukraine-Black Sea-Georgia-Azerbaijan-Caspian Sea-Kazakhstan-China.

“This is a new Silk Road and an alternative that will allow us to send cargoes to the east bypassing the territory of Russia. It will use the ferry lines of the Black and Caspian seas (Illichivsk-Batumi and Alat-Aqtau Port). We expect it to be more competitive than traditional land routes,” says Ukraine’s Infrastructure Ministry.

The official launching of the route took place in Illichivsk (Odessa Oblast) on Jan 15. The presence of Infrastructure Minister Andriy Pyvovarsky, Regional Development Minister Hennadiy Zubko and Economic Development and Trade Minister Aivaras Abromavicius was meant to show how epochal that ceremony was. During the ceremony the first container train of 10 cars and 20 containers. According to the Infrastructure Ministry, it will take a train 11-12 days to reach the Kazakh-Chinese border. But this route is much longer than the one running via the territory of Russia.

But let’s have no illusions about this Silk Road. Over the last 25 years this name has been given to almost every new route running to the east.

This route is a response to President Putin’s decision to close the Russian territory for cargo from Ukraine. As a rule, a confrontation of two countries benefits the third one. In our case, this is good for Belorussian President Alexander Lukashenko. The new Silk Road is just something better than nothing. Here we can find lots of risks and the key one is that it will be expensive.

One more risk is that the route will run close to the Middle East.

In fact, this is a Ukrainian remake of the Trans-Caspian Corridor.

China, Kazakhstan and Azerbaijan sent the first container train from Shihezi (China) via Dostyk-Aqtau (Kazakhstan) to Kesla (Azerbaijan) in July 2015. The train covered as many as 4,726 km in 6 days. Turks have expressed wish to join the project. The operators have promised to redirect the route to Georgia and Turkey. In fact, this project has three scenarios. Presently, China is implementing the first basic one – bypassing Russia.

Governor of Odessa Oblast Mikheil Saakashvili has suggested involving Ukraine. His map is as follows: Dostyk-Aqtau-Port-Alat (Kazakhstan)-Boyuk Kasik (Azerbaijan)-Batumi (Georgia)-Illichivsk-Paromnaya-Izov/Uzhhorod/Chop (Ukraine).

But the authors of this project should keep in mind the capacities of rivals: Burgas (Bulgaria) and Constanta (Romania) have a number of competitive advantages as compared with the Ukrainian Black Sea ports. So, there is a risk that the operators of the new Silk Road may redirect their cargos to Burgas or Constanta. So, this is a question if Ukraine will be involved in this project.

Oleksandr Krasnov, Head of DSV Logistics, Sea and Air Department:

Let’s first see what options Ukraine has for sending its cargos to Kazakhstan and China. Traditionally, it used the territory of Russia. It was a popular route.

In 2015 alone, our company delivered over 1,300 cars and trucks using this route. As far as logistics is concerned, the cost of a shipment depends on how optimal its route is and what delivery mechanisms are used for it.

In order to be able to evaluate this route, we need to know how, for whom and at what a price it will work. Russia’s ban on Ukrainian cargo deliveries was a big challenge for us. Our partners in the east are keen to receive our cargoes, so, we will have to find alternative routes.

Andriy Blinov, economics expert, Chief Editor of Expert Ukraine business magazine (2009-2013):

The new route implies the following serious risks:

Risk 1 – it will cross too many borders and will run via countries representing different geo-political blocs. All of the countries involved in the project, even Georgia, have normal relations with Russia. But they may be spoiled at any moment. In case Azerbaijan, there is a risk of renewed Nagorno-Karabakh conflict as the Azerbaijanis are yearning for revenge and are actively enlarging their army.

The Georgians are improving their relations with the Russians but there are not going to join their geopolitical bloc as there still are the problems of Abkhazia and South Ossetia.

Risk 2 is the situation in the Middle East. Eastern Turkey is a territory where the Kurds are planning to create their state. So, in the second half of the 2010s this will be a risky territory. The existing Baku-Ceyhan oil pipeline is also in danger. For Ukraine the best option here is the Georgian port of Poti. But the question here is if Poti will be able to transmit so many cargoes and if the South Caucasus will remain peaceful. In fact, Russia may cause certain problems there as it will hardly want to lose.

Supplies to the ports in Odessa Oblast will satisfy the needs of Ukraine and possibly Belarus. But the Odessa ports will hardly receive the bulk of the cargoes as ports like Burgas and Constanta have big competitive advantages. They are further south than Odessa and are less prone to winter storms and frosts. Besides, they have larger oil storage facilities and have oil refineries (controlled by Russian owners).

Even if this route is launched, it may prefer Poti-Constanta to Poti-Odessa as rail deliveries are a costly business.

Sergey Slobodchuk (Kiev, Ukraine), specially for EADaily