Ukraine joins the Silk Road

The new communication route connecting China with Ukraine, launched in mid-January, is the first step in pushing Russia out of the transit of goods all the way from the Great Wall to the Eiffel Tower.
Ukraine joins the Silk Road

The old Silk Road, Wakham Corridor (Lensnmatter, CC BY)

Just one month after the signing of the Ukrainian-Chinese memorandum of January 15, the containers the Ukrainian port of Chornomorsk. The railway and sea route passes through the territories of Ukraine and then Georgia, Azerbaijan and Kazakhstan before arriving in China.

The route is part of the so-called New Silk Road and it provides an alternative for cargo from Ukraine to these markets. It means that Ukrainian and European goods will reach Central Asia even if sanctions are imposed by Moscow.

“The Russian transit and trade embargo will not harm the export of our goods to the markets of Central Asia,” argues Ukrainian Prime Minister Arseniy Yatsenyuk.

The New Silk Road runs from Chornomorsk (formerly Illichivsk) near Odessa by ferry to the Georgian city of Batumi, then by rail through Georgia and Azerbaijan to the port of Aliat, by ferry across the Caspian Sea to Aktau in Kazakhstan and then again by rail to the Dostyk station on the Kazakh-Chinese border. The full trip along the new route, spanning thousands of kilometres, is supposed to take a maximum of 14 days.

Kozak silk road

(infographics Darek Gąszczyk)

According to Javid Gurbanov, head of Azerbaijan’s state-owned railway company, eight trains per month will initially be able to travel the route, that is up to 20,000 tonnes of goods in one direction. The new route’s cargo capacity on the Black Sea ferry transit is currently 5 million tonnes per year (2.5 million tonnes in one direction). After accounting for local freight traffic, that leaves 3 million tonnes per year for trade with China.

These limitations are a result of the trans-shipment capacities of the ports on the Caspian Sea.  Kazakhstan has already increased Aktau’s capacity to 13 million tonnes per year, and aims to reach 23 million tonnes per year by 2020, of which 10-12 million tonnes could be used by cargo transported as part of the New Silk Road project. Alat in Azerbaijan, opened in 2015, is supposed to reach a target trans-shipment capacity of 25 million tonnes per year.

Causative factor: the aggressive Kremlin

“China warmly welcomes the proposal of Ukraine and other countries for a new transport corridor,” said the Chinese Foreign Ministry, according to the Russian RIA Novosti news agency.

However, it was in fact China that came up with the initiative to launch the New Silk Road with Ukraine’s participation back in 2013, still during the reign of Ukraine’s ousted President Viktor Yanukovych. Today it seems that the benefits will be as large for the former Soviet republics trying to free their international trade from Russia’s influence as for China The Kremlin’s bellicose policy has become the catalyst for this project.

“The geopolitical transformations taking place in the Black Sea region in the past two years have led to changes in the existing supply routes,” says Svetlana Malysh, an analyst at the Kiev-based consulting company UkrAgroKonsult. “In Ukraine, due to the annexation of Crimea and the loss of some of the ports the grain export system has been reoriented, mainly towards the ports of the Greater Odessa region. However, the prolonged confrontation with Russia and the various trade and transport restrictions on the supply of goods have already affected many countries, not only in the Black Sea region, but also some countries of the Commonwealth of Independent States. The search for new routes for the supply of Ukrainian goods bypassing Russia led to the revival of the project of the New Silk Road Ukraine-China,”

Vladislav Inozemtsev, a Russian economist and director of the Moscow-based Center for Post-Industrial Studies, ,says: “2016 began with a further deterioration of Russia’s economic relations with its neighbours – the most serious event was Moscow’s blockade of the transit of goods from Ukraine to the former Soviet republics of Central Asia, including especially Kazakhstan. Trade between Ukraine and Kazakhstan is worth approximately 2 billion dollars per year.”

In his opinion, the problem is much deeper: “Moscow has put Kazakhstan in a difficult situation. Forty percent of Kazakhstan’s foreign trade is with the European Union and Russia acts as a transit monopoly for this country. In Astana they have to consider what could happen if there is any suspicion of Kazakhstan’s ‘disloyalty’. Moscow could stop all export-import traffic in the blink of an eye.”

Inozemtsev recalls the “failure” of the gas pipeline in April 2009, which blocked the export of natural gas to Europe (through Turkmenistan). In his assessment, Russia unintentionally strengthened the position of those who  favour developing the New Silk Road project.

The Kremlin had hoped that the New Silk Route would run through Russian territory from the border with Kazakhstan through Orenburg, Ulyanovsk, Moscow, Smolensk and then through Belarus to the Polish border in Terespol. However, Russia is scaring potential partners away because of the risk of instability and its aggressive policy, while Russian road infrastructure investments associated with this route have come to a standstill.

“It seems that the next step in the application of economic sanctions against its neighbours, which Russia made at the beginning of January, will put an end to one of the Kremlin’s most ambitious geo-economic projects,” says Inozemtsev.

Saakashvili vs. Poland

According to the Sputnik Uzbekistan website, the Polish Embassy in Tashkent is looking for an alternative transport route to Poland instead of the one crossing through Russia. Due to obstacles created by Russia, Polish trade turnover with Uzbekistan declined by 20 percent in the past year. According to data for the period from January to October, it amounted to USD 113.5 million.

The natural extension of the Chinese project would be to connect the new transport corridor with the former “Steel and Sulphur Railway” and to build a European railway hub on the basis of its infrastructure. This could be blocked, however, by the ideas pushed by Mikheil Saakashvili, the former President of Georgia currently serving as the governor of the Odessa Oblast, and plans presented by the management of Ukrzaliznytsia, the Ukrainian state-owned railway company.

The Ukrainian railway authorities want to develop  a northern route, through Belarus to the Lithuanian port of Klaipeda. Under this concept, any possible branching to Poland and Slovakia would only be local in nature. Saakashvili wants to redirect cargo traffic Chornomorsk with road transport to Romania and from there further into the EU. The existing road from Odessa to the border with Romania is in such a catastrophic state that the carriers going to Romania choose the route through Moldova (which is in only slightly better condition). Right now, of the 295 kilometres of the Odessa-Reni road, only 6 kilometres do not require renovation, while other sections with a combined length of 60 kilometres are virtually non-existent. The authorities of the Odessa Oblast have begun its modernisation.

So far Polish ideas for the New Silk Road have been limited to plans for the construction of a railway hub on the Polish-Belarusian border, connected to the northern version of the route passing through Russia, which is dependent on the political will of the Kremlin. However, Polish President Andrzej Duda declared a desire for greater cooperation with China at the end of last year. It is possible that this will be followed up by more concrete solutions.

We should keep in mind that Beijing will not give up on Western Europe, but could simply choose an access route that bypasses Poland.

The old Silk Road, Wakham Corridor (Lensnmatter, CC BY)
Kozak silk road