LOGISTICS OF EXPORTING TO EURASIA SERIES 

 

Transportation, Distribution and Warehousing Services in Siberian Federal District, Russia

 

November 2006

 

Prepared by:   Azim Mamanov, Bisnis Representative in Novosibirsk,

                        Mark Shulgov, BISNIS Representative in Tomsk

 

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2006. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.

 

 

This Report consists of the following main sections:

 

1. GENERAL MARKET OVERVIEW

2. TRANSPORTATION IN SIBERIA

3. TRANSPORTATION INFRASTRUCTURE AND MARKET PECULIARITIES IN SEPARATE SIBERIAN REGIONS

4.MAJOR INFRASTRUCTURE DEVELOPMENT PROJECTS

5. PRIMARY TRANSPORTATION MODES

6. TRANSPORTATION AND LOGISTICS SERVICES

7. MARKET OPPORTUNITIES FOR U.S. COMPANIES

8. USEFUL RESOURCES

 

 

GENERAL MARKET OVERVIEW

 

Siberia is located in the middle of Eurasia, and plays an important role in transportation system between European and Asian countries. Primary modes of transportation from West to East, and from East to West are: railroad, air and road transportation. River transportation is mainly used to provide cargo shipments from South to North.

 

Siberia is actively developing foreign trade relationships. Foreign trade turnover of Siberia for the first three months of 2006 amounted to $7.2 billion. Exports amounted to $6.3 billion, and imports – $918 million. Main foreign trade partners are China, Great Britain, Switzerland, France, USA, Japan, Portugal, Netherlands, Belgium, and Kazakhstan. Share of foreign trade turnover with the US is estimated at 5-6 percent of the total.

 

The Siberia region is evolving as an active foreign trade participant and an important transportation hub for cargo shipments between Europe and Asia.  These factors stimulate investments in improvement of existing transportation routs and services, and construction of new roads and transportation infrastructure in general.

 

TRANSPORTATION IN SIBERIA

 
Rail

 

The Trans-Siberian Railway is a critically important link in the Russian railway system.  It is also the main transportation route in Siberia and is vitally important to the region’s economy.   This is predicated on the fact that majority of Siberian population and industrial production is concentrated along or in relative proximity to the Railway. The length of Trans-Siberian Railway (from Moscow to Vladivostok) is around 9,300 kilometers. It extends from West to East of Russia, and crosses a number of large Siberian cities, such as Omsk, Novosibirsk, Krasnoyarsk, and Irkutsk.

 

 

Cargo transportation by Trans-Siberian Railway has advantages compared to transportation by sea. One of them is speed of delivery. Delivery by sea from Asia to Europe takes 35-40 days, whereas delivery by the Trans-Siberian Railway may take 18-20 days. However, a number of problems (such as customs procedures, tariffs unification, infrastructure development) need to be resolved to make the railway transit transportation more efficient. Top managers of the Russian Railway, Railway of China and Railway of Germany are negotiating plans for developing container transit railway transportation corridor from China to Europe and vice-versa. Among goods transported by rail, transportation of coal constitutes 70.8%, construction materials – 5.5%, oil and related products – 4.5%, and ferrous metals – 3.8%.

 

Container transportation by Trans-Siberian Railway grows by 30-35% annually. In 2005, approximately 135,000 containers were transported between Russia and China. Railroad transportation represents 80% of all cargo moved between these two countries. In light of the fact that in 2005, the trade turnover between these two countries amounted to $29 billion and by 2010 it is expected to reach $60 billion, the volume of cargo moved via the Trans-Siberian Railway will significantly increase.

 

The other important railroad -- Baikal-Amur Railway -- was constructed in 1970-1980s to provide the alternative connection to the Pacific Ocean. During the period of economic recession in Russia, this railroad has been underutilized, with just several trains passing though it daily.  Currently, Baikal-Amur Railway is regaining its importance due to growing trade with the Siberian and Far Eastern territories that are rich in timber and mineral resources.

 

Waterways and Ports

 

Several large rivers cross the region of Siberia: Ob-Irtysh, Yenisei and Lena. Almost all of the major Siberian cities are located along rivers: Novosibirsk – on the Ob River, Tomsk – on the Tom’ River, Krasnoyarsk – on the Yenisei River, Omsk – on the Irtysh River, and Irkutsk on the Angara River. Even though there are over a hundred companies transporting cargo along these Siberian rivers, most of the volume is transported by a few large enterprises that have been established before the collapse of the Soviet Union.

 

The general range of cargo transported via the Siberian rivers can be illustrated by the example of the Yenisey River Steamship Line (transported during the year 2005): bulk-oil – 9%; miscellaneous dry cargo including coal – 17%; floatwood – 21%; construction materials (mostly gravel, crushed rock and sand) – 53%.

 

In the early 2000s, the volume of water transportation in Siberia continuously decreased. Krasnoyarsk Krai and Omsk Region were the only regions that recently demonstrated some growth. Despite of the decline, the volume of services of large water transportation companies remains relatively stable because for the most part they kept their old clientele of industrial enterprises that generate the bulk of the cargo volume in this sector.

 

Table 2: Cargo transportation by water transports in Siberia, million tons

 

2000

2001

2002

2003

2004

Siberian Federal District, total

15.5

16.6

14.2

12.6

12.9

Krasnoyarsk Krai

4.6

4.3

3.8

3.4

3.9

Irkutsk Region

3.7

4.1

3.1

2.9

2.8

Tomsk region

2.5

2.9

2.4

2.4

2.2

Novosibirsk Region

2.3

2.3

2.1

1.7

1.6

Omsk Region

1.5

2.0

1.7

1.5

2.2

Altai Krai and Altai Republic

0.7

0.7

0.6

0.5

0.2

Kemerovo Region

0.2

0.3

0.5

0.2

0.1

Source: Kommersant-Sibir

 

Profitability of water transportation in Siberia is low, and in fact there are very few independent carriers left on the market; together they provide around 10% of services. Their business is irregular and strongly depends on successful participation in tenders. Many corporations have their own fleets, serving the needs of those companies exclusively. The largest customers of water transportation companies are often-times shareholders as well, e.g. Norilsky Nickel holds 44% of shares of Yenisey River Steamship Line, which provides up to 70% of the company's cargo transportation, and Vostokgazprom possesses 26% share in West-Siberian River Steamship Line.

 

The period of active development of Western Siberia has already passed; new highways and railroads constructed there provide strong competition to water transportation. The prospects of river transportation development are usually associated with the development of oil production in the Eastern Siberia. Currently, there are many construction projects taking place in the Republic of Sakha (situated in the North-East part of Eurasia), which may revitalize water transportation in Siberia.

 

The Northern Sea Route is the shortest freight line between the European part of Russia and the Russian Far East with its length reaching 5,600 kilometers. This national waterway is a very important constituent of Siberian economic complex connecting the Russian arctic ports and the largest Siberian waterways into one integrated transportation system.  This waterway is used to transport fuel, food and equipment to supply Sub-Polar settlements and other inland regions.  This same route is also used to export timber and minerals to Europe. Such companies as Norilsk Nickel, Gazprom, Lukoil, Rosneft, and other companies from the territories of Krasnoyarsk Krai, Sakha Respublic and Chukotka are the main users of the Northern Sea Route. The navigation there lasts only 2 to 4 month a year, and freight convoys must be accompanied by powerful icebreakers.

 

Further development of this sea route is mostly associated with development of the oil fields of Timano-Pechersk province, Yamal Peninsula, Ob and Yenisey river basins. At present, the Northern Sea Route is a domestic route only with the annual cargo turnover of 1.2-1.5 million tons. However, this waterway is recognized as a promising international transportation corridor. A recently conducted test run proved that foreign freighters delivering goods from Norway to Japan via the Russian polar seas would save about 15 days and up to USD 500,000 compared to the conventional route via the Suez Canal. Russian and foreign experts predict that cargo volumes transported via the Northern Sea Route will substantially increase within the next two decades, to reach approximately 12 million tons per annum by 2010, and up to 50 million tons per annum by 2020. Russian officials consider building of modern icebreaker fleet as a basis of further development of cargo transportation on the Northern Sea Route. Despite the difficulty in securing funding, it is anticipated that an open tender for design of three 60 Megawatt nuclear-powered and four smaller diesel-electrical icebreakers will be announced in the nearest future.

 

Roads

 

Roads in Siberia play vitally important role for the region’s economy. Within Siberia, 70% of all cargo is transported by roads.  Most of the volume of interregional road transportation is performed via the three main federal highways – M51, M52 and M53.  These main highways interlink all Siberian regions. One of the most developed road transportation hubs in Siberia is Novosibirsk. Significant volumes of road cargo shipments from Novosibirsk are made to West Siberian regions (Tomsk, Kemerovo, and Altai). Road cargo shipments from Moscow and St.-Petersburg are popular as well. The following chart provides information on length of roads between the major transportation destinations:

                                                          

From-To                                 Length, kilometers

 

Novosibirsk – Tomsk                          236

Tomsk – Kemerovo                            205

Novosibirsk – Kemerovo                    274

Novosibirsk – Barnaul             244

Omsk – Novosibirsk                           663

Novosibirsk – Krasnoyarsk                 789

Novosibirsk-Moscow                         3,242

Novosibirsk – St.-Petersburg              3,802

Novosibirsk – Irkutsk                          1,835

 

Airways and Airports

 

Two major airports for cargo shipments in Siberia are the Tolmachevo International Airport in Novosibirsk, and the Krasnoyarsk Airport. S7 Airlines (former Siberia Airlines) company is based in the Tolmachevo airport, and Krasir Airline company is based in the Krasnoyarsk airport. Both airlines are among top five largest airlines of Russia.

 

The Tolmachevo International Airport is the largest in Siberia. However, it does not have an “anchor” air cargo career that would have cargo planes, that’s why over 85% of cargo is transported in luggage sections of passenger planes, which impedes growth of air cargo shipments.

 

A company specialized in processing incoming and outgoing cargo for the Tolmachevo airport is Tolmachevo-Terminal-Service company (TTS). The company was founded in 1998, and is a subsidiary of the Tolmachevo Airport JSC. The total amount of cargo processed by the TTS in 2005 at the Tolmachevo International Airport was over 15,800 tons. The majority of air cargo shipments from/to Novosibirsk are domestic (within Russia). As an example, over 8,900 tons of cargo was shipped in 2005 by TTS by air from the airport to other Russian cities and only 515 tons abroad. Over 8,900 tons of cargo came in to the Novosibirsk Tolmachevo airport from within Russia and processed by TTS, and only 960 tons from abroad.

 

A key player in air cargo transportation in Krasnoyarsk is AirBridge Cargo Company. Presently, the company’s flight schedule includes flights from Frankfurt, Amsterdam and Luxemburg via Moscow (Sheremetyevo) and Krasnoyarsk to Shanghai, and Beijing. The flights from China to Europe are carried out via the hub in Krasnoyarsk. In the beginning of 2005, the company added Yuzhno-Sakhalinsk (Sakhalin Island, Russian Far East) to its flight network and performs flights there via Krasnoyarsk.

 

TRANSPORTATION INFRASTRUCTURE AND MARKET PECULIARITIES IN THE REGIONS OF SIBERIA

 

Transportation Infrastructure of Novosibirsk Region

 

The Novosibirsk Region is located in West Siberia, between the Ob and Irtysh rivers, and occupies an area of 178,200 square kilometers. It is a region with over 2.7 million inhabitants. Over 75% of the population is urban. Approximately 1.4 million people live in the city of Novosibirsk. Being a commercial center and major transportation hub in Siberia, further development of the transportation infrastructure in this region is very important.

 

Total length of roads in Novosibirsk region is around 15,000 kilometers including 747 kilometers of roads under federal jurisdiction, and over 11,000 kilometers under regional jurisdiction.

 

Novosibirsk is the largest distribution hub in the Eastern part of Russia. Novosibirsk is located on the Ob river, providing transportation link between industrially developed south of Siberia and the northern part of the region, which is rich in oil and gas. The river intersects with the Trans-Siberian Railroad and the Baikal automobile highway.

 

The Tolmachevo airport in Novosibirsk is the only one in the East of Russia that corresponds to standards of ICAO (International Civil Aviation Organization). In addition, the airport is suitable for servicing cross-polar flights. S7 Airline company based in the Tolmachevo Airport is one of the largest airline companies in Russia. Over 30 airlines, both Russian and foreign, have regular flights to and from the Tolmachevo airport. Flights from Novosibirsk are made to over 60 cities.

 

Transportation Infrastructure of Omsk Region

 

The infrastructure consists of railway, road, air, and river transportation routes. The city of Omsk is located on the Trans-Siberian Railroad, which crosses the region from West to East. The Irtysh River is an important transport artery (length of the river is 1,174 kilometers) stretching through the region from South to North. Major industrially developed areas are located along the Irtysh river. Rivers in the region provide effective transport connection with the Eastern part of Kazakhstan, Tyumen, Novosibirsk, and Altai regions.

 

Administratively, the road network in the region consists of two groups:  federal or Oblast (regional) roads. The main roads are federal ones: Chelyabinsk-Kurgan-Petropavlovsk (Kazakhstan)-Omsk-Novosibirsk, Omsk-Tyumen-Ekaterinburg and Omsk-Pavlodar (Kazakhstan). They provide road transport connection with other Russian regions and Kazakhstan.

 

Air transportation provides connection mostly with other regions of Russia, and the NIS countries. Most intensive route of passenger and air cargo transportation is Omsk-Moscow-Omsk. An international airport Omsk-Fedorovka will be established in the region. The airport is designed to become an essential part of Eurasian air transportation infrastructure.

 

Transportation Infrastructure of Tomsk region

 

Majority of the population and bulk of economic activities are concentrated in the south of Tomsk region – the administrative center and the main transportation/logistics hub. The rest of the territory, despite wide-scale oil and gas production and some timber-harvesting, is sparsely populated, and does not have a well developed transportation system.

 

The transport infrastructure of Tomsk region includes 6,600 km of roads, 400 km of railroads, one national and several regional airports, and more that 5,000 km of navigable waterways. Motor transport performs 75% of cargo transportation inside the region, including servicing of remote oil and gas processing facilities. Distribution and delivery of goods to scarcely accessible locations has seasonal character.  For example, in certain areas, water transportation is used in summer, however, when rivers and swamps freeze in the winter time, goods are delivered by truck. Ninety out of about six hundred settlements in the region have no regular transport communication.

 

Tomsk remains a transportation dead-end, which has been seriously impeding the region's economic growth. There is only one railroad branch line that connects the region to the Trans-Siberian Railroad; other railroad (Tyumen-Nizhnevartovsk) approaches the region from the Northwest, and although it does not go deep into Tomsk region, it is often used to deliver goods to oil and gas fields. With the total length of its borders 3,100 km, the region still has only four external roads, one of which leads to Hanty-Mansiysk autonomous region in the North and three others to Kemerovo and Novosibirsk regions in the South.

 

Transportation Infrastructure of Kemerovo region

 

Kemerovo region, also called Kuzbass, is a compact and urbanized and densely populated region in Siberia with 3 million inhabitants living in 20 cities and 47 urban-type settlements. The region is characterized by high level of transportation development and its transport infrastructure is considered one of the most advanced in the Eastern part of Russia.

 

The total length of railroads in Kuzbass exceeds 1700 km and railroad density is the highest in Siberia. The railroad ifrastructure of Kemerovo region constitutes the most advanced shipping complex in the entire Russia. Annual transportation of goods by railroad in Kuzbass is reaching 200 million tons; 17 % of all Russian railroad cargoes (mostly coal) are processed in this region. The regional railroad transportation system is deeply integrated into the overall infrastructure of Kuzbass coal and energy production, metallurgy, chemical and machine-building industries, becoming an intrinsic part of a regional-level supply chain. The logistics of 1,200 large and medium enterprises are heavily dependant upon railroads for their transportation needs.

 

The length of road network reaches 9,200 km. In terms of cargo volumes transported by trucks, Kemerovo region is on the 1st place in Siberia and 4th in Russia, with the annual cargo turnover of about 150 million tons.

 

Two international airports, in Kemerovo and Novokuznetsk, process flights from all regions of Russia. The traffic flow through these airports increases each year especially as regards international flights. Aeroflot Company is looking at Kemerovo airport as a possible transit hub for Aeroflot flights from Europe to Asia.  To this end, the management of the airport developed an airport modernization project which will be implemented in the near future. With development of tourism and mountain skiing in South Kuzbass, the role of small airport in Tashtagol will be growing as well.

 

Transportation Infrastructure of Altai Region

 

Altai region is located in the south of Siberia. Barnaul, the capital city of the region, is connected with the Trans-Siberian Railway. However, the railroad system is less developed compared to other Siberian region. The total length of railway tracks in the Altai Region amounts to 1,790 kilometers. Such products as ferrous metals, coke, chemical and mineral fertilizers, and oil products are exported by railroad. A considerable number of consumer goods and imported products come through Novosibirsk by truck. The total length of water routes is 500 kilometers.

 

Transportation Infrastructure of Krasnoyarsk Region

 

Krasnoyarsk’s inland position makes interregional and international travel difficult. The large territory, dense forests, and arctic climate in the north further inhibit travel by land. Railroads and highways are found only in the southern part of the region. The northern part of the region is only served by river and air transportation systems. In 2005, up to 58 million tons of cargo have been transported in the region.

 

Krasnoyarsk region has well-developed railroad connections with all industrial cities of the region and other regions of Russia. The total length of the railroads in the region is about 3,200 km. The railway transport with its 82% share of the overall freight turnover dominates in transportation system of the region. The railroad network covers mostly the southern part, however, it is not linked with the transport networks in the north of the region. Two main railroads, the Trans-Siberian railroad and the South-Siberian railroad, cross the region from west to east. In the North, the city of Norilsk is connected with a sea port of Dudinka on Yenisey river.

 

The volume of cargo transported by roads and highways is second to the cargo volumes transported by rail. Total length of the road system of the region is over 10,000 km of which 9,100 km are under the regional jurisdiction and 910 km of the Trans-Siberian highway that connects Krasnoyarsk to the European part of the country are under the federal jurisdiction. The road system covers only the Southern part of the region; there are no roads connecting the South and the North of the region.

 

Sea and river transportation systems are also critical. The world’s third largest river by volume, the Yenisey, is an important route because it flows from the South to the Arctic Ocean, a distance of several thousand kilometers. Krasnoyarsk and Lesosibirsk are two large ports located in the middle part of the Yenisey and can accommodate vessels for sea-river operations. Two other major Siberian river/seaports, Igarka and Dudinka, are located on the Northern delta of Yenisey and have access to the Arctic Ocean.

 

Total length of the network of internal waterways of the region is over 6,000 kilometers. The waterways network is crucial for the entire transportation system of the region as it forms the basic transportation highway connecting the Northern and Eastern parts of the region with the city of Krasnoyarsk, and the Northern sea way with Trans-Siberian railway. The river ports in Krasnoyarsk and Lesosibirsk have direct access to the railway which makes it easier to arrange combined railway-river transportation of cargo.

 

Water transport is the main means of transportation of goods to the Northern part of the region. Implementation of radar control system has enabled 24-hour navigation. The way downstream from Krasnoyarsk to Dudinka takes 4-5 days, and the same way back against the stream takes 6-7 days.  There is a route regularly traveled by sea vessels and ice-breakers (including atomic ice breakers) from Dudinka to the city of Murmansk (2,500 km away), whereby Murmansk is directly linked by a sea route with Finland. Also, transportation from Dudinka to Rotterdam through the Northern Sea Route by international charters is possible, which is a more efficient shipping ropute compared to transportation by rail.

 

In the near future, establishing of interlinked lines of sea and river transport utilizing inland waterways and the Northern Sea Route, will enable direct transport corridor to Scandinavia and other European countries including Great Britain.

 

Though air transportation represents only a small share of total freight turnover, it is of great importance in the north of the region, especially in winter when the river is frozen, and this is the only way to reach the city of Norilsk. Air transportation system is represented by a network of airlines with more than 24 airports, 2 of which (the airports in Krasnoyarsk and Norilsk) are able to service aircrafts capable of making direct non-stop flights to/from Moscow.

 

AirBridge Cargo is actively expanding throughout Russia, including Siberia. At this time, the company operates air cargo flights from Europe to China through Krasnoyarsk.

 

Transportation Infrastructure of Irkutsk region

 

In terms of railroads length (2,700 km), the region occupies the first place in Siberia. Trans-Siberian Railroad that transports more that 70 million tons of cargo each year and Baikal-Amur Railroad are the main transportation lines.

 

Partially due to extensiveness of its territory, Irkutsk is ranked second in Russia (after Moscow region) by the total road length (almost 20,000 km), but only one third of them are asphalted. About 30 million tons of cargo is transported each year by road.

 

Water transportation represents about 10% of total freight turnover inside the region. Largest ports located on the Lena River, Kirensk and Osetrovo, process cargoes bound for Sakha Republic and Northern sea port of Tiksi.

 

The airports of Irkutsk and Bratsk have international status.  They serve the flights to the Western part of Russia and to South-East Asian countries.

 

Irkutsk City is the main transit and distribution point in the Eastern Siberia but vast Northern territories of the region are at the same time rather isolated. Development of transportation in the region on the whole is considered far from sufficient and that is one of the main factors stifling the growth of the regional economy. Implementation of a number of large investment projects in the region is contingent upon accessibility of remote districts situated in the Central and Northern parts of the region that are rich in natural resources.

 

MAJOR INFRASTRUCTURE DEVELOPMENT PROJECTS

 

According to the “Concept of Development of Russian North, Siberia and the Far East” announced in 2005, a developed transportation system should be the basis of further development and population of Siberia.

 

Currently, railroad network constitutes the core of Siberia transportation complex, however, the transport infrastructure in the region is still not sufficient. The Federal Program Modernization of Transportation System of Russia allocates RUR 241.5 billion (approximately $9 billion) in investments for the development of the Trans-Siberian Railroad by 2010. The Russian Railway JSC plans to invest RUR114.2 billion ($4.2 billion) during 2006-2008.

 

Reconstruction of railroads is taking place throughout all Siberian regions. For example, about $270 million were spent on railroad reconstruction in Kuzbass in 2004-2005 and another $650 million are allocated for this purpose for 2006-2008. Two thirds of these funds will be contributed by the Russian Railroads JSC and the rest by local industrial producers interested in improvement of their logistics.

 

Due to high workload of the Trans-Siberian Railroad, additional transport routes have to be implemented. Along with the development of new territories in Siberia and the Far East, the role of Baikal-Amur Railroad will be increasing. In order to establish links to reserves of natural resources, the experts seriously consider constructing the Sub-Polar railroad line, to connect the Atlantic and Pacific Oceans by the 60th parallel, with offshoots to Baikal-Amur and Trans-Siberian Railroads. However, implementation of this project may only begin in 10 years.

 

Previously, the main criterion for evaluation of transportation lines was it cargo processing capacity, at present, however, the issues of cost efficiency, safety and comfort are also taken into account. Based on international experience, introduction of advanced information and control systems, advanced logistics principles and supply chain integration become relevant factors in the Russian transportation infrastructure development efforts.

 

Further economic development of Siberia is also associated with ongoing road construction and repair. Roads and bridges are actively constructed and re-built in most regions of Siberia. For example, financing of construction and renovation works in Novosibirsk region in 2006 amounted RUR 5 billion (approximately $185 million). In 2007, about RUR 7.8 billion ($300 million) will be invested in road construction in the region. Two of the three largest bridges in Russia commissioned in 2006 were built in Siberia – in Kemerovo and Tomsk regions. Construction of the Subpolar arterial road Perm-Hantymansyisk-Surgut-Nizhnevartovsk-Tomsk will soon convert Tomsk region into the transit territory between the European part of Russia and oil-producing territories and industrial centers in Western Siberia.

 

In Irkutsk region, there are plans to construct a highway circle around the city of Irkutsk and provide conjunctions with Angarsk, Shelekhov, Ust-Orda and Listvyanka. Along with completion of construction the third bridge across Angara River in Irkutsk, this will greatly optimize cargo transit in Irkutsk. There are also ambitious plans to combine the neighboring cities of Irkutsk, Angarsk and Shelekhov into one megalopolis, which will represent further opportunities for logistics and transportation development. Experts predict that Irkutsk region may become one of the essential Russian territorie by means of transportation development.

 

Dynamic growth of freight and passengers traffic in Irkutsk region resulted in the development of solutions for transportation costs reduction.  To this end, the Baikal Transport and Logistics Complex corresponding to the world standards is being developed in Irkutsk region. This complex will include an information control center for the freight and passenger traffic; contemporary warehouse and cargo processing facilities; hotels; and the system coordinating the entire transport infrastructure in the region to include, road, rail and river transportation. About 50 million dollars will be required to implement this project.

 

Much is presently done for development of airport infrastructure. One of the largest infrastructure projects is development of multimodal transportation hub in Krasnoyarsk. The hub will play an important role in transportation between the Asia Pacific region and Europe. In addition, the hub will offer unique possibilities of establishing cross-polar flights to the USA (Chicago, New York and Houston) and to Canada. Major participants of the project are the Krasnoyarsk Regional Administration, KrasAir airline company (based in Krasnoayrsk), and AirBridge Cargo (www.airbridgecargo.com), part of Volga-Dnepr Group of companies. The hub will be based in the Krasnoyarsk airport. A terminal with the total area of 4,413 sq.m. will be constructed at the airport. The airport’s cargo-processing facility will enable to process up to 400 thousand tons of cargo annually, as opposed to 20,000 tons of cargo that can be processed by the airport facilities today. Further development of the hub will enable processing of up to 2 million tons of cargo annually. Investments in the development of the hub within the coming six years are estimated $40 million.

 

Tomsk airport will soon have an international terminal.  In addition, the runway is being modernized and new highway with several junctions will link the airport with the city and the newly established Special Economic Zone for high-tech development. Considerable investments are planned for 2007 in Kemerovo region for repair of airport building, runway and taxiways in Kemerovo airport and purchase of special equipment (passenger bus, oil and fuel fillers) for Novokuznetsk airport.

 

The airport in Irkutsk region might provide special opportunities for the tourism industry of Baikal Lake. More than 350,000 tourists from Western part of Russia and from abroad visit Irkutsk each year and gradual reconstruction of the airport is presently performed there.  During 2007-2010, about $140 million in funding will be required for completion of a new airport building and construction of "A" grade runway. In addition, the decision on construction of one more brand new airport with annual capacity up to 3 million passengers has been announced in November of 2006 by the Minister of Transportation. The site for the new airport was chosen between the cities of Irkutsk and Angarsk.  Construction will start in 2008 and shall be completed by 2011. The estimated cost of the project is $900 million and private-sector investments for its implementation will be needed. The old airport will probably be sold to a private operator.

 

PRIMARY TRANSPORTATION MODES

 

Delivery of goods from the United States to any location in Siberia usually implies intermodal cargo shipments - crossing either Atlantic or Pacific oceans and then continental transit. Geographic position of Siberia in the center of Eurasia makes it almost equally challenging to get the goods there from any border, and several common schemes of goods delivery from the U.S. are usually applied.

U.S.A. è directly to destination by international express-delivery service or by post;

 

U.S.A. è to a transit airport in Europe or Asia by air è to Moscow (Novosibirsk, Krasnoyarsk, Irkutsk) by air è local delivery or pick-up organized by the recipient.

 

U.S.A. è Atlantic coast è to St. Petersburg or other Baltic ports by sea è to transshipping point in one of large Siberian cities by railroad or truck è local or regional delivery.

 

U.S.A. è Pacific Ocean coast è Far East Countries ports by sea è to the Russian Far East seaports by sea è to transshipping point in one of large Siberian cities by rail-road è local or regional delivery.

 

Worldwide express delivery companies, such as DHL, UPS, FedEx, are present in all large Russian cities. Their services might be demanded in cases of time-critical deliveries, or compact but high-value shipments. Delivery of a parcel from the U.S. to any large Siberian city takes no more than 5 working days. In addition, an express-delivery carrier is usually able to take care of the customs clearance formalities and provide a number of convenient transportation and logistics solutions.  Some of these companies can provide services, such as, regular delivery of spare parts, airfreight, container and multimodal transportation etc.

 

Railroad transportation and in particular container deliveries is usually the most cost-efficient and safe way of cargo delivery.  There are many freight forwarding companies in St.-Petersburg, Moscow, Vladivostok that can provide shipping services to Siberian regions.

 

Road delivery of cargo from European part of Russia to Siberia is considered a faster but sometimes a riskier and about two times more expensive way than railroad delivery. Pick-ups, various trucks, refrigerators and euro-wagons can be hired for this purpose. According to the road-transportation agencies, the average daily run of a truck transport is about 450-500 km.

 

If the cargo is not bound for one of the large Siberian cities, and the transportation company does not provide door-to-door service, the final stage of cargo delivery from a transshipping point in Siberia to the destination might imply very case-specific and complicated forwarding (truck, water, air). Such deliveries should be well coordinated with the cargo recipient.

 

TRANSPORTATION AND LOGISTICS SERVICES

 

There are many experienced freight forwarding companies able to deliver cargo throughout Siberia.  Most of the large companies are based in St.-Petersburg, Moscow and Vladivostok; many Western forwarders have their branches there as well. Local freight forwarders work in each of the major Siberian distribution hubs - Novosibirsk, Omsk, Kemerovo, Krasnoyarsk and Irkutsk; however, most of them specialize in domestic transportation and only few have sufficient experience in international deliveries.

 

The distribution of ready products or supplies of assorted commodities to e.g. food shops in Siberian cities is typically performed by trucks belonging to individual entrepreneurs and independent transportation companies.  Large enterprises and trade companies mostly have their own distribution infrastructure with their own fleet of trucks.

 

As a distribution center and a hub city, Novosibirsk is attracting increasingly greater number of Western companies. Increasing commodity turnover (by 10-15% annually) requires more warehousing space.  The total volume of warehousing space in Novosibirsk is estimated to be 650,000 square meters. However, demand for warehousing space continues to be unfilfilled. The largest owners of warehousing space are Levoberezhny (50,000 sq.m.), NovosibirskSnabSbyt (40,000 sq.m.), MashKomplekt (38,000 sq.m.), and ElectroComplectService (25,000 sq.m.). Less than 10% of the warehousing premises meet high standards (class A). Leasing rates for warehousing space of class A in Novosibirsk are around $120 per sq. m/year.  However, most of these high-quality premises were built by large companies (Baltika, Sibirsky Bereg, Krasny Vostok) for their own needs, and not much space in these warehouses is available for lease.

 

There are trade zones with warehouse buildings where wholesale trade of products and consumer goods in all Siberian cities, but they are usually not well equipped. Similar storage areas also present near most of market places. Only a few good-quality storage spaces including these that are operated or owned by Tablogix and FM Logistic companies, NLC (National Logistic Company, warehousing space of class A) are available. Two Moscow-based developers, ILP (International Logistics Partnership) and RosEvroDevelopment, announced their intentions to build warehouses of class A in 2007. The first company plans to build 100,000-sq.m warehouse of class A (estimated project investment need of $100 million). NLC has already put to operation 10,000 sq. m warehousing facility, and plans to finish construction of the remaining facilities with the total area of 30,000 sq. m. “Eldorado” company announced its intention to build 250,000 sq. m warehouse in Novosibirsk, and the company plans to invest over $125 million into the project.

 

First in the Eastern Siberia A-grade trade and storage facility was launched in 2006 in Irkutsk. This complex is able to handle cargoes delivered by road and rail, and consists of several warehouses with the total area of 20,000 sq. m, a parking lot for heavy trucks, and modern office areas. Among other services, the center provides all types of handling operations, dispatching and storage of cargo. Presence of such logistics center will greatly facilitate Siberian market entry of large Russian and western suppliers.

 

MARKET OPPORTUNITIES FOR U.S. COMPANIES

 

Siberia provides numerous business opportunities, though interested foreign organizations should be aware that this territory remains a deep province, where most companies have no experience of international collaboration.

 

Experts predict rapid growth in the Russian market of aircrafts and airport equipment within the next few years (up to 600 aircrafts will be demanded in the next 20 years). Russian airlines presently report steady growth in passenger and cargo volumes, and both of the largest air carriers working in Siberia – S7 and KrasAir – started active modernization of their fleets.

 

AirBridge Cargo conducts air cargo shipments within and outside of Russia. One of the company’s largest offices and facilities in Siberia is located in Krasnoyarsk. The flights from China to European countries are carried out via the hub in Krasnoyarsk. The company uses Boeing 747 freighters, and US companies have an opportunity to supply various maintenance and engineering services/equipment to AirBridge Cargo’s Boeing 747 freighters. In addition, modern airport ground equipment is need not only in Krasnoyarsk but also in Novosibirsk. The Tolmachevo International airport, the largest in Siberia, needs significant renovation of airlines servicing equipment.

 

For the past few years, demand for the US-made freightliner trucks considerably increased, and many transportation companies and individual entrepreneurs consider purchase of as a cost efficient and reliable solution for their businesses.

 

Apart from the fact that the road network steadily develops here, severe Siberian climate results in the need for ongoing road repairing and constant demand for advanced technologies and equipment for road repair and maintenance.

 

Prospect development and modernization of existing railroads, along with development of transportation infrastructure, cargo transit and commodities circulation in Siberia, the demand for automated systems of logistics and freight forwarding control is also growing. Effective management of fleet and cargo transportation has been an acute need for river transportation companies. Application of corresponding IT solutions is one of best way of logistics optimization.  As a result, an IT solution TRIM developed by SpetsTech of St.-Petersburg was recently implemented on several river lines. Technical re-equipment conducted on the Siberian railroads provides the opportunities to the US companies engaged in manufacturing and supplies of efficient means of telesignalization, radio communication, automatic block systems, etc.

 

 

USEFUL RESOURCES

           

http://www.loglink.ru/?lang=en - information on logistics market, database of companies (transportation, logistics, warehousing, etc) in Russia, including Siberia

http://www.loglink.ru/catalog/transportation/transport_companies/?f8=on&lang=en - link to listing of transportation companies in Siberia of the above web-site

 

http://www.eng.rzd.ru - Russian Railroads, JSC

 

http://www.zszd.ru - West-Siberian Railroad, branch of Russian Roads, JSC (only in Russian)

 

http://www.vszd.rzd.ru  - East-Siberian Railroad, branch of Russian Roads, JSC (only in Russian)

 

http://www.transsib.ru - Trans-Siberian railroad (English version is available)

    

http://bam.railways.ru - Baikal-Amur Railroad (English version is available)

 

Russian sea ports engaged in imports from the U.S. (English version is available on each):

Sea Port of St. Petersburg - http://www.seaport.spb.ru

Nakhodka Commercial Sea Port - http://www.ncsp.ru

Commercial Port of Vladivostok - http://www.vmtp.ru

 

http://www.s7.ru - S7 Airlines

 

http://www.krasair.ru - KrasAir Airlines

 

http://www.airbridgecargo.com - AirBridge Cargo company, as part of The Volga-Dnepr Group, provides air cargo transportation services.

 

http://tolmachevoeng.faktura.ru/scdp/page - Tolmachevo Airport

 

http://www.gruzovozoff.ru - truck carrier covering the entire Russia

 

http://www.customs.ru - State Customs Committee of Russian Federation (only in Russian)

 

http://www.sibfo.ru - official site of Siberian Federal District  (only in Russian)

 

For more information on Siberia, visit BISNIS online at http://www.bisnis.doc.gov/bisnis/country/siberia.cfm

 

U.S. Business Information Service (BISNIS),

http://www.bisnis.doc.gov

 

Azim Mamanov, BISNIS Representative in Novosibirsk

Tel: +7-913-9879631; e-mail: bisnis-nsk@mail.ru

 

Mark Shulgov, BISNIS Representative in Tomsk

Tel./fax: 7-3823-548152, cell +7-913-8249755; e-mail: bisnis-tomsk@mail.ru

 

 

 

BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service (www.export.gov).