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China in surprise move on Russian
ports
By John Helmer
MOSCOW -
In a move that threatens to transform competition in the
lucrative Pacific coal market, the Chinese government
has proposed taking over two Russian far eastern ports
on long-term lease.
The Pacific ports, Posyet
and Zarubino, are close to the Sino-Russian border, and
plans to upgrade them as an outlet for Chinese exports
across the Pacific have been under discussion by
Russian, Chinese and US transportation officials for
several years.
Those talks were focused on
creating what participants called an "East by West"
corridor to enable mostly container cargoes to move out
of China's northeastern province of Jilin to export
markets in Japan and the west coast of the United
States. Changchun, Hunchun and other Jilin production
centers are closest by rail and road due eastward to the
sea outlets at Posyet and Zarubino. Harbin, in
Heilongjiang province, is closer to the much larger
Russian ports of Vostochny and Vladivostok, to the
southeast. To the south, however, the Chinese port of
Dalian is much farther away.
Chinese officials
have wanted to spur exports of light industrial and
consumer goods from Jilin and Heilongjiang to enable the
regions to move away from the heavy industry
concentration they had developed in the 1950s. The US
west coast market was viewed as the primary target, and
easing transit through Russia was viewed as the optimum
way of dispatching containers in both directions.
However, Chinese frustration at Russian
inaction, and Russian concern with Chinese trade
competition, especially for the lucrative Japanese and
North American coal markets, have now led to the
unprecedented bid to change national management of the
ports.
The proposal was tabled by Chinese
representatives at a recent session of the
inter-government commission on economic cooperation that
meets every six months. China said it wanted to manage
the ports for export of various products, notably coal,
from the Tunangan economic region. Intended markets for
these port shipments are Japan and the US.
The
proposal is officially still under study, and the
inter-government commission has yet to discuss it
formally. But already, Deputy Transport Minister Chingiz
Izmaylov told Asia Times Online, the Russian Ministry of
Transport is opposed to the leasing scheme.
Izmaylov said that as the national
transportation authority, the Transport Ministry
"advocates the use of existing port facilities by
Russian companies and doesn't see the need to rent out
port terminals to foreign companies, when Russian
companies can provide the transportation services and
develop port facilities". Izmaylov added that he would
consider negotiating alternative proposals from the
Beijing government for export operations through the
ports, on condition that there would be no change in
legal management.
The Chinese
government-to-government move has taken Russian
commercial port interests by surprise, because both
Posyet and Zarubino are owned by private Russian joint
stock companies. Posyet is controlled by the
Moscow-based MDM Group, which holds a controlling 65
percent stake in the port, and has announced its own
plan to expand Posyet for transportation of coal and
metals produced by companies MDM also controls. Zarubino
is controlled by Universe-Holding.
A spokesman
of SUEK Baikal-Ugol, a coal company affiliated with the
MDM Group, told Asia Times Online that MDM has so far
received no approaches from the Chinese government
regarding a leasing scheme for Posyet. He added that "in
principle the company is ready to discuss business
proposals for transportation of Chinese coal through
Posyet". But he also conceded that his company was
likely to turn it down, as Chinese coal would be
competing for the same export markets as Russian coal
produced by MDM's units.
"It doesn't make sense
to assist natural competitors," a source said, "or help
Chinese coal producers to get better access to export
markets of coal. We have our own large coal production,
and plan to further develop our own coal exports through
Posyet." He noted that in 2002 the company doubled its
throughput of coal through the port and is now
considering a capital expenditure program for further
expanding the port's coal capacity. SUEK Baikal-Ugol has
also been a vocal opponent in the past of proposals from
China to build rail access for their coal exports to the
Trans Siberian (Transsib) rail network and thence to the
larger Russian far eastern ports of Vladivostok and
Vostochny. Frustration at this commercial lobbying by
Russian coal companies may have prodded Beijing to seek
direct approval for the port scheme from the Kremlin.
In 2002, Posyet reports that it increased the
volume of its cargoes to 614,500 tonnes, a jump of 120
percent on the 2001 level.
Officials from
Prikorsky Krai, the regional government, and maritime
industry sources said the owners of Zarubino port have
been in discussions with Chinese counterparts for a
49-year leasehold at Zarubino that would facilitate coal
shipments from China. The talks, which must be approved
by the federal authorities in Moscow, have yet to reach
an outcome. The region says it favors joint ventures
with the Chinese, but it is flatly opposed to any deal
with the Chinese that would give them port control.
The Chinese move comes at an awkward time, as
Russian rail executives claim that, as a result of war
in Iraq and rising insurance premiums, charter rates and
shipping risks, a significant diversion of container
shipments is taking place right now from Asia to Europe
through Transsib.
Russian rail officials said
that the latest figures for the first quarter ending
March 31 show that container volume has more than
doubled, as shippers in Japan, Korea and Vietnam opt for
the land route instead of by sea, through the Suez
Canal. The volume of transit container traffic through
Transsib was 18,320 large-size containers, an increase
of 175 percent compared with the same period last year.
In March the jump was even more dramatic - up 270
percent compared with March 2002.
Federal rail
sources told Asia Times Online that they have added an
extra third container train per day from the
Nakhodka-Vostochnaya railway station alone, while
officials are considering going up to five trains per
day if demand continues to rise. The daily norm is two
trains. The chief of the far eastern railway division,
Valery Yakhimovich, has said publicly that the war in
Iraq is driving cargo shippers in Asia to stay as far
away as possible from seaborne shipping and the conflict
zone.
Rail Ministry sources say that the
Transsib system has a capacity for transportation of
250,000 large-size containers per year; in 2002 Transsib
carried 48,000 twenty-foot-equivalent units (TEUs). The
dramatic growth in the volume of container
transportation through Transsib is also confirmed by
stevedoring sources who report that orders for box
movement through Vostochny port will be well up this
month over March. The main reason for that, a source
close to Vostochny port said, "is that the war also
results in increased premiums for insurance of vessels
against war risks, which in turn drives the charter
rates up".
This may be too much of a good thing
for the Russian rail system, however. Rail sources in
Moscow admit that the far eastern division is short of
railcars for the new container volume, and has placed an
urgent order for conversion of multi-purpose railcars to
accommodate the box trade. To ease the congestion at
Russian far eastern railheads, Moscow rail
administrators have assigned 20 additional locomotives
to the east. Vostochny International Container Service
(VICS) has also announced the launch of a new container
line between Ningbo and Vostochny; the first delivery of
the Chao Yang Shipping Lines' vessel Ginter Star with
302 TEUs was made on March 24. Russia's Far Eastern
Shipping Co (FESCO) has also increased its
Vostochny-to-Korea service (KSDL - Korean Soviet Direct
Line) to twice a week, as of April 2.
The volume
of China shipments to Russia is also rising fast.
According to the federal Rail Ministry in Moscow, total
volume of cargo transportation between China and Russia
was 15.4 million tonnes last year, and is expected to
top 22 million tonnes this year. In order to handle the
increased box trade between the two countries, an
additional direct container train between Beijing and
Moscow via Zabaikalsk has been launched. The border
crossing at Zabaikalsk, in southeastern Siberia, is
reporting that container traffic this past month was up
37 percent compared with March 2002. This month's
increase is projected to be 71.5 percent compared with
April of last year.
(©2003 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com
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