As Kiev overcome the consequences of the “transit wars” with Russia

Kiev — Ukraine counts the loss from the introduction of Russia in the beginning of January 2016 restrict transit of Ukrainian goods through its territory. According to the official information of the Ministry of economic development and trade of Ukraine, because Russian transit blockade for a year, the Ukrainian economy has lost about half a billion dollars. This additional loss in GDP of 0.3 percent. During this time, the export of goods to Kazakhstan and Kyrgyzstan, of Ukraine’s traditional markets in Central Asia, has decreased by almost 44 percent and 47 percent, respectively.

Ukrainians are being squeezed out of the market

Experts suggest that the hardest hit by the Russian restrictions transit food and engineering industry of Ukraine. Ukrainian confectioners have concluded that gradually began to lose its positions on the market of Central Asia.

“During the year our exports to these countries fell by almost 30 percent. There, due to its quality, our products are so positioned in the luxury segment. Since the shipping cost after the closure of the Russian transit grew, respectively, and the price of our products increased significantly,” — said DW Chairman of the Association “Ukrkondprom” Alexander Baldynyuk.

He notes that because of this, Ukrainian producers became difficult to compete, so in Kazakhstan and Kyrgyzstan cheap Russian candy gradually replace the Ukrainian confectionery.

Distressed silk road?

If earlier by land across Russian territory Ukrainian goods delivered to Central Asia for one to two weeks, but now the delivery time has doubled, which is especially critical for food manufacturers.

Now Ukraine has to transport their products via the TRANS-Caspian international transport route (TITR) is one of the corridors of the Chinese “silk road”. In January 2016, Azerbaijan, Georgia, Kazakhstan and Ukraine signed the Protocol on preferential tariffs for carriers, and then the TRANS-Caspian route was tested in Kiev.

It passes through two seas and four countries. Starts this transport corridor in Ukraine, on the ferry crossing the Black sea, the former Ilyichevsk. From there on the Black sea Ukrainian goods delivered to the Georgian ports of Poti and Batumi. Then by rail to their transporterowych through Georgia and Azerbaijan. Then ferry across the Caspian sea delivered to the Kazakh city of Aktau and is transported by rail further. In addition, this route is longer than a transit corridor through Russia, he is also much more expensive due to the limited number of carriers in the Black sea, say Ukrainian experts.

Now there provide transportation only two companies — the Ukrainian shipping company “Ukrferry” and the Bulgarian shipping company, which monopolistically set prices for transportation of goods by sea.

Besides TITR only works in one direction — from the Ukraine to Central Asia since Kazakh and Kyrgyz producers continue to export their products to Europe through a more beneficial route by land through the territory of the Russian Federation. This greatly affects the overall cost of delivery of Ukrainian goods on the silk road. For Ukrainians it has become too expensive alternative to, say Ukrainian experts.

In search of a solution

The Ukrainian government has a year looking for the exit of transit of the Russian blockade. The fall of Ukraine has started the appeal process in the world trade organization (WTO) restrictions on Russian transit traffic from the territory of Ukraine on the territory of Kazakhstan and Kyrgyzstan, after consultations within the dispute settlement procedure. Now the Ukrainian government looks forward to the establishment of the panel of arbitrators of the WTO, which should be a final decision in this case.

In turn, the Ministry of infrastructure of Ukraine is trying to somehow reduce the cost of transit of Ukrainian exports via the TRANS-Caspian route. “We have already agreed that the Ukrzaliznytsia (Ukrainian Railways), Railways of Azerbaijan, Georgia, Kazakhstan, and marine operators to simultaneously reduce the cost of transportation and set a single through rate,” — said in an interview with DW, the Deputy Minister of infrastructure of Ukraine on European integration Viktor Dovgan.

He noted that with the agreement the price per container will be not be 10 thousand dollars, and almost half the time.

Pain points

The weak point of Ukraine remain high port fees, and outdated infrastructure of ports, which cannot cope with the traffic, said the expert of the transport sector Alexander kawa.

In his opinion, that the Ukrainian government should work in the first place. However, Deputy Minister of infrastructure States that the government is now preparing the documents for the concession to private companies of the black sea ports to the investor was able to upgrade it.

In addition, with the government of Georgia has concluded the agreement on organization of direct international railway-ferry communication between ports of Ukraine and Georgia. This, according to Robbins, will allow to break the monopoly on ferry transport in the Black sea and through competition reduce the cost of delivery of Ukrainian goods on TRANS-Caspian route.

“We are now negotiating with Chinese companies that could fill their cargo containers and wagons on this route back from Central Asia to Europe through Ukraine, and thus reduce the total shipping cost for Ukrainian producers”, — said Victor Dougan.

At the same time Alexander kawa convinced that it is useless to hope for China’s interest in this proposal because the Chinese authorities see it for himself only as one way of diversifying supplies to Europe, not the most convenient and cheap. Best of all, in his opinion, to reduce the cost of access of Ukrainian exporters to the markets of Central Asia through state subsidies. But since now the government can’t afford it, then gradually the access of Ukrainian producers to the market will be closed and trade there will be only one.