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Almost 700 Russian companies have redirected their exports to the east: how is the transport infrastructure coping with changing supply chains?

Alexey Shilo.  Photo by the Roscongress Foundation

Alexey Shilo. Photo by the Roscongress Foundation

Western sanctions have broken existing supply chains. The ban on the transit of foreign aircraft through the territory of Russia, the entry of Russian ships into foreign ports, the partial restriction of rail transportation – all this breaks the usual business processes. On June 16, at the St. Petersburg International Economic Forum, the session “New Challenges – New Logistics” was held, where industry experts discussed the most pressing problems

Stronger than a pandemic

“For a couple of years, logistics was tested for strength by coronavirus restrictions. According to Rosstat, the total volume of cargo transported by Russian transport companies decreased by 5.5% with the onset of the pandemic. The sanctions hit harder than the pandemic. The session is devoted to how the logistics market is adapting to new conditions, what steps are being taken by business and the state,” said Ivan Fedotov, director of the Association of Innovative Regions of Russia.

Let’s consider a specific example. The Lipetsk region is a powerful industrial and agricultural region. More than 250 enterprises with foreign participation. The region was one of the first in the country to face a disruption in supply chains.

“We immediately began to cooperate and help them find new alternative routes for the supply of raw materials,” said Igor Artamonov, Governor of the Lipetsk Region. – Then we thought about whether all the components need to be imported? And we launched a pilot localization project together with Sber based on the use of big data. We are looking for enterprises in neighboring regions that can produce the necessary components for our partners. All information about such enterprises is posted on the site of the Ministry of Industry and Trade.

Regional enterprises of the region are also supported by the regional industrial development fund, which was additionally capitalized in early March. For industrial organizations, several areas of support are provided, they differ in goals, interest rate levels, co-financing conditions and amounts.

Railways are reliable

The participants of the meeting noted that rail transportation remains the most stable and reliable.

“The transportation geography has changed,” said Aleksey Shilo, Deputy General Director of the Russian Railways. – The western direction in terms of exports sank, and they were taken to the east with an increase of more than 26%. The government’s decision to suspend non-discriminatory access rules has allowed many businesses to use the infrastructure of the eastern test site.”

The top manager of Russian Railways noted that almost 700 new enterprises have redirected their exports to the east, as European markets are closed to them. Railway workers are actively expanding the infrastructure of the eastern range. By the end of the year, the company expects to reach the planned parameters for the transportation of 158 million tons of export cargo to the east, which is considered a good result. In 2021, the carrying capacity amounted to 144 million tons.

Today, according to the deputy director of Russian Railways, there is a need to re-profil the ports in order to prepare them for a wider range of cargo.

“North-South Corridor. We see the interest of business in these routes in terms of volumes … There is a separate program for the development of corridors. We have planned to build an additional station on the border with Azerbaijan by 2025 – this will also increase the volume,” Shilo said.

Average speed – 8 kilometers per hour

Ivan Demchenko, a member of the Delovaya Rossiya coordinating council and a shareholder of Novostal-M, also took part in the discussion. Novostal-M supplied products not only to the domestic market, but also to the markets of countries on other continents. The businessman told how logistics chains and the very concept of logistics have changed under the new conditions.

“In Russia, the average speed of cargo movement is 8 km/h, while for foreign colleagues it is 40-45 km/h. This is, first of all, because they have an excess infrastructure, and we have an insufficient one. Moreover, we do not need 44 km/h, we need at least 15–20 km/h,” Ivan Demchenko said.

The very concept of “logistics”, according to the speaker, is now becoming much broader. This is a restructuring to other rules for international sales, and problems with the delivery and acceptance of payments, and the need to work with local companies in local currencies.

“New challenges only emphasize the problems that have always been,” the entrepreneur believes. In the current environment, businesses have no choice. It is necessary to independently invest in infrastructure – build ports and roads to suit your needs.

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