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Home > Business/Finance > Diversified Services > Shipping & Logistics
Russia Freight Transport Report Q3 2007
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Russia’s reputation as a tough and monopolistic operator in the oil and gas pipeline business remained
very much to the fore in early 2007. Russia served notice to former satellites Belarus and Lithuania in
mid-February of its determination to bypass them in bringing its oil to European customers. In May, after
political tensions rose with neighbouring Estonia, Russian crude oil deliveries to that country by rail were
reduced, due to what Moscow claimed were technical maintenance reasons. In the same month Russia
pulled off something of a coup by announcing a new gas pipeline deal with Turkmenistan and Kazakhstan
which overshadowed EU and US attempts to seek an export route for Caspian oil and gas that is not
dependent on Russia. Despite various machinations and continuing European concerns over the aftermath
of the Russian-Ukrainian ‘gas war’ at the beginning of 2006, the outlook for Russian pipeline throughput
remains strong: when all is said and done, the country remains a critically important supplier both to
Western Europe and to Asia: the consumers may not like the way Moscow does business, but they need
the oil and gas. In our newly-released Russia Freight Transport Report, BMI concludes that with strong
demand for its exports, Russian pipeline throughput will rise by an annual average of 8.9% over the 2007-
2011 forecast period.
Various factors support this forecast. On the back of its current oil and gas boom, Russia’s economy is set
to grow at an annual average rate of 5.6% over the next five years. Oil and gas markets are diversifying,
and the best prospects lie in Asia, an area where pipeline delivery is particularly attractive. President
Vladimir Putin recently renewed his pledge to boost Russian oil exports to new markets over the next
decade. Putin said he planned for 30% of Russian oil and gas to be exported to Asia within the next 15
years, compared with 3% at present. There will be ongoing funding for big pipeline projects to markets in
both the West and the East. Pipelines’ share of Russia’s total freight turnover will rise from an estimated
53% in 2003, to 56% in 2011.
Russia is a vast country where the transport infrastructure remains relatively thinly spread. We now
expect freight carried across all modes, measured in million tonne-km (mntkms), to achieve an annual
average growth rate of 7.7% over the 2007-2011 period. The fastest rate of growth will be registered by
air cargo, averaging 11.2% per annum. We expect to see ongoing consolidation among Russia’s
‘babyflots’, with some beginning to specialise in the freight business. Demand for road haulage will be
boosted by the expansion of the motor vehicle fleet and the sophisticated door-to-door logistics
requirements of an increasingly consumer-oriented society. However, the lack of enough new highway
capacity will be a severe limiting factor. We predict 6.7% annual growth in road haulage turnover. Other
modes of transport will experience comparable growth curves. Railway freight turnover will grow at a
strong 6.2% per annum, with the emphasis being placed on the gradual modernisation of the network.
Shipping cargo turnover will expand at an average 5.7% per annum. Russia scored 43 (out of a theoretical
maximum of 70) in the BMI freight transport business environment rating. This market’s stronger areas
include freight traffic and infrastructure growth, with a relatively good showing for long-term economic
risk. Long-term political risk comes a little bit further down the scale. Areas of particular weakness are
the regulatory and competitive environments.
The total value of transport and communications GDP will rise to US$226.4bn in nominal terms by 2011,
representing 10.8% of Russia’s GDP. The transport and communications sector employed 5.875mn
people, or 9.0% of the labour force, last year. We see that figure falling to 5.728mn by 2011, while
remaining constant at 9.0% as a proportion of the total labour force.
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