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Russia Freight Transportation Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: May 2008 Product Code: R302-3176 Description In January Russia and Serbia reached a strategic gas pipeline agreement described by some analysts as avictory in the ‘pipeline war’ with the European Union. Under the terms of the deal, Serbia agreed to jointhost the South Stream gas pipeline project, and to sell a majority stake in NIS, its oil and gas monopoly,to Russia’s state-owned Gazprom at a favourable price. South Stream is an 885km, EUR10bn(US$14.7bn) gas pipeline project led by Gazprom and Italy’s ENI to pump Siberian gas under the BlackSea to Europe. Earlier in January Bulgaria also agreed to support South Stream. Concerned aboutexcessive dependence on Russian supplies, the EU had been promoting the rival Nabucco pipeline tobring gas from Central Asia via Turkey to Europe. There had been doubts over Nabucco’s economicviability, however, and over whether enough supplies could be secured to make it a paying proposition.The agreements with Serbia and Bulgaria, analysts suggested, meant that South Stream was now clearlyahead of Nabucco and on much more solid ground. ‘The agreements signed will make Serbia a key hub inthe prospective network of Russian energy supplies to southern Europe’ Russian President Vladimir Putinsaid after the signing, adding that ‘this network will be long-lasting, reliable, highly efficient, and what isvery important, help boost energy supplies to Serbia and the entire European continent’. Indeed, despitevarious machinations and continuing European concerns the outlook for Russian pipeline throughputremains strong: when all is said and done, the country remains a critically important supplier both toWestern Europe and to Asia: the consumers may not like the way Moscow does business, but they needthe oil and gas. In our newly-released Russia Freight Transport Report, BMI concludes that with strongdemand for its exports, Russian pipeline throughput will rise by an annual average of 10.8% over the2008-2012 forecast period. Various factors support this forecast. On the back of its current oil and gas boom, Russia’s economy is setto grow at an annual average rate of 5.8% 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. PresidentVladimir Putin recently renewed his pledge to boost Russian oil exports to new markets over the nextdecade. Putin said he planned for 30% of Russian oil and gas to be exported to Asia within the next 15years, compared with 3% at present. There will be ongoing funding for big pipeline projects to markets inboth the West and the East. Pipelines’ share of Russia’s total freight turnover will rise from an estimated53% in 2003, to 58% in 2012. Russia is a vast country where the transport infrastructure remains relatively thinly spread. We nowexpect freight carried across all modes, measured in million tonne-km (mntkms), to achieve an annualaverage growth rate of 8.8% over the 2008-2012 period. The fastest rate of growth will be registered byair cargo, averaging 11.6% 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 beboosted by the expansion of the motor vehicle fleet and the sophisticated door-to-door logisticsrequirements of an increasingly consumer-oriented society. However, the lack of enough new highwaycapacity will be a severe limiting factor. We predict 7.0% annual growth in road haulage turnover. Othermodes of transport will experience comparable growth curves. Railway freight turnover will grow at astrong 7.8% per annum, with the emphasis being placed on the gradual modernisation of the network.Shipping cargo turnover will expand at an average 6.7% per annum. Russia scored 66.0 (out of atheoretical maximum of 100) in the BMI freight transport business environment rating. This market’sstronger areas include freight traffic and infrastructure growth, with a relatively good showing for longtermeconomic risk. Long-term political risk comes a little bit further down the scale. Areas of particularweakness are the regulatory and competitive environments. The total value of transport and communications GDP will rise to US$321.8bn in nominal terms by 2012,representing 10.9% of Russia’s GDP. The transport and communications sector employed 5.86mn people,or 9.0% of the labour force, last year. We see that figure falling to 5.71mn by 2012, while remainingconstant at 9.0% as a proportion of the total labour force. Table of Contents
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