By Chris Devonshire-Ellis February 8, 2023
Russia’s Eastbound rail freight shipments exceeded westbound shipments for the first time in 2022, at 80 million tonnes compared with 76 million tonnes, according to Russian Railways (RZD) Chairman Oleg Belozerov, commenting during a meeting with Russian President Vladimir Putin.
The reversal shouldn’t really be a surprise as the European Union has reduced access to its markets by Russia and blocked passenger trains. However, it does symbolize the extent of the ‘Pivot to Asia’ that Russia has gone through in little under 12 months, itself a quite remarkable feat.
Russia’s trump card here has been the Trans-Siberian and Trans-Mongolian rail networks, which span from European Russia to the Russian Far East port of Vladivostok and via the Mongolia spur, to China.
China’s trade increases with Russia are well known, however are often written off as purely energy related. In fact, China’s non-energy trade with Russia has been growing too, with specific and significant growth in agriculture, automobiles, and raw materials such as metal ores and timber, which China needs to feed its own, hugely diverse manufacturing base.
91% of exports to China from Russia’s Far-Eastern Federal District are unfinished goods needed for China’s economy to maintain its fantastic rates of production and export of finished goods across the world that would not be as well-off without Russian-origin energy and ores in particular.
Projected growth for China this year – the IMF considers China and India to be the major 2023 global drivers – will mean increasing imports from Russia, and the Russian railway network – directly linked to China at numerous border crossings and new bridges – is proving up to the task.
As an example, China’s imports of Russian soya were up 210% in January this year alone. This non-energy trade growth will continue.
Less well known is the Vladivostok dynamism. This huge seaport on Russia’s east coast is being repurposed as an East Asian hub and is responsible for increasing amounts of trade with South Asia in some surprising areas. Considered a terminus for the entire country, Vladivostok is directly connected via rail to much of the Russian heartlands via both the railway network but also its varying offshoots and multimodal road and river connections. That means exports from across the country can reach Vladivostok with relative ease for onward shipping to friendly Asian markets with booming consumer growth.
Vietnamese seafood exports to Russia for example have boomed, while in return Russia sends pork. Demand for Russian produce is so high there are now direct maritime services between Vladivostok and Ho Chi Minh City.
The same is also true for India, whose non-energy imports from Russia have also been developing. In 2022, Russia rose from 25th to 7th place in the list of the largest trading partners for India, while like China, India is acquiring increasing volumes of Russian raw materials. With India the second 2023 global growth driver for the year, these non-energy raw materials are vital for India’s productivity.
As China is doing, India is also buying metal ores and timber among other consumer commodities including wheat. This trend will continue for the foreseeable future as India continues its productivity growth – fueled by Russia.
This is leading to significant developments at Vladivostok itself. Gamma, Russian Federal SOE, is building an A Class logistics centre in Vladivostok under an agreement with Russian Far East and Arctic Development Corporation. This envisages putting into operation an additional 11,000 sqm of warehousing facilities and 1,000 sqm of office space.
Alexey Karnovich, Gamma’s Managing Director has stated that “The demand for state of the art warehousing facilities in the Russian Far East remain high. Moreover, it is growing in the wake of the developments in 2022, which spurred Russian cargo flows changing directions from supplying Europe to supplying Asia”.