PROS & CONTRAS
In a package sent to us from Riga, we found an issue of the local newspaper "Business and Baltia". A discussion between journalist Eleonora Gailish and member of the Academy of Science of Estonia, consultant of Estonian Oil Service concern Michael Bronstein was underlined in black.
The eminent economist believes that Russia saves a great deal of money when it uses Baltic ports for cargo transportation. He stated this opinion during the Baltic Transit Route - 2000 conference in Riga.
Together with the interview given by Michael Bronstein, the Business and Baltia newspaper published the words of Boris Usanov, adviser to the St. Petersburg vice-governor, who also participated in the conference in Riga. Boris Usanov's point of view is completely opposed to the previous one. Our issue presents Boris Usanov's article in response to the Estonian academician.
A Baltic cooperation resourse
Michael Bronstein,
Academician of Estonian Academy of Science
A freight turnover of the former Soviet ports on the Baltic Sea has increased 1.5 times as much for the last five years. The above process has been caused by the three most important factors as follows:
Those years have seen the accelerated integration of Russia into global and European market environments.
At the same time, the exports of power resources and raw materials have appeared to be the main source of currency receipts.
Once the Soviet Union disintegrated, the Baltic countries have generally continued to be in a common transport environment with Russia and the CIS countries. The point is not only the same gauge line. The existing trading transport infrastructure in the Baltic region is a result of careful research and engineering developments. In particular, when engineering the construction of most advanced Ventspils and New Tallinn (Mooga) seaports and their transport systems, they relied upon a criterion of economic efficiency and minimized aggregate freightage costs.
The Baltic countries, having renovated their seaports by means of foreign investments (to set up new terminals and process lines, deepen mooring points, expand a tank farm, etc.), have been successful to offer transport services to Russia on economically beneficial terms. The transit of Russian cargoes is implemented on a duty-free basis. Using the seaports of the Baltic countries, which transferred 87.6 million tons of cargoes in 1999, Russia has saved about 10 billion USD in capital expenditure.
This is an integration resource. Unfortunately, there is a threat of losing it. During the same years, some plans have matured under the slogans of "national security" and "transport independence" to establish some alternative ways of carrying Russian cargoes as opposed to the Baltic ones. This summer a final decision was made to construct the Baltic Pipeline System and the first stage of the seaport in Primorsk to transfer 12 million tons of oil by 2001-2002 and achieve 30 million tons subsequently. As a proportionate growth of exported resources is not expected, then an actual drastic reduction of oil transfer via Ventspils will occur.
What are the reasons of our opponents?
The economic reasons are a so-called "overpayment" for the transit through "alien" seaports, which is estimated as USD 2 to 2.5 billion per annum. The figures are, gently speaking, are spun out of thin air. For example, the transfer of oil and oil derivatives, and these account for more than 50 percent of the total freight traffic through the seaports of the Baltic countries, costs USD 350-400 million a year to Russian exporters. Therefore, some "saving" could be achieved only in case of free or extremely beneficial (at the cost of Russian taxpayers) transit through domestic seaports.
The geopolitical reasons: they refer to a danger of blocking any transit through the Baltic countries in case of a threatening conflict between Russia and NATO. However, in this case the ways for Russian cargoes to the West will be also blocked both through St. Petersburg and Primorsk. By the way, the supporters of changing-over Russian oil streams from the West to China are also referring to such a hypothetical threat (see The Expert No. 27, July 17, 2000, a special issue "China").
The consolatory reasons: Russian transit on the Baltic Sea will grow rapidly and there will be enough work for every seaport. Allegedly serious experts from the northern countries forecast a freight turnover in the Eastern Baltic countries as high as 400 million tons by 2010, and Russian ports pretend to as low as 150 million tons, i.e. a bit higher than the turnover of the nine largest seaports of the Eastern Baltic countries in 1999. This is a praiseworthy modesty. But where have they got a mystical figure of 400 million tons? The initiated revival of Russian processing industry will raise sharply a demand for power and natural resources, and the production thereof will increase by 20 or 30 percent by 2010 at best. Therefore, a relative reduction in exports is inevitable. Besides, the new development areas of crude oil production, if we exclude the 
Timan-Pechora oil field, are located in the Eastern Siberia and on the Caspian Sea. Consequently, new pipeline systems are also designed in the East and South. Moreover, although 54 percent of Russian crude oil and its derivatives flowed towards the Northwest late in 1990s, then according to a power development strategy of the Russian Federation Fuel and Energy Complex for a period up to 2020, a share of the Northwest Region will shrink to one third.
A relative reduction in crude oil and oil derivative transit flows in the Baltic Region could be possibly compensated by means of other cargoes to a certain extent. In particular, great expectations are placed on a growth of container traffic. Theoretically, it is related to an expansion of Russia's part as a transcontinental bridge between Asia and Europe. However, the most recent years have seen, in practice, a substantial cutback in the utilization of a principal railway, i.e. Transsib, for those purposes. Although the above railway passed through 150 thousand 20-feet containers annually during 1980s, then 1999 saw 15 thousand ones only. At the same time, a freight turnover between the South East Asia and Europe had grown three times as much. Cargoes from Japanese and other Asian seaports go by sea to Rotterdam and Hamburg around Russia. A powerful competitor against Transsib may emerge in using overland routes. European Union has officially initiated and financially supported a TRASECA Project, i.e. a transportation passageway to pass around Russia through Uzbekistan, Kazakhstan, Azerbaijan, and Georgia. An idea of a "new silk way" is also proposed, that means a Trans-China Railway Project to start from Lianyingan Seaport through the Middle Asia to Turkey and European countries. This is the Southern route again.
It is possible to retain and improve the economic and political importance of the Baltic shortest transportation passageway through some joint efforts of the regional countries. The unworkable competition on the edge of trading and transit wars must be replaced with the cooperation within an international legal framework. The basis is a mutual economic interest and growing investment efficiency in an environment of limited financial resources.
If we add together all the national transportation programs of the Baltic Region, then we could face 2- or 3-fold excess of a seaport and transport service supply over an actual demand for the same by 2020, that will freeze huge capital investments and undercut stability in our region. Thus, we hold that it is necessary to coordinate and streamline national investment programs to some extent, establish large-scale transnational projects and programs intended to ensure an adequate status and high competitive ability of the Baltic transport route on the whole.
The further development of the baltic passageway depends on the consolidation of efforts from the states located on the Baltic sea cost
Boris Usanov,
Academician of Russian Academy of Transportation
This rather extended title is the basic view of the St. Petersburg Administration (and Russia's, in general) with respect to the development of seaports, also known as "the marine aspect" of the St. Petersburg transportation and technical network. During the V General Assembly of the Baltic Sea Port 
Organization that was held in St. Petersburg in early May this year, we were glad to see the participants' positive assessments on its efficiency. Representatives from 60 ports from 9 Baltic countries unanimously stated that import-export cargo growth rates had been 3 times higher in 1998 for the OAO Seaport of St. Petersburg, for instance, than for Baltic Sea ports in general.
It would seem everything is clear; the line of activities is in place, and its results are positive.
However, this is not so:
And this is why...
This year has witnessed (and will still see more) international conferences on transportation in every Baltic State, with special emphasis on issues of cargo movement. This is quite natural. The handling of Russian freight accounts for more than ? of the Baltic national budget revenues. How then can one assess the Russian initiatives in the Baltic for the reconstruction and renovation of existing port facilities and the construction of new ones? In this case, will Russians take back "their own" cargo from the Baltic seaports?
It is important to note that seaports in the Baltic States, Ukraine and Finland are presently handling over 80 million tons of Russian cargo, which is more than 2.5 times what the stevedore companies handled in the Great Seaport of St. Petersburg in 1999. Taking this into consideration, Russia pays more than 2 billion USD a year, which is approximately the cost of the missing components in the St. Petersburg transportation network. Therefore, the problem is far from trivial from the viewpoint of both parties concerned.
I fully agree with Mr. Michael Bronstein, member of Estonian Academy of Science, who prefaced his interview with the subheading "People who have their own interests in mind are lobbying for new Russian Ports" (Business & Baltia, June 14, following the Baltic Transit Way - 2000 conference in Riga, June 8-9). Well, it is economic estimates rather than politeness that dictate the need for our own facilities to handle domestic cargo and avoid using third country seaports. As a participant in the above conference, I am pleased to mention that we (our Russian delegation was large) were properly understood. In this regard, the Russian Journal published the following article on June 16 entitled "Why Are Bars Required on the Window to Europe":
"The Baltic countries seem to realize the time has come for Russian exports to find alternatives, and the (Baltic) monopoly on Russian cargo is ending. Russia may enter this new stage with a positive outlook".
However, things are not so simple.
Please open page 28 of the Great Seaport of St. Petersburg reference book that has was recently published. The diagrams presented in the book show that the Riga Seaport for instance, cut down the handling of containers by 6% in 1999 as compared to 1998, of metals by 3% and fertilizers by 1%, while St. Petersburg increased those figures by 6%, 14%, and 4%, respectively.
As they say, one has one's interests at heart. A summary article following the Riga conference appeared in the Commersant BALTIK weekly analytical journal, under the heading, "The Transit Way: Our Forces are Retreating". This is just a simple statement of facts. Academician M. Bronstein was being polite when he used the words "The Self-Interests of the Nationally Offended" in the title of his interview. I believe this is an unacceptable statement. This should be avoided in our mutual relations in accordance to the foreign policy section in the government declaration (on the occasion of Mr. Andris Berzins' assumption of office as Prime Minister), where good neighborhood relations with Russia appeared as a priority for the first time.
The Baltic region has enough work for everyone, which is confirmed in the prognosis presented by the Council of Ministers for the Northern Countries. This study shows that marine cargo traffic will grow by roughly 400 million tons in the forthcoming decade.
At the same time, 
the consolidation of multilateral relations in the Baltic region is also necessary for it is the only way to integrate our efforts in gaining the cargo that flows between the West and the East. We are all in direct competition with such cargo corridors as the TRASEC (the former Great Silk Way). Although TRASEC is longer (in distance and time) and more expensive for cargo owners, it has a sufficient number of supporters. It does not take a prophet to anticipate that TRASEC problems will be an important part of the discussion during the 2nd International Eurasian Conference on Transportation. We have invited Academician M. Bronstein to participate in an open discussion rather than offering interviews, to face what he calls "the real threat to us all". This will also be an adequate response to his assertion that "the scary words about the billions of dollars that Russia loses in cargo flow are intended, first and foremost, for internal circulation within Russia. The real figures will never enter the Russian press. It is impossible to make one's way in…"
Eurasian Transport Conference is convened on the Neva banks for the second time. The Ministry of Communications, the 
Russian transit is presented at the forum as an alternative to the projects passing around the country. The Conference will discuss a part and position of the Trans-Siberian route and Russian seaports, BAM, Northern Sea Route, as well as the establishment of a transport passageway China - Kazakhstan - Russia -Belarus - Western Europe that will permit to intensify the cooperation among Russia, Belarus, and Kazakhstan, as well as North - South passageway being established now with the involvement of Russia, Iran, India, and other countries.
They recognized the following issues as necessary for the development of effective and coordinated transportation links between Europe and Asia:
further efforts towards progressive liberalization and harmonization of the transport markets of all parties;
Five versions of Declaration were worked out. Work on the last one was finished on the day of opening the conference. However the delegates spoke about many amendments. The questions of principle also were touched. The delegations made some proposals to make the results of the conference more appreciable and efficient. All of them were considered, and many were stated in the final version of the document. 
a transportation industry. It is even more important because it determines the general transportation strategy.
This water route already exists and could be used depending on the political will and interest of all those countries through which the ring runs.
Road, and Passage from the Vikings to the Greeks, and the search of a route to India that resulted in discovery of Americas, construction of Panama and Suez Canals, Channel Tunnel and all others well known and less known roads and thoroughfares can be regarded, inter alia, as the most important landmarks of geopolitical changes.
I as soon as one year after St. Petersburg had been founded, and has been a major shipbuilding yard of the industry for almost three centuries. 
placed on the construction of tanker fleet, non-nuclear submarines and deep-water facilities, small-size vessels and ship repairs. The enterprise is oriented mostly for export.
American experts who visited the shipyard recognized that the United States are missing the devices of the class. 
Even in St. Petersburg famous for its shipyards the "Baltiysky Zavod" is the industry leader, it has already managed to take a very special place as a shipyard building men-of-war and also merchant and specialist ships.
further development of the Northern Sea Route (SEVMORPUT), delivery of supplies to the population of the Russian Arctic (Far North), development of large Arctic off-shore hydrocarbon reserves. That is why together with the completion of the "The 50-th Anniversary of the Victory" icebreaker it was decided to design and build nuclear icebreakers of a new generation, which should replace old ships that had already outlived their operation resource.
new and difficult projects allowed the Shipyard to start a new project of designing a desalting complex, with the production rate of 40 -60 thousand cubic metres of fresh water daily. Today as shown by the IAAE (International Agency of Atomic Energy) 20 African and Asian nations claimed that they desperately needed fresh potable water and the "Baltiysky Zavod" is ready to deal with this challenge.
transport corridor caused a greater number of problems than the other 10 transport corridors determined within the framework of pan-European intermodal transport system. This took place in Crete (1994) and then in Brussels (1997) and Helsinki (June 1997). The main problem does not consist in the fact that this transit road refers to Russia and connects Baltic transport systems with the transport systems of the country's central territories and the Black Sea Region. As soon as the system was founded, our neighbouring countries, i.e. Latvia, Estonia, Lithuania, Finland and Sweden got the opportunity of maintaining the million-strong Russian export-import shipments in their ports. That's the main problem. This situation began to form when the USSR mostly developed the ports in Tallinn, Ventspils, Klaipeda and other Baltic cities. The switchover of the greater part of intermodal exchange to the Baltic seemed to help deliver Leningrad from the excessive development of its own seaport. This switchover also seemed to be able to perfect the allocation of labour throughout the Baltic.
They do not want to lose one third or fourth of their budgets consisting of the money received from transit cargo maintenance. And Russia does not want to spend its money for this any more, the more so that despite the sequence of crises the country step by step straightens things out in the field of transportation. We get more and more used to count our funds and we want each rouble or dollar we have got to do good to the country's economy and working people.
By 2001 the declared depth will make 11.5 metres. This will open the water area for the ships of greater tonnage. Our customers expressed their great satisfaction by the appearance of an up-to-date container terminal, a terminal for the reshipment of fertilizers, new facilities for the oil-loading terminal, and special moorages for the reshipment of general cargo. The further plans on port development include the construction of facilities for the processing of 3.5mln tons of fertilizers on pier 107 by 2001, as well as processing of 2mln tons of fertilizers on pier 106 by 2002. We also plan to add 350.000 tons of general cargo transfer on pier 28, significantly increase the processing of oil cargo, and raise general output to 10mln tons. We successfully move towards the creation of a Great Port of St. Petersburg with annual total output of 60mln tons of cargo. This port area will include the existing port with all its zones, the north coast of the Gulf of Finland including the settlement of Gorskaya and the Kotlin Island, constructions protecting the city from floods, and the south coast of the Gulf including Lomonosov - Bronka section. The main thing is that our specialists turned from their recent words to real deeds. The specialists are supported by the Government and the local authorities. Many terminals are already in operation, and some other ones have found investors and begin working as well. At the same time, we work on the improvement of highway and railroad accesses to the future terminals. This is very important when your work is connected with high-class transport facilities. 
about successes of late, about complexities the every chief inevitably faces with, we have asked Valery S. Izrailit, director general of JSC "Ust-Luga Company", a company which directly controls the port construction.
Orders of Government about prime measures on revival of a mercantile fleet of Russia. The project has no regional, but federal significance.
along the Northern Sea Route. Our institute has developed projects for the construction of ports in Murmansk, Kandalaksha, Mezen, Onega, Naryan-Mar, Anderm and the Dickson Island and well as piers for seaborn ships in Dudinka. Throughout these years Lenmorniiproject has taken part in the reconstruction and considerable development of the port in Archangelsk. New facilities were set up which then became part of the country's transportation system and that in turn, catered the needs of Northwest Russia and of the western Arctic.
central area it is 10-30 m deep. The bay is virtually in the center of the shelf deposits and 130-150 km from the biggest ore deposit in the world. At present, a port already exists there with two loading and four auxiliary piers. There is also a settlement with all the necessary infrastructure. There is stone and sand on the island, and the eastern and northern parts are vast undeveloped areas. All of the above allows for construction in stages. 
together with the Krylov Institute have been asked to prepare the project for the construction of new generation icebreakers and a new 25 megawatt diesel/electric icebreaker. 
According to Russian and foreign sources the real cargo potential between Europe, the Northern Far East and the North American Pacific Ocean is 6.8 million tons eastbound and 2.8 million tons westbound annually. Yet this prognosis does not take the North Sea seasonal traffic into account. 
advantages. This type of cargo is still transported on very remote routes in order to reduce the number of countries whose territorial water it crosses. By using the North Sea Route, it would only cross Norway, Russia and USA (Alaska). The existing high tariffs on nuclear fuel transportation on the North Sea are hardly a serious obstacle. A preliminary estimate shows that 15-30 eastbound trips with nuclear waste will be necessary during the next 15 years, with additional trips carrying processed nuclear fuel. 
There are several aspects that single out the Russian Arctic zone from the many other districts, places, and territories of the globe. First of all: the untold wealth in its bowels. Its role and significance increase because of the seas and bays surrounding the shores of the Arctic, that form a united transportation line: the Northern Sea Route. 
Northern Sea Route can not be studied separately from the general problems of the Russian Arctic. It is no coincidence they attract international attention. The Russian-Norwegian-Japanese team known as INSROP is devoted to researching the possibilities of the Northern Sea Route. However, the effective functioning of the Northern Sea Route as an international transportation passage, which would solve cargo transportation problems by fulfilling the economic needs of Russia and by complying with international requirements, is possible only if addressing the following issues:
living standards in many Russian regions. The development of international Euro-Asian transport corridors will provide solutions to global social-economic problems.
to its geographical location and powerful infrastructure which includes railway, motor and water transportation. 
through which cargo can be carried to the Baltic, Black Sea, Mediterranean and Caspian regions. What's more, the Danube-Rhine water corridor further links the network with central Europe. 
the Soviet Union and Japan considered connecting the Sakhalin Island with Russia's mainland and Japan. Because the Sakhalin was (and still is) the only oil-gas region in the Far East, the goal was to connect the island with the mainland through a tunnel and thus boost the development of production forces both on the island and in the entire Far East. The tunnel would supply food and goods to the population and provide the mainland with oil and gas. This objective is still relevant.
to the natural resources in the Far East and Siberia. Second, direct shipment and delivery between Japan, Europe, Asia and Russia becomes cheaper, faster, more reliable and cost effective while also better protecting the cargo from damage. 
lower than from the European part of Russia. Second, the Far Eastern economy is connected to the national economy through an inter-sector exchange rather than through industrial and technical cooperation. Third, production and consumption in the Russian Far East and in some Asian Pacific countries is in most cases mutually complemented. 
Primorye and the USA. This idea has been supported in the USA (in the Seattle and Tacoma ports) and it is also being carefully examined by Chinese specialists. The proposed route already transports more than 50 thousand containers a year. It is 2630 km shorter than the conventional route from the USA through the ports of Japan and Daliang. Correspondingly, the cost of delivering one container is almost 600 USD lower. There are also other routes through Primorye from China to Japan and Korea that have significant advantages. A recently established container line is in operation on all directions through the Vladivostok, Posiet and Zarubino ports while coal is being transported from China through the Vostochny port.