Kaliningrad: In pursuit of deeper meaning

Government and businesses of Kaliningrad region continue to press for the construction of a deep-sea container port, which would be specialized in the transshipment of transit containers shipped to Russia and compete with Gdansk-Gdynia and Klaipeda. Some experts in St. Petersburg and Ust-Luga said it would be better to open a short sea service and to drop plans on transits via Kaliningrad.

Trapped by tariffs burden

The Kaliningrad region is an enclave surrounded by foreign countries, the fact that determines the situation in the region. This is not enough to have ice-free port for transit traffic. There is one more obstacle – to deliver the cargo to mainland. And it turns out a complicated task, since neighboring states implement such rail tariff policy that makes the overland transport less affordable then shipping the transit goods by sea. First, to the Polish Port of Gdansk with its deep-water container terminal, with further transshipment onto feeder vessels, or to Lithuanian Klaipeda, and in some cases directly to Big Port St. Petersburg and Ust-Luga.

Another disadvantage of the Russian port of Kaliningrad is bureaucratic red-tape, caused by imperfection of Russian legislation, long delays at the border crossing while customs clearance. Some port and customs authorities have eased customs control procedures. According to Svetlana Kumaneva, chief of customs control enforcement of Kaliningrad regional Customs, only 20% of merchant ships are now inspected onboard by Customs officers in the port of Kaliningrad. However, market participants believe the administrative barriers are still too high compared to the ports of the European Union.

“The main reasons for the decrease in transit traffic passing through the Kaliningrad region are the railway tariff policy of neighboring countries and of Russian Railways (RZD), as well as administrative barriers," said minister of infrastructure development of the Kaliningrad region Alexander Rolbinov.

RZD objects, saying that the maintenance of the rail facilities demands huge investment. Sergei Kolomeets, the head of an RZD branch, Kaliningrad Railroad, the infrastructure is loaded only by 40-50%, and its maintenance costs RUB 2 billion a year. The situation might be improved after Russia's accession to the World Trade Organization (WTO). This will bring more loads to the European narrow gauge and boost traffic by twofold.

Kaliningrad also hopes that through the WTO, Russia will be able to influence on Lithuania to reduce rail charges in the country imposed on cargoes hauled to / from Kaliningrad region.

The regional minister is sure that Kaliningrad has found its niche as a port receiving small tonnage vessels and is not in rivalry with it neighbor Klaipeda than handles larger vessels.

Yet, the fact remains – traffic at the port is steadily declining. Over the past eight months, cargo throughput at Kaliningrad port has dropped 11% to 8.4 million tons.

According to Kaliningrad port’s Stevedoring Companies Association President Vladimir Kozyrev the port is able to handle 17-19 million tons of cargo a year, and the ports in Baltiysk not less than 7.5 million tons. But to attract those loads it is necessary to solve the tariff issue - subsidize RZD tariffs for Kaliningrad-bound cargoes and to reduce rail tariffs in Lithuania.

The situation would have changed radically if Kaliningrad had a new deep-water port, which could enable the region to compete with neighboring Gdansk, Gdynia and Klaipeda. But Vladimir Kozyrev believes the time has been lost. The deepwater port project should be implemented a long time ago as the same project had been completed by the EU in the neighboring Polish port. Yet, there is still a chance, and Kozyrev says it’s worth trying to build a deep-water container terminal, which could hardly be competing now with Gdansk-Gdynia.

"The deepwater port in the Kaliningrad region will have a better location than the Ust-Luga - it will be a non-freezing one," argues Rolbinov, who is sure the project could be competitive.

According to Kozyrev, the best option for the project would be the construction of a terminal in Baltiysk, as there are sufficient depths and it will require significant investments. This would be possible in the case of construction of a railway bypass of Kaliningrad, which has already been underway. Another option, which is also being considered, is the a port on the Balga peninsula, close to the Poland’s border. But this would be a ‘zero-base’ construction.

The new port or terminal, not to depend on railway tariffs, should be able to transship the containerized cargo from large ocean-going box ships directly to feeder vessels, that will then be shipped to St. Petersburg and Ust-Luga. The projected port capacity is 12 million TEUs per year. "The real throughput will be lower, but the port is worth of creation anyway," said Kozyrev.

Dreams do not come true?
Meanwhile, the Transportation Ministry of Russia questions the feasibility of the project, and the funds set aside for this project will likely be invested, for  example, in the railways infrastructure. The Ministry is currently studying the possibility and feasibility of the port project.
According to stevedoring businesses in St. Petersburg and Ust-Luga, the project of Kaliningrad deepwater container port has no future in the existing conditions, and the money will not pay off. As chief operating officer of Phoenix Ltd. (a contractor for building outer harbor Bronka in St. Petersburg) Alexei Shukletsov commented, Kaliningrad region should not rely on the transit traffic, at least until the enclave becomes someday part of single Eurasian economic space, which will include the Baltic countries.

"Logistics routes have long been established, Kaliningrad is not able to compete with Klaipeda and Gdansk," says Shukletsov. He believes that the export of goods by rail from the area to Russia is too expensive because of the tariffs, and transshipment in Kaliningrad makes no sense – it is extra charge, plus Russian bureaucracy. According to the expert, it is better to build a logistics of maritime container supply chain to St. Petersburg and Ust-Luga.

"We need a regular domestic container line, there is a shortage of railway ferries. The state should subsidize line operators the cost of bunker fuel in exchange for competitive rates," says Shukletsov. National Container Company, an operator of container terminals in St. Petersburg and Ust-Luga, agrees with the opinion.

Vitaly Chernov.