Feature: Ukraine-China cargo train on Silk Road opens up prospects for trade promotion

The first cargo train freight connecting Ukraine and China has recently completed its journey, after passing through three other countries along the Silk Road in a test run of a planned regular service.

Although much work is yet to be done to establish a fixed railway route, the new train service is seen here as a promising instrument to boost inter-connectivity and trade between Ukraine and China and in particular between European and Asian markets in general.

HISTORIC EVENT

On Jan. 15, Ukraine launched a cargo train from its south-western port of Illichivsk to China via the Trans-Caspian International Transport Route, traversing Georgia, Azerbaijan and Kazakhstan, thus joining the famed Silk Road initiative.

The launch of the train was highly welcomed by officials and experts in Ukraine, with Infrastructure Minister Andrii Pyvovarskyi describing it as a "historical event" for the country, which will pave the way for boosting Ukraine's foreign trade.

"We are opening a new way from Europe to China, a new way for Ukrainian goods to reach those markets where we have always been very strong -- Kazakhstan, Georgia and Azerbaijan, and a new way to those markets access to which is now limited," Pyvovarskyi said.

As one of the main advantages of the route, Kiev has laid out its speediness which covers the full distance of 5,471 km from Ukraine to China in 9 to 14 days, while the average maritime trip takes about 40 days.

This opens new prospects for transporting food products with limited shelf-lives as well as high-value cargo and freight which need express delivery to customers.

According to the Infrastructure Ministry of Ukraine, the new train service has already attracted the interest of Ukrainian exporters of food, agriculture products, stone, ceramic tile, metal and furniture.

In turn, the East European country, by establishing the new route, gains an option to boost its imports of electronics, clothing, automotive products, minerals, household appliances, light oil and liquefied gas from Asian markets.

With an estimated capacity to transit from 1 million tons to 3.5 million tons of goods per year, the train service would boost bilateral trade between Ukraine and China by increasing the cargo turnover, which stood at 25.5 million tons last year.

Analysts also suggest that the new train service could boost investment in Ukraine.

"We need to prove the attractiveness of the proposed route to draw interest from the Chinese companies, which could invest in road and port infrastructure to develop our region," said Olexandr Borovyk, Ukrainian former Deputy Economy Minister.

BRIDGE BETWEEN EUROPE AND ASIA

Kiev's interest in joining the famed Silk Road initiatives is not limited only to boosting the trade turnover. It also stems from Ukraine's long-term aspiration to become a transit country, linking Europe and Asia.

This is vividly illustrated by the fact that only a week after launching a train to China, Kiev announced plans to expand the Silk Road channel via Ukraine into the European Union (EU) by building a new railway tunnel in the Carpathian Mountains.

The Beskyd tunnel, which establishes a transport corridor between Ukraine's western city of Lviv and the Hungary-Slovakia borders, indeed has a prospect to play a key role in making Ukraine a new transit bridge between Europe and Asia, given its logistic importance.

"The Beskyd tunnel is a strategic infrastructure facility because it is the section of the fifth Pan-European transport corridor, which passes through the territory of Italy, Slovenia, Hungary, Slovakia and Ukraine," said Nikolai Ostashuk, an associate professor at the Institute of Mechanical Engineering and Transport.

While the tunnel is seen as a major link to connect Asian countries with Western Europe, there is also a huge untapped potential for expanding the Silk Road northwards.

The port of Illichivsk, which serves the train running between Ukraine and China, also has direct cargo train links with countries in Northern Europe.

The idea to combine these routes indeed has bright prospects given the huge amount of cargo carried by trains to the EU -- the Zubr train from Illichivsk to Estonia via Latvia can transport about 48,000 tons of cargo per year, and Viking freight train to Lithuania can carry 96,000 tons.

Analysts believe that if the project to connect Asian and European railway routes in Ukraine becomes a reality, it would pave the way for the East European country to leverage its unique geographical position and become a new important cargo transit link in the Silk Road chain.

The idea looks very promising particularly in the light of the rapidly growing trade between Europe and China.

"The potential of the Silk Road train routes is enormous. For comparison: in 2011, there were only 12 pairs of trains connecting China and the EU, but currently about 400 trains serve this route. Therefore, it is clear that the cargo transit market is growing and Ukraine has a room for joining it," said Volodymyr Omelyan, the country's Deputy Infrastructure Minister.

MUCH WORK LIES AHEAD

While the proponents of the Silk Road route via Ukraine say it could become a breakthrough for the country's economy in particular and the regional development in general, critics warn that its prospects are not so rosy if the project is not properly managed.

The main issue is that the rail-sea route currently costs more than traditional maritime transit, which has been carrying more than 90 percent of goods traded between Ukraine and China.

According to Ukraine's State Railway Service, the shipping cost of a 40-foot container on the new train service would be about 8,900 U.S. dollars while on the maritime route it is about 30 percent lower.

Ukraine has been gripped by its worst financial crisis in two decades, and very few exporters stand ready to overpay for a faster delivery of their products.

Experts suggest that the Ukrainian government should find an instrument to make the route competitive in the global freight transit market, and otherwise the project may collapse.

"To make the entire chain of the project break even, the government should allocate subsidies to the carriers at least at the initial stage," said Vladimir Shemayev, head of infrastructure projects at the Agency for Investment and Development.

Another problem of the new route is its complicated logistic structure.

The two ferry crossings are making the route weather-dependent and the four shifts from rail to ferry are extending the entire delivery time and could create unpredictable challenges during the trip.

"Of course, this complicates the route and makes it more protracted -- loading and offloading the components of the train takes time. Moreover, the ferry from Georgia to Ukraine is carried only twice a week and the train will be often forced to be idle," said Alexandr Kava, an expert for infrastructure projects development.

The challenges of establishing the regular train service were vividly underlined by the fact that the first journey of the train took 15 days instead of the planned 11-12 days.

To prevent such incidents in future, the Ukrainian authorities should develop a clear timetable for the train, which is agreed on by other countries along the route to ensure the service's smooth functioning.

Although much work still lies ahead and it could be not easy for Ukraine to become a new link in the Silk Road, many in the East European country are aware that this promising opportunity should not be lost.

And it seems that Ukraine, which has found itself in a critically unstable economic position, will make every effort to bring this perspective idea to reality. Endi