La Peau De Chagrin of Russian roads

15.04.2013 — Analysis

Russia's regional roads are contracting. Almost no new motorways are being built and the existing ones are in dismal condition, with their deterioration accelerating every year. Experts fear that because of the increase in logistics costs, which are double the average internationally, this country could lose its freight market. Industry lobbyists are offering to substantially increase the funding for road construction and to arrange for the production of high-quality materials. The government responded to this idea by increasing the tax on those who use the roads. But this commentator for RusBusinessNews has determined that neither cash nor new technology will be able to help Russian highways, if road construction continues be used as a smokescreen for those wishing to siphon off public money.

At the Sixth Conference of Road Builders in Ekaterinburg, Svetlana Vorontsova, the first deputy general director of the state-run corporation Transport Integration, reported that there are now 60,000 fewer kilometers of roads in the Russian regions compared to 2005. Igor Starygin, the general director of the Russian Association of Local Road Management Agencies (RADOR), estimates that only 490,000 miles those motorways currently exist. What's more, 60% do not meet regulatory requirements, or to put it more simply, have disintegrated. In 2012, Russia managed to repair only 2% of its roadways, thus the fact that the average thoroughfare goes almost 50 years before any repair work is done comes as no surprise. And the situation is getting worse each year. According to Alexander Sidorenko, the Sverdlovsk region's minister of transportation and communications, last year the number of unsatisfactory roads increased from 40 to 51%.

The rapid deterioration of the roadways dramatically reduces the productivity of the country's transportation industry. Experts attest that commercial freight on Russian roads travels at only half the average speed that it does in Europe or the US, while consuming even more fuel. And that trip is quite expensive in Russia. Svetlana Vorontsova claims that logistics eat up as much as 20% of total costs, compared to no more than 11% in other countries. Drivers are very concerned by these statistics because this is a real battle for them. Every year 800 million tons of good are exported from Russia and another 200 million tons are brought in.

The government is addressing the situation by developing a transportation strategy. Russian President Vladimir Putin estimates that by 2022, 6,960 kilometers of new roads will need to be built each year, which is three times as much as is currently being constructed. Igor Starygin thinks this task can be accomplished if the funding is increased from the current 124 billion rubles per year to 707 billion. The state seems to have no objection. The finance minister, Anton Siluanov, has proposed supplementing the highway funds by increasing the excise tax on gasoline, which currently makes up 35% of the final price of fuel.

However, experts do not believe that a simple increase in financing will be enough to make a difference. Cash, or rather the lack thereof, is not the main reason Russian roads are deteriorating. The practice of introducing toll highways is clear evidence of this.

Sergei Iliopolov, a departmental head at the state-run corporation Russian Roads, said that the introduction of a pay-per-use stretch of the M4 Don has not resulted in the expected decrease in traffic. Quite the opposite, in the first year there was a 26% increase each month and then 25% the second year. The road was not designed to carry such heavy traffic and so it soon fell apart. In other words, throwing money at the sector is no guarantee whatsoever of a road's longevity.

Sergei Iliopolov believes that the rapid deterioration of the roadways can be explained by the disgraceful management and unscrupulous contractors found in that sector. Attempts by those commissioning the work to introduce innovations are met with organized resistance from those in charge of carrying out the work, which prevents real change. The road builders continue to use both porous asphalt-concrete mixtures, which cause ruts to form, as well as "substandard" crushed stone, which quickly turns to dust. There are also problems with the bitumen, which receives very little attention in oil-rich Russia.

The directors of Oil and Gas Company, LLC, Viktor Kolesov and Vadim Chistyakov, argue that high-quality road bitumen must be produced from heavy crude oil that is high in tar and, conversely, contains little paraffin. But few hydrocarbons of this type are produced in Russia, and those are mixed with light oil during the refining process. As a result, the bitumen meets the old Soviet standards, but is unsatisfactory for the manufacturers of asphalt-concrete mixtures. This country does have oil refineries that produce bitumen of the type that is needed, but in very small quantities. And this is of little interest to the oil companies because it is more profitable to manufacture motor fuel. There is no business in Russia that specializes in developing bitumen.

Experts are confident that under the current system of overseeing the motorways, infusions of cash will only be used to build even more poor-quality roads. Russia will never switch its focus from quantity to quality, because that is not what the market players need. According to an investigation by the Russian Presidential Supervisory Agency, those in charge of building new roads are not concerned about the best way to do the job, only about much it is going to cost. Taking advantage of the dearth of requirements for choosing the route for a future road, they always choose the longest and most difficult option.

The Russian government is trying to change things by introducing new standards for road construction. The plan is to estimate the maintenance and repair costs for roadway's entire service life and then incorporate those expenses into the design process, in addition to establishing requirements for bitumen and methods for testing it. But these steps are unlikely to achieve the desired result, again due to the lax oversight over the construction process.

A representative from a contractor firm explained to RusBusinessNews why roads are constantly being repaired in Russia. He claims that builders are forced to pay half the estimated cost of repairs in kickbacks to the officials commissioning the work. If they refuse, they will quickly be passed over in favor of a more accommodating competitor. High-quality work is not possible under such conditions. And although raising the excise tax will have no effect on the quality of roads, it might have an impact on the prosperity of some Russian bureaucrats.

Vladimir Terletsky