Governor Misharin and the Gold Road to the Kremlin

05.08.2010 — Analysis

The length of the railroad announced by the head of the Middle Urals will total 2,100 kilometers. The road is planned to be built concurrently from Ekaterinburg and from Moscow. The project is worth 2.5 trillion rubles. Its facilitators suggest two patterns of financing: either each Russian region that is traversed by the railway will take responsibility for its section, or there will be a single customer who will have to find investors. The profitability of the project, according to Alexander Misharin, will amount to not less than 40%.

By and large, the representatives of Sverdlovsk Railways - branch of Russian Railways OJSC, endorsed the governor's initiative. However, Sergey Nekh, Deputy Superintendent in Sverdlovsk Railway Passenger Transportation, has stated that it is still not clear who is going to invest the project and when it is scheduled for commencement. The railway managers have many issues to solve, as they are still at the initial stage of developing the idea.

The traffic capacity of the existing railroad from Ekaterinburg to Perm is very low. Before the crisis, the traffic to the western (Moscow) direction amounted to about 60 freight and 30-35 passenger train-pairs daily. The actual usage of the road capacity was 85-90%. There was no sense in developing passenger transportation in that situation, as each commuter train "cancelled" passage of two freight trains, whereas each passenger train and high-speed train cancelled four and almost seven freight trains, respectively. In the time of the after-crisis economic recovery, the decreased transportations resumed the upward trend, thus, giving grounds to consider further increasing of the traffic capacity of the railroad.

In the meantime, the existing infrastructure cannot accommodate the increased traffic intensity; furthermore, there is no adequate rolling stock. Russian Railways' modern trains service only high-speed traffic from Moscow to St. Petersburg and Nizhny Novgorod. In all other cases, the company uses old locomotives CHS-2, which need to be in tandem to reach the speed of 140 kilometers per hour. The maximum speed of the present-day cars is 160 kilometers per hour. On the other hand, Governor Misharin estimates that the Ekaterinburg-Moscow train will reach the speed of up to 350 kilometers per hour. Russian railway tracks are another problem to solve.

Russia buys quality rails mainly from Japan. In the same way as the foreign railway stock, they are half or twice as expensive as the domestic ones. The major rail suppliers - the Evraz Group companies, the Novokuznetsk and Nizhny Tagil integrated iron-and-steel works - are still renovating their production facilities that eventually will bring them to manufacturing of advanced products. According to Alexander Kolba, Technical Director of FERROBANK-ENGINEERING LLC, the quality of their rails will depend on the chemical composition of steel and efficiency of hydrogen-removing technology.

Yevgeniy Shur, head of the laboratory at the All-Russian Research Institute for Railway Transport, informed "RusBusinessNews" that recently the Russian metallurgists have improved the composition of rail steel; however, the Russian manufacturers have bought only part of the equipment required to create conceptually new technology for rail production. Today, professionals realize what they need to do to enhance quality of the product, but the modification of the rail-hardening technology requires much larger funds than it was initially earmarked by Evraz for the renovation of the two smelters. The Russian manufacturers have achieved better results in the wheel production; however, the percentage of rejects is still high. That is why, Ye. Shur thinks that the elimination of problems existing in railroad-related manufacturing needs time and sizeable financial resources.

The profound reconstruction is also required for the Ekaterinburg-Moscow railroad; otherwise, passengers' safety and comfort are at stake. For example, in the Perm Region, the railroad has sharp bends. Technically, the high-speed train can go along this road at the speed of 200-250 kilometers per hour, but the cars will shake immensely. The railroad professionals point out that there must be smooth curves, a conceptually different contact system must be installed and there are a lot of other things to do.

Investment in the reconstruction will be compared with the building of a new feeder; therefore, railway management considers an option of development of conceptually new infrastructure that will accommodate high-speed passenger train traffic. The existing railroad will service only freight trains. The Sverdlovsk Railways executives see this option as the best choice.

However, Pavel Kurchalov, head of the section at the Department of Investment Activity at Russian Railways OJSC, points out that the need in the increased road capacity could be justified if cargoes were delivered from Siberia to the Baltic ports. However, such need is not apparent today, and the issue boils down to exploiting the existing infrastructure. The manager states that nobody has seriously considered the project construction of a separate passenger rail line. "I would not recommend you to write about the governor's initiative, Pavel Kurchalov warns. - There is neither estimated cost of the project, nor need in it. The situation may change in the long term ".

In the meantime, experts doubt that the high-speed railroad running from Moscow to the Urals or Siberia will ever be able to pay itself back. The price for the ticket in the Sapsan high-speed train can be compared with the flight ticket; however, the express train can rival the aviation only in relatively short-distance trips, for example, from Ekaterinburg to Kazan or from Omsk to Novosibirsk.

The survey carried out back in 2001 by the All-Russian Research Institute for Railway Transport, attempting to assess the demand for services offered by high-speed railroads at the Moscow-Ekaterinburg and Moscow-Adler sections, showed that the high-speed rail development will take place under difficult conditions: from 1990 to 1999 the number of the railway passenger trips shrank almost two times. By 2007, their number slightly increased just to go down again during the crisis.

The Transport Academy of Russia estimated that a high-speed railroad can be feasible only if the transport flow reaches 10-12 million passengers a year. In the good year 2007, this criterion was met only by the Moscow - St. Petersburg line. Today, when the transportation market has not recovered after the crisis, from the economic perspective, there is no sense in talking about the construction of the line from Moscow to Ekaterinburg.

It is assumed that the demand for high-speed railroads can emerge only when a country has reached a certain level of the economic development: the gross domestic product must be at least 20 thousand US dollars per capita. In 2009 in Russia, it amounted to 11 thousand dollars. On the other hand, the increased GDP will not be able to help the high-speed railroad: "Sapsan" will be affordable to approximately 40% of the Russian citizens, thus, the payback period for the railroad will take at least 20 years. Yet, the experience shows that Russian investors are not willing to "tie up" their money in projects for more than 5 years.

There is also no need to speed up freight transportation by the Trans-Siberian Railway. Today, freight trains can deliver a container from the Far East to the border with the European Union within 7 days. The construction of the high-speed railroad, which will be built under the project being developed by China, will reduce the travel time to 2 days. At the same time, experts note that nobody transports ore and coal at the 300 kph speed; electronic appliances and consumer goods can be shipped by sea, which takes longer time, but is cheaper.

The European Union representatives who initiated the creation of the high-speed Trans-Siberian Railroad make no secret that the European Union needs the project to promote high-tech products in the East. The Chinese who are today's best builders of high-speed roads joined the project to expand their vital space with the intent to get an access to resources. It is still unclear why Russia needs the "gold" road.

First of all, experts are puzzled with the very approach of the Sverdlovsk Region government to the HSR construction: The project is going through its initial stage, but the cost of the speed railway has already been announced. The 2.5 trillion ruble cost (some professionals even mention 4 trillion rubles) went down like a bomb: an ordinary railroad has become comparable in cost terms to the high-speed commercial magnetic levitation line in Shanghai where one kilometer of the maglev line cost 30 million euro.

It is likely that nobody, in fact, is going to build the "gold" road from Moscow to Ekaterinburg, and everything will boil down to wasting money from the fund for governor programs just to show off with the project. However, the very existence of highly doubtful initiatives speaks volumes: the actual politics in Russia is rapidly being displaced with PR-propaganda. As one renowned classic said, politics is the condensed manifestation of economy.

Marina Sirina, Vladimir Terletsky