Putin sticks his oar in over Russia's decrepit shipping industry

By bne IntelliNews May 7, 2007

Tim Gosling in Moscow -

On a visit to Murmansk last week, President Vladimir Putin appeared frustrated with the state of the country's dilapidated shipping industry and demanded a fundamental overhaul of Russia's ports and landside transport infrastructure.

His concern with ports and shipping infrastructure mirrors the establishment of the latest national champion: the United Shipping Corporation, which aims to rebuild the country's ailing commercial fleet.

Putin has no intention of handing control of the industry on landside to investors, however. According to RIA Novosti, the president claimed it's only possible to implement strategic development plans, especially in organizing the infrastructure and management of commodity flows, on the basis of a partnership between the state and the private sector.

Putin and transport-crusading-presidential-hopeful Sergei Ivanov took turns to interrogate local officials on their plans to boost maritime infrastructure, according to news reports. Transport Minister Igor Levitin was on hand to variously back up the twin attack or bear the brunt of it, whichever was required.

"This is a particular type of transport that is responsible for almost 90% of international freight deliveries in the world; it accounts for some 60% of Russia's foreign trade turnover," Putin informed a joint meeting of the State Council and the Nautical Board. "Coordinated development of all elements of sea transport in Russia is important, primarily to improve competitiveness. The efficiency of Russia's integration into the world transportation system, and of course the development of the Russian economy, depends on the competitiveness of our sea transport."

If Putin's words are anything to go by, every one of Russia's coasts features poor infrastructure. He claimed that major ports on the Baltic and Black Seas, the Far East and the Arctic seas' route all need serious upgrading and development, charging the Maritime Board with managing the effort.

"Presently, Russia has 62 such ports, but...Russian cargo continues to flow through foreign ports. The reason is well known - our ports don't meet modern requirements or the needs of the Russian economy," he was quoted by RIA Novosti as saying. "I believe that the government must immediately adopt a set of measures to upgrade these ports in the first place. Individual programmes of action must be mapped out for each of them without waiting for new laws, the approval of which should also be accelerated."

Admitting that administrators back in Moscow needed to pass "without delay" the legislative basis for the establishment of special economic zones at the country's major ports, Putin also noted that land issues are holding back development, with "50% of bureaucracy related to land use," he complained.

That issue extends well away from the actual ports, of course, with rail and road infrastructure, customs, and warehousing and other logistics elements needing to support the growth of traffic through Russian ports.


Moving from land to the sea, Putin said the United Shipping Corporation will aim to turn around the depletion of Russia's cargo fleet. "Russia controls more than 1,500 ships with a combined deadweight of about 15m tonnes," the president said, according to Prime Tass. "However 60.3% of this tonnage is transported under foreign flags that are 'comfortable' for Russian ship owners, and the number of such ships grows all the time. The average age of such ships is about nine years, and that of those sailing under the Russian flag is more than 24."

Putin claimed that overall, the Russian fleet shrank 4.8 times over the past 15 years. "There is no Baltic shipping line any more, and the fleet of the Far Eastern shipping line has shrunk by almost 66%," he said.

Sergei Darkin, governor of the Far Eastern region of Primorie, suggested that a minimum of 350 vessels are needed if the Russian fleet is to deal with half of the country's sea trade.

More specifically, Levitin spoke about the facilities at Murmansk, calling for the establishment of a management company to control the port and the trading hub there, and adding that cash will be pumped in to get the investment ball rolling.

"The managing company would get a project with substantiated investment and the investor will come here when he realizes that the infrastructure has been built," he asserted, mentioning Rosneft, Russian Railways, the Russian Property Agency and the regional authorities as parties interested in participating. The Kuzbassrazresugol coal company and the port are ready to build coal terminals, he added.

Putin, meanwhile, picked out the development of Artic shipping lanes as a priority, given their strategic role for accessing energy deposits and hydrocarbon exports, as well as a route connecting European and Asian Russia. At the same time he gave environmental concerns a cursory nod.

"Considering the projected increase in hydrocarbon transport to 40 million tons by 2015, we are going to need to develop our Arctic transportation system," quoted RIA Novosti. "This should be done in an environmentally balanced way: we know how vulnerable the local environment is. The broader issue will be to promote Russia's strategic interests in the Arctic, its economic, academic, and defense interests."

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