Clare Nuttall in Giurgiulesti, Moldova -

The opening of Moldova’s only port, the Giurgiulesti International Free Port, on the maritime Danube removed one of the main obstacles to the country’s development. Now, the conflict in neighbouring Ukraine and Moldova’s worsening relationship with Russia have increased the importance of this independent route to international markets.

Partway between Moldova’s capital Chisinau and Giurgiulesti at the southern tip of the country, the newly resurfaced highway disappears into a potholed road used by the container trucks travelling to northern Moldova and beyond. Cargo transport through Giurgiulesti is growing steadily, according to the port’s operator, Danube Logistics. The company aims to attract more international transit, though this is being held back by poor infrastructure in Moldova and neighbouring countries.

Landlocked Moldova obtained the area where the port is located – a small strip of territory on its borders with Romania and Ukraine – through a 1999 land swap with Ukraine. Moldova gained 450 metres of Danube riverbank and thereby access to international waters. The small port is owned by Netherlands-based EASEUR Holding (80%) and the European Bank for Reconstruction and Development (EBRD) with 20%, bne reported [ http://www.bne.eu/content/landlocked-moldova-gets-international-port ]. Today, Giurgiulesti has terminals for oil products, grain and vegetable oil, and a small container terminal that opened in 2012.

Previously, imports and exports by sea were channeled via Odessa, which is less than 60km from the Moldovan border, and other Ukrainian ports. “Having its own port gives Moldova more reliable access to international markets, as it is no longer dependent on the authorities of a neighbouring country. Secondly, with the opening of an alternative port competition increased and transportation costs have fallen,” says Thomas Moser, chairman of Danube Logistics. “This has helped to diversify Moldova’s export trade.”

Conflict logistics

With the outbreak of violence in Ukraine, this has become even more crucial to Moldova. The situation was further complicated as the most direct route from Odessa to Chisinau is via Moldova’s breakaway Transnistria region. The conflict between Russia and Ukraine has caused Kyiv to shut its border with Moscow-backed Transnistria, which is expected to further increase cargos via Giurgiulesti from Transnistrian producers.

Moser hopes to see an increase in transit volumes this year, projecting an increase in total cargo from 410,000 tonnes in 2013 to over half a million tonnes, and container transport from 7,000 teu (twenty-foot equivalent unit) to at least 12,000 teu.

As well as the tense geopolitical situation, this increase also reflects greater demand for transportation within Moldova, whose economy is expected to grow by 3.5% this year, rising to 4.5% in 2015, according to the International Monetary Fund. The Moldovan agriculture ministry forecasts that wheat production, part of which is exported to East Asia, is expected to be 10% higher than in 2013, which itself was a 10-year record high. Meanwhile, imports of construction materials have also been boosted by the ongoing EBRD-funded road reconstruction programme.

With the signing of the EU free trade and association agreement on June 27, Moldova is expected to see a further hike in trade with EU countries. Moser notes that Moldova has “great opportunities” to export fresh and processed food to Europe. “As costs rise in existing EU member states such as Romania, manufacturers, including those in both the automotive and clothing sectors, are starting to move their operations eastwards to Moldova, again increasing both imports and exports,” he explains.

Chisinau hopes this will offset a fall in exports to Russia, which followed up its 2013 ban on Moldova wine with new restrictions on meat imports six days after the EU agreements were signed. Moscow has warned that further restrictions on Moldovan products could be forthcoming.

New facilities

With the expected increase in traffic, the port needs to be expanded, Moser says. “The existing export terminal has insufficient capacity, and there is also a need for a second container berth and more warehouse space including cold storage for fruit, vegetables and fish.” Construction of a mixed-gauge rail terminal, now close to completion, will allow the port to handle railway shipments from both the European gauge railway used in Romania and the former Soviet Union’s rail network, which runs on a wider gauge.

However, for the port to reach the next level – as a regional logistics hub – Moser says that investment into transport infrastructure, both in Moldova and the region, is “critical.” At present, a lack of investment in road and rail infrastructure have resulted in the ports of Southeast Europe, including much bigger ports such as Romania’s Constanta and Varna in Bulgaria, being underutilised, Moser argues. “With better transport links, Giurgiulesti would be an interesting transit route, for example for companies in Ukraine and eastern Poland,” he says.

At present, however, companies from Central Europe that are geographically closer to the southern ports – even some from northern Romania – opt to transport goods northwards to the ports of Rotterdam and Hamburg rather than south to the Black Sea because of better transport links.

Although the EBRD is already funding a large-scale road rehabilitation programme in Moldova, extending a €150m loan facility in 2013, the country’s railways are in urgent need of investment, as are the roads and railways in other countries in the region.