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Foreign participation in Russian mega railway project promising for world economy

October 08, 2013, 17:02 UTC+3 Zamyatina Tamara

MOSCOW, October 8 (Itar-Tass) - Russian President Vladimir Putin offered participants in the Asian-Pacific Economic Cooperation forum in Bali, Indonesia, to invest in the Russian project to complete the construction of the Baikal-Amur and Trans-Siberian railways and modernize the Northern Sea Route, promising incentives to the investors.

Experts believe Russia is unable to implement such large projects on its own. The Kremlin intends to spend 562 billion rubles (approximately 18 billion dollars or more than 13 billion euros) on the project. The sum includes 300 billion rubles for the modernization of the Trans-Siberian and Baikal-Amur railways, to be invested by the Russian Railways state-owned corporation. Federal budget allocations will make up 260 billion rubles.

At a meeting with cabinet officials last July, the Russian president underlined that the announced sum "for such large projects is absolutely insufficient, it's start-up capital in actual fact; yet it will enable investors to feel more confidence," meaning that the state was taking certain risks and making the first moves towards implementing these projects.

According to Putin, many Asian countries show great interest in the development of the Trans-Siberian and Baikal-Amur railways. Investments might come within the scope of public-private partnership, i.e. under government guarantees.

Last summer, Abu Dhabi's finance department decided to channel up to five billion dollars of investment in the Russian infrastructure, in particular in the construction of the Moscow-Kazan high-speed railway. This circumstance became a stimulus to invite foreign investors to participate in the upgrade of other railways.

According to the InfraNews research agency, Russia accounts for less than 1 percent of transit trade between the European Union and Asian countries. This trade is worth one trillion dollars. Russian authorities plan to increase trade flows in this direction by 10 percent.

Academician Alexander Dynkin, director of the Institute of World Economy and International Relations (IMEMO), Russian Academy of Sciences, noted in an interview to Itar-Tass that the issue of transport infrastructure was pressing for the whole world today. "In the conditions of almost ubiquitous recession, the modernization of the Trans-Siberian and Baikal-Amur railways involving foreign investors might speed up the rates of growth of world trade amidst the crisis," he said.

The project to modernize the Trans-Siberian railway has been discussed for more than a decade, as the best shortcut to deliver cargoes from the most developed countries of the Asian-Pacific region to Europe," the academician went on.

Moscow State University doctor of geography Leonid Smirnyagin, in an interview to Itar-Tass, noted that "Russia should make haste to implement the projects, because its neighbours - in the first place China and Kazakhstan - are thoroughly working on similar projects to link Europe with the Pacific Ocean." For his part, Dynkin told Itar-Tass that China had already run the first train to Europe bypassing Russia.

Some experts believe that the Trans-Siberian and Baikal-Amur railways upgrade project cannot pay back. Expressing an opinion to the contrary, Dynkin believes that everything will depend on the quality of the railway and the quality of services it will provide. "If we offer attractive conditions to APEC countries and large shares in the project, it is quite possible to have the project pay off," Dynkin said. By using the Trans-Siberian and Baikal-Amur railways, the European Union could cut the time for delivery of goods from Asia by two weeks. This transportation channel would bring advantages to Asian-Pacific countries, because the Suez Canal is overloaded with merchant vessels and is located in an unstable region. "We need an alternative to the Suez Canal. For Russia, the project is advantageous for domestic shipments and for receiving transit payments," he said.

According to Leonid Smirnyagin, one of the most prominent experts in political and economic geography, "a hope is emerging that the trans-continental transit will generate a sort of Californian gold fever in the Far East. Or it might reverse the trend towards its demise, in which the Far East lost more than one-fifth of its population during the years of Russia's independence."