Silk Road from Ukraine to China – No Tickee No Shirtee (Part I)

I saw this piece in VZGLIAD, written by reporter Olga Samofalova.

The context is a large international economic project, headed by China, called the “Silk Road”.  Named in honor of the ancient trade route, dating back to Marco Polo times, between China and Europe.  So named because Chinese silk was one of the top products exported and traded.  The route itself is like a spider web of branches and filials.  Modern-day China is attempting to resurrect several branches of this ancient route; and it goes without saying that any nation participating as a hub or transit point, stands to profit economically from the lucrative trade.

The VZGLIAD piece is a negative portrayal of Ukraine’s involvement in this project.  Several years ago, even before the latest events, Ukraine proposed itself to China as a Silk Road hub whose major attraction would be to bypass Russia.  Bypassing Russia is considered by some as an attractive political goal.  But not everything is about ideology.  Russia’s vastness of territory has always been a challenge to travellers and traders.  It can take up to 2 weeks to move freight by land (mostly railways) through the vastness of Russia.  Hence, one of the purposes of the “Silk Road” is to try to ameliorate this distance by using a network of other more southernly routes, including waterways.  Ukraine factors into this because of its envious geographical situation, bordering Europe on the West, while also bordering the Black Sea.

Interview with Head of Ukrainian Railroad

Ukrainian participation in “Silk Road” would be as a railway hub.  Hence, the success of this portion of the project depends on Ukraine’s ability to run a good railway system.  Ukrainian railway system is a type of publicly owned monopoly, dating back to Soviet times, called Укрзализныця (UkrZaliznytsya).  This company is responsible for all railway movements, of both private passengers and freight.  This company is headed by a man named Alexander Zavgorodniy.  A major interview with Zavgorodniy is linked here.  For several months now, the railway monopoly has been in dispute with private freight companies, over the issues of government tarrifs and freight fees.  Recently they have been in arbitration at something called the American Trade Palace, and I honestly don’t know what that is.

According to Zavgorodniy, the Ukrainian railway system is in need of capital investments and infrastructure improvements, in order to ensure the safety of passengers and the overall functioning of the system.  He names an “ideal” figure of 35 billion hryvnas annually, but realizes that is unrealistic.  Like most Ukrainian institutions, UkrZaliznytsya is heavily in debt to Euro-bond holders.  The debt was restructured, giving them some temporary relief.  But survival requires more investment.  Zavgorodniy plans to present a detailed economic plan on 20 March, to potential investors.  He uses the same language and expresses the same ideology as most Ukrainian officials, saying that the plan is to discard the old Soviet models and to reform the Ukrainian railway system, along the model of Germany or France, in order to be compliant with “European” standards.

Zavgorodniy is responsible for the Ukrainian railway network.

In this interview Zavgorodniy was asked about the start of  “Trans-Caspian Corridor”, aka “Silk Road”.  He responded thusly:

There wasn’t a start per se.  There was a test run, which allowed us to assess the situation – where the problems are, and what kind of problems.  We plan the actual start in March.  Once the Silk Road takes off, we will be able to move freight from China to the Polish border in 11 days.  Which is about the same amount of time that it takes for a train to pass all the way through Russia.  Of course, there is still the issue of the price.  But currently we own two ferryboats, which became the property of the Ukrainian railways.  They will help us to noticeably lower the price of shipping cargo along the Silk Road, making our route more attractive and competitive.  Our colleagues from Germany and Poland have stated many times, that they are interested in the creation of such a corridor.  And currently we are working with them to formulate a single policy, and to create a single tariff.

Is Zavgorodniy just spinning a yarn?

For Ukraine, this route has a strategic significance, above all in the question of national security.  Already last year we foresaw the risk of a transportation blockade on the part of Russia.  And we “took out some insurance”, so to speakподстелили соломки» — literally “laid down some straw” at the spot where we were to fall down), by activating negotiations surrounding this corridor.  If we had not started this process already, then today we’d be starting practically from zero.  But thankfully we have already invested a lot of time and thought into the Silk Road project.  And as we can see, it has already produced results.

But has it?  Or is Zavgorodniy just fooling himself with wishful thinking?

[to be continued]

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