Currently, the Trans-Siberian Railway is capable of moving some 120 million tons of cargo each year, and around 13 percent of container trade between Europe and Asia utilizes the line. The railway's expansion would add another 55 million tons of capacity by 2018 — a 46 percent increase. The project will be underwritten with $10 billion from Russian Railways, $4 billion from the Russian government's National Welfare Fund (the oil-supported rainy day fund) and $3 billion in other forms of direct government funding.
Since the railway was built more than a century ago, various governments in Moscow have discussed improving the line, but only nominal expansions have ever been undertaken. More substantial upgrades have been deterred by factors such as high costs, intense labor requirements and political complications related to expanding physical connections with Russia's neighbors. Over the past decade, the Russian government has more seriously considered proposals to bolster the line's capacity by around 12 million tons, but such a relatively minor upgrade was not deemed worth the costs. In 2010, then-Prime Minister Vladimir Putin once again backed off plans for an expansion, since Russia was struggling to emerge from its 2008-2009 financial crisis.
With high oil prices boosting the Russian government's revenues over the past three years — and with Russia forecasting that high energy prices will continue for the foreseeable future — the Kremlin has been much more willing to take on large infrastructure projects. Indeed, Russian Railways decided that the best way for an upgrade of the Trans-Siberian line to be worth the cost would be to increase the size of the expansion itself from previous proposals — hence the coming 55 million-ton boost in capacity.
Goals and Benefits
The railway expansion will be accompanied by several other infrastructure projects. According to Russian railway and port operator N-Trans, Russia will triple rail-to-port capacity in its Pacific coast terminals by 2020. In addition, the port at St. Petersburg is expanding by 44 percent, and German engineering giant Siemens signed a $3.2 billion deal in 2012 to supply 675 cargo electric locomotives to Russia.
Moscow has two goals in the railway expansion. First, it hopes to boost its exports of raw commodities. Russia has become among the top oil producers and exporters in the world, and around 250,000 barrels of Russian oil is transported to Asia by rail each day — an amount that could increase with the Trans-Siberian expansion. Moreover, Russia's largest mining firms — Evraz, Severstal, Rusal and Russian Copper Co. — recently invested some $8 billion in the country's coal sector, especially mines and coal-related transportation, in hopes of expanding production by 2020. The coal industry too would rely on an expanded Trans-Siberian Railway for exports to Asia.
The upgraded railway would also give Russia a more prominent role in trade between Asia and Europe. Currently, goods from Asia can reach Europe in roughly 10 days via the Trans-Siberian Railway. By comparison, seaborne goods from South Korea or Japan, for example, take around 28 days to reach Germany and 40 days to arrive in St. Petersburg. Moscow hopes the rail expansion will make overland transit through Russia even more attractive as an alternative to seaborne routes.
An expanded Trans-Siberian Railway will also prove useful for quickly and cheaply returning empty, non-revenue-earning containers from Europe to Asia, since there is not enough eastbound cargo to fill all the returning boxes. The European Union is China's largest trading partner, and China is Europe's second-largest, so any reductions in transportation costs will benefit both sides.
Possible Hurdles
Despite the benefits of the railway expansion, Russia's efforts to strengthen its role in Asia-Europe trade may face some resistance. For example, China is hoping to build its own railways to Europe that would not be vulnerable to Moscow's whims. Over the past year, Beijing has been working on plans to construct its own line to Europe through southern parts of Central Asia and the Middle East. The route is still in the early stages of development, so cost comparisons to the expanded Trans-Siberian line are still unclear. Moreover, the various routes being considered for the Chinese line pass through politically sensitive and relatively insecure regions such as parts of Uzbekistan and Iran.
Another challenge for the Trans-Siberian expansion is the incompatibility of the broad-gauge track used in Russia and former Soviet states to the standard-gauge lines common in the rest of the world. The difference forces cargo heading across Russia to Europe or China to stop and change gauges between regions. To improve connectivity somewhat with Central Europe, Russia is planning to build a broad-gauge railway from Russia and Ukraine to Austria and Slovakia by 2016.
Traditionally, Central European states have been suspicious of Russian attempts to increase connectivity, which they typically see as aimed at increasing Moscow's influence in the region. Indeed, Russia has demonstrated its willingness to use infrastructure projects such as natural gas pipelines to shape its political relationships in the region.
Ultimately, Russia's success in enhancing its role in Asia-Europe trade will depend on the willingness of both Europe and Asia to expand logistical connections with Russia — as well as Moscow's ability to move forward with such a large investment project at such a sensitive time. In Asia, Japan and South Korea appear keen on taking advantage of the shorter route to Europe provided by the Trans-Siberian line. And with Europe currently under economic and political pressure stemming from its ongoing economic crisis, calculations on the Continent about working closely with Russia are changing. The benefits of cheaper and faster transportation to Asia — even if via Russia — may override concerns about Moscow's geopolitical ambitions.
