Summary of Working Paper No. 116-1998
III.02.2
In this Working Paper a number of factors related to the development of the
Russian transport sector, but also economic trends have been presented. The
complexity of the environment within which Russian ports works has called for the
use of a multitude of sources to support the statements presented here. Still
only some few of all factors, and sub-factors, that can be said to influence
development. The difficulty in making predictions in the Russian environment remains
as large as during the first years of the 1990ís. In a Russian setting
projections can be made invalid due to unexpected changes in basic assumptions at
practically any time. This also makes prediction extremely insecure also when it is
only intended to cover the coming two or three years.
Within the next 2 - 3 years, the supply of port services in Russia is not
likely to change dramatically, and this leaves some two more years of respite for
the two ports in the Russian north-west. The situation for the two ports focused
upon here, Murmansk and Arkhangelsk, has for some years been problematic, but
improved slightly during 1997, when both ports increased their turnover to 7.1
and 800.000 tonnes respectively. In volume terms, it was a substantial
improvement in Murmansk, and in percentage terms the same could be said for
Arkhangelsk. What will happen during the first two years of the next millennium is a
dramatic increase on the supply side of port capacity in the Baltic States and in
the Russian part of the Gulf of Finland. In a first step capacity is likely to
increase by 50% of present capacity until 2001 and within five years, yet another
50% capacity increase will take place. Such an increase in capacity is not
likely to be met by a similar increase in, which is most important here, exported
bulk cargo volumes. The present plans for many of these projected ports,
especially in the Gulf of Finland, have been well covered in this paper. To add so
much new capacity to a port market, that already today shows no signs of
saturation, will of course increase competition between existing as well as new
transport corridors and ports immensely. It must be remembered that also ports in the
Baltic countries are expanding, but are operating existing facilities and have
had time and possibility to adjust to, and practise, market behaviour longer
and better than their Russian counterparts. All ports, existing and new, will
from the beginning of next millennium have great difficulty in finding cargoes. To
run a port in a location off the main flow of cargoes under such conditions
will probably prove more than difficult. Which is the case in both the ports of
Murmansk and Arkhangelsk.
The Russian port sector is far from the only, and not the most obvious, sector
in the country that hopes to attract large foreign investments. The most
obvious field for FDI's is perhaps oil and gas prospecting and extracting. For oil
and gas some insecurities in the legislation have been clarified at the same
time as others have been created. Positive side-effects from oil and gas
prospecting in the north are what is often mentioned as the future basic industry for
the Russian north. To set high hopes on oil and gas might be a realistic
scenario, but not in the short run while oil prices are continuing to fall to new
record lows. It has also been shown that the importance of such an expansion, at
least when counted in tonnage, will be of rather marginal importance for the ports
concerned as a large share of the equipment will be produced domestically.
If the Barents co-operation partner, Finland, manages to arrange the opening
up of the long discussed Ledmozero - Kochkoma railway, this will become yet
another factor that will further deplete the already weak competitive position of
the ports in Murmansk and Arkhangelsk.
Based on the multitude of facts that have been presented in this paper no
other conclusion can be drawn than that the two ports in Murmansk and Arkhangelsk
face a gloomy future. This in times of drastically increasing capacity in the
Russian port sector. The hour of destiny is still two or three years away, but
after that point the two ports will have to concentrate on the handling of
locally generated cargoes for their future turnover.