Apart from some critical raw materials such as gas, coal or – to a lesser degree – oil, Russia has been largely cut off from trade with the West following its invasion of Ukraine. While the economy is going south, Moscow is eagerly looking for alternative ways to compensate for the loss of trade and supply by shifting its attention from the EU and partially North America to alternative markets. Since March, China and India have increasingly been put under Moscow’s microscope.
One of the first visible results of this new “Turning to the East” strategy are the rejuvenated rail services jointly operated by the railway companies of Russia and Belarus. The services, running twice or thrice per week, start from Orsha-Zapadnaya station in Belarus and end in Absheron station, Azerbaijan. The trains take seven days to complete their journey. Both Russia and Belarus emphasize that the cargo trains tap the Central Asian market and connect to India. However, given the low volume of trade between Russia and Azerbaijan in particular, this rail link is of only minor importance and hardly measurable in terms of transport volume, experts hold.
Silkway West’s transport volumes reach record heights
However, Azerbaijan benefits indirectly from the sanctions imposed on Russia by western and same Asian states. Evidenced by state-owned freight carrier, Silkway West Airlines, whose transport orders are going through the roof. For the Baku-based cargo carrier, the sanctions work like a stimulant. With the exclusion of competitor, AirBridge Cargo, from serving intercontinental east-west routes, Silkway has been able to further consolidate its already strong position on air services between the Far East and Europe. This will presumably also be reflected in the balance sheet. Yet, the carrier keeps the figures under wraps.
Small gap, big consequences
Back to trains, a rail track gap existing between Rasht, Iran, and Astara, Azerbaijan shall be eliminated. The missing link measures only 165 kilometers but, once closed, the rail corridor will stretch from India to Russia, with multiple connections to the Caspian region. Meanwhile, India is trying to persuade Iran to connect Rasht and Astara, to enable much sought-after cargo via rail services. Currently, most trade between India, Russia, and the neighboring CIS states, is carried out by ocean freight via the Bosphorus and the Black Sea, but firstly, it is very time consuming, and secondly, drifting sea mines make it increasingly risky for vessels to take this route.
India shifts attention to CIS and Russia
This Rasht – Astara project is in the mutual interests of India and Russia, since both are facing economic problems although for different reasons. It comes at a time when India is keen on engaging in a comprehensive trade treaty with the Eurasian Customs Union, led by Russia. At a meeting held recently in Azerbaijan, of eight countries interested in the project, India had offered to provide consulting services through its subsidiary Rail India + Economic Services (RITES), to complete the railway project at the earliest.
Abhijit Das, a professor at the Indian Institute of Foreign Trade and Head of the Center for WTO Studies, said Russia is a big market while the other countries in the region, though small, are rich in energy resources. While negotiating with Kazakhstan, Tajikistan, Uzbekistan, and others, India should focus on ensuring part of its energy security from this region, apart from trying to meet their import requirements, Mr. Das recommended.
Maritime alliance
Further east, China and Russia are deepening their ties in maritime services. Enterprises of both countries have inked sailing agreements to ship exports of Russian raw materials to ports located at China’s Pacific rim. Included in the deal are Russian freight forwarders, Inteco, and the Swift Transport Group that capitalize on the retreat of western shipping companies such as Moller-Maersk following trade bans imposed on Russia.
Trade between Russia and China, including India, has picked up remarkably since sanctions were imposed. The exchange works according to a familiar recipe: Russian energy and raw materials are needed in both China and India, while these countries supply technical equipment and consumer goods in return. Due to the partial elimination of the European market, Moscow now has to grant the aforementioned countries large discounts on energy, however, sources close to the market confirm.
Out of China
Chinese media, although strictly censored, is increasingly reporting an exodus of expats. While official figures are not available, China’s strict zero covid policy is causing expats to leave, the French agency AFP recently reported, citing local papers. And social media is full of other reasons for the ongoing departure of European and American managers, consultants, and technical experts. One example is a Singaporean source named A. Dan, who lived in China for many years, but has meanwhile left the country. His post is exemplary for many similar statements: “China is an autocratic society and continues to move toward a modern feudal society led by an emperor whose megalomania will ultimately destroy the country. China has been through this before and it broke. It seems they are about to do the same and have begun to alienate more people and countries as they strive for world domination. It’s time to leave before you can’t anymore,” Mr. Dan recommends.
Meanwhile, an increasing number of foreign companies prefer to divert their investments to Malaysia, Vietnam, or Thailand, or opt to reshore their business altogether, thus reducing the risk of becoming victims of industrial espionage and product piracy.
Heiner Siegmund
Cargoforwarder.eu
