Trans-Siberian Land Bridge Opens – Reducing Japan-EU Transportation Time By 50%

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Op/Ed by Chris Devonshire-Ellis

The so-called “Trans-Siberian Land Bridge” has opened, with a successful first test run of cargo from Yokohama to Europe. Essentially the route covers a dual maritime-rail link that initially sees products travel by ship from ports on the Japanese west coast, travel to Vladivostok and connect with the trans-Siberian express through to Moscow and onto Brest in Belarus, right on the border of the EU and Poland. From there they enter the EU market and be dispersed as required.

Although the concept is not entirely new, it is a new commercial route being operated by Russia’s Far Eastern Shipping Company (FESCO) in a venture with RZD Logistics. The crucial point about the route is that it cuts down the journey time in shipping goods from Japan to the EU by 50%, taking about 20 days, saving considerable amounts of time and money.

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I wrote about the increasing role Russia has in terms of cross-border transportation between China and the EU before in the article “Transshipping China Trains and Ships To Europe” and this new Japan route is an extension of the same thing. While the shipping of Chinese goods to Europe is responsible for the largest single national volume of goods using the trans-Siberian, the new Japan route will usher in a significant increase in transit cargo passing from both Japan and South Korea through Russia. It is also a route that offers plenty of growth potential – the total current volume of containerized freight between Japan and South Korea with Europe is about 5 million 20-foot containers (TEU) per annum. FESCO and RZD have eyes on that increasing to 200,000 TEU plus each year.

There are other dynamics at play that will also see, in time, an explosion of transit freight across Russia from Asia to the EU. One is the development of the China-Eurasian Economic Union Free Trade Agreement, which has been signed off but at present does not contain provisions for a reduction in tariffs. But that is on the cards, with the Chinese and Russian Presidents Xi and Putin stating at the recent SPIEF conference in St.Petersburg that tariffs were being worked on between the two sides. As and when a significant agreement is reached, tariff reductions on Chinese goods and Russia will see Chinese goods turning up at Ports like Brest, essentially duty free. While the EU will still be imposing their own customs duties, it will usher in developments such as warehousing infrastructure and repackaging facilities at ports like Brest. The use of Blockchain by both Russia and China in terms of cargo and containers will also speed up delivery times. That has implications for Russian, Japanese and Chinese fishing grounds in north-east Asia and Far East Russia, reaching out to affluent consumer markets in the West.

 

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Russia Briefing is produced by Dezan Shira & Associates. The firm advises international businesses on investing, setting up businesses and administering them throughout the Eurasian region, including Russia, China, India & ASEAN, and maintains offices and partners in each of these countries and regions. For assistance with investing in Russia, or for Russian businesses wishing to invest in Asia, please contact Maria Kotova at maria.kotova@dezshira.com or visit us at www.dezshira.com.

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