Publication: Eurasia Daily Monitor Volume: 5 Issue: 176

Despite continuing disagreements with the West, Russia’s top officials have pledged to turn the Eurasian nation into a “transit superpower” to link Europe and Asia by developing transcontinental railways and encouraging infrastructure development projects.

New transportation infrastructure projects would allow Russia to emerge as a “transit superpower,” said Sergei Mironov, speaker of the Federation Council, the upper house of parliament. Among priority projects, he noted plans to connect the Trans-Siberian Railway with a Trans-Korean rail line.

Addressing the Baikal Economic Forum held in Irkutsk from September 8 to 11, Mironov advocated dialogue between energy suppliers and consumers. He also criticized what he described as attempts by some consumer and transit states to dictate their conditions. He suggested turning the Baikal Economic Forum, with the motto “Europe-Russia-Asia Pacific: Ways of Integration and Cooperation,” into a venue for dialogue between East and West (Interfax, September 8-10).

Subsequently, Russian officials revealed plans to upgrade the Far-Eastern railway system, including a Korean link. On September 8 Russian Railways (RZD) head Vladimir Yakunin told the forum that construction of a Khasan-Rajin (Rason) line to connect the Russian and North Korean railways would start on October 3. In August the Russo-Korean joint venture RasonConTrans and North Korean railway company Tonhe signed an agreement to develop a Tumangan-Rajin rail line. The 49-year project would require an investment of about $200 million (Interfax, September 8).

The state-run Russian Railways, formerly Russian Railways Ministry, has long been preparing to extend the Trans-Siberian Railroad across the Korean Peninsula. In August 2001 Moscow and Pyongyang said in a joint statement that their countries would cooperate closely to create “a railroad transport corridor” linking the Koreas with Russia and Europe.

An “iron silk road” could cut the cost of exporting South Korean goods to Europe by half, but North Korea’s outdated railway system, mostly built by Japan before 1945 or in the 1950s with Soviet assistance, must first be modernized to fit the “iron silk road.” Russia’s RZD has long planned to take part in the modernization of North Korea’s railways, but these plans have been slow to materialize.

At the same time, Russian officials disclosed plans to upgrade China-bound railways. On September 9 RZD and the Mongolian government signed an agreement to develop an Ulaan Baatar rail line (Interfax, September 9). RZD had indicated plans to expand the Naushki-Ulaan Baatar rail line toward the Chinese border and build new lines to reach Mongolia’s major mining projects.

Apart from transcontinental railway projects, Russia has also pledged to develop domestic lines in the Far East, notably the Baikal-Amur Mainline (BAM). The project to increase BAM’s capacity up to 80 million tons of freight per annum would cost $7 billion, said Guennady Apanasenko, first deputy head of the Khabarovsk regional administration.

BAM was originally designed to encourage development of remote but resource-rich regions in the Far Eastern, notably Yakutiya. On September 7 RZD and the Yakutiya regional administration signed an agreement to more than triple funding for the construction of Yakutsk-Tommot-Berkakit rail line, notably the 273-mile Tommot-Kerdem section, from $582 million a year to $1.9 billion (Interfax, September 7).

Despite its importance, the Yakutiya Railway has been subject to delays. Since the early 1990s, Russia has been building a 510-mile railway between Yakutsk and the BAM. Although it was originally expected to be completed by 1998, its completion has been repeatedly postponed.

OAO Yakutiya Railway was launched in 1995 to operate the Yakutsk-Tommot-Berkakit line. The company currently operates the Tommot-Berkakit line, transporting some 2 million tons of freight a year. Its annual freight is expected to reach 40 million tons, and earnings should rise to $800 million by 2012 owing to development of coal and iron ore deposits.

Yakutiya has been an important part of Moscow’s plans to expand energy exports to the Pacific. The region plans to pump 35 billion cubic meters (bcm) of gas by 2016 and 12 million tons of oil by 2020, according to Yakutiya regional administration, which estimated that Yakutiya’s potential oil reserves may prove as high as 2 billion metric tons.

Subsequently, federal and local authorities have boosted investments in Yakutiya. In the past seven years, annual investments in Yakutiya increased by five times up to $4.7 billion, said Guennady Alexeyev, first deputy head of the Yakutiya regional administration. Yakutiya intends to increase annual investments up to $7.8 billion next year, he said, adding that the region would need $97 billion by 2020 to complete all its investments projects (Interfax, September 7).

In a bid to secure power supplies to serve the ambitious development projects, Russia’s RusHydro pledged to build the Kankunsky hydropower plant in Yakutiya by 2015 at an estimated cost of $3.6 billion (Interfax, September 7).

Not surprisingly, the Baikal Economic Forum was apparently intended to come as a major venue for the interaction of domestic and foreign investors. Investment agreements closed at the Baikal Economic Forum totaled $26.4 billion, Irkutsk acting regional governor Igor Yesipovsky said. More than $2.9 billion would be invested in the Irkutsk region by the end of 2008, he added (Interfax, RIA Novosti, September 10).

Overall, Russian officials have promised that the federal government would allocate up to $23.3 billion to fund development projects in Eastern Siberia and the Far East by 2013, and $349 billion by 2025. Official pledges of massive investments also appear to indicate that despite strained ties with the West, Moscow still does not expect any serious domestic financial troubles in coming years.