Publication: Eurasia Daily Monitor Volume: 4 Issue: 81

Russia has announced an extraordinary project to build a transcontinental Yakutsk-Magadan-Anadyr-Alaska rail link, which would include the world’s longest subsea tunnel under the Bering Strait. However, the news comes as a reminder that Russia’s major railway projects in the East tend to be loss-making and take decades, if not centuries, to materialize.

The plan was revealed in Moscow on April 18 by Viktor Razbegin, deputy head of industrial research at Russia’s Economic Development and Trade Ministry and an expert at Russia’s Academy of Sciences. He insisted that the project could prove economically viable, despite its huge costs, estimated at $55-67 billion. Razbegin argued the railway would repay construction costs in 13-15 years by attracting and generating up to 70-100 million tons of freight annually.

The 4,000-kilometer Yakutsk-Magadan-Anadyr section of the rail link in Russia would cost $12-15 billion, the tunnel would take another $10-12 billion, while the remaining amount would be invested in infrastructure development, Razbegin said. The 102-kilometer tunnel would be built in three sections through two islands, while the project would also include oil and gas pipelines across the Bering Strait and a fiber optic cable network, he said (Interfax, RIA-Novosti, April 18).

Plans for a tunnel under the Bering Strait, the Yakutiya railway, and the Baikal-Amur Railway line (BAM) were first considered in the 19th century. Stalin revived the BAM idea, and half a million Gulag prisoners built its Eastern section during the 1930s and 1940s.

Following Stalin’s death in 1953, BAM construction was abandoned, only to be revived again in the early 1970s by Soviet leader Leonid Brezhnev. The 4,000-kilometer rail system, which traverses Eastern Siberia and the Russian Far East some 400-500 kilometers north of and parallel with the Trans-Siberian railway, was finally declared complete in 1991 at an estimated cost of $10 billion. However, technically the BAM was not completed until December 2003, when the Severomuisk tunnel — running nearly one mile below ground — was completed.

Another part of East Siberia’s railway system, Yakutiya Railway, has also been subject to delays. Russia has been building this 820-kilometer-long railway between Yakutsk and the BAM since the early 1990s. Although it was originally expected to be completed by 1998, now its completion is tentatively slated for 2008.

Yakutiya Railway was launched in 1995 to operate the Yakutsk-Tommot-Berkakit line. In 2006, it reported net losses of 2 million rubles due to dropping usage. Last year the company funneled 1.7 million tons of freight or about 5% less than in 2005. According to Yakutiya Railway CEO Vasily Shimokhin, the decline is the result of Yakutiya coal companies cutting their shipments. The company currently operates the Tommot-Berkakit line, which funnels some 2 million tons of freight a year.

However, the company aims at raising its turnover, as the Yakutsk-Tommot line is due to be finalized in 2008. This year Yakutiya Railway plans to handle some 2.2 million tons of cargo. Its annual freight is expected to reach 40 million tons and earnings to go up to $800 million by 2012 due to development of coal and iron ore deposits (RBK daily, April 6).

As with BAM, Yakutiya Railway appears to continue struggling to make the ends meet as commercial enterprises due to the high costs. Both lines are located in permafrost areas and run through swamps, taiga, mountain ranges, and over hundreds of rivers, making maintenance expensive. The cost of freight carried by Yakutiya Railway or BAM is roughly twice that of the Trans-Siberian Railway.

Both Yakutiya Railway and the BAM were originally conceived to give the development of Eastern Siberia a much needed boost. Railway designers planned new mining and industrial centers along these routes to mine and process its timber, coal, gold, iron and other resources, but private investors in these projects are yet to show up, while the government is yet to provide funding to build them. Therefore, instead of stimulating new industries in the region, these rail links appear to remain liabilities rather than assets, at least for now.

In terms of its scale and engineering challenges, the proposed Yakutsk-Magadan-Anadyr rail line could equal or exceed the BAM. The Yakutsk-Anadyr link would run through inhospitable permafrost areas with the world’s harshest winter weather conditions, and its construction and maintenance costs would be not only exorbitant, but also difficult to estimate in advance.

Therefore, the Yakutsk-Alaska rail link seems destined to hemorrhage red ink, like the BAM and Yakutiya lines, which remain largely priced out of the cargo market because their revenues still cover roughly half of the maintenance costs. As the economic viability of the proposed Yakutsk-Alaska rail link appears an unlikely goal to achieve, this extraordinary project would need equally extraordinary circumstances to materialize.