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Entering promising markets

The growing trade relations between Russia and Asian countries highlight the need for cargo transportation logistics
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According to the Federal Customs Service of Russia, the foreign trade turnover between Russia and Asian countries in January – November 2023 amounted to $446 billion, a $60 billion increase compared to the same period in 2022.

In January-November 2023, Russia's exports to Asian countries rose to $276.1 billion from $257.1 billion, while imports grew to $169.9 billion from $128.7 billion.

The Chinese side

China continues to stand as Russia's primary and most significant trading partner in the present day.
According to the General Customs Administration of the People's Republic of China, in 2023, compared with 2022, the trade turnover between the two countries increased by 26.3% to $240.1 billion. Shipments of imported goods from China to Russia grew by 46.9% to $111 billion. Russian exports to China rose by 12.7%, reaching $129.1 billion. 

Establishing a comprehensive transport and logistics network is essential for facilitating the movement of goods across countries. As reported by Alexey Chekunkov, Minister of the Russian Federation for the Development of the Far East and the Arctic, last year the cargo turnover of railway checkpoints in the Far East increased by 30%, while the container turnover grew by 22%. He announced these figures in mid-January at a meeting of Russian President Vladimir Putin with members of the government.

In turn, Russian Railways, together with the Ministry of Transport of Russia, is constantly working on technological and technical improvement of checkpoints on the border with China. The primary tasks of Russian Railways include modernizing and developing the existing border crossing infrastructure.

Along with this, a cross–border railway bridge over the Amur River, Nizhneleninskoye - Tongjiang, was opened in November 2022. According to Russian Railways, over 11 months of 2023, almost 2.9 million tons of cargo were exported via this bridge including 2.2 million tons of coal and 623 thousand tons of ore. While the Nizhneleninskoye checkpoint is currently equipped for the transportation of coal and iron ore exports, it also facilitates the passage of container trains in both directions.

Border crossings on the border with Mongolia and Kazakhstan are also used to transport goods to/from China. In addition, the possibility of building new railway lines from the Kemerovo Region and from the south of the Krasnoyarsk Territory to China via Mongolia is now under consideration. The Ministry of Transport, the Ministry of Economic Development and Russian Railways are currently preparing a feasibility study for constructing new railways and identifying the funding sources for this project.  

A growing trend

The dynamics of foreign trade with India, currently one of the top five key trading partners of the Russian Federation, have become even more pronounced, particularly with exports reaching $56 billion. The main exported items included crude oil and petroleum products (almost $45 billion), as well as coal ($3.8 billion), fertilizers ($2.2 billion) and diamonds ($1 billion).

At the same time, according to the Indian Ministry of Trade and Industry, imports increased 1.4 times in 2023 to $3.7 billion with the main items being medicines ($311 million), steel products ($209 million), minerals ($149 million), shrimp ($137 million) and ceramics ($108 million).

As a consequence, the development of trade relations between Russia and India entails the need for the development of transport infrastructure and the organization of new cargo delivery routes. The key role here is to be played by the North–South International Transport Corridor (ITC). 

According to Russian Railways, the volume of cargo transported along all three routes of the North–South ITC grew to 11.5 million tons in the first 11 months of 2023, marking a 5.6% increase compared to the same period last year. The volume of container traffic amounted to 42,000 TEUs.

It may be recalled that there are two land routes along the North–South ITC – eastern and western, with a railway line on each. But while the eastern direction is completely connected by a railway network, the western route has a missing Rasht–Astara section, which negatively affects the transportation volumes.
Today, delivering cargoes between India and Iran to Russia (and vice versa) via the eastern route has become more convenient due to the established railway network. The Ministry of Transport is actively engaged in developing an end-to-end transportation service and negotiating agreements with Kazakhstan and Turkmenistan in both unilateral and multilateral formats.

It was the eastbound railway direction that saw the launch of a regular container service by the subsidiary of the RZD holding, JSC "RZD Logistics". Also, in February 2023, the FESCO Transport Group opened a regular FESCO Indian Line West marine service operating on the Novorossiysk – Nava-Sheva – Mundra – Novorossiysk route. In August, the company put into service its own container ship on the sea line thus reducing the transit time from Indian ports to Russia to 16 days.

Untapped potential

Vietnam is also a promising country for the development of trade relations today, although the trade turnover of the Russian Federation with China and India exceeds trade with Vietnam by orders of magnitude.
" The mutual supplies between Vietnam and Russia account for a small portion of their foreign trade. (less than 1%)," Vladimir Mazyrin, head of the Center for Vietnam and ASEAN Studies at the Institute of China and Modern Asia of the Russian Academy of Sciences, told 1520international.

As reported by Maxim Kuznetsov, chairman of the Russian-Asian Business Council, according to the data of the General Customs Administration of Vietnam, the trade turnover between Vietnam and Russia in 2023 amounted to $3.6 billion, an increase of 2.3% compared to 2022. This amount includes $1.7 billion in exports from Vietnam and $1.9 billion in imports from Russia.

The Russian market today has a demand for a number of Vietnamese goods. These are coffee, fruits, cashew nuts, textiles, rubber and rubber products, confectionery and ceramic products. In the first 7 months of 2023, Vietnam exported coffee ($155.3 million), textiles and clothing ($234.5 million), as well as machinery and equipment ($74 million).

Vietnamese partners are demonstrating demand for meat and dairy products, fertilizers, grain and wood. In the first 5 months of 2023, Vietnam imported 29.6 thousand tons of fresh, chilled or frozen pork worth $73.6 million. Notably, the structure of the pork market in Vietnam has changed: imports from Russia and Germany have increased.  Russia exported 95% more pork products to Vietnam compared to the same period last year.
The development of trade between Russia and Vietnam is facilitated by a free trade agreement with the Eurasian Economic Union signed in 2015, which stipulates that more than 90% of goods are duty-free. Thanks to the agreement and the development of relations, the trade turnover between the two countries increased to $5.5 billion in 2021. 

The imposition of Western sanctions against Russia, the withdrawal of foreign maritime operators from the Russian market, the complication of the payment situation in 2022, and the absence of an infrastructure for settlements in national currencies have significantly harmed bilateral trade and economic relations. 

"This led to a limitation of the number of sea voyages and, for a brief period, a total lack of direct communication between the countries. Additionally, challenges emerged with regard to payment for goods," Vladimir Mazyrin continues. 

The trade turnover between the two countries in 2022 amounted to only $3.54 billion.

"Currently, the enhancement of direct sea communication between the countries and the arrangement of goods delivery by rail through China, facilitated by the opening of new services by the FESCO Group in May 2022, as well as the efforts of a joint Vietnamese-Russian bank to establish mutual settlements, including in national currency, stand out as notable initiatives by Russia to address these challenges," Vladimir Mazyrin believes.

Nevertheless, by 2025, the governments of the two countries aim to achieve a bilateral trade volume of $10 billion, a goal set in 2010 that has yet to be realized. 
"The development of a payment system and financial infrastructure in national currencies is expected to help reach this level in the mid-term perspective," Maxim Kuznetsov says.

In his opinion, Russian-Vietnamese logistics is at an acceptable level, with diverse cargo delivery channels, and a predominance of maritime supply channels to the ports of Vladivostok.

Sergey Volkov

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