Russia’s Rivers: A Viable Trade Alternative?
Long-neglected waterways are one of the few ways Moscow can boost trade with China.
By: Ekaterina Zolotova
In a bit of performance art at Russia’s Victory Day parade on May 9, Russian President Vladimir Putin made a big show of sitting next to Chinese President Xi Jinping.
Then, during his ceremonial speech, Putin praised China's contribution to the victory in World War II.
The two leaders spoke at length the night before, after which they pledged to advance bilateral trade and investment.
Yet both understand their countries lack two of the most foundational elements of full economic alliance: unity and infrastructure.
Moscow is desperately searching for ways to build that infrastructure, and to that end has turned its attention to an unlikely and long-overlooked source: river transportation.
To be sure, there’s an interest and an opportunity to enhance economic relations.
Bilateral trade turnover has grown dramatically in recent years.
Russia is interested in Chinese goods to offset the loss of Western imports, and China has upped its imports of resources like ore and concentrates, inorganic chemical products, pipeline gas and aluminum.
This has brought trade turnover to a record $245 billion.
Beijing also remains interested in cheap energy resources, potentially including joint liquefied natural gas projects.
Trade growth hasn’t always been linear – some periods of increased activity were followed by declines brought on by dips in demand and the threat of secondary sanctions – but trade never stopped, and despite the global uncertainty, Moscow expects Chinese interest in the Russian market to grow.
However, they won’t be able to realize their trade ambitions if they don’t first build out the infrastructure that can facilitate trade.
Russian infrastructure has been working at the limit of its capabilities for several years.
International sanctions forced Russia to quickly redirect its trade orientation from the West to the East and thus substantially increase the use of its eastern roads, railways and pipelines.
But these routes are too few, too poorly maintained and too small to handle the uptick in cargo.
Russia has had some modest success in solving this problem, including by increasing the capacity of the Trans-Siberian and Baikal-Amur mainlines, but many portions of these lines are still redlining.
Moscow also plans to increase the carrying capacity of the eastern section of the Trans-Siberian line to 210 million tons by 2030 and to 270 million tons by 2032, but these are the largest and most expensive jobs that will be hard to pull off in the face of insufficient funding and investment.
In light of these shortcomings, it makes sense that Russia is trying to revive river transportation, which could solve some of its capacity problems.
The government has pledged to allocate 500 billion rubles ($6.2 billion) from the budget over the next six years to support builders and customers of the sea and river fleet, with priority given to large-tonnage projects such as tankers for transporting crude oil, gas carriers, tanker carriers and bulk carriers.
It’s true that Russia has much more potential to ship via land than by water, but both Russia and China have extensive experience in river transportation, and the two are already linked by two large rivers, the Amur and the Irtysh.
Rivers tend to play two roles in Russo-Chinese relations.
Those that flow south to north (like the Irtysh) generally serve as modes of transportation, while those that flow west to east generally serve as borders – a fact that makes Russia’s river plans fairly controversial.
The Russia-China border runs along the fairway of the Argun, Amur and Ussuri rivers, which were historically subjects of territorial disputes.
Agreements signed in 1991 and 2008 help to resolve those disputes by clarifying water usage and transferring to China ownership of Damansky Island (Zhenbao in Chinese), Tarabarov Island (Yinlongdao) and the western part of Bolshoy Ussuriysky (Heixiazi Dao).
But the friction returned over the use of the Amur.
China and Russia disagree on how the basin can be developed, how fast it should be developed, and how its development will affect the environment.
Other points of contention include illegal labor migration, smuggling, illegal fishing and, perhaps most importantly, active construction on the southern bank, which causes swamping on the Russian bank.
Last month, a deterioration in the quality of water on the border with China was reported, as was the discharge of untreated or insufficiently treated wastewater.
Even so, the economic duress brought on by sanctions has persuaded Moscow to look past these disagreements.
The Kremlin believes the expansion of the Amur River crossings is one of the few ways it can bolster trade with China.
After 2014, when sanctions first hit and Moscow first looked to the east for economic relief, Moscow revived an old project to connect the Russian and Chinese banks of the river in Blagoveshchensk via a bridge.
The problem is that the construction of the bridge has cost Russia 13.6 billion rubles compared with 5.2 billion from China.
So now that Russia’s eastern transportation routes are proving insufficient, Moscow is searching for other, cheaper projects.
Russia’s Ministry of Economic Development, for example, recently confirmed its readiness to participate in the creation of an international hub for drones in the Amur region, intended to expedite cargo delivery to China.
This involves launching the transportation of small goods weighing up to 50 kilograms across the Amur River using drones – which could require minimal infrastructure construction.
Though the Amur is a suitable vehicle for trade between China and Russia's Far East, it does nothing to transport goods to the European side of Russia.
Enter the Irtysh, a large river originating in China that crosses the whole of Russia from south to north and terminates in the Arctic Ocean.
The Irtysh connects the Ob-Irtysh basin with Kazakhstan and China, making it not just a river route but also a potential artery of international trade.
At the same time, inland waterways connect the southern regions with the Far North, the Arctic Circle and the Northern Sea Route.
It’s little wonder that modern Russia is keen to develop it: It has already proved its utility and efficacy.
The first Kazakhstan-China transport forum is currently taking place in Astana, where both countries are discussing the creation of a multimodal transit corridor, which will include the Irtysh River.
Moscow believes the implementation of the corridor could significantly reduce the cost of delivery of goods along the Irtysh.
It also expects the river to relieve congestion on highways and railways.
In theory, goods could travel from the transport hub of Omsk to a logistics center in Kazakhstan, and then by rail to China.
It is expected that up to 2.5 million tons of cargo per year will be transported along the Irtysh.
On a strategic level, Moscow hopes that the Irtysh could be a link between the Northern Sea Route and China's Belt and Road Initiative that integrates Eurasian transport corridors into the global transport system – which would strengthen Moscow’s role as a regional transit hub and lock in Chinese participation.
Implementing plans as ambitious as these is no easy task.
At a minimum, it would require repeated talks with China, which would have to forge potentially new agreements on water management.
In China, water resources in the upper Irtysh are essential for the development of the increasingly populated Xinjiang region.
In Kazakhstan, the Irtysh provides water for almost a third of the population and nearly half of all agriculture, so joint use of transboundary water bodies for neighboring countries may be very different from what Moscow has in mind.
In addition, dredging is required in certain sections of the Irtysh, and it's unclear who will finance the work.
Either way, Moscow is convinced that its long-neglected waterways can be a competitive alternative to its roads and rail lines.
But Moscow still needs to be convinced of their feasibility and profitability.
By giving Xi such a warm welcome at the Victory Day parade, Putin is likely preparing for difficult negotiations on this issue.
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