From Sochi Olympics to 2018 World Cup: Ukrainian high-speed trains for Russia in Angola and a sexy Kamaz top in Ethiopia

As Chris Weafer, a senior partner at Moscow-based research consultancy Macro-Advisory, suggests in a 2013 end-of-year post on FT’s beyondbricks:

For the next two months one policy priority will eclipse all others [in Russia]; delivering a controversy-free and efficiently-managed Winter Olympics.

Weafer adds:

President Putin wants budget spending to focus more on measures to encourage entrepreneurs and boost infrastructure spending.

Strategy options? Some amendments to the Russian federal law “On Railway Transport” reported in September 2013 provide an opportunity to private investors to own railways of general use, however ban their sale to third parties. As noted by journalist Eugene Gerden, traffic density of the country’s steel trunks is by 10 times higher than in the developed Europe.

Russian Railways (RZD) have long complained about the lack of funds for modernization and expansion of its infrastructure. The investment program of the state-owned monopoly, designed until 2020 involves investment of about USD200 billion in the development of the Russian railways infrastructure, however the company does not have sufficient financial resources.

High-speed lines in Europe, 2013

Regardless of this, as much of last year has been spent preparing for the 2014 Sochi Olympics, Russia Today estimates that the Eastern European country spent USD50 billion on the Winter Olympics, the most expensive in Games history. Out of which, Russian Railways spent $8.7 billion on a railway and road link to the coastal and mountain Olympic villages.

Terrorism awareness poster on a RZD train in the run up to 2014 Winter Olympics in Sochi.

In such climate, any fundraising strategy is tried. RZD hopes to raise 2 million ruble (USD60,854) by suing California-headquartered ideators of iPhone. RZD told the Moscow Commercial Court that Apple Inc. violated the Russian Railways’ copyright, by adding the company’s logo to App Store.

The president of the National Association of Transport of Russia Georgy Davydov:

Russia needs to build at least 1,500 km of new rail tracks each year in order to reduce the current load on the already existing railways.

With the Sochi Olympics looming over Russian planners and doers, there is another frontier to aspire to: soccer World Cup in 2018.

Largely devastated during three decades of Angolan civil war at the end of the 20th century, Benguela railway connects the deepsea port of Lobito with the hinterland of east Angola, the copperbelt of Katanga in DR Congo and Zambia.

As reported in August 2013, building of Moscow – Kazan – Yekaterinburg high-speed rail line, the second largest project in the field of high-speed rail lines in Russia, is expected to be completed by 2020, according to the President of RZD Vladimir Yakunin. According to Yakunin, currently RZD is trying to do its best to complete the construction of bullet rail line from Moscow to world championship venue of Kazan (one of 11 host cities), which should be completed prior to 2018. Bloomberg said in a December 2013 report that Russian Railways was seeking bank funding for USD33 billion to make the Kazan speedy train link a reality.

Back in the Soviet days, two experimental high-speed trainsets were built in 1974 designed for 200 km/h (120 mph) operation: the locomotive-hauled RT-200 (“Russkaya Troika”) and the Latvia-manufactured ER-200 EMU. Nowadays Russia’s highest speed railway link — with a top speed of 250 km/h (155 mph) — The Sapsan, operates German Siemens Velaro trainsets.

Preparation of more local production is underway.

According to online publication Railway Bulletin,  Russian leading rolling stock producer Kirov plant and Ukraine’s Kryukov car building plant agreed to start jointly producing locomotive-hauled passenger cars, high-speed inter-regional and suburban and diesel trains in the first quarter of this year.  The production will be located at the capacities of the Kirov plant in Gorelovo, St. Petersburg, as well as the city of St. Petersburg.

[youtube https://www.youtube.com/watch?v=v3x4TFg-0Mg]

In fact, Russians are now exporting railway technology overseas. One of Russia’s largest scientific and industrial complexes located in Nizhny Tagil, Uralvagonzavod (Facebook page), works on joint projects with the likes of Caterpillar and in Kazakhstan. During Russo-Angolan business forum in August 2013, Uralvagonzavod signed off on the plan to build a rail car plant in Benguela, Angola. This southern African country imports most of its rolling stock from China and North America.

Uralvagonzavod-manufactured tram

To be launched in 2016-17, at Phase 1 the joint venture is to annually produce between 1,500 and 2000 mostly gondola freight cars. Ukrainian Techvagonmash, based in Kremenchuk, Poltava participates in the project.

There is a reported growing interest from African markets for “made in Africa”  rail cars, made by Africans with steel made of African iron ore.

Pre-feasibility study for the new rail car plant cites several positive sides to this project along the Benguela railroad (Caminhos de Ferro de Benguela):

– we avoid in the future maybe maritime transport of 100,000 wagons, to be transported from the Far East to Africa

– the energy for the plant will come from Angolan hydro-power-plants, CO² emission free

-Once the railway line is the Congolese Province of Katanga is repaired, it will be easy to transport wagons to countries in South and East Africa. With the presence of the port of Lobito, new wagons can be shipped by sea to new markets in West and North Africa.

Largely devastated during three decades of Angolan civil war at the end of the 20th century, Benguela railway connects the deepsea port of Lobito with the hinterland of east Angola, the copperbelt of Katanga in DR Congo and Zambia.

VTB Africa, an Angola-based subsidiary of one of Russia’s leading universal banks, is expected to finance the project. According to Bloomberg, VTB Capital, the investment arm of Russia’s second-largest bank,  was one of four Russian lenders that provided $278 million of loans to Angola in 2011. The southern African country’s government later picked VTB to manage its $1 billion bond.

Tatarstan-headquartered Kamaz, producer of multiple Dakar Rally winner in the truck category, reportedly plans to launch a production line in Angola, following successful experience in Ethiopia.

Kamaz-branded top

Back at home, since early 1990s, proposals have been voiced to connect the Russian railway network to Norway, with only about 40 kilometers (25 mi) of railway missing to connect the two Arctic lines.

In September 2013, governor of the Sakhalin Region, Alexander Horoshavin, reportedly said that Russia and Japan were to negotiate the establishment of a transport corridor between the Sakhalin and the Japanese Hokkaido island (about 580 km long).

Earlier Eugene Gerden reported that total volume of investments in the expansion of Transsib and BAM, Russia’s longest rail lines, by 2018 will amount to USD18,7 billion. Payback period of both projects is 50 years. Let’s wait and see, then.

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