Russia Asks to Lower Transit Tariffs for Grain

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Dec 1, 2022 | Agricultural Markets

Reading time: 2 minute

Russian Railways (RZD) requests Kazakhstan’s railway company to reduce the transit tariffs for the transportation of agricultural products, including Grain. It has been negotiating with Kazakhstan Temir Zholy (KTZ) since September this year. This company raised the tariffs in mid-October of this year. Since then, KTZ raised the costs for cargo transport and empty wagons in domestic, import, export, and transit traffic by 14.7 percent.

Kazakhstan is an important transit country for traffic between China and Russia. Since the outbreak of the war, the export of Grain from Russia to China has increased rapidly as trade with Europe collapsed. However, RZD pointed out this September that freight volumes between Russia and China were not as expected, mainly due to China’s zero-covid policy that sees whole metropolitan areas shut down for days. Consequently, terminals and border crossing infrastructure are also underperforming, due to either closures or a lack of workforce.

The increased tariff on transit through Kazakhstan also has a significant impact on the falling export volumes to the countries of Central Asia and China. Russian Railways is therefore conducting a dialogue on the issue with KTZ, together with the leadership of the Omsk, Orenburg, and Novosibirsk regions of Russia. This issue was discussed at the interregional forum in Orenburg on November 28, Vice Prime Minister of Kazakhstan, Serik Zhumangarin, said. “If it is unprofitable for us, naturally, we will not do it. Because our railway is also an economic entity, it earns on transit,” Zhumangarin noted.

The tariff for the transit of Russian agricultural products through Kazakhstan has not changed for four years, and the volume of transit has increased. Through Kazakhstan, Russia exports Grain to the countries of Central Asia and China. According to AgFlow data, Turkey led Russian Grain export market with 12.5 million tons in 2021-2022, followed by Iran (7.7 million tons), Egypt (6.1 million tons), and Saudi Arabia (1.7 million tons). 

Russia Asks to Lower Transit Tariffs for Grain

Russian Challenge for Kazakh Grain

The markets of Central Asia are traditional for Kazakhstan, where the country supplies Grain, flour, and oilseeds. At the same time, this region is very promising as the population is growing, and the aridity of the climate is increasing. Experts predict an increase in demand for Wheat in the next two to three years by a third.

However, Kazakhstan will have to compete with Russia to maintain its share. The northern neighbor does not hide his plans to send surplus agricultural products there, which are formed due to the growth in production and the complication of access to former markets due to sanctions restrictions.

We cannot arrange regular export at a time when our counterparties in Central Asia and Afghanistan are sitting with empty bins and waiting for our deliveries, noted Yevgeny Karabanov, Official representative and expert of the Grain Union of Kazakhstan. At this time, Russia declares that it is ready to provide rhythmic supplies to this region and replace our volumes. So far, our partners are waiting for us to solve our problems with the railway. But if this does not happen soon, they will get tired of waiting and simply switch to Grain from Russia.

It is no secret that one of the reasons for the current collapse in the railway networks of Kazakhstan is the growth in the transit of goods from China to Europe. This trend is explained simply – the transit tariff allows you to earn twice as much as the transportation of Kazakhstani goods.

Evgeny Karabanov explained: “As a result, Chinese container trains transit through the territory of Kazakhstan at a speed of 1,000 kilometers per day. And to ensure such speed, they are given priority in servicing by traction mainline locomotives. And our exports are choking”.

Other sources: ELDALA

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