Russia

Roads and Road Network. The Russian Federation is one of the largest countries in the world. The span of territory and distances that passengers and cargo need to travel demand a vast and developed network of roads and highways to connect the economic space and achieve economic development. The statistical data shows that the current length of road network is a little under 900 thousand km. Out of that number only 84 percent are paved and the rest do not allow all-seasons transit, leaving almost 40,000 communities frequently isolated. Major corridors, such as those between Moscow, the European borders, and the Black Sea and Caspian Sea regions are rather congested and insufficiently safe; if the situation does not improve rapidly, they become barriers to further economic and social development of the regions they serve.

The Government of the Russian Federation earmarked over 2000 billion roubles (63 billion dollars) in 2001 for the new Federal Transport Program (FTP) "Modernization of the transport system of Russia – subprogram "Roads" for 2002-2010". The main objectives of the subprogram are (i) for the period 2002-2005: maintaining the functioning of the public road network and new construction only in the most overloaded nodes of the network; and (ii) for the period of 2006-2010: accelerating the road maintenance activities to decrease the share of roads in need of urgent repair, and construction of the main traffic arteries connecting Russia with international transit system.

More on Russia's Road Network

Railways.   Since the break-up of the Soviet Union, Russian railways have lost half of their traffic and seen radical changes in the industrial markets they serve as well as in personal mobility. Critics allege that the railway system is not serving the economy well as a result of high and discriminatory freight rates, arrears of tax payments and pension contributions, increasing payables to other public entities and financial transactions of many non-core activities and ancillary companies that are far from transparent.

The Russian economy is more rail-dependent than any other large country in the world. It is the second largest in network size, third in ton-km, fourth in passenger-km, second highest in traffic density and second in average length of freight movement. But whereas a decade ago long-distance road transport had a negligible share of the market, it now accounts for up to 20 percent of the total freight market. There is an urgent need to restructure the rail system to reflect the changed structure of demand for rail transport.

The incorporation of the Russian Railway system as RZhD OAO on October 2003, set out a firm direction for legal, organizational and regulatory reform whilst acknowledging the need to retain flexibility in the structural changes to be made as the market develops and responds to reform. The profound transformation achieved in a remarkably short time and positive results in terms of investment, productivity and traffic are already apparent, with significant investment in rolling stock by private operators following the creation of the necessary legal framework and modifications to rail tariffs. Planning and analysis for the next stages of reform in areas such as competition (both intra-rail and intermodal), tariff regulation and involvement of local governments are expected to follow. Read more in Regulatory Reform of Railways in Russia - Updated Summary and Conclusions, published by the European Conference of Ministers of Transport in February 2004.

Ports and water-borne transport. Following the dissolution of the USSR, Russia retained only 41 of its previous 92 seaports, and a substantial proportion of its international trade still goes through the "lost" ports. Russia's remaining seaports have suffered from lack of investment and modernization but some of this is also attributable to a railway tariff policy that made it less costly to transport freight to foreign ports than to Russian ports. Before this trade can be attracted back to Russia's own ports, with associated logistics benefits, they need to be upgraded physically and technically. Port development is now a high priority for the Russian federal and regional governments, with a determination to rebuild the maritime infrastructure and increase the volume of international trade through its own ports.

As with most of Russia's international competitors, it is unlikely that the federal and regional governments will have the financial and technical resources to deal with port modernization without some form of private help. Even more important will be international experience in port operations. Many ports now function with their container berths operated under concession to private companies, and these are often subsidiaries of the larger shipping lines that use the ports. While this is not the only model for development of an efficient port, it has been found to work in countries with a wide range of political regimes, and would be one of the models evaluated for improving the efficiency of Russian ports.


Airports. According to the new air transport licensing law, any Russian airline that has been certified and licensed for air transportation may launch regular flights to any destination inside the country. The airline should only require approval of the destination airport that provides slots, a certain time for landing and takeoff for the airline, so the air transportation market will be regulated to a large extent by airports, which are influenced by both local authorities and their major airline companies. Under the planned economy, airports, aircraft and air transport functioned as an integrated operation. The process of splitting air-transport enterprises into airline companies and the airports independent from each other, which began in early and mid '90s, has now been suspended, so any new entrants will operate under the new licensing regulation, and will find themselves in unequal competitive conditions. Some existing operators will be able to protect their markets by not allowing competitors to use their airports. This reduced competition will be exacerbated by a continuing decline in the number of airports, now down to fewer than 500 compared to more than 530 just a year ago.

Updated January 3, 2005