The matter concerns a resolution of June 26, 2006 of the Cabinet of Ministers “On the Construction of the Izmail-Reni Railway Line.” The order for construction was submitted by the Odesa railway. In other words, Azarov was not so much against the project of construction of this line, as he much as simply wanted to transfer it to another financial branch, which has two aspects.
The first geo-economic aspect lies in the problem of finding a serious investor who could invest a large sum of money for the construction of the Izmail-Reni line. Experts consider Krivorizhstal to be one of the potential candidates (Krivorizhstal and the Romanian metal industrial complex Sidex Galati belong to Mittal Steel Corporation. This new railway line would create an almost direct way for the transportation of iron ore for processing in Romania).
The situation with the delivery of raw materials from Kuzbas in Russia is similar. They are conveyed through Moldova to Galats as transit goods. We should not forget that a situation when more than 100,000 tons of registered cargo wait in storehouses of the Izmail Commercial Sea Port to be transported due to the shortage of free vessel tonnage on the Danube River is quite typical. Under these conditions the railway line will serve as a transport artery and will unload the unnecessary work of Danube vessels that still have not recovered from the economic blow inflicted by the NATO operations in Yugoslavia in 1999.
The second aspect of the problem lies in the fact that transferring the construction project to private owners automatically becomes a trial project of the broader notion of the overall privatization of the national railway.
The construction plot is small (less than 60 km), but the complicated landscape of rivers, dams and some lakes will make the process more expensive. According to former Minister of Transport Vasyl Bondar, “If the construction was in the Kharkiv oblast it would be three times cheaper.”
This problem has a geo-cultural aspect as well, because the southern part of the Odesa oblast to this day remains among the less socially developed sub-regions of Ukraine. Despite this, construction of the railway line will stimulate both economic and social development of the Prydunavia (Trans-Danube) region of Ukraine.
As a reminder, a transport corridor of strategic (global) importance runs through the southern part of the Odesa oblast. While the highways function more or less normally, railway transportation at this point makes a huge – some hundred kilometers – detour bending around Moldova through Mohyliv-Podilskiy.
Both ferrymen and the state budget suffered losses from this situation.
For comparison, the total volume of transportation between all forms of transport in member countries of the European Union is divided as follows: 45% - sea and river, 44% - motor, 8% - railway, 3% - air. In Ukraine, 54.5% of the total volume of passenger and 85.1% of cargo transport are performed by railway. The railway’s utilized capacity (annual volume per 1 km) in Ukraine is 3-5 times higher than in developed European countries.
After the reinforcement of customs regime with Moldavia, Ukraine began suffering serious losses connected with transit flows. Ukrainian goods were transported to the Ukrainian port of Reni on the Danube through Prydnistrovya and Moldova and then continued on to the Balkan Mountains. 3% of dry cargo of all Ukrainian government ports and 7% of dry cargo transit pass through Reni.
According to Reni port administration, the use of the transit railway line through Moldova reduces cargo transshipment to 14.5 bn t per year (10-15% of project power). The volume of transportation through Reni railway junction reduced tenfold to 0.9 bn t per year correspondingly. The rates there are US $0.5-3.5 per t higher than in directions to other ports in the Odesa oblast.
The former head of Ukrzaliznytsya Vasyl Gladkykh says, the total cost of railway construction is anywhere from UAH 0.75-1 bn (US $150-200 bn), but according to the financial plan Ukrzaliznytsya had to use UAH 650 bn this year. Moreover, the construction of the infrastructure (train stations) will cost another UAH 1.5-2 bn. With the will arrival of the new government this unlikely to happen, at least not until an interested investor is found.
Director of the Center for Civil Society Studies:
“Construction of the Reni-Izmail railway line using private funds may lead to the start of a ful scale privatization of the Ukrainian Railway (Ukrzaliznytsya). The government and administration of UZ have to clearly define their positions. In case private investments in construction and privatization are “cause and effect”, then this issue takes on greater importance for the Cabinet of Ministers and Ukrzaliznytsya from the point of view of national security. International experience of railway privatization shows that there are a number of threats to the security of citizens. Private owners economize on passenger safety and repairs of railway lines, which results in the diminishing of the capacity of the social railway infrastructure.
Deformations in privatization processes taking into account the post-Soviet aspect can essentially lead to robbery of the entire transport sector.”