Logistics companies must regularly keep up with the world of politics. Geopolitical influence on trade and commerce cannot be ignored, as they have the potential to influence one’s daily business. A situation arose in 2014, that had significant repercussions for rail and road transport organized around some of the routes of the Belt and Road Initiative (BRI). A geopolitical crisis involving Russia chopped down the ability to move certain products across the country, which formed a large chunk of some significant rail routes towards China.
The Story so Far…
EU and China always had thriving trade between even before the BRI was formally established. China has a substantial requirement of food and agricultural products that the EU had fulfilled. With infrastructural development of the New Eurasian Land Bridge and the rail networks involved in it, there was a growing opportunity to transport food and agricultural produce via rail.
However, in 2014 Russia was embroiled in the Crimean crisis, that forced the EU and US to impose economic sanctions on Russia. In retaliation, Russia also enforced sanctions on EU by preventing the transport of food products and agricultural produce through their borders. This move completely halted the movement of this cargo from the EU to China. Bear in mind, some products such as cookies and bread were still allowed, but the halt caused the business to depend on air or ocean freight for the transportation of these sanctioned items. Some of these embargo items are:
fresh and frozen pork meat
fresh and frozen beef meat
poultry meat and co-products
lard and fat from other types of meat
fresh fish and shellfish
milk and dairy products
vegetables, root crops and tubers
fruits and nuts
(This list is subject to change)
Finally, in July 2019, these sanctions were rolled back but included certain conditions. The most significant being that the sanctioned goods could be transported via rail or road, through the Russian borders, only if the end destination was a third country. This news was welcomed by one and all in the supply chain industry as it opened opportunities to expand into different sectors.
The Present Scenario
Although this news is considered positive, it arrived fraught with a bundle of uncertainties. The question on everyone’s minds was how to transport these sanctioned goods through the region. The Russian authorities had not publicly announced these conditions, and therefore, companies had to do their research before undertaking this initiative. Three important conditions need to be acknowledged: 1. It is only applicable for goods transported via rail or road, through Russia, on its way to a third country; 2. The cargo must be electronically sealed so that they can be tracked; 3. The tracking authorization is given to a company called RT Invest, which works closely with the Russian authorities. These measures are taken by Russian authorities to prevent the opening of the containers in any Free Trade Zones within the borders.
So far, some companies have already moved frozen fresh produce such as salmon via rail to China, including NSRN’s very own member Intermax Logistics. As we learnt from our talk with Rob Brekelmans, European Business Director of Intermax Logistics, the special reefer containers are necessary to transport these sanctioned items. The cold chain logistics industry is expecting a doubling of volumes in 2020 concerning these sanctioned goods. It is interesting to note that rail freight along the New Eurasian Land Bridge will become competitive with regards to air freight, due to reduced cost. This route will also compete with the Middle Corridor in terms of time efficiency.
Due to the novelty of this sector it is essential to bear in mind some critical factors. Documentation is a vital aspect while transporting goods via Russia. As the documentation load will be increased, experts recommend that all papers must be in place before entering the border in Russia. Once the products arrive in China, these documents will be used to for re-tracking and inspection of the goods.
Further, it is necessary to contact a Russian advisor that can guide the process more intimately. A company must do their due diligence in finding out information about the sanctioned products and the requirements necessary. It is always better to consider all legal aspects before transporting. The lifting of these impositions has opened plenty of doors for logistics companies that are primarily engaged in cold chain logistics, as the reefer containers will be able to carry both east and westbound cargo, creating balanced trade conditions.