Alona Lebedieva: "European track in Ukraine: new opportunities for the Ukrainian economy or an expensive project that will never pay off?"

One of the important components of the European integration of Ukraine, especially in the economic sphere, is the integration of Ukraine’s railway system into the European one.

Aurum group

It is a well-known fact that Ukraine inherited the railways with a track width of 1,520 mm from the Russian Empire and the Soviet Union, while in the west, historically, tracks of a narrower format were built, namely 1,435 mm.

With Ukraine moving towards closer economic, political and cultural rapprochement with the states of the European Union, it is becoming increasingly noticeable that the difference in the railway gauge is a problem. In recent years, a lot of analytical materials have been published regarding the proposed options and models for solving this problem, however, none of them looks like an axiom even now.

In July 2023, the strategy for integration of the railway systems of Ukraine and Moldova into the European one, developed by the European Commission together with the European Investment Bank, was published.

According to this strategy, the development of the 1435 mm track network is planned to be implemented in three stages, moving from west to east. At first, it is proposed to lay a track from Poland to Lviv, then, from there, in the second stage – to Kyiv, as well as an additional northern branch to the capital, and a connection between Lviv and Chop.

In the third stage, the developers see the continuation of the track further east – to Kharkiv and Dnipro, as well as the expansion of the network in the south of Ukraine, in particular the connection of Odesa with Chisinau, which at that time will also have built a European-style track connected to Romania.

The developers of the plan estimate that these stages will cost 11.5 billion euros in total. At the same time, they themselves point out that “the construction of new corridors with the European 1435 mm track in Ukraine and Moldova is not sufficient to ensure the integration of these countries’ railway systems into the EU”, and “numerous additional measures” are needed.

In one of the previous analytical materials, Aurum Group experts estimated the total cost of replacing the entire railway network of Ukraine with the European gauge at 250 billion euros, and the hypothetical term of the implementation could be at least 20 years.

In general, this problem is not new for the states of the post-Soviet space, especially those that have become integrated into the European Union and faced logistical challenges for exporting their products.

In particular, one of the partners of the Aurum Group in Lithuania, Stanislav Kachanovski, the founder and co-owner of the company “Vagoneta”, in his analytical article “Development and prospects of the fleet of freight cars in Lithuania”, in addition to a number of related issues, also touched on the issue of difference between the size of the country’s and the European tracks. If one compares the situation in Ukraine and in Lithuania, it’s possible to see both similarities and differences.

First of all, it is worth noting that Lithuania has been a member of the European Union for almost 20 years, and thanks to its location, it occupies a transit place in the European transport logistics to the north.

Due to this, the “Rail Baltica” project is already being developed and implemented, aiming to connect Warsaw and Tallinn with a European-style 1435 mm railway by 2026-2028. At the same time, 93.7% of the total Lithuanian railway is still 1520 mm wide, being mostly used in domestic freight transportation and trade interaction with the neighboring Baltic States.

As a result of Russia’s aggressive policy, Lithuania’s “old format” railway is losing part of its transit value, and local carriers are increasingly choosing alternative options for transporting goods – in particular, road transport is actively developing, which, despite a relatively smaller load, is characterised by greater mobility and accessibility.

In the period from 2009 to 2019, the total share of freight transportation by rail decreased from 40.3% to 31.4%.

Nevertheless, in the future, the authorities plan to encourage carriers to give preference to rail transport in transporting goods for a distance over 300 km, due to the higher capacity and comparable environmental friendliness of the railway.

However, Mr. Stanislav considers the general technical level of railways in Lithuania insufficient in comparison with European standards, and therefore emphasizes on the development and modernization of these railways and the renewal of rolling stock, which is noticeably outdated, just like in Ukraine.

In order to improve the interaction of the Lithuanian 1520 mm railway with the railways of other EU countries, great attention is paid to the implementation of directives on technical interaction – the Trans-European Transport Network of the European Union (TEN-T) and the rolling stock system belonging to it. In the future, the design, modernization and construction of railway infrastructure, as well as the design and production of rolling stock in Lithuania, according to Stanislav Kachanovski, will be based on the Technical Cooperation Specifications (TSS), which are mandatory for all EU member states.

The Lithuanians, though they have a smaller size of the state and smaller total mileage of the railways, are currently not talking about a complete transition to another track gauge – only about improving the existing one and the ways of its integration into the European railway.

What about Ukraine? In the wake of rejecting everything Russian, one can hear in the information field, time and again, an idea to completely change the track in order to integrate into Europe, without taking into account economic expediency.

Nevertheless, we forget that Ukraine is not Lithuania, and the length of the tracks is not 2.3 thousand kilometers, but more than 20 thousand.

Alona Lebedieva: “We are also talking about a complete replacement of rolling stock and traction”

Alona Lebedieva, speaking in the European Parliament, July 2023.

Alona Lebedieva, the owner of the Aurum Group, industrial and investment group of companies, suggests taking a more realistic look at the aspect of railway network integration: “First of all, in the matter of changing the track gauge, it is worth keeping in mind that it is not just reinstalling the rails. We are also talking about a complete replacement of rolling stock and traction, which in our conditions does not seem realistic and requires colossal funds and production capacities.

“The experts of the Aurum Group, investigating this issue, determined that in our conditions the most optimal solution in terms of price and efficiency would be the creation of high-speed transshipment points on the border, electrified and equipped with everything necessary, in particular, the necessary number of trolleys fit for different tracks and terminals to conduct transshipment from car to car.

“The option proposed by the European Commission is an intermediate stage between this format and the proposal to completely switch to a new track gauge.

“It should be understood that during the implementation of this plan there will still be the need for cargo transshipment, only now, instead of border cities, Lviv, Kyiv, Odesa and others will also become the same kind of logistics hubs. If this may possibly improve the situation with passenger transportation, it is unlikely to be very noticeable in the case of freight transportation by rail.”

In addition, Ms. Lebedieva highlights a number of accompanying processes that may not be obvious, but will affect the railway industry in Ukraine one way or another: “The question of the European track, which arose acutely during the war, may now seem more urgent than it really is.

“Most of Ukraine’s international exports were going through the Black Sea ports to the countries of Asia, Africa, Europe and the Middle East. Goods were (and are) delivered to the ports by the track of the current format. In the conditions of the enemy blockade of the coast, it is clear that the turnover of goods is redirected by railway to neighboring countries, such as Poland or Romania, increasing volumes and actualizing the issue of transshipment due to the difference in track formats. The same refers to the passenger transportation – after all, with closed skies over Ukraine, it’s exactly the railway that becomes one of the main modes of transport for Ukrainians, on a par with road transport.

“In other words, if now passenger rail transportation such as Kyiv-Berlin may look interesting and relevant, later in the post-war future it will lose competition to more common air transportation. And such an issue as reinstalling the railway track of a different gauge is not about a short-term perspective, but about serious capital investments and a large volume of long-term work.”

Nevertheless, according to Alona Lebedieva, precisely in the long term, taking into account all the nuances, adaptation of Ukrainian production of railway products of a new model and corresponding rolling stock, adaptation of Ukrainian railway norms and standards to European norms – the unification of the railway networks of Ukraine and Europe will become an additional incentive for bilateral land trade and passenger traffic. But prior to that – will the game be worth the candles? And what are the prospects of payback for such a large-scale project, given the realities and future trends?

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According to the statements of the Ukrainian authorities, in particular Prime Minister Denys Shmyhal and Minister of Infrastructure Oleksandr Kubrakov, the country has taken a “strategic course for a full transition to the European track in the future.” So, the “choice has been made”, and Ukrainian companies will have to take into account both future prospects and existing problems and needs to implement this ambitious and resource-consuming, without any exaggeration, project.

One way or another, this will bring Ukraine even closer to Europe, which is definitely in line with the interests of future generations. As for us, here and now, we can only hope that the implemented steps will only help the Ukrainian economy, and will become an incentive for the renewal of the railway industry, ensuring a closer integration of the Ukrainian transport system into the European one.

This article was originally published by UKRAINIAN NEWS.

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