BMI's Executive Summary

[TOP]

Prospects of an interruption of Russian gas supplies to Europe amid pricing disputes for the third year in succession appeared to be receding in August. Supplies were stopped in both the winter of 2005-2006, as a result of a dispute with Ukraine, and again in the winter of 2006-2007 in a dispute with Belarus. However, Gazprom, the state-owned Russian oil company said at the end of August that it was not planning any major price revisions for 2007-2008 and prices would only be ‘fine tuned'. It was responding to a series of reports saying that Lithuania, Ukraine and Belarus were all expecting big price hikes. Russia's reputation as a tough and monopolistic operator in the oil and gas pipeline business has remained to the fore, particularly as seen from Europe. Despite various machinations and continuing European concerns the outlook for Russian pipeline throughput remains strong: when all is said and done, the country remains a critically important supplier both to Western Europe and to Asia: the consumers may not like the way Moscow does business, but they need the oil and gas. In our newly-released Russia Freight Transport Report, BMI concludes that with strong demand for its exports, Russian pipeline throughput will rise by an annual average of 9.9% over the 2007-2011 forecast period.

Various factors support this forecast. On the back of its current oil and gas boom, Russia's economy is set to grow at an annual average rate of 6.2% over the next five years. Oil and gas markets are diversifying, and the best prospects lie in Asia, an area where pipeline delivery is particularly attractive. President Vladimir Putin recently renewed his pledge to boost Russian oil exports to new markets over the next decade. Putin said he planned for 30% of Russian oil and gas to be exported to Asia within the next 15 years, compared with 3% at present. There will be ongoing funding for big pipeline projects to markets in both the West and the East. Pipelines' share of Russia's total freight turnover will rise from an estimated 53% in 2003, to 57% in 2011.

Russia is a vast country where the transport infrastructure remains relatively thinly spread. We now expect freight carried across all modes, measured in million tonne-km (mntkms), to achieve an annual average growth rate of 8.5% over the 2007-2011 period. The fastest rate of growth will be registered by air cargo, averaging 12.4% per annum. We expect to see ongoing consolidation among Russia's ‘babyflots', with some beginning to specialise in the freight business. Demand for road haulage will be boosted by the expansion of the motor vehicle fleet and the sophisticated door-to-door logistics requirements of an increasingly consumer-oriented society. However, the lack of enough new highway capacity will be a severe limiting factor. We predict 7.4% annual growth in road haulage turnover. Other modes of transport will experience comparable growth curves. Railway freight turnover will grow at a strong 6.9% a year, with the emphasis being placed on the gradual modernisation of the network. Shipping cargo turnover will expand at an average 6.3% per annum. Russia scored 44 (out of a theoretical maximum of 70) in the BMI freight transport business environment rating. This market's stronger areas include freight traffic and infrastructure growth, with a relatively good showing for long-term economicrisk. Long-term political risk comes a little bit further down the scale. Areas of particular weakness are the regulatory and competitive environments.

The total value of transport and communications GDP will rise to US$264.4bn in nominal terms by 2011, representing 10.8% of Russia's GDP. The transport and communications sector employed 5.87mn people, or 9.0% of the labour force, in 2006. We see that figure falling to 5.74mn by 2011, while remaining constant at 9.0% as a proportion of the total labour force.

Competitive Landscape for Europe Freight Transport Reports: Sample of Companies Ranked

[TOP]

Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of European Freight Sources

[TOP]

BMI's European Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: