Sochi 1520

Sochi, on Russia’s Black Sea coast will be hosting the 2014 Winter Olympics. David Shirres went to the International Rail Business Forum in the city and reports from an Olympian event. David Shirres reports

Russian Railway’s operations are certainly large scale, and so are their conferences. With 1400 delegates from 32 countries, this year’s Eighth International Rail Business Forum held on 30th and 31st May was an impressive event.

Sub titled “Strategic partnership 1520” (Russian gauge in millimetres), it promotes the development of Russian gauge railway business. The forum was first held in Sochi in 2006 when it attracted 450 delegates. Since then it has grown in size and diversity with participants including politicians, engineers, rail companies and financiers from over 300 organisations.

This year the forum was held in a newly constructed hotel complex built for Sochi’s 2014 Winter Olympics in Krasnaya Polyana. The hotel complex is reached by a newly built 48 km railway line through difficult mountain country from the coast to service the games. The large media contingent, of whom RailStaff was the only UK representative, travelled to the forum on the first passenger train on this new line in a Siemens-built “Lastochka” EMU which had only started running a few days previously. The train was hand-signalled as the signalling system was commissioned and travelled at a maximum 60 km/hr.

Opening the conference, Vladimir Yakunin, President of Russian Railways (RZD) told delegates that holding the conference at Krasnaya Polyana was part of RZD’s support for the games for which there had been a huge investment in the railways around Sochi. He saw the conference as a key opportunity to strengthen business relationships, promote the development of international rail corridors and consider the best rail business model.

The vertical integration debate

In the opening session Yakunin led the debate on whether railways should be vertically integrated. He advised that Russian Railways had studied railways worldwide to assess what was best for them. He was convinced of the need for a system wide approach and did not think this was possible with full scale liberalisation, such as in the UK where the lack of integration gave a 40 per cent increase in costs compared with other models. He also noted that the French were moving away from vertical separation.Moscow Kazan High Speed [online]

Other speakers on this topic included Dietrich Moeller of Siemens; Alexander Hedderich, CEO, DB Schenker Rail; Henri Poupart-Lafarge, President, Alstom Transport and Francis Fukuyama, political scientist. Moeller also was convinced of the need for vertical integration to ensure an overall system authority which would, for example, ensure power supplies could accept regenerative braking.

Hedderich and Poupart-Lafarge were less adamant. Hedderich felt the correct model depended on the circumstances of the country concerned. For Germany he felt the concept of separate businesses within an overall holding company worked well. Poupart-Lafarge advised that whatever the model it did not detract from the success of Alstom train projects.

Last to speak was Fukuyama whose main point was that the issue was not the degree of state involvement but the quality of state governance, something that is clearly relevant in the UK with its recent West Coast franchise experience.

Although Russia has still to decide how it will re-structure its railways to best attract private finance, Yakunin indicated that he favoured the German model

All happening at the forum

The large media contingent ensured that the forum was a newsworthy event in Russia and provided an impressive media scrum around Yakunin. The press pack explains that “In 2013, a key consideration will be given to the development of the business model of the national carrier and an organisational model of the railway market.

“The agenda also includes issues of freight and passenger traffic, transportation design, engineering, transportation hubs, and strengthening the human-resource capacity. Prospects for development are based on the network contract and long-term tariffs for cargo.”

The programme included numerous and varied presentations on commercial and technical matters which can be seen at http://forum1520.com/2013/en/. For non-Russian speakers there is a simultaneous translation of the, mainly Russian, presentations whose impact seemed to be lost in translation.

Russian press colleagues advise that little new is said in these presentations. Part of the programme is the choreographed signing of agreements with a young woman standing behind each of the signatories who conveyed the agreement for signing.

The impression is that it is all a big show. In his interview with RailStaff, Yakunin acknowledges this, but points out the forum’s main purpose is to provide an opportunity for business communication by bringing key people together in the right setting (which included two very enjoyable “strategic parties”). So it would seem that the real work is done behind the scenes with agreements to the value of £2.4 billion being signed at last year’s forum.

Russia’s high-speed future

Speaking to RailStaff, Yakunin outlined the current status of two key projects discussed at the forum: high-speed rail and the construction of a Russian gauge line through Slovakia into Vienna.

Until recently it had been expected that Russia’s first high- speed rail line would be from Moscow to St Petersburg. However, at a high-speed rail conference in April held by Russian President Vladimir Putin, it was decided that the first stage of Russia’s high- speed rail network would be an 803 km line from Moscow to Kazan via Nizhny Novgorod.

Yakunin advised this was a political decision to promote this region’s development. It is also likely that this high-speed line has a stronger business case than the one to St Petersburg which already has fast Sapsan trains that average 180 km/h, taking 3hrs 40 minutes for the 659 km journey.

The cost of the Moscow – Kazan line will be 1.2 trillion roubles (£24 billion) and that the intention was that 70 per cent would be funded by the state with the remaining amount from private investment. With private funding yet to be secured there is as yet no timescale for the line.

After completion of the Kazan line RZD’s strategy is then to build high-speed lines from Moscow to St Petersburg and Moscow to Alder.

Russian gauge to Vienna

The proposed 1520 line to Vienna from Košice in eastern Slovakia was also discussed at the forum. To learn more RailStaff met Robert Kredig of ÖBB (Austrian Railways) and Mikhail Goncharov of RZD who are on the management board of Breitspur Planungsgesellschaft, a joint venture between the Austrian, RussianVienna 1520 line [online], Slovakian and Ukrainian railway companies.

They explained that the proposed line is not just a new 400km railway. The intention is to create a 8,000 km rail corridor from the Pacific to Europe without a change of gauge. In Vienna there will be a distribution hub to take traffic further by rail or the river Danube with a small amount distributed by road. A pre- feasibility study has indicated the line to be a potentially attractive investment.

The next stage is a feasibility study which would provide a more accurate prediction of traffic levels, recommend a route and estimate construction costs. Goncharov explains that the contract for this study is expected to be let this year. He would not commit to a timescale for this feasibility contract, but did joke that the line would be built before the British HS2.

He estimated the cost of the feasibility contract to be around 20 million euros, with each partner in the venture contributing 25 per cent. He also predicted that as the project developed other railways would wish to join the venture.

RZD’s global vision

Yakunin’s vision is one of international rail development for mutual benefit of which RZD’s high-speed rail and international projects, such as the line to Vienna, are a key part. These projects are, however, expensive, ambitious and as yet have no committed funding. With Yakunin believing there is the required business case and political consensus, the 1520 forum provided an opportunity to further promote them to the government representatives and financiers present.

In his closing speech to the forum, Yakunin noted that the agreements signed at the forum offered participants new opportunities for economic development.

Big shows they might be, but Yakunin clearly considers that the Sochi forums have an important part to play to promote his vision of global rail development.

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