Russian Railways boosted by demand to move cargo to Europe after Red Sea attack

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Demand to move goods from Asia to Europe by rail through Russia has surged since the Red Sea crisis began, boosting the finances of the country's state rail monopoly, according to logistics companies and rail operators.

Germany's DHL said requests to transport cargo on Russia's rail corridors have increased by about 40% since container ships began rerouting them to longer routes in December. RailGate Europe said demand was up 25% to 35%, while Netherlands-based Rail Bridge Cargo said rail freight volumes through Russia were up 31% this year compared with the same period last year.

Logistics companies are re-examining routes through Russia after most major container lines decided to reroute Asia-Europe routes that usually pass through the Cape of Good Hope through the Suez Canal. They took action after Yemen's Iran-backed Houthi rebels launched attacks on commercial ships in support of Palestinians in Gaza.

These diversions have increased door-to-door journey times between China and Northern Europe by 7 to 10 days, to 50 to 55 days. DHL said that the current door-to-door transportation time of Russian railways from Chengdu, China to Duisburg, Germany is 25 to 30 days.

“Requests have increased by around 40% since the outbreak of the Red Sea situation,” DHL said of customer inquiries regarding rail. “The vast majority is through Russia.”

However, the company stressed that it did not carry any flights originating from or to Russia under export restrictions imposed by the West over Russia's war in Ukraine.

“We are implementing strict export controls in accordance with applicable sanctions,” DHL said.

Logistics providers such as Switzerland's Kuehne + Nagel and Denmark's Maersk say they have been avoiding rail lines through Russia since Vladimir Putin's full-scale invasion of Ukraine in February 2022. Monthly cargo volumes on this route have declined since the invasion, but are still below the volume carried by a large modern container ship.

RZD, which owns Russia's vast rail network and operates most trains, is owned by the Russian state and has long been seen as having close ties to the Kremlin. When the British government imposed sanctions on the company's chief executive Oleg Belozyorov in April 2022, it said it had “close ties to Putin.”

Under EU sanctions, road freight transport to and from Russia and Belarus is all but banned. RZD's ability to obtain certain financial services is also restricted. However, there is no ban on transporting goods across the country by rail.

The Eurasian Rail Alliance is a Russian company that organizes rail freight using Russia's 1,520 mm gauge, which is wider than European track. Container rail traffic from China to Poland in 2017 was 14,532 twenty-foot equivalent units (TEU), according to the alliance. January.

While this figure is 36% higher than January 2023 levels, it is still insufficient to fill one of the largest modern container ships, which can carry 24,000 TEU each.

Michael Aldwell, head of maritime logistics at Kuehne & Nagel, said there was “even greater demand” to move goods from Asia to Europe by rail under the current circumstances.

“High value cargo has always been popular [on that route],” O'Dwyer said.

Nonetheless, Aldwell stressed that Kuehne & Nagel, which once provided a rail service called KN Asia Express, had “completely” shut down operations on that route after the attacks in Ukraine.

Most Asia-Europe cargo travels by rail on what DHL calls the “Western Corridor”, passing through Kazakhstan into Russia and then into Belarus. Some traffic passes through the “Northern Corridor”, directly from China into Russia east of Mongolia.

Some logistics companies offer a “southern route” that avoids Russia and passes through Kazakhstan, Azerbaijan and Turkey. But the route involves ferries across the Caspian Sea and takes longer than a container ship voyage between China and Europe. Mainly applicable to goods entering and leaving Uzbekistan and other Central Asian countries.

Maersk started offering customers in September the option of shipping goods by sea to the Georgian port of Poti and then to Central Asia via the southern route.

Julija Ščiglaitė, head of business development at RailGate Europe, said her company has no business dealings with RZD. Instead, it books transportation through operators such as Deutsche Bahn.

Nonetheless, Deutsche Bahn confirmed that it currently only acts as a “travel agent” for goods passing through Russia. RZD is owned by the Russian state and maintains a near-monopoly over train transportation on Russia's vast rail network. This means Russian Railways will be paid for transporting goods through Russia and into its network.

Rail Bridge Cargo said the “majority” of its cargo was transported by RZD.