The race against food inflation begins on rusty Soviet railways
The rusty railway tracks from Rini in the southwestern corner of Ukraine to Galati port in Romania, dotted with vegetation, have long been a part of Soviet-era history. About a quarter of the 12-mile line is missing.
However, like other relics of the ancient Eastern bloc network, the route along the Danube could eventually play a small role in the increasingly large and complex process of securing vital food shipments.
European leaders are desperately trying to figure out how to get grain out of Ukraine, whose exports are usually greater than those of the entire European Union. Russia, accused by the United Nations of waging a war on global food security, said last week it would open sea lanes to open ports such as Odessa on the Black Sea if sanctions against it were lifted. But Ukraine said it was skeptical due to security concerns.
The challenge of the labyrinth has politicians looking at everything from sea escorts to diverting all that is possible overland to the Baltic Sea. Officials at ports, logistics companies and in the agricultural industry across the region say they are scouring the maps for solutions such as diverting road transport and reviving railroads like the one connecting Galati.
The task is complicated by the dearth of truck drivers and the fact that the Soviets used a track gauge wider than the European standard. The EU said this has caused delays of up to 30 days at the border for existing routes, where goods must be transferred to compliant train cars and customs infrastructure is flooded.
Meanwhile, ports in Romania and Poland are backed by traffic or are already operating while there is a shortage of specialized personnel to deal with the increase in demand. Even with Ukrainian exports a fraction of what they used to be, trade officials warn that bottlenecks will only get worse as the rest of Europe begins harvesting wheat next month.
“The scale of the problem is enormous,” Taras Kachka, Ukraine’s deputy economic development minister, said at a conference recently. “In the past 15 years, we have developed our infrastructure in such a way that it cannot simply be replaced by another destination, or another port.”
Ukraine is a major supplier of wheat, corn and barley and leads global sales of sunflower oil. Future crops will undoubtedly be diminished by the war, but it still has 20 million tons of grain accumulated since last year.
Ukraine is expanding export capacity on its western borders and simplifying trade arrangements with the European Union. European Commission President Ursula von der Leyen said on May 24 that the EU is working to bring what is stuck in Ukraine to world markets by opening “solidarity corridors” to European ports as well as financing various means of transport. The Ambassador of Ukraine in Warsaw expects Poland to be the conduit for 80% of Ukraine’s grain.
But people on the ground say it’s easier said than done when you look at a map, especially the rail network.
In Slovakia, the main traffic operator transported 18,000 tons of corn from Ukraine last month via 12 trains, and private freight companies are also involved. The problem is that cargoes from Ukrainian wide-caliber wagons need to be reloaded onto standard European sized wagons or move the container section onto different wheels.
Poland has a 400 km wide railway linking Ukraine with its southwestern industrial region of Silesia. It was used mainly in steel products, and in recent weeks to transport refugees. State rail operator PLK SA has begun investing in capacity enhancement, reversing its previous focus on connections to China via Belarus.
In April, Poland and Ukraine also agreed to create a joint shipping company and simplify border rules. But with roads to Poland’s Baltic ports already congested and wagons in short supply, there are doubts whether Poland can increase Ukrainian grain volumes to well above 2 million tons per month anytime soon. That compares with 5 to 6 million tons sent per month through the Black Sea ports, said Roman Slaston, general manager of the Ukrainian Agribusiness Clubs Industry Group.
The railway from Reni to Galati via Moldova will be a relatively small piece of the panorama, but it shows the enormity of the challenge.
TTS, a Romanian company operating on the Danube and in the port of Constanta, is removing shrubs and young trees to open the road. “We are a logistics company and we have done many things in this life that defy geography,” said Ion Stancio, Executive Vice President of TTS, in an interview on May 20, and now we start from the same principle. “
Romania is keen to upgrade Galati to ease congestion in Constanta on the Black Sea. Galati is connected by wide railway which conforms to the Ukrainian system and may facilitate faster grain rerouting. Prime Minister Nikolai Siuka said last month that the government wanted to speed up the construction of the missing section of 4.6 km and the work would take three months.
However, it remains unclear who will do that, according to TTS, which has spent two months testing rail or truck logistics options. The route includes three countries and three different rail operators. Romania’s transport minister said he hopes to find a company to build the missing part of the track this week and may visit Galati with his Ukrainian counterpart.
“Ukraine was exporting 20 million tons of minerals annually and even more grain on water alone, so to believe that these capacities can be completely replaced is a dream,” said Petro Stefanot, CEO of TTS. “What we are all trying to do is help them as much as we can. But we cannot compare what they had and what they lost.”
TTS has been able to transport about 200,000 tons of grain and minerals from Ukraine in the past two months, although Stefanut is confident that more will come when routing across the Danube becomes more efficient.
Any increase in supplies is critical after the war in Ukraine raised growing fears of a food crisis. At the World Economic Forum in Davos, von der Leyen accused President Vladimir Putin of using “hunger and grain to exercise power” as she decried Russia’s bombing of granaries and the blockade of Ukrainian ships full of wheat in the Black Sea. About three-quarters of Ukrainian crops are usually sold abroad, and they are a major exporter to Africa, Asia, the Middle East, as well as Europe.
Ukraine’s Agriculture Minister predicts that another 30-40 million tons of grain will have to be exported after the harvest this summer and autumn. While the grain can be stored, farmers need to sell it for cash to grow the 2023 supply, with winter crops like wheat in just a few months.
Kis Huizinga, a Dutch farmer living in Ukraine and employing 400 people, was able to transport 25 tons of his grain to Odessa’s Black Sea terminals and back within a day. Drivers now spend a week traveling, queues and border checks – three times the cost – getting cargo on a new route, and unloading across the border in Romania. From there, you still need to weave to its final destination.
The European Union exempted grain imports from requiring veterinary or phytosanitary certificates to facilitate transit. But in the three weeks to mid-May, Huizinga shipped only 150 tons. Usually, it will load within a few hours. He worries that once Romania begins its harvest soon, the crises could worsen.
“It would be a disaster,” Huizinga, who farms 15,000 hectares and milks 2,000 dairy cows 200 kilometers south of the capital Kyiv, told a conference in Geneva. For now, “At least you can do something. But they start harvesting in a month and a half, and then it’s over. All the local men, they need their own infrastructure.”
That won’t be restored any time soon. Lithuania is leading an effort to try to liberate Odessa, but this is also complicated by security in the Black Sea.
Lithuania can handle about 8 million tons annually through the Baltic sea port of Klaipeda, although it can only transport 1 million tons via Polish railways, according to the country’s transport minister. A trial rail shipment of agricultural goods from Ukraine took three weeks.
“There are simply no alternatives for Odessa to send the grain quantities that have accumulated in Ukraine and will pile up over the summer,” Gabrielius Landsbergis said on May 26. The world will face food shortages, prices will rise, or we need to find ways to unblock Odessa.”
At the moment, the most realistic solution remains Romania, Constanta and the Solina Canal, which connects the Black Sea with the Danube. The port’s customs agency has added staff to help deal with the surge in shipments, with ships lining up to get in. Ports director Florin Guedia said the Romanian railway company has abolished its links to the ports and started improvement work, which could lead to a 30%-40% increase in transport capacity as soon as next year.
“We are expecting larger quantities to arrive, this is only the beginning,” he said. “This summer will be very busy. It will not be easy for us, but we have to find solutions.”