Launching of the New Silk Road between Ukraine and China

This article discusses implementation of a new #trade route between #Ukraine and China, which is designed for transportation of goods avoiding the territory of the #Russian Federation.

Visit our website if you are interested in the #Ukrainian economy or #doing business in Ukraine.

On 15 January 2016, the first cargo was loaded on a ferry in the Ukrainian port of Illichivsk to be transported to China via Black and Caspian seas and railway routes through Georgia, Azerbaijan and Kazakhstan. It is expected that the cargo would reach the Chinese border within 11-12 days. The governments of the respective countries agreed to establish preferential tariffs for transit of cargo on the New Silk Road.

The New Silk Road was designed a couple of years ago, but its implementation and realization was accelerated in 2015, including due to a trade war between Ukraine and Russia. We note that as of 1 January 2015 transit of any goods from Ukraine via the territory of Russia is prohibited. It was estimated that due to such ban Ukraine might lose up to USD 500 million in trade with Russia and up to USD 700 million in trade with Kazakhstan. Ukraine announced that such ban violated the World Trade Organization rules, and it would refer to dispute resolution procedure within the organization.

We note that according to some experts, transportation of goods via the New Silk Road is 30-50% more expensive and takes almost twice longer than land transportation via the territory of the Russian Federation. In addition, transportation via sea might be delayed due to poor weather conditions. Nevertheless, through implementation of the New Silk Road Ukraine seeks to establish closer economic ties with the relevant countries of the project, and with China in particular. Today China holds the first place in export traffic from Ukraine, relegating Russia to the second position, with the export volume of 15.9 million tons for the last year.

Image by Jakub Hałun – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=6909926

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