Ukrainian inland waterway reform: stakeholders brace as new opportunities arise

Anton Molchanov

Arzinger law firm, Kyiv

anton.molchanov@arzinger.ua

Praised for centuries as the breadbasket of Europe, Ukraine ended a pre-pandemic 2019 having exported an astonishing €5.9bn in agricultural products, exceeding even China as the EU’s third biggest partner for agricultural imports. As the country’s production increases so does demand for faster and more reliable carriage. With Ukrainian railway and road transportation still struggling from the low-efficiency Soviet legacy, many producers and freighters count on inland water carriage (IWC) – and it’s not just agricultural commodities keeping the industry busy.

What are Ukrainian inland waterways?

The inland waterways in Ukraine consist of more than 4,000km of navigable rivers, with the main Dnipro or Dnieper river running through the country for nearly 1,100km. Its leading role in the country’s inland waterways is supported by the Ukrainian part of the rivers Danube (more than 160km), Buh (about 155km) and Dniester, or Nistru in Moldovan (about 900km).

Being a critical transport hub between Europe and Eurasia, Ukraine mostly uses inland waterways for carrying commodities (agricultural and ore), iron and steel products and byproducts and river sand (mostly used for the country’s constantly rising construction demands).

Ukraine is a party to most of the active international treaties governing IWC. These include the European Agreement on Main Inland Waterways of International Importance (AGN or the Genevan Agreement) and the Budapest Convention on the Contract for the Carriage of Goods by Inland Waterway (CMNI).

At present, 19 of the country’s extensive inland waterways have E (pan-European importance) status and are included in the United Nations Economic Commission for Europe (UNECE) Blue Book. 

Reform: what’s on the menu?

With Ukraine’s commodity exports growing exponentially, the main means of domestic transportation are still road and railroad carriage. Both are hostages of the Soviet era’s bureaucracy and ineffective management. With the railroad being the weakest part of the Ukrainian multimodal carriage, both traders and freighters count on IWC as a much more effective alternative to cover the leg from the initial warehouse to the export seaport.

They apparently have all the reason to believe so. The Ukrainian infrastructure ministry expects IWC to carry more than 30m tonnes a year. The independent Center for Transport Strategy has an even more ambitious prognosis: from 60 to 80m tonnes a year before 2030. The Dnipro is expected to pass 45m tonnes a year, with 30m tonnes for export and 15m tonnes for import.

From 1 January this year these ambitious goals have become more realistic, as the long-expected Law on Inland Water Transport partially entered into force.

The law contains the following key achievements:

• The state is directly obliged to develop strategic inland waterway infrastructure. All river locks and navigation are to be properly carried by the state with no lock and bridge fees placed over freighters. Several port duties for IWC are also cancelled.
• Ukraine effectively implements five European Union directives simplifying IWC vessel technical requirements and registration formalities. Specific provisions ensure that a foreign-flagged IWC vessel can make river port/terminal calls under simplified rules.
• A key focus officially fixed within the national IWC strategy is expanding a multimodal terminal network by using PPPs or 100-percent private invested terminals. For a country with export capacities as huge as Ukraine, it is of crucial importance that all export commodities have direct access from rail/road carriage to IWC load within the same terminal. This should shorten the IWC laytime and thereby exclude additional costs.  

Moving forward

The potential of IWC is as evident as the numbers are. Just one tugboat and two NSP barges are claimed to be capable of replacing 250 fully loaded trucks, or two locomotives carrying 100 rail wagons. It’s not just about carrying capacity – don’t forget it also adds free oversized cargo transportation and shortened road renovation expenses. The experts estimate that transporting about 1m tons of cargo by IWC saves more than US$32m on road service and repair expenses in four years.

With the war waged by Russia against Ukraine having a devastating effect on the country’s infrastructure, active IWC usage appears to be a true remedy replacing long-length rail and road legs in grain and iron commodity carriage.