News / Russian logistics companies enjoy high demand on new routes

© Tikhonova Vera

The Russian shipping and transportation sector is adapting to new realities amid an ever-tightening sanctions regime and the exodus of major logistics and transport companies from the country.

The beginning of Russian-Ukranian military conflict in February last year led to a serious drop in the market – but it provided serious opportunities for growth for domestic companies to fill vacancies left by foreign players.

Maxim Tolstobrov, commercial director of СDEK, one of Russia’s largest express companies, in an exclusive interview, said  the departure of major companies, such as FedEx, UPS and DHL led to major structural changes and redistribution of their customers.

Mr Tolstobrov said Russian carriers were able to build new routes.

“Initially we sent shipments from the US and the UK to Finland, but because of the long inspections at the border, that route was discontinued. From Australia and Singapore cargo used to go to Dubai and then to Moscow. But today only Turkey and Central Asian countries remain open. If cargo is not under sanctions, it goes through the Baltics, Poland, or Belarus. All land logistics routes between the EU and CIS countries remain open. The air and automobile connections with China are maintained.

“While Russia, despite the sanctions, allowed foreign carriers to move through our country for some time, on September 29, 2022, the government introduced a ban on international road freight transport in Russia from ‘unfriendly countries’.”

As a result, road carriers from the EU, UK, Norway, and Ukraine are not allowed to enter Russia. Before crossing the border, they must hand over cargoes to Russian carriers. Restrictions do not apply to the Kaliningrad region.

As air services ended, Russian carriers and shippers had to increase the number of ground routes to the south, which allowed the, to partially compensate lost time – although the average delivery time increased by one or two days.

“Today we are seeing a new challenge – most carriers have begun to experience a shortage of spare parts and components, which are difficult to deliver to Russia from abroad for two reasons,” explained Mr Tolstobrov.

“First, it is impossible to pay the foreign currency bill. Secondly, some categories of goods are under sanctions, and it is impossible or very difficult to export them from Europe. Dealers, in turn, referring to force majeure (sanctions imposed), refuse to service cars, although they are required to do so under the contract and warranty obligations. International carriers have solved this problem by making it possible to have the vehicles serviced abroad; Russian carriers, unfortunately, are not able to do so.”

According to Mr Tolstobrov and other forwarders and shippers, the southern route, along with the Asian one, became critical for cross-border trade after the sanctions.

In recent months, Turkey, the UAE, and Bahrain have become fully fledged transportation hubs for most international cargo, with the final delivery points to Europe and the US.

Eastern routes via China and Southeast Asian countries have suffered less than others, although logistics became more complicated due to the dramatic reduction of capacity from Russian air cargo carriers.

Western routes have dropped considerably, leaving small traffic flows. Air traffic has completely stopped, and logistics has been complicated by the increased requirements, customs monitoring, and the need to transit cargo at the borders.

An official spokesman for Delovye Linii, one of Russia’as largest logistics companies, told The Loadstar that current events have radically changed the Russian freight market, while the departure of European players has disrupted logistics flows to Russia.

“The trend of the last year is the opening of new routes, forced by problems and restrictions at the land borders of the EU and the Customs Union. In addition to the usual Kazakhstan and Uzbekistan, transport companies are ready to deliver cargo to China, India and Turkey. According to our data, the demand for delivery in the latter direction increased by an average of 30%. The main direction of our work in the international direction is China and Southeast Asian countries.

“Here we have a high demand for transportation. In addition, adapting to the new conditions, we changed the logistics schemes and built a sea route for container transportation, launching our own schedule for the delivery of goods by container from Turkey, which is in high demand and meets the needs of customers in terms of cost and delivery time.”

The company added it had high hopes for growth in ecommerce.