Ukraine a huge social and environmental impact.

Ukraine is often called to be the bridge
between East and West. Due to the advantageous location, (eastern border with Russia, northern with Belarus,
and western with European countries – Poland, Slovakia, Hungary Romania and
Moldova), it has a huge transit and logistics potential. However, the whole
infrastructure, starting from various communication channels and ending with
roads, has an extremely high degree of depreciation. Therefore, the speed and
quality of the whole logistic process is decreased. Even though the condition
of the rail and road infrastructure is not satisfactory currently, it operates
almost to a full capacity. Ukraine is washed by the Black Sea and the Sea of
Azov, and has the great water arteries such as Dnieper and Danube rivers. Even
though Ukraine is situated in such a favorable way, the capacity of Ukrainian
waterways is characterized by a very low usage.

When it comes to a decision, where to invest:
road, rail or water transportation network, decision makers should consider
several factors. From the viewpoint of the relatively low costs of
infrastructure construction and maintenance, roads are the most attractive for
the capital investment. Nevertheless, roads and road transport have a plenty of
disadvantages and carry a huge social and environmental impact. Rail transport,
on the contrary, is an environmentally and socially friendly mean of transportation.
But it requires the largest investment into design, manufacture, installation,
and maintenance. Water transport is a compromise between social, environment
and infrastructure costs. It is the most cost-effective way to transfer goods
and commodities around the globe. Vessels can carry huge amounts of goods and
commodities and are suitable for transporting gas, liquids and various types of
dangerous freight. Therefore, it is essential for the countries which have an
opportunity to build and use the waterborne transport network, not to neglect
the opportunities which water infrastructure provides.

In this article, I will focus on the potential
of Ukrainian waterways. I will describe the current condition of the river and
sea transport in Ukraine, try to figure out what are the issues and main
obstacles to the development of waterborne transport network, consider the
advantages and perspectives of the buildup of the sufficient river and maritime
infrastructure in Ukraine, and come up with an answer to a question “Why is it
worth to develop Ukrainian river and sea transportation?”.

2.
Current Situation of Waterways

2.1.
The Logistic Performance Index

To determine the weaknesses of Ukrainian logistics
system, which includes water transport as well, it is relevant to consider the
Logistic Performance Index (the LPI) which was presented by the World Bank
(2016). The LPI is a tool which was created to help governments and decision
makers to identify the challenges and opportunities their country face in
performance on trade logistics and what they can do to improve the existing
situation. The LPI 2016 ranks 160 countries on six dimensions of trade: the
efficiency of customs and border management clearance (“Customs”), the quality
of trade and transport infrastructure (“Infrastructure”), the ease of arranging
competitively priced shipments (“International shipments”), the competence and
quality of logistics services—trucking, forwarding, and customs brokerage (“Logistics
competence”), the ability to track and trace consignments (“Tracking and
tracing”), the frequency with which shipments reach consignees within scheduled
or expected delivery times (“Timeliness”) (World Bank Group, 2016). The maximum score
which a country can get is 5 and the minimum is 1. The higher the score, the
better the country’s logistics performance is. Germany is the country with the
best logistics infrastructure with an average score of 4,23. Ukraine is ranked
as number 80 out of 160 countries with an average score of 2,74. The comparison
of Ukraine and European and Central Asia countries shows that Ukrainian
performance on all ranking parameters is worse by 15,2% (Figure 1). According
to the LPI rank, logistics system in Ukraine is slightly better (9,16%) than
the systems in the lower middle-income countries. The issues of Ukrainian
transport and logistic infrastructure, which include the problems of waterway
transport and neglecting of its potential, imperfect document flow system,
complicated permitting procedures, long time of
goods handling, are the causes of the low Logistic Performance Index and,
consequently, the reduced level of economic competitiveness.

Figure
1. The Logistic Performance Index (World Bank Group, 2016).

2.2.
Port Infrastructure in Ukraine

As of 2018, there are 13 seaports in Ukraine situated
on the shore of the Black Sea and the Sea of Azov. This number doesn’t include
5 ports located on peninsula Crimea, an occupied territory by Russia since 2014 (Figure 2).

Figure 2. Sea ports in Ukraine. (Ministry of Infrastructure of Ukraine, 2013)

The total capacity of the cargo handling by all
the Ukrainian sea ports is 240 million tons a year. Currently, the largest
ports of Ukraine are Yuzhny, Odessa, Mykolayiv and Illichivsk, which account
for about 80% of the total capacity of all Ukrainian sea ports. Their main
advantage is the deep-water areas up to 21 meters, which allow service for
large-tonnage vessels. Currently, container services are provided by container
terminals located only in ports Odessa, Illichivsk and Yuzhny with a total
capacity of 3130 TEU per year. In these sea ports, non-state business entities
can provide their logistics services. (Cabinet of Ministers of Ukraine, 2013 ). All
the Ukrainian ports are state-owned. These types of cargo are processed in
Ukrainian ports’ terminals: petroleum products, coke, ore, minerals, building
materials, chemicals, crops, vehicles, black metals, non-ferrous metals,
fertilizers, gas,
consumer goods, wood. The sea ports of Ukraine are the members of the Transport Corridor Europe-Caucasus-Asia (TRACECA). This transport
corridor is also called a New Silk Road. TRACECA aims to strengthen economic,
trade and transport relations in the regions of the Black Sea basin, South
Caucasus and Central Asia.

Also, there are 9 river ports on the bank of
Dnieper and 1 on the bank of Danube river (Figure 3). Operating length of the
river waterways in 2016 is 1569,4 km. In 1980, this number was three times
higher (4910 km) (State Statistics Service of Ukraine, 2017). Since 1980 there is a decreasing trend: Ukrainian waterways’ length shrinks
of about 1% each year.

Figure 3. River ports in Ukraine. (Ministry of Infrastructure of Ukraine, 2016)

Danube river port is involved in Pan-European
Corridor VII, which runs through Austria, Hungary, Bulgaria, Romania, Moldova
and Ukraine. The Danube river corridor takes only 70 km of Ukrainian territory.
Dnipro river with its numerous ports, which were actively used during the times
of Soviet Union, isn’t currently engaged in any international transport
corridors. At the national level, the Dnipro can link the center of the country
with the Black Sea. Internationally the Dnipro may provide a more optimal
distribution of traffic flows of the Central and Eastern Europe towards the
Black Sea. In the future, Dnipro could play an important role in the world and
European logistic chains because it is open to foreign vessels.

2.3. Modal
Split for Freight Transportation in Ukraine

Ukraine heavily relies on road and rail
transport. In 2016, there were 20 952 km of railway tracks and 163 033 km of
roadways in operation. The level of deterioration of both networks is very
high. However, they are used almost to a full capacity. In comparison to
freight transportation carried by roads and rails, the amount of cargo carried
by water transport is substantially lower. According to State Statistics
Service of Ukraine (2017), even though vessels have the highest cargo
efficiency, only 0,46 % of the whole exported and imported cargo in Ukraine is
carried by waterborne transport (Figure 4).

Figure 4. Modal split of freight transportation
in Ukraine (State Statistics Service of Ukraine, 2017)

Talking about the passenger transportation, the
situation with public transportation by water transport is even worse than with
freight transport. Only 0,02% out of total of 2 422 707 thousand of passengers used
water transport as public transport mode in 2016 (Figure 5). However, it is
worse to admit that river transport (448,5 thousands of passengers) is more
popular than sea transport (30,3 thousands of passengers). Currently, river
transport routes are not included into the master plans of public
transportation of the cities. Private companies offer unregular cruises on
short distances and frequency of the trips is season-dependent.

 

Figure 5. Modal split of passenger
transportation in Ukraine (State Statistics Service of Ukraine, 2017)

The European Union (EU) modal split of freight
transportation differs from Ukrainian substantially. In 2015, the average share
of waterways usage of 28 countries-members of EU was 6,4%. The modal split
obviously depends on the availability of a given mode. Only 17 of the Member
States have navigable inland waterways (Eurostat, 2017). In the Netherlands, waterborne
transport has a crucial role in freight transportation system. The share of
inland waterways freight transport (45.5%) almost equals the share of road
(48.3%) in the Netherlands in 2015. High traffic on the Danube also explains
the comparatively high shares of inland waterways in Romania (30.4%) and
Bulgaria (27.4%). Also, there was a declining trend over the past few years in
the EU countries in the share of cargoes carried by road, whereas the share of
waterborne transport in the countries which have access to rivers and seas is
rising.

Ukraine could create an efficient waterborne
freight transport system like Romania and Bulgaria, according to available
water resources (rivers Dnieper and Danube). In addition, there is already an
existing infrastructure built in the times of the Soviet Union. Currently, the
vessels and port equipment are run-down and outdated, the waterways itself are
in neglected state. The constant depth of the rivers is not maintained.

3. Advantages
and Perspectives of Water Transportation in Ukraine

The importance of waterborne transport
development in Ukraine is supported by the fact that the motor roads
infrastructure is in an extremely unsatisfactory state today, which
substantially decreases the efficiency of logistics operations. Also, equipment
and rolling-stock is in run-down condition: over 90% of locomotives and 82% of
railroad cars are worn as of today. In addition, development of water transport
infrastructure helps the country to reduce the share of freight carried by
trucks, which leads to the decrease of pollution, noise, and energy dependence
of transport sector.

The European Commission has already realized
the negative influence of freight road transport on
environment and developed a strategy for near- ‘zero-emission urban logistics’
which would help to redistribute 30% of cargoes transported by road to river
and rail transport by 2030. The European Commission already works towards a
strategy to bring together the aspects of land-use planning and river access,
information availability and business practices in order to increase the figure
to 50% by 2050 (Directorate-General for Mobility and Transport, 2011). It is planned to
deploy such smart mobility systems as maritime surveillance systems
(SafeSeaNet) and river information services (RIS).

It is known from the general economic theory
that one of the most important characteristics of a countries’ economy
development is a transportation cost component in the structure of a product,
produced in the country. This component could be called a macroeconomic
indicator. The less the factor is, the better the economy performs. The
transportation and freight forwarding component in GDP should be less than
10-15%. In developed countries, this condition is fulfilled. For example, in
the countries in European Union and the United States freight forwarding
expenses account for 12-16% of GDP. In Japan, this number is substantially
lower, only 6 % of GDP. If we talk about Ukraine, 30-35% of GDP accounts for
logistics expenses. Therefore, a lot of the experts describe the Ukrainian
economy as a “third world country” economy. In monetary terms, 30-35% equals to
approximately 31.8 – 37.1 billion dollars loss per year. Based on this, it is
crucial for the country to seek for the reduction of logistics costs. Thereby,
the understanding of the potential for the logistics systems improvement,
well-developed long-, mid- and short-term decisions in transport sector and
infrastructure, adequate use of the network and resources could considerably
affect the economic performance of the country.

In comparison to trucks, vessels have the
highest capacity. On average, one river barge can transport 1 500 tons of
cargo, while maximum 30 tons could be transported by one truck. Sea vessels, on
average, have the capacity of 5 500 tons of cargo. In terms of capacity, rail
transport competes with water transport. The decisive factor of a train
capacity is a locomotive traction.

Comparing the transportation costs in domestic
connection, haulage by road transport is the most expensive. The expenditure of
carriage of one ton of freight by lorry is approximately 9,16 Euro per 100 km.
It costs 6,38 Euro to transport the same amount of cargo by rail. The price of
shipping by waterways is 3,68 Euro, what is the most attractive in terms of
reduction of logistics expenses.

Safety comparison of water, road and rail
transport shows that shipping by river or sea is the most secure way of
transportation (Tennessee-Tombigbee Waterway, 2017). There were only 0,01
deaths and 0,09 injuries per billion ton-miles recorded on ships and barges.
Surprisingly, rail transport shows the highest level of deaths (1,15) and
injuries (21,77) per billion ton-miles. Road transport has the degree of 0,84
deaths per billion ton-miles and the number of injuries is not identified.

The index of energy efficiency of shipment
methods is expressed in number of miles one ton of cargo can be carried per
gallon of fuel. The most energy effective mean is water transport, as one
gallon of fuel is needed to carry one ton of cargo for 827,3 km. The value for
rail and road transport is 325,1 km/gallon and 95 km/gallon respectively.

From the prospective of environment quality of
means of transport, vessels and barges are responsible for the lowest degree of
emissions in comparison to trucks and trains. A unit of water transport emits
0,0009 pounds of emissions/ton-mile of hydrocarbons, 0,0020 pounds of emissions/ton-mile
of carbon monoxide and 0,0053 pounds of emissions/ton-mile of nitrous oxide (Haulk, 1998). Environment impact of
a train in comparison to a vessel is significantly higher. The level of
hydrocarbons emitted is 5, carbon monoxide – 3,2, and nitrous oxide – 3,5 times
higher than by water transport (0,0046 pounds of emissions/ton-mile, 0,0064
pounds of emissions/ton-mile, and 0,0183 pounds of emissions/ton-mile
respectively). Only one truck which can carry 30 tons of cargo emits 19 times
more nitrous oxide than a vessel which is able to carry 1 500 tons of freight.

Besides, Ukrainian decision-makers and
stake-holders should not neglect the fact that European countries are
responsible for a substantial share of Ukraine’s both exports, namely 34% of
the whole Ukrainian export (State Statistics Service of Ukraine, 2018) and imports (38%) with
the greater part of cargo flow running through countries located on the banks
of the Danube, Rhine and Main rivers. Presently, the cargo traffic flowing
between Ukraine and the Eurozone countries is carried by rail and road. For the
time being, Ukraine did not utilize the obvious advantages of river transport due
to a high degree of wear of watercraft and supporting infrastructure.

Water transport before financial crisis in 2008
played an important role in Ukraine’s transit. However, because of a complicated
economic situation, the water transit traffic from Europe and Canada to the CIS
countries (Russia and Kazakhstan) and, in the opposite direction, from Russia, Kazakhstan
and Uzbekistan to Greece and Italy was lost.