Russia-China Meridian Toll Highway Under Consideration Again
2,000km superhighway could link millions of consumers in Russia and China via toll road at lower costs.
The feasibility study for the project to build the Meridian Toll Highway, which was proposed a few years ago, is being worked on again with Chinese partners, Igor Koval, the Deputy CEO for investment policy at Russia’s SOE Russian Highways (Avtodor), has said this week.
“We are currently working out a comprehensive feasibility study for the Meridian project, within the context of which we are working on traffic modelling, assessing the cost of construction and installation work. We are involving, among others, Chinese partners to assess the traffic modelling including the amount of freight that will come from China.” Koval stated at the Innovative Technology and Smart Transport Systems in Road Construction forum taking place at Sochi on the Russian Black Sea.
He said previous forecasts for traffic on the Meridian Highway, which was planned as part of the transit corridor from China to Europe, are now being reconsidered.
“The results of our feasibility study will be ready in the third quarter of this year. The amount of freight, preliminary estimates of the required capital expenditures for the project and the main zones of attraction for the freight base will be clear to us based on these results,” he said, adding that this will finally clarify the route options. The Eurasian Development Bank has already stated it is prepared to provide finance.
Asked about the possibility of China’s participation in the project, Koval said: “There is much interest. Among other things, various mechanisms of an intergovernmental loan are being discussed in this regard.”
Avtodor CEO Vyacheslav Petushenko also stated that the Meridian Highway project is being worked out taking into account changing logistics routes.
“The main objective of the Meridian Highway when the project was originally planned, was a Europe-Western China corridor. Today, there’s no point in running it to Europe, so now we’re considering other options for this freeway’s route. I can’t say right now what the actual routing and its cost will be. As a result of the feasibility study we’ll understand how much this will cost and what corridors will be involved.” Petushenko said.
“We are actively working with Regional Hotel Chains (RHC). We prepared the terms of reference together. We allocated funds from our revenue. And we will continue to work with them. Now we are doing the feasibility study, which the state is fully financing.” Petushenko said. RHC are a Russian hotel group owned by Luxembourg investment fund VIY Management.
“At the implementation stage we will already understand what sections there will be, the order of priorities, what the cost of money will be, and what share the government will invest. Most importantly, we will understand the traffic that will be involved, and in what period we will recoup this. Because we must consider the economic side. In the meantime, I think, by Q3 2022 we will have the first estimates.” Petushenko said.
The project to build the Meridian Highway was originally approved by the Russian parliament in 2019, with parties expressing interest but saying the project needed refinement. It will take between 12 to 14 years to be completed. However, other financing is also being sought, with Chinese and Indian contributors also being looked at. Investors have asked for assurances from the Russian Government that losses amounting from geopolitical risks such as border closures will be covered by Moscow. The highway is expected to make a profit after 15 years of operations – a ROI when the build cost is also factored in.
The route will not be entirely new in terms of much of the routing, which already exists in the form of existing Russian roads. Much of the Meridian Highway though requires a completely new build, both in order to preserve the Highways toll revenue integrity, in addition to handling the punishing treatment both heavy lorries and extreme weather conditions will impact upon the road surface and construction itself.
It is significant as part of the attraction of the projects that the Meridian Highway runs through Belarus, Russia, and Kazakhstan – all members of the Eurasian Economic Union (EAEU). The EAEU is a Free Trade and Customs Union also including Armenia and Kyrgyzstan, which may in future lead to Meridian Highway sub-routes leading off to Bishkek and Armenia’s capital of Yerevan.
Of additional future free trade interest is that China has signed off a Free Trade Agreement itself with the EAEU – which although is currently non-preferential in terms of any goods being affected, is known to be under product negotiation. As and when that happens, Chinese products will be able to travel the Meridian Highway, duty free. That is likely to occur way before the Highway is completed and lead to an immediately high volume of traffic – good news for the investors.
There are several Kazakh options for road links to China. One is the existing international Kazakhstan M36 link to the main Astana-Almaty-Urumqi in China’s Western Xinjiang Province, while several other national Kazakh highways also reach Chinese borders via the M38 highway, as well as the A2, A5, and A8. These all enter from the West.
From Russia direct, there are road borders to China at Inner Mongolia, Jilin, and Heilongjiang, entering China from the North. Several of these, such as Suifenhe have developed into significant Sino-Russian trading cities that include cross-border Free Trade Zones.
The interesting part about the Meridian Road project is that it is not just a highway, it provides access to the Trans Siberian rail at several important junctions, in new plans to extend Russia’s Far Eastern Rail network, also announced this week and which are currently being studied.
in addition to numerous important, commercially navigable and strategically positioned inland River Ports giving additional access to the vast Russian interior, Europe, and into Kazakhstan. As such the Meridian project is part of a far larger and already integrated rail and river transport network with connections embracing a population running into hundreds of millions of consumers and producers.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates. The firm assists British and Foreign Investment into Asia and has 28 offices throughout China, India, the ASEAN nations and Russia. For strategic and business intelligence concerning China’s Belt & Road Initiative please email email@example.com or visit us at www.dezshira.com