Trucks vs trains: what is behind rail freight tensions between Poland and Ukraine
For almost two months, Ukraine has been blocking the rail freight transit to neighbouring Poland. The controversial decision of the Ukrainian Railway has also affected the container trains running between China and Poland, the two largest trade partners of Ukraine. Poland demands to cancel blockade and restore rail freight transit. Meanwhile, Ukraine, in turn, has its own proposals to the neighbour. They are related to road freight traffic between the two countries.
On 30 November 2021, the Ukrainian Railway (UZ) implemented a temporary ban for transit rail freight operations from 15 states to Poland via its network. The list of the mentioned countries includes China, Russia, Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, Azerbaijan, Armenia, Georgia (Sakartvelo), Moldova, Lithuania, Latvia and Estonia.
This decision resulted in a blockade of container train traffic between China and Poland that runs via Ukraine. Two major Polish rail freight operators, PKP Cargo and particularly PKP LHS, are most affected by this blockade. PKP Cargo lost several million tonnes of freight while PKP LHS lost its container trains from/to China. “It is a pity that our transport plan for December 2021 and its implementation with 87 contracted trains from China and six trains to China has become impossible,” said Zbigniew Tracichleb, CEO of PKP LHS, at the press conference that took place in Zamość on 18 January.
The future of the situation is still unclear as the Ukrainian side has not informed its Polish counterpart about any possible date when the restrictions will be lifted. “By today, we have not received any feedback from the Ukrainian Railway,” added Andrzej Olszewski, member of the board of the Polish state railway holding PKP S.A.
What is the real reason?
UZ explains the imposed restrictions by the electrification works on the Kovel-Izov line that connects Ukraine with Poland’s Broad Gauge Metallurgy Line from Hrubieszów to Sławków. “The electrification works on the Kovel-Izov-state border section and modernisation works on the Znamianka-Zdolbuniv section are underway. As a result, the capacity towards Poland decreased to 350 wagons per day. These volumes are not enough to ensure transport on time. Therefore, it was decided to temporarily introduce a convention banning transit rail transport via Ukraine,” the Ukrainian Railway briefly reported in early December.
It is worth noting that the electrification on the Kovel-Izov line is not the first being implemented in Ukraine within the last decades. However, it is the first time when such kind of restrictions was introduced on the country’s network. According to Andrzej Olszewski, UZ informed PKP S.A. that the cancellation of the introduced restrictions was beyond its responsibility. So, what is the real reason for the blockade?
Ukrainian demand
The answer on this answer could be found not in the rail market but in the road haulage sector. As the cross-border road freight operations are limited, the governments of Poland and Ukraine negotiate the quotas for hauliers year by year. In 2018 the Ukrainian road freight companies have 200,000 permits for entering or running via Poland. Afterwards, this amount was reduced to 160,000 permits. Such a number is regarded by many Ukrainian logistics umbrella organisations as inefficient. As a result, both governments often start additional negotiations for extra permits. The Ukrainian hauliers got 15,000 extra permits in 2019 and 4,711 extra permits in 2020. In 2021 the parties did not succeed in issuing more permits and the figure of 160,00 permits was kept for 2022.
Neither the Government of Ukraine nor its Ministry of Infrastructure did not declare that the permit issue for international road transport is connected with the restrictions for rail freight transit to Poland. Meanwhile, there are several facts that indirectly confirm this. Slightly after imposing the ban of transit rail freight operations towards Poland, Ukraine announced its intention to file a lawsuit against Poland, which does not increase the number of permits for road freight in 2022.
Both parties have their own arguments on this issue. According to Ukraine, the Polish unwillingness to increase the number of permits is contrary to the EU-Ukraine Association Agreement. Poland, in turn, argues that it cannot do this as the Polish hauliers use far less permits (no more than 90,000 permits annually). “The Ukrainian side wants 200,000 permits, and we need to find a middle ground in such a way not to hinder trade and freight opportunities as well as take into account the interests of the Polish carriers,” said Rafał Weber, the Polish deputy minister of infrastructure in December 2021.
While the two countries are still disputing over trucks and trains, the shippers and forwarders from both sides are losing money every day. Currently, there is a stalemate for both issues, road freight permits and rail freight transit. However, a possible middle ground could be found by combining the advantages of both modes of transport. Perhaps, instead of implementing restrictions and permits, both countries should think together about launching cross-border combined transport. This will generate more freight volumes for railways and will allow road hauliers to quickly cross the border. Such a service has already functioned in the 2000s for delivering semi-trailers, trucks and containers from Kyiv to Sławków. Why not relaunch it again?