RUSSIA  BUILDS  NEW  BALTIC  PORTS

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**October 1997**
by Dan Brennan
Three major new commercial ports are under construction in the Leningrad oblast as part ofRussia's long-term bid to reduce dependence on ports in neighboring Baltic countries.  U.S.companies shipping products in and out of Russia should monitor the development of these portsin planning future logistics needs.
The first port to begin operations is located at Batereinaya Bay, 47 miles from St. Petersburg onthe Gulf of Finland.  The port will be used primarily to handle oil shipments and is expected tohave an annual capacity of 15 million tons once it becomes fully operational by the end of 1998. The project will cost an estimated $250 million, and is being financed chiefly by the Russian oilcompany Surgutneftegaz.
The Batereinaya project officially opened on June 19, at a ceremony attended by Russian DeputyPrime Minister Vladimir Bulgak, Transport Minister Nikolai Tsakh, and the Governor of theLeningrad oblast, Vadim Gustov.  Gustov, who has been a strong supporter of the Batereinayaproject since taking office last year, has publicly stated that the new port would inject $l billioninto municipal and regional coffers by the year 2001.
Batareinaya will be joined by two other ports being developed in the region, at Ust-Luga (78miles southwest of St. Petersburg) and Primorsk (70 miles northwest of St. Petersburg). Collectively, the three ports will boost annual port turnover by an estimated 100 million tons, 60million of which will consist of crude oil, petroleum products, and gas.
Ilya Baskin, of the Leningrad Oblast Port Authority, said that the new ports would provide amajor boost to Russian exporters, who currently pay a total of $24 million each year for the rightto transport shipments via the Baltics.  News of the new ports has already had a direct impact onRussian coal exports.  A contract to supply Germany with 8 million tons of coal from 1998 to2005 was concluded soon after plans were finalized for the Batereinaya port.
The Ust-Luga port, where construction began in February of this year, will have an overallcapacity in excess of 35 million tons.  The initial phase will focus on construction of a dedicatedcoal terminal, to be followed by a terminal for mineral fertilizer.  The Ust-Luga company hasalready signed handling contracts for future consignments of 5 million tons of fertilizer.  Furtherdedicated terminals for timber, ore, cement, bauxite, grain, unrefined sugar, and containers, aswell as rail, automobile, and ferry facilities, are also in the planning stage.  The Port Authority'sBaskin asserted to the Itar-TASS news agency that "Ust-Luga is destined to become Russia'sleading and best equipped commercial seaport, and has the potential to secure economic growthnot just in the Leningrad oblast, but in the whole of the Northwest [of Russia]."
The main backer for the Ust-Luga port is another Russian energy giant, Rosterminalugol, whichis currently holding talks with a number of German banks to obtain funding for the project,according to the Interfax news agency.  According to a representative of Rosterminalugol, thedoor to foreign funding for Ust-Luga and the other two ports was opened by the new presidentialdecree "On Freight Transit via Finland," which was signed on June 6 of this year.  In fact, all threeports have been in the planning stage since 1993, but have been slow to get off the ground due tolack of serious investment.  The new decree commits the government to provide the investmentguarantees needed to back port construction work, subject to provision of a freight transitdevelopment program prepared jointly by the St. Petersburg municipal and Leningrad oblastauthorities.  The objective of the program, according to the decree, is to "secure Russia's nationalinterests and economic security."
Other transportation infrastructure projects are underway in the Leningrad oblast, as well.  Inaddition to plans to establish a new international cargo terminal at St. Petersburg's PulkovoAirport, which has qualified for a major credit from the World Bank, the region has alsocommissioned a feasibility study into the conversion of a disused military airbase at Veshchevo(62 miles northwest of St. Petersburg) into an international cargo airport.  The study is beingconducted by American aviation consultants, Airis International.  If the project, which couldcost an estimated $250 million, goes ahead as expected, Veshchevo will become the largestdedicated cargo airport in Europe and the fourth largest in the world.  This article expresses theviews of the author, and should not be construed as a statement of U.S. Government policy.  Thisstory is reprinted with permission from Russian Customs News of London, which is publishedby CIS Information Publishing in association with the Adam Smith Institute.
Dan Brennan is Editor of Russian Customs News.
***This report is provided courtesy of the Business Information Service for the NewlyIndependent States (BISNIS)***