Benefits for Ukrainian Traders
Taking into account the preferential rates that were already in place (prior to August 12), the actual size of the new discount will not be 50%, but an average of 34.7%. In other words, by using Moldova’s railway “solidarity corridor,” Ukrainian traders could theoretically save an average of $6.35 per metric ton on the transportation logistics for their agri-food products, according to agromarketing expert Yuriy Ryzha.
But that’s under ideal conditions. The realities of operating amid a military conflict will undoubtedly prove more challenging.
It must be acknowledged that Ukraine’s railway infrastructure faces real risks of attacks and damage to the two existing routes into Moldova (Mogilev-Podolsk-Velchinets and Chernivtsi-Larga).
Consequently, the transit of cargo through Moldova will depend on the functioning of the Ukrainian infrastructure adjacent to the border, as well as the coordinated operation of alternative routes. Otherwise, traffic jams, delays, longer routes, and increased transit times for cargo are possible.
Economically speaking, all these factors could completely “eat up” the discount on transit service rates along Moldova’s “solidarity corridor.”
Theoretically, if there were a detailed plan for the delivery of Ukrainian cargo that took all risks into account — and distributed them evenly throughout the entire marketing period—the parties to the agreement could derive economic and diplomatic benefits from it . But in practice, this will be difficult to achieve.
The financial risks are high, and they will be factored into the price of the goods. From this perspective, it can be assumed that even with the discount on rail transport logistics via Moldova, the competitiveness of, in particular, Ukrainian grain (compared to similar Russian grain) in the Black Sea region is unlikely to increase significantly.
Economic Impact on the Moldovan Railways
According to Yuriy Rizi’s assessment, in order to maintain the previous gross revenue of the Moldovan Railways while accounting for the discount on the base rate, it will be necessary to transport 40% more Ukrainian cargo.
If Ukrainian operators provide the railcars and locomotives in all cases, the Moldovan Railways’ costs may be lower. If Ukrainian trains require the use of Moldovan locomotives and railcars, engineers and maintenance crews, as well as multiple shunting maneuvers and stops at junction stations, costs will obviously increase.
It is worth noting that not all Ukrainian transit cargo will be transported between Ukraine and Moldova in grain cars. Goods may be transported in containers, in large bags (big bags) on flatcars, and so on. Vegetable oils may be transported in tank cars, while flour and other perishable goods may be transported in specialized railcars.
The rolling stock may be Ukrainian, but after entering Moldova, it will need to be provided with a clear track, a receiving station, authorized technical and commercial inspections, etc.
For Moldovan farmers, the risks lie not only in the fact that Ukrainian trains will inevitably take railcars away from Moldovan customers, but also that they will certainly divert a portion of the infrastructure at all levels to serve their own operations.
At the same time, returning to the starting point, attacks and damage to the adjacent railway infrastructure in Ukraine during the transit of cargo will also have economic consequences in Moldova: changes to train schedules, the reservation of locomotives, line occupancy, etc.
That said, for Ukrainian traders, this is offset to some extent by a discount on the tariff, whereas for Moldovan traders, it is not.
