China considers cuts to Belt and Road rail rate subsidies

China is considering cutting subsidies covering 40 to 50 percent of the total cost for China-Europe rail shipments and reducing its investments in Russia’s portion of Belt and Road. For the route to be profitable rates would have to hover between $8,000 and $9,000 per container, compares with between $11,000 to $12,500 by air and $1,200 to $2,000 for ocean shipping, said Kirill Konstantinov, deputy head of logistics department in the Russian Ministry of Transport.

China had planned to divert 15 percent of its overall container flows with Europe to rail but will now have to adjust because the route is unprofitable for transportation companies. Through August, China-Europe rail traffic grew 17 percent to 835,000 TEU, with high-value cargo such as electronics, automobile accessories, pharmaceutical products, cosmetics, and jewels.

The average train speed on the Trans-Siberian Railway (TSR) is 12km/h, compared with 40km/h in China. The Baku-Tbilisi-Kars railway line that bypasses Russia through Azerbaijan, Georgia, and Turkey and would be able to support train speeds between 30 and 35 kmh.