Border development: how Ukraine is increasing its land exports without waiting for the opening of seaports

Coping with the flow of cargo that inundated wagons and trucks in the western direction in 2022 posed a challenge for Ukrainian infrastructure. It was even more challenging for the infrastructure of EU countries which had never faced such a volume before.

There was a shortage of personnel and wagons at the borders, and roads leading to the borders were paralyzed by long queues of trucks and passengers. There was also a lack of space in European ports, where the goods were headed.

Even back then, it became clear that there were insufficient capacities at the western border. However, no one was ready to invest in extensive development. The reasoning was that once the ports opened, what would be the need then?

Nevertheless, businesses understood that Ukraine would eventually join the EU, so border development was unavoidable.

The large-scale war has been ongoing for a year and a half, prompting both businesses and the government to consider the future prospects: new border crossings are being opened, and land exports are increasing. However, some major projects have already been abandoned.

How the railroad borders were opened

In the first months of the war, the task of Ukrzaliznytsia (Ukrainian Railways) was to redirect agricultural and metallurgical cargo to the western borders, which had been heading to the ports for years.

Currently, Ukrzaliznytsia primarily transports grain. Ukraine exported over 1 million tons of grain in December 2022 through the western borders. At the beginning of 2022, this figure was only 36 thousand tons per month.

Over the past year, abandoned railway tracks for passenger and freight transportation have been restored on the borders between Ukraine and three neighboring countries.

The restoration of the Berezyne-Basarabeasca railway section, spanning 22 km on the border with Moldova, became particularly important as an alternative route to the Danube ports.

Understanding the significance of the Danube River ports, the Russians have made repeated attempts to destroy the bridge over the Dniester Estuary.

The largest project on the border with Poland was the restoration of narrow-gauge railway on the Kovel-Yagodyn-border section, which spans 64.4 km and has increased freight transportation. The project was estimated at $54 million in 2020.

In 2023, Polish and Ukrainian railways agreed to restore narrow-gauge railway with Rava-Ruska, which will enable the operation of additional passenger trains to Warsaw. The first testing of this connection took place in April.

Additionally, the reconstructed Line 102 consists of two railway sections connecting Khyriv with Przemysl. Thanks to this project, Ukraine will have two additional crossings with Poland, which will help increase domestic exports.

Ukrzaliznytsia has also opened connections with Romania. Two sections on the state border were restored: Rakhiv-Berlebash and Teresva. Both had been non-operational for over ten years.

When the Romanians restore the railway on their side, these sections will become the third and fourth busiest crossings on the border with Romania. According to the former head of Ukrzaliznytsia Oleksandr Kamyshyn, this will allow for an additional shipment of 3.5 million tons of cargo annually.

All of these works were costly. In 2022, Ukrainian Railways ended the year with a loss of 10 billion UAH.

While international organizations were providing assistance with funding for operational work, the company invested 3.7 billion UAH in capital construction, of which 1.1 billion UAH was spent on major repairs of buildings and structures.

Since prior to the war, Ukrzaliznytsia was transporting twice as much cargo within the country, and the company does not face any issues with wagons.

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The country’s borders are capable of allowing the passage of 3,422 wagons per day, but only 1,614 wagons are allowed through, indicating that there are sufficient resources in the EU to increase transportation.

However, the readiness of the European Union for increased trade is another question. It is not just about the political ban imposed by four EU countries on the import of Ukrainian grain their infrastructure is also unprepared for the flow of Ukrainian products.

New road checkpoints

In such circumstances, automobile border crossing points have become a solution for passengers and exporters.

Although, currently, the volumes of export transportation by land are approximately half of what is transported by rail on a monthly basis, compared to April 2022, they have increased by 20 times.

About half a million tons of goods are delivered across the border by cars each month. These primarily include high-value-added products, particularly food products.

All this was made possible by the opening of new checkpoints and the expansion of existing ones, separating queues for passengers and trucks, and the launch of an electronic queue.

The new border checkpoint Krasnoilsk on the border with Romania started operating in November.

As explained by the Deputy Minister of Communities, Territories, and Infrastructure Development, Sergiy Derkach, this checkpoint was built in just six months, allocating 115 million UAH from the budget’s reserve fund.

This helped relieve the burden on the only existing cargo checkpoint at this border.

“In the Chernivtsi region, there was one major border crossing point Porubne-Siret. Everything was at a standstill there, queues stretched for 20-25 kilometers, reaching from the border to the city of Chernivtsi itself,” recalls Roman Slaston, the head of the Ukrainian Agricultural Business Club.

A checkpoint called Dyakivtsi was also constructed on the border with Romania during the time of the war, which operates exclusively for passengers.

Important changes have also taken place on the Polish border.

Although the EU regulatory framework does not provide for temporary checkpoints, the Nyzhankovychi-Malhowice checkpoint for small empty trucks has recently been launched. This has helped to reduce queues at neighboring checkpoints.

Currently, it operates in temporary mode and looks like a modular building with a concrete road. The Poles on their side are constructing a permanent checkpoint that will allow the passage of trucks weighing up to 7.5 tons.

They are primarily used by exporters of high-value-added products such as meat, milk, and electronics. The construction is planned to be completed by the end of 2023, and in the first quarter of 2024, cars will pass through it.

However, building border crossings is expensive and time-consuming. Another issue is expanding existing capacities and separating truck queues from passenger queues.

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This was precisely done at the busiest crossing, Yagodyn-Dorohusk, where only trucks and passenger buses are allowed to pass.

An important change, according to Daria Sichkar, the head of the Logistics Committee of the European Business Association, was the launch of the echerha system (electronic border crossing queue).

It started operating in test mode in late 2022 in “Yagodyn,” and recently, it has been implemented in 16 other major crossing points.

The system not only removed the queues by moving them online but also created a transparent mechanism for crossing the border.

“Now, due to the strikes of Polish drivers, the queue is not working as we would like. In addition, there have been recent cyberattacks from Russia. But overall, the project is good,” says Daria Sichkar.

Business thinks about the future

A year ago, neither Ukrainian Railways nor private companies were ready to invest in infrastructure projects to expand the capacity for border crossings. However, time has shown that the market is geared towards working with a long-term perspective.

“On railway and road routes, companies have implemented multimodal complexes near the borders with Poland, Romania, and Hungary. In addition, companies have actively invested in transportation: trucks, wagons, and watercraft,” says Mykhailo Prykhodko, a partner at EY Ukraine’s Strategy and Transactions practice.

According to Roman Slaston, new transshipment points were built on the borders with all neighboring countries. One of the largest projects was implemented near the railway crossing Mostyska-Medyka on the border with Poland.

In September, LEM Trans and Real Trans Investment companies launched the logistics hub Mostyska Dry Port. According to Slaston, the dry port features a container terminal that handles bulk cargo.

Vilia, which operates its elevator near Yagodyn, Ukrlandfarming, which has a grain elevator near Mostyska, and Agrosem, an agricultural distributor, expanded its capacities at the MOST LT terminal.

The companies also built transshipment points on the other side of the border, where the Ukrainian broad gauge railroad enters. According to Slaston, there are about six such companies: in Slovakia, Hungary, Romania, and Poland.

Suspended” projects

Not all ideas were implemented during 2022. The agreement on joint control at the road border crossings is among them.

In 2022, Ukraine initiated negotiations for joint control with Poland. Similar agreements will be initiated with Hungary and Slovakia, as stated by Sergiy Derkach.

The agreement is already in the finalization stage. As explained by Derkach, several joint border crossing points are already operational on Polish territory, such as Uhryniv, Hrushiv, and Smilnytsia. The agreement will allow for the creation of new ones.

Here’s how it works: a Ukrainian border guard stands at the border and allows the vehicle to enter the Polish checkpoint, where checks are conducted by Ukrainian and Polish representatives. In this case, there is no separate Ukrainian border crossing point.

“This speeds up the process by half because there is no need to travel from one place to another. It relieves the burden on the budget as there is no need to construct a border crossing point on the Ukrainian side. And this is important from the perspective of European integration,” says the Deputy Minister.

Another idea is the construction of a wagon bogie exchange point in Lithuania, at the Šeštokai station.

In the EU, narrow gauge tracks with a width of 143.5 cm are predominantly used. An exception is the Baltic countries, including Ukraine, where the tracks have a width of 152 cm. Another characteristic of these countries is that they have available capacities in their ports.

Currently, Ukrainian grain wagons have to change tracks twice to reach the Baltic ports through the narrow gauge tracks in Poland. Ukrainian Railways aims to expedite this process and has proposed to Lithuania the construction of this exchange point. The project is estimated to cost both parties 6 million euros.

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However, the countries have abandoned the idea of building a broad gauge track through Poland. In November, the European Business Association (EBA) approached the Polish government with this request but received a categorical “no,” as explained by Sichkar. They consider it impractical.

Moreover, the future of the so-called “oil pipe” through Poland, which the ministries of the two countries announced in September, remains uncertain.

What’s next?

Although the issue of the import ban on agricultural crops from Ukraine has been partially resolved, it has set a precedent. Questions have arisen regarding whether neighboring countries will block the import or transit of goods and whether it is worth developing infrastructure at the borders.

“As demonstrated in 2022, we were unprepared for restrictions on access to ports. Considering the various ways of hybrid influence on maritime traffic in the Black Sea by aggressors, we cannot afford a similar level of concentration on a single logistics route. The diversification and development of transport infrastructure in different directions should be seen as an element of Ukraine’s economic security,” said Mykhailo Prykhodko.

In addition, it is unclear how long Russia will block Ukrainian ports and whether the “grain corridor” will work.

Business representatives surveyed by Economichna Pravda agree that the current focus should be on maximizing the efficiency of existing capacities.

According to Mykhailo Prykhodko, it is prudent to take a step back, assess current capabilities and needs, and concentrate on the most critical bottlenecks.

Specifically, Roman Slaston emphasizes the need to reduce waiting times at border queues by improving the operation of transshipment points, as trade flows to the EU will remain substantial under any scenario.

It is likely that Ukrzaliznytsia and the Ministry of Reconstruction will not stop at the checkpoints launched in 2022.

Ukrzaliznytsia will develop narrow-gauge railways in Ukraine, repair the section from Matceiv to Kovel, continue electrifying the section through Yagodyn, build the Mostyska-Sknyliv European gauge, and repair the European gauge at Vadul-Siret station.

In addition, Ukrainian Railways plans to construct 500 fitting platforms, including through the investment of international partners to develop container transportation.

The company also aims to automate traffic management, as revealed by Daria Sichkar. According to her, Ukrzaliznytsia has presented a project to the business community for a system that makes border queues transparent and allows real-time tracking.

The Deputy Minister of Communities, Territories, and Infrastructure Development, Sergiy Derkach says that there are not enough automobile crossing points and there are queues at almost all crossings.

After the State Customs Service transfers most of the checkpoints to the Reconstruction Agency, they are planned to be expanded and modernized.

In particular, Ukraine wants to receive co-financing from the Connecting Europe Facility project for 5 infrastructure projects at the border.

New crossings will also be established. Primarily, the development of the Uzhhorod checkpoint on the border with Slovakia is planned. Furthermore, according to the Deputy Minister, Poland and Romania are the priority as these borders are the most heavily trafficked.

“We have locations where we can construct crossing points, but we need to analyze how much it will cost and what benefits it will bring. If new checkpoints are opened, they will be small and primarily for passenger traffic,” said Sergiy Derkach.

Such facilities are easier to build and will alleviate the congestion at major truck checkpoints.

Originally posted by Economichna Pravda, translated and edited by the UaPosition – Ukrainian news and analytics website

See also: Fate of the “grain corridor”: can Russia withdraw from the agreement?

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