The world’s first specialized rail grain terminal with land corridor (NLGC)
report Mehr’s reporter, Hossein Shirzad, an analyst in the field of agricultural development, wrote in a special note for Mehr;
The emerging multipolar world in the conditions of climate change, economic disasters and global geopolitics needs a reason for unity between countries and people and a positive example of such cooperation. It can be the creation of food security corridors and belts. In this context, China, as the largest importer of agricultural products in the world, is actively diversifying its food strategy. As part of this tactical diversification, Russia has participated in the design and foundation of the New Land Grain Corridor (NLGC) to create the world’s first specialized grain rail terminal in the Russian Far East.
It is noteworthy that the development of the NLGC corridor can significantly affect the global dynamics of food, not only on China and Russia, but also on the surrounding world. to affect For example, in China, as the largest producer and main importer of food in the world, this corridor can support food security by diversifying imports and increasing investment in the Far East by Russia to increase grain supply and bypass possible supply barriers. slow.
In the long term, this initiative could also strengthen China’s influence in global and regional food trade and security, potentially changing the flow of agricultural products in its favor. . For Russia, amid Western sanctions, the grain rail corridor will ensure continued agricultural exports not only to China but potentially to other Asian markets, while facilitating more agricultural investment in the country’s Far East. For the rest of the world, reliance on the movement of food from key production areas to low-supply areas means that corridor expansion could potentially transform global and regional food supply chains.
The new ground grain corridor from the perspective of history
The NLGC concept, which connects China with the countries of the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia), was first proposed by Beijing in 2012. It was suggested. Immediately, this concept received the official support of the President of Russia and the President of China in 2016.
However, this project has not been prioritized by Russia until recently as Russia’s main grain export markets have historically been the Middle East, North Africa and Europe. However, as Western sanctions attributed to the Russia-Ukraine war have affected the country’s agricultural exports, the project has now become more attractive.
On June 17, 2022, during the 25th anniversary of the Saint Petersburg International Economic Forum (SPIEF) in the Russian Export Center, the Group of Companies of the New Russian Ground Grain Corridor and Investment China International, owned by the Chinese government, signed an agreement for the joint development of the infrastructure of this agricultural corridor for a total amount of more than 2 trillion rubles.
The New Grain Corridor Group of Companies is a manufacturing holding structure that has a plan to develop grain production. and implements grain logistics infrastructure in the Urals, Siberia and the Far East. The increase in the production of cereals, pulses and oilseeds in regions from the southern Urals to the Far East and the increase in grain exports by 1.9 trillion rubles ($19.6 billion) with the settlement of national currencies prompted Russia to consider the establishment of a specialized corridor. Let the grain fall.
In May 2023, the Russian government announced that it would increase its grain exports to China through the NLGC and expand the Far East (Russia) to Inner Mongolia ( China) to connect. A few months later, in October 2023, Russia and China signed a massive grain supply deal worth 2.5 trillion rubles ($25.8 billion) amid ongoing disruptions in Russian agricultural exports and the war with Ukraine. According to this contract, the Russian EPT grain export company is going to supply 70 million tons of Russian grains, legumes and oilseeds to the big Chinese holding in the next 12 years. /p>
To be sure, at the equivalent of 6 million tons per year, the new land corridor still accounts for only a fraction of China’s total annual grain imports, which will reach 160 million tons in 2023. It was ten. However, the country’s grain imports have largely been dominated by Westerners. For example, soy (about 100 million tons per year), on the other hand, imported wheat is about 12 million tons, mainly imported from Australia, Canada and France.
Now, since wheat exports are expected to make up the largest share of Russian grain exports to China, this corridor could play an important role. Next, it was decided to deliver the huge grain supply contract in October 2023 through NLGC; In addition, the Russian president has ordered his cabinet and the country’s central bank to finalize an intergovernmental agreement to increase grain exports to China, which will increase grain production in the Far East, the Urals and the Siberian Federal District, as well as increase the volume of production. It will be Russia.
On the one hand, according to Russian analysts, exports to China will help Russia to improve its transport and border infrastructure, to increase its agricultural exports to China, and agricultural cooperation. strengthen with China. By 2023, the direct land supply of agricultural commodities from Russia to China is generally very low. Significantly, the difference in grain supply by rail between the two countries has made it impossible to move grain directly by rail without interruption – Russia’s rail network uses 1520 mm gauge, while China’s uses 1435 mm gauge. Therefore, Russian grain exports to China had to be transported by sea, which may take up to 3 months.
So far, this delay has limited export competition. To address this problem, Russia has built the Grain Terminal as a rail transit hub and grain dry terminal on Russia’s border with Mongolia, designed to maximize the loading capacity of rail vehicles between China and Russia. /p>
Implementation of the “Zbaikalsk Container Terminal” project with the aim of increasing the container cargo handling capacity at the way station Iron Zbaikalsk started and construction of GTZ was completed in September 2022. By overcoming rail gauge differences, GTZ increases the competitiveness of the grain trade by shortening transportation time.
GTZ is expected to have an annual handling capacity of up to 8 million tons, which can reach up to 16 million tons with new infrastructure (for example, grain terminals and transportation multifaceted border), to increase trade between China and Russia significantly.
Importance of the New Ground Grain Corridor for China’s Food Security
In China, the largest producer and importer of food in the world, there is an expression of the belief that “people consider food as their heaven, so food security during the turbulent history China’s downturn has always been a top priority, and for decades, food security has been a key priority for Chinese officials.
The Chinese believe that “for any society, without the modernization of agriculture, there will be no modernization of the whole society”. The goal of national modernization can be achieved only with the realization of agricultural modernization. Therefore, the NLGC corridor can contribute to the country’s food security in two ways: one, by modernizing logistics and supporting the food import diversification strategy, and second, by avoiding potential food bottlenecks. In the first step, increasing grain supply from Russia is part of China’s import diversification strategy to reduce domestic climate shocks and the risk of strained political relations with major grain suppliers such as the United States and other Western countries, which are among the top suppliers of agricultural products to China. are Therefore, instead of relying on a single country or region to ensure the stability of its food supply amid an increasingly fractured and complex geopolitical environment, Beijing is sourcing agricultural products and inputs such as fertilizer through multiple channels, regions, and approaches. Sentence under the Belt and Road Initiative to prevent reliance on a single country or region. As President Xi pointed out in his recent article on agricultural self-reliance, the crisis in Russia and Ukraine shows that agriculture has become the “base of national security” and guarantees the well-being of a country and the well-being of its people.
Also, the new grain corridor may alleviate domestic grain shortages to the extent necessary. Although Beijing has tried to improve the quality of soil, land and water, these efforts have so far only slightly improved the country’s grain production.
Between 2013 and 2021, China’s per capita grain production increased from 1,020 pounds to 1,066 pounds. At the same time, its food self-sufficiency rate has decreased from 101.8% in 2000 to 76.8% in 2020. It is expected that this amount will decrease to 65% by 2035.
As a result, Beijing has become increasingly dependent on imports of animal feed and processed foods and has been a net importer of food items, including grains, since 2004. For example, although China has long been the largest producer of wheat in the world, contributing more than 17% of global wheat production. However, in 2023, it became the largest importer of wheat, importing 12.1 million tons, with more than half coming from Australia and significant amounts from the United States, Canada, and France.
This contradiction of high production and high imports is caused by challenges such as extreme weather events including droughts and floods, and the loss of arable land that produces wheat. It has endangered the domestic economy and has led to a budget deficit in recent years.
Given the uncertainties surrounding China’s agricultural production as well as external factors, the strategic corridor of NLGC can be considered as a profitable prospect. In February 2022, China announced that it would allow unlimited imports of Russian wheat, and the NLGC would allow it to import even more than the conventional limit. In fact, against the backdrop of increasing wheat imports, China’s food security policymakers consider the NLGC useful to further enrich wheat imports and ensure reliable wheat supply.
China’s strategy to diversify agricultural imports beyond key food products to include agricultural inputs such as fertilizers, especially fertilizer potash Although China produces potash, its domestic production falls short of the country’s growing demand – it needs about 14 million tons of potassium chloride per year, and only half of that Imports quantity – In 2021, China’s potash imports reached 7.57 million tons, accounting for 83.3% of the year’s total fertilizer imports. allocated Only a few countries, such as Canada and Russia, export significant quantities of potash. Canada, in particular, holds nearly half of the world’s known potash reserves and more than 35% of global Potass has been allocated to itself.
There are also concerns that China’s reliance on imported potash “could pose a major threat to food security.” be this country”. In order to secure its potash supply, China has targeted the expansion of domestic production and increased imports from Russia, Belarus and to some extent Kazakhstan. In 2021, out of 7.57 million tons of potash imports, 2.25 million tons from Russia (30% of total imports) and 1.75 million tons from Belarus (23% of the total import) has been imported. Therefore, in 2023, closer cooperation in the supply of fertilizers was mentioned as a priority area in the development plan before 2030 in the priorities in the economic cooperation of China and Russia in the available codified policies.
China, which has become increasingly dependent on the international market, sees food bottlenecks as a major concern. For most countries, despite their importance, bottlenecks are often overlooked in strategic food security assessments. This is in stark contrast to analyzes of energy security where bottleneck risks are managed by global governance mechanisms.
In this context, China is an exception. China, with its large population and reliance on the international food market, takes food weaknesses as seriously as its energy counterparts. As these strategic points are vulnerable to geopolitical tensions, conflicts, piracy, natural disasters and accidents, disruptions can delay the delivery of shipments, putting pressure on food availability and prices. Longer transportation time also increases the risk of spoilage of perishable foods.
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