The project idea has appeared in 2011 among associates who worked in the agricultural sector in Siberia. They were familiar with the problems of the agricultural sector in the region in general, and especially crop.
We are talking about a limited domestic demand for grain and lack of export potential, caused by (until recently) the political and infrastructure constraints.
Domestic demand is also limited by underdeveloped livestock (the main consumer of the grain) and another objective limiter, which is "food production oriented to the domestic market with low population” in the vast territory of Siberia and the Far East.
At the same time a huge export potential exists. Thus, in the Asia-Pacific region there are already 4.6 billion of people, and 1.4 billion of them live in China.
According to the WHO and UN in 2025 the number of inhabitants of the planet will increase to 8.1 billions. According to various estimates, a shortage of grain will leave without the necessary food supply from 1.4 to 2 billion of people.
The Siberian Federal District (SFD) has enormous agricultural potential. The farmland area is 47 million hectares, where arable land takes only 23 million hectares. Less than 10 million hectares (actually less) are used for crops. A yield, due to lack of demand, agronomic crops and technologies, on average is 1.2-1.3 tonnes per hectare, while sparing yield potential can be at least twice greater.
The figures clearly demonstrate that the SFD has a huge potential in the market of food production and its export. Geographical location and logistical feasibility are great for building the potential of the SFD towards China, while at the moment they are not in use.
For example, the average volume of Russian grain exports is 20 million tons a year. In the United States it is about 130 million tons a year. Japanese imports on average are 20 million tons a year.
It took over two years to create the project, where the following things were performed:
- data collection on the grain market of China and its prospects;
- data collection on the export potential of the SFD;
- search for efficient logistic and technical solutions for the problem caused by the different gauge standards;
- modeling and proof that the found solution is economically viable and feasible.
Then there was a memorable visit of the Russian President VV Putin to China in June 2012. After that there was APEC Summit and in March 2013 President of the Republic of China Xi Jinping visited Russia. During his visit the long-awaited document Phytosanitary Agreement was signed.
It became clear that the so-called historical "turning Russia towards Asia" is not just a word. They have developed the best in the history of the New Russia political conditions at the level of relations between the two countries. It allows Russia and China to implement all plans and now they can proceed to the practical and consistent implementation of large-scale and complex project on "Siberian grain export to China". The starting point is the building the "First Railway grain terminal Zabaikalsk-Manchuria."
Due to the fact that the project is carried out in the territory of the SFD, it affects inter-state relations and the issues of food security, which is a controlled area both in Russia and China. The project`s successful implementation obviously requires a large-scale political and industry support and forming a pool of like-minded partners.
Being commercially initiated this project has become a tool for meeting the public interest, as well as for implementing social and sectoral programs. It organically combines interests of citizens, the State and business in both countries, providing conditions for developing commercially promising market for export-oriented grain production, grain logistics and trading in the Siberian Federal District. This project has become a basis for strategic food security and cooperation between two countries.
Strategic prospects and the scale of the formed market are estimated at 30-40 million tons of grain a year.
Revenue from these exports are comparable with annual revenues from gas export through pipeline "Power of Siberia" on the eastern route. We are talking about "strategic industries and strategic cooperation between Russia and China" in the true sense of the word, where the level and quality of life will progressively increase. New job opportunities will be created, and each of them gives 5 new jobs in related industries in village, which is not only in Russia, but also in China.
Siberian grain is ecologically pure product with significant export potential. New export grain channel Siberia-China is the shortest and most efficient route for exporting Siberian grain to China.
The route excludes:
- Additional overland transportation, because railway terminal is located much closer, than the existing seaports.
- Transportation over the sea.
- Excess grain handling in the port (car-to-ship).
As a result, due to the unique logistics the grain exported through the new grain channel will cost much less than other providers, such as the United States and Canada, can offer on FOB in the ports of China.