Information published on 9 September 2014 in the UIC electronic newsletter "UIC eNews" Nr 414.

Russian Railways and the Mongolian Ministry of Roads and Transportation have agreed on a strategic partnership for the modernisation and development of Ulaanbaatar Railway

  • Cooperation

On 3 September in Ulaanbaatar (Mongolia), an agreement was signed between Russian Railways and the Ministry of Roads and Transport of Mongolia outlining a strategic partnership for the modernisation and development of Ulaanbaatar Railway (UBZD). In the presence of the presidents of the two countries, President of Russian Railways Vladimir Yakunin and Minister of Roads and Transportation of Mongolia Amarjargal Gansukh signed the document.

Vladimir Yakunin noted a consistent course in the development of Ulaanbaatar Railway and the railway infrastructure of the entire country in the interests of mutual cooperation. The most important condition of this partnership will be the agreement signed between Russian Railways and the Ministry. Thanks to the joint efforts of both sides, UBZD broke even, upgrading and replacing its entire locomotive fleet.
The president of Russian Railways emphasised the importance of further developing 1520-mm rail in Mongolia Railways, noting that constructing infrastructure using other standards will lead to the unnecessary duplication of services and an increase in operating costs.

The goal of the agreement is the strategic development of JSC “UBZD” to ensure growth in the export and transit of goods and strengthen its role in the Eurasian transport and logistics system.

According to the document, by 1 March 2015 the parties will agree to terms of reference and determine specialized engineering companies to conclude the agreements with JSC “UBZD” for the preparation of investment feasibility studies, including market research, financial and legal models, and a feasibility study on construction projects and the modernisation of the railway infrastructure in Mongolia.
Funding will be done by JSC “UBZD”, using their own and borrowed funds.

The main projects being considered include the centralised modernisation and development of the route Sükhbaatar–Sainshand–Zamyn Üüd (1100 km), including the electrification and/or construction of a second track; the northbound construction of the Erdenet–Ovot railway (545 km) from the perspective of developing the mining industry of northwestern Mongolia; and the construction of the Ovot–Arz sur route (215 km) with access to Russia and contiguity to Kyzyl–Kuragino. In the west, a railway line linking Russia and China through Mongolia to export from Russia to China, India, Pakistan, and other countries in the region will be developed, and in the east the possibility of using the Choibalsan–Erentsav railway section (239 km) from the perspective of transit to Khut–Bichigt is being considered.

The agreement also reflects the interest of parties to work with China to build up traffic from Russia to China in the opposite direction using UBZD, which includes the development of competitive tariffs and technological conditions for such shipments.

JSC “UBZD” was created on 6 June 1949, on the basis of an agreement between the governments of the Soviet Union and the Mongolian People’s Republic with an equal distribution of shares in the company (50/50). Until July 2004, the powers of shareholder on behalf of the Russian Federation were held by the Ministry of Railways of Russia; then, by RF Government Decree of 30 July 2004, no. 397, shareholder powers were transferred to the Federal Agency for Railway Transport.
Given the important role played by the UBZD in trade and economic relations between Russia and Mongolia and its importance in the organisation of transporting goods by rail in to Asia-Pacific countries and China, in accordance with the Presidential Decree dated 22 August 2009, no. 965 “On the Transfer of Federally Owned Shares of Soviet-Mongolian JSC Ulaanbaatar Railway to the Trust Management of JSC Russian Railways,” since 17 December 2009, it has been a trustee of the Russian stake.

At the time of its entry into the trust, the technical condition of the basic production assets of JSC “UBZD” (wear of the rolling stock was over 70% and that of the track structure was more than 50%) had a negative impact on the capacity of the road, hindering the prospective development of traffic, including transit traffic.
Since 2009, the key performance indicators of JSC “UBZD” have significantly improved: there have been increased turnover and positive financial results. With the participation of Russian Railways, the volume of freight traffic on Ulaanbaatar Railway reached a historical maximum in 2013: 21 million tons.

Today, the share of rail transport accounts for over 60% of freight traffic in Mongolia. The length of the Ulaanbaatar Railway is 1815 km and the track width is 1520 mm. JSC “UBZD” has a workforce of about 15 000 people.

(Source: RZD)