1. A New Green Corridor in the EU: The Thessaloniki – Danube River Link
Professor Alkis John Corres
Thessaloniki 30 November 2016

2. Ladies and Gentlemen and welcome in the lovely city of Thessaloniki.
Two years back we gathered here for the first time to discuss the possibility of linking the Danube with the Aegean Sea. The response then, has been fantastic and everyone thought this great piece of work was about to materialize. Things however seem to be taking their time and progress in the between has been slow. This surprise development may have more to do with spheres of geopolitical influence than with arguments in the countries involved against this idea.

3. Nevertheless..the benefits from this huge infrastructure work never fail to impress.
The object of this presentation is to complement the original presentation of 2014.
It is focusing on the economic perspectives for the regions, rather than on commercial aspects which were addressed previously.
Before I do that, let me briefly recap the main characteristics of this project.

4. This is Axios river, its name in FYROM is Vardar and it connects to the Morava river in Serbia which meets the Danube up north near Belgrade.

5. Length of canal in the Morava area 345,74 km
It is a 650km waterway which flows through the Balkans and is presently partly navigable. It will require work to make it again navigable and will also necessitate the creation of a canal north of Skopje to connect the two river sections.
Total length
650,10 km
Length of canal in the Morava area
345,74 km
Length of canal in Vardar (Axios) area
274,68 km

6. The idea is that the river link will run from the port of Thessaloniki in the north of Greece..

7. …to the Serbian city of Smederevo on the Danube
…to the Serbian city of Smederevo on the Danube. The river link will complete a logistic chain which starts from Chinese ports, passes through Piraeus and ends in the middle of Europe entailing enormous transport savings.

8. The key question in a project of this size is who is going to finance it.
Discussions started following a suggestion by a Chinese construction company specializing in river works and engineering (GESUBA) that it was prepared to undertake the entire cost of the project (circa 10 billion dollars) on a concession basis. The three countries would not have to pay but they would concede instead the fees from transit of river ships over a lengthy period to recover cost. In the meantime, the regions around the river link would be enjoying significant benefits and the Chinese side savings on the landed cost of their exports.

9. Let me now guide you through some of these benefits..
TOTAL
2,471,600
Cubrija
30,000
Paracin
24,500
Jagodina
43,300
Batocina
11,700
Lapovo
7,800
Svilainac
23,300
Pozarevac
75,300
Velika Plana
40,600
Smederevo
108,000
Krusevac
77,400
Aleksinac
16,400
Nis
305,500
Leskovac
60,200
Vlasotince
29,600
Bujanovac
18,000
Beograd
1.6 mill.
Let me now guide you through some of these benefits..
Before I do that, allow me to introduce to you to the regions on the Morava river in Serbia which will be getting direct benefits from the operation of the fluvial link. The benefits will not be limited to the facilitation of trade in the region through direct access of cargo. The link itself is expected to put into motion economic multipliers which will spur economic development in the hinterland through power generation projects, irrigation systems, new investment and tourism, all offering new employment opportunities and support to the local economies. These are essentially medium and long term benefits which will boost economic growth particularly in less developed parts of the country.

10. The local areas which will benefit on the southern side, i. e
The local areas which will benefit on the southern side, i.e. Greece and FYROM, are also significant in way of numbers of citizens.
Total ,627,600
Thessaloniki 800,700
Skopje ,000
Gostivar ,000
Tetovo ,900
Veles ,000
Veroia ,000
Kozani ,000
Katerini ,000
In short just over four million people in
nearby cities, not taking into account the
inhabitants in hundreds of villages who could add
another million.

11. You may be thinking that I am optimistic in my claims about the importance of this link. Allow me to explain…
A single 1,600 ton river barge can lift the equivalent of at least 40 trucks.
The river barge is much cheaper than rail. Cheaper than anything else in transport ashore in fact.
In the US inland waterways carry 60% of grain exports, 22% of domestic oil and products and 20% of coal according to the president of Waterways Council of Arlington.
Other than construction workers, inland waterways bring jobs
in industry, in tourism, but also in..
farming,
steelworks,
river ports,
power generation,
customs, terminals,
tug and barge officers,
logistic operators and so on.
River transport is cleaner by way of having the lowest carbon footprint.

12. A few more words on Sustainability..
It has been estimated by the Waterways Council that on average one gallon of fuel moves one ton of river cargo for 576 miles. The equivalent number for rail is 476 and 176 miles for truck transport.
It is very safe, consider this: there is statistically one (just 1) fatal accident for 22.7 in rail and 155 in road transport.
It does not generate any noise.
It does not create traffic jams.
It helps control flooding.
It leads to substantially higher property values.

13. Local National International
One can therefore envisage benefits from the operation of the river link at three levels..
Local National International
East/West trade with emphasis on EU/China commercial relations.
Circa 2 billion people
Benefits to the population of individual states
20 million people
Cities and villages
5 million people

14. Let us briefly consider beneficial effects at national level…
…these can be:
ECONOMIC (lower energy costs, more competitive imports and exports, better use of land, new investment opportunities, job creation, etc)
SOCIAL (reduced poverty and isolation, reduced emigration, increased ability to pay taxes, fewer needs for subsidization, improved trade and communication with neighboring nations and so on)
ENVIRONMENTAL as explained before, and
COMMERCIAL big gains from trade diversion (north and south – to and from the Danube and international traffic through Thessaloniki), earnings from transport and storage…..
These wider benefits will be applicable to:
a total population of 20.1 million inhabitants in the Balkan peninsular
living in a high unemployment/ low inflation region and
having a total GDP of $ 412 billion.
When established and operating, the river link could be the equivalent of a smaller scale Suez canal for them.

16. China is the locomotive of all developments.
Will get a shorter by 1,200 km route – not counting the deviation of big vessels into the Black Sea, nor the onward voyage to the Rotterdam/Antwerp area - to reach the fast developing central Europe for its exports.
In reality the savings on transit expenses will be much bigger..and also…
distribution costs will be lower,
delivery times will be shorter, and in general..
…a more efficient logistic chain with lower requirements for working capital covering goods in transit.
Further, significant gains are expected in container usage (idle time rental, faster return of the empties) leading to the need for fewer units to serve the supply chain.

17. ….China continued…
COSCO has already secured the management of the port of Piraeus for 35 years and it has officially announced its intention to make it the number one container port in the Med by 2018.
It is evident that the trebling of container turnover in Piraeus will have a spillover effect on all transport modes.
Nevertheless, the most important goal is the commercial penetration of Chinese exports in central Europe through the river network making use of the scale economies it can offer.
Lower transport costs mean better profit margins in combination with sales expansion.**

18. Greece

19. Greece will provide the gate to Europe and the river-to-sea interface of the project.
Will be looking at major port service/storage/logistic benefits mainly through the Piraeus/Thessaloniki maritime link..
.. but also from the East/West Egnatia highway linking Greece and Turkey with the Adriatic.
The meteoric growth of container traffic in Piraeus in the next few years will directly impact traffic in the port of Thessaloniki, even before the start of the operation of the river link.
Once in operation, direct port earnings can more than double, to reach and perhaps exceed 120 million euros per annum (not taking into account river fees which will be going towards repayment of construction costs).
Environmental gains will be comparatively limited in Greece but social gains in the north are expected to be substantial.

20. Former Yugoslav Republic of Macedonia

21. FYROM will be the essential middle part joining of the two rivers ( Axios and Morava)
Is a landlocked state of 2.1 million population and it will at last get the desired access to the Aegean Sea.
Agriculture (10.2% of its GDP) can benefit from improved irrigation allowing for more extensive and intensive farming.
Industry (24.9% of GDP) will be assisted by substantially cheaper energy, transport and distribution.
Imports/exports will be facilitated through Thessaloniki and Smederevo respectively limiting reliance on road transport.
Similar direct and indirect gains are expected also for its extensive service sector (64.9% of the GDP).
Both environmental (flood control included) and social gains are expected to be significant in FYROM where GDP per capita is roughly half that of Greece and unemployment at more or less the same level around 25%.

23. Serbia will host the longest leg and it will be the interface to the Danube and further to the river network of Central Europe.
Serbia
Serbia’s 7.2 million population is still recovering from the damages of the recent war showing the lowest per capita GDP of the three and a 20% unemployment rate.
It has presently no access to the Aegean Sea, and the alternative access to the Adriatic is through Montenegro.
Serbia will have the full benefits from the revival of its north/south fluvial axis. Some 35% of its population lives nearby, or along the Morava river and therefore social and environmental gains will be paramount.
35%

24. …Serbia continued…
In a similar fashion to that of Thessaloniki, a big rise in port/logistics/trans-shipment business is going to take place on its Danubian front starting from Smederevo which will probably necessitate new investment in container terminal(s).
The service sector in Serbia presently accounts for 51% of the GDP and the prospects are for further rise once in operation.
Industry (38% of the GDP) is also expected to benefit from cheaper energy and lower transport costs for feedstocks and finished products.
The river link is expected to boost tourist flows and bring new life to presently remote regions.

25. In the meantime, the Hellenic Union of Shortsea Shipowners has been following developments with interest…
..as it includes among its members Coastal, Mediterranean and River operators.
The government is aware of that.
The presence of Greek operators in the Danube before WW2 may be revived in a new way.
The river link – we believe - will have the status of an international fluvial highway in conformance with the relevant legislative provisions.
This will allow free use of the link by operators of other flags.

26. Once the project gets under way and details of the river link
Once the project gets under way and details of the river link **become public, the Hellenic Association – which also is a member of the European Shortsea Network – can be instrumental in the provision of suitable vessels…

27. ...built to state of the art specification in series based on the innovative production method ‘’PlatformShips’’ which allows standard ship sections to be used in different ship types.

28. The new generation of river ships
It can also readily provide ship management services, experienced crews, door to door service and supply chain management…
…to turn this river link into a uniquely useful transportation corridor which will fulfill all the requirements of a Green Corridor in the EU sense of the term.
The new generation of river ships
can be fuelled by Liquefied Natural Gas to minimize atmospheric pollution and
will also feature zero water pollution,
state of the art propulsion and navigation and
excellent control in restricted quarters.

29. Operationally speaking..
…preliminary calculations without exact knowledge about the construction plans and based on assumptions ** have shown that:
One way transit may take approximately one week, which means a round trip could take anything from 15 to 17 days basis one-to-one port inclusive of load/unload operations.
Following this line of argument, the link could theoretically deliver up to 19 million tons of cargo per year depending on the cargo mix, the size of vessels, the water flow statistics**, the size and number of the locks, the average length of voyage and so on. ..
…provided also that the minimum depth of the river route will be more than 3.3 meters.

30. Let me add now a few words on possible competition to the river link starting from rail services.
The overall value of goods shipped from Asia to Europe every year is between $ 600 – 650 billion by all modes.
Inland (road, rail and river) transport routes presently account for approximately 1% i.e. 6.5 billion and probably a lower percentage in terms of volume.
Since 2014 the Chonqing – Duisburg rail connection makes three weekly services over this 10,300 km distance in 16 days carrying around 50 units of 40 ft. (A sea voyage from China to Hamburg takes approximately 30 days and the river service to Duisburg a few more days).

31. …rail continued…
Therefore the estimate is for about 7, ft containers annually.
At an average weight of 12 tons per box we are talking about 93,600 tons of cargo mainly of laptops and TVs of an approximate value of USD 8 billion.
By 2020 the plan is to make this service daily which will bring the number of containers to 28,580 per year and the value of the cargo to 18.6 billion dollars bringing the market share of rail transport up to 3.1% of the total value.
Even if the number of services is trebled to three trains daily, it would still be a small fraction of the maritime container traffic…
…therefore it may be safe to assume that rail – which is more expensive than shipping – will remain restricted to high value cargoes for the foreseeable future.

32. …rail continued…
Locally in Greece, there are three international rail services run by Trainose in the north and northeastern parts of Greece.
Line 1: Athens-Thessaloniki-Skopje-Belgrade
Line 2: Athens-Thessaloniki-Sofia-Bucharest, and
Line 3: Athens-Thessaloniki-Istanbul
Line 1 could be a direct competitor to the fluvial link and to a lesser extent Line 2.
A lot will depend however on the quality of service offered and on the overall charges.**

33. Shortsea links
When considering the China/Europe trade flows it becomes evident that the Thessaloniki/Danube link will operate in a complementary fashion to deep sea shipping similar to that of feedering:
China to Piraeus (Deep Sea, 7,850 sea miles)– Piraeus to Thessaloniki (Short Sea, 252 sea miles)– Thessaloniki to Central Europe (River link, 361 sea miles = 650 km). With only 613 extra miles Chinese exports will get access to the great European river network.
There are other gates in the Med into the EU through the Italian ports on the Adriatic (Venice, Trieste, Ravenna) ..
..running along the Baltic- to the- Adriatic corridor
and also another one through the Marseille/Fos complex.

34. Shortsea links continued…
While Adriatic ports are competitive they require a long deviation of the large container carriers in their Suez – to – Gibraltar leg.
This deviation can be as much as five days i.e 17% of the total voyage time to the ARA from China. Alternatively there would be a need for trans-shipment.
The deviation to the port of Piraeus is much smaller.
In addition, Venice, without access to the Danube, it is no less than 750 km to the West of Smederevo rendering it unsuitable for serving exports in the Serbian, Romanian and Hungarian regions and beyond.
Despite this the new Venice Port will include a new container terminal to serve local and regional needs in Austria, Switzerland and Germany.

35. Shortsea links continued..

36. ….Shortsea and Road.
Where competition is expected to be stronger between shortsea and fluvial services is for the transit cargo on Egnatia highway.
The key port presently is Igoumenitsa on the Ionian Sea through which RoRo vessels move a high volume of road cargo to Mediterranean ports .

37. Shortsea and Road continued…
It remains to be seen to what extent Egnatia’s westbound traffic to Igoumenitsa will be affected if/when Thessaloniki river services kick in taking also into account the numerous toll gates announced by the Greek government.
Last, but not least, one must not forget there are other open issues such as..
… the Piraeus/Thessaloniki shortsea link presently served by feeder company ARKAS in view of COSCO’s expansion plans…
The Greek government’s privatization plans for ports,
The future of the railway network, and – of course –
The implementation of China’s New Silk Road grand plans on land and sea in which Piraeus is seen taking centre stage.

39. This completes our presentation today.
In such world class projects there are so many aspects one has to take into account. There is always uncertainty about intentions and shifting of priorities in this multi-player game. Intermodal competition will always be there, along with modal complementarity…influencing and being influenced by… … the shifting sands of geopolitics, while the European Union is making stern efforts to play a major role. Yet, one must reach a conclusion…

40. …and the conclusion is, Ladies and Gentlemen..
…that we have here a potential win-win situation on all four country-fronts.
In my humble opinion the river link represents an opportunity that must not be missed.
To that end, national and local differences must be set aside in view of the common good in the Balkans, therefore…
Thank you for your attention …
…and many thanks to Professor Haralambides of Erasmus University for his constructive comments.
…I am finishing this presentation with a wish that this river link project becomes reality.