The global supply chain, already strained by pandemic disruptions, faces new pressures from the Ukraine conflict. The closure of Russian airspace to Western airlines and the withdrawal of Russian cargo capacity have severely impacted global air freight. While sea and air transport can reroute around conflict zones, rail networks lack such flexibility. In the early days of the conflict, multiple companies including Flexport suspended bookings on the Trans-Siberian Railway. Escalating sanctions against Russian entities, including Russian Railways, have further complicated rail logistics.
Rail's Growing Role in Asia-Europe Trade
In recent years, rail transport has emerged as a vital supplement to sea and air routes on the Far East-West Bound (FEWB) corridor, becoming a key component of China's Belt and Road Initiative. The primary route runs from China through Russia, Belarus, and Poland into Europe, with an alternative path via St. Petersburg connecting to other EU destinations by sea.
The rail option gained popularity between 2017-2018 as freight forwarders, rail operators, and container shipping companies introduced dedicated rail and intermodal services. Its chief advantage lies in transit times: rail shipments from Guangdong to Germany typically take 20 days, compared to over 100 days for current ocean freight according to Flexport's Ocean Timeliness Indicator.
EU imports from China via rail accounted for 4.2% of total imports in 2021 (€20 billion), up from just 1.1% in 2015. This growth came largely at the expense of sea freight, which declined from 62.2% to 60.2% during the same period. Eastern European and Baltic states showed particularly high rail usage, with Czech Republic at 15.9% and Finland at 12.9%.
The disruption also affects South Korea and Japan, though their volumes remain relatively small (€2.5 billion and €380 million respectively in 2021).
Impacted Industries: Automotive, Apparel and Beyond
Rail's time savings and inland connectivity make it attractive to manufacturers and retailers alike. Cost considerations became particularly important after two years of soaring shipping rates.
Transport equipment (including vehicles and parts) represented rail's peak share at 9.9% of EU imports from China in 2020, though semiconductor shortages reduced this to 4.8% in 2021. Capital goods (like power generation equipment) formed the largest single category at €5.2 billion, representing 5.7% of such imports.
Among consumer goods, home furnishings and apparel showed rapid rail adoption, reaching 4.9% and 4.8% of imports respectively in 2021. Apparel became the most valuable consumer category by rail volume at €2.4 billion.
Return to Sea Freight?
Recent trade analyses suggest sanctions against Russia will likely persist, potentially diminishing rail's utility for the foreseeable future. Questions remain about whether all EU-Russia rail freight falls under sanctions, though reports indicate Chinese rail operators are covering war risk insurance for shippers.
Alternative routes through Kazakhstan and Azerbaijan into Southern Europe present one option. Otherwise, shippers may need to revert to slower ocean services or costly air freight, both currently facing operational challenges.
Analyst Perspective: Supply Chain Restructuring
The conflict exposes deeper vulnerabilities in over-reliance on single transport modes. Key considerations include:
Risk Assessment: Companies must evaluate geopolitical scenarios and alternative routes, including detailed cost/benefit analyses of sea, air, and emerging rail options while diversifying supplier networks.
Data-Driven Decisions: Advanced modeling should incorporate fuel costs, port congestion, and insurance variables alongside real-time tracking of transit reliability and demand forecasting.
Technology Integration: IoT tracking, blockchain documentation, and AI-powered routing optimization can enhance visibility and efficiency.
Policy Monitoring: Continuous evaluation of sanctions, trade agreements, and compliance requirements remains essential.
Emerging Alternatives: The Middle Corridor
The Kazakhstan-Azerbaijan-Georgia-Turkey route ("Middle Corridor") offers a Russia-avoiding path to Europe, presenting both opportunities and challenges:
Opportunities: Reduced geopolitical risk, diversified transport options, and economic development potential for transit countries.
Challenges: Infrastructure limitations, higher current costs, complex customs procedures, and regional political instability.
The Ukraine conflict has forced a fundamental reassessment of Eurasian supply chains. While creating immediate disruptions, it may ultimately drive innovation in risk management, transport diversification, and technological integration across global logistics networks.