THE USSR AND EASTERN EUROPE BELATEDLY RECOGNIZE THE CONTAINER REVOLUTION (ER RP

Created: 5/1/1973

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CENTRAL INTELLIGENCE AGENCY Office of Economic Research

THE USSR AND EASTERN EUROPE BELATEDLY RECOGNIZE THE CONTAINER REVOLUTION

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The USSR and Eastern Europe Belatedly Recognize the Container Revolution

Summary

Although broadly employed in the westodern standardized container transport only recently has been introduced in the USSR and Eastern Europe. Advances in industrial technology and trade in countries of the Council for Mutual Economic Assistance (CEMA) haveeedafer, faster transport system toariety ofhigh-cost goods. Accordingly, the CEMA countries have committed themselvesoordinated policy for the expansion of containerizedfrom its present rudimentary base.

Installation of basic rail and port terminal facilities is under way. Additional container ships, railcars, and trucks are provided for in current five-year plans or are on order from Western The necessary bureaucratic bodies are being organized and expanded. 5 the skeletonEMA network should be formed, with regular service

Note: Comments and questions reaarding this paper are welcomed.

Typieavldirod Container Transportation System

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betweenEMA cities and ports from Moscow in the east to Rostock in the west. Containerized service to Japan via the Trans-Siberian Railroad will be systematically built up in this period tooviet "Land Bridge" as an alternativefreight route. Western suppliers offor container transport systems should find an expanding market in the USSR and Eastern Europe. Sophisticated loading and unloading equipment, systems technology, container leases and purchases, and even some ships and rolling equipment will be on the Communist shopping list for several years at least.

3. The developing CEMA capabilities intransport will effect important economies and speed up the movement of Soviet military This is true both for the transfer of freight between different railroad gauges at the Soviet borders and for intermodal transfer ofdestined for military and civilian units in remote areas of the USSK. Furthermore, container-ization is essential to the Soviet policy of playing an increasingly important role in international shipping.

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Discussion

The Container Revolution

earlyovernments andin the industrialized West werecontainerization as the means totransport requirements. containers developed by the UnitedWorld War II, maritime shipping companieswere operatingpecial containerthe United States and Europe. In theyear, operations were extended towater, and highway transportation andrevolution" was in full swing. estern fleets wereartial-containera combined capacity of moreoot containersayload of

3 millionillion tons.

contrast to these dynamicUSSR and East European countries havebroad implementation of modern containertechnology. This lag,ajorthe inability of the CEKA countries totechnology expeditiously into successful

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operation. Basic economicuch as the growing complexity of industrialand trade within the CEMA area" and theof the USSRajor maritime powerhave forced Moscow to take action. Therefore, the USSR is investing substantial domestic resources and is actively seeking technical aid and equipment from developed Western countries to spur its con-tainerization program. CEMA and the Communist Effort

CEMA has long been the forum for resolving problems and coordinating actions on theand operation of the transport systems of the USSR and the East European Communist countries. The USSR has dominated the organization since its inception Following the worldwide trend to containerization and the experimentation in various applications by some member countriesEMA-wide program for development of aof container terminals and transshipmentwas finally adopted at Bucharest in

In the CEMA program, member countries are to be linked5etwork of container-handling ports and terminals integrated with rail

TI This complexity is, ofuch greater incentive in highly developed western countries but is nevertheless of concern to the CEMAat their current stage of development.

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New CEMA container network will linkerminals Heavy lines indicate routes scheduled for opening on or Broken lines indicate routes to be opened on or Squares show eventual locations of CEMA's major port and rail container terminals.

At the same time, the number of container terminals

is to increaserom thevailable

with container traffic accounting for about 7ft of

illion tons of freight scheduled to move

Transport facilities in the CEMA countries, especially the railroads, are being graduallyincluding changeover to modern diesel or electric traction and the improvement of ancillary facilities to realize the inherent advantages of the new traction.

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within the region. An increase in the inventory of standardized containersromn hand1 is also envisioned.oordinating council was established to allocate production responsibilities forand specialized container-handlingamong CEMA members.

Total investment in the system probably will be more than USillion, somewhat less thanf estimated total public transportation investment during the current Five-Year. Among member countries, Soviotis to top SI billion, followed byand Romania0 millionespectively. Data are lacking on the East German, Polish, and Bulgarian shares of thispackage.

The CEMA program is small in comparison with the long-run task. Thehare of traffic targeted5 contrasts with estimatesf freight moving between CEMA countries is containerizable. As to the5 inventory, two US container leasing and operating companies alone own morenits. Finally, the projected investment expenditures are low, given the highly capital

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intensive nature of containerization programs.

One container ship, for example, costs as muchillion, each containernd port

installations and related facilities

million per berth, including cranes costing more thanillion each. The Newew Jersey Container Terminal at Elizabeth, New Jersey, has invested more3 million alone in seven fully equipped container borths and extensive back-up facilities. esult, Elizabeth handledillion tons of containerized cargo1 andillion tons in the first six monthsore than any other port in the world. The economy of container ship operations, however, as demonstrated in Tableore thanthe large investment.

Tnbfc I

Space Costs for Four Kinds of Ships

er Cubic Meter

Ship

Ship

Itirpc Ship

Capital cost Operational cost

2

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Developments in the USSR On the Rail System

The USSR has used small cargo containers domestically This system was developed to handle small cargo lots over the rail system, and most of the containers are not suitable for maritime or international shipments. Lackell-developed road network and enough suitable truck transport in the USSR will continue to limit most movement of large containers to the railroads for some years to come. Inland waterways are closed for two to six months of the year andare inadequately equipped to handle large containers. Many important shippers and consignees are not served by water or by intercity truck transport.

There areillion containers in the Soviott of which areons or loss with most of theons. urvey

of tho Soviet container inventory latet were defective.

ontainerized shipments inUnion had reachedillion tons,rail. oviet railroadsfoot international standard

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containers on an experimental basisew routes. Organization was tightened inhen the responsibility for the organization, development, and control of internal container transport by all modes was centralized in the newly created all-union association, Soyuztranskonteyner, anunit within the Ministry of Railroads. Byoscow and nine other cities were servedegular basis (seend attompts were under way to establish international service to Japan (see Figureia the Trans-Siberian Railroad and to Berlin, Prague, Budapest, and Sofia. All-container express trains are to be startedhe first such services to be inaugurated between Moscow and Leningrad, between Moscow and Brest (for through service to Easternnd along the Trans-Siberian route. By the endontainer traffic accounted for only aboutillion tons) of the total volume of rail traffic, but this amountf the total value of rail traffic. Plans call for the Soviet railway system to handleillion tons of containerized cargo As the volume grows, however, lack of automaticsystems for the movement of containers will

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TaNe2

USSR: International Standard Container Routes and Stations in Regular Sen-ice'3

Routes; Moscow to

Riga

Khar'kov

Tashkent

Odessa

Berlin

Budapest

Sofia

Prague

tations) Lenin grad

Khar'kov

Tashkent

Minsk

Odessa

Ungrny

Brest

Irkutsk

Khabarovsk

Nakhodka

Vladivostok

Frequency olteivMeonmAifeek.

hamper the efficiency of container operations. Lack of widespread internal handling facilities will tend to limit the large containers mostly to international railroad transit routes. Seaborne

13. The first official commitment to Soviet use of modern seaborne containerized transport came inhen Nikolai Bykov, member of the Collegium of the Ministry of the Maritime Fleet, announced that shipsapacityo

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ontainers were to be acquired by the USSR. This commitment was expanded inive-Year Plan, which called for (a) seaborne containerized cargo toillionillion tons lb) purchase of at leastontainer ships ontainer capacity), (c) construction of modern container portseend (d) upgrading of the merchant fleet inventory of international standard containers0 units. The new vessels will be used on major international routes between the USSR and Europe, Cuba, Japan, and the Middle East.

14. Whenive-Year Plan was being drafted, experimental use of internationalwas carried out by adapting existing ships, rolling stock, and cargo-handling equipment. By the endew Soviet international shipping

T.Most of the port facilities are new orareas at existing ports. One or two berths have been adaptedemporary basis, with adequate cranes, not specifically designed, however, to handle containers until the new facility is The current volume of container traffic at Soviet ports is small. Leningrad, probably the leading Soviet container port, processedontainers inndicating an annual rateontainers (perhaps0 tons). The leading non-Communist port. New York, was already handlingillion tons ofcargo

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Major Container Ports of the USSR: Status as3

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Hay

Operating wilh otpansion under wayUnder construction

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lines were carrying small amounts of containerized cargo on converted cargo ships. Some of thewore small Soviet -railway containersons or less, whereas othersfoot containers leased from foreign shippers andto international standards. These larger units wore carried on the decks of conventional cargo ships on international routes moving between Il'ichevsk and Egypt, Black Sea ports and Bulgaria, Baltic ports and the United Kingdom and East Germany and Far Eastern ports and Japan.

15. The first Soviet-flag full container ships -two snail East German-built Boltenhagen-clas3ontainers)were delivered in The lead ship of the first class of full container ships to be built in the USSRSestrorotsk8 containers)was delivered to the Soviot Baltic Steamship Co. inhe Soviet merchant fleet now has at least four

ships of the Sestroretsk class and perhaps five of

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the Boltenhagen class. In addition, at leastry cargo ships have been converted to handle Other ships of the Sestroretsk and Boltenhagen classes will be delivered5 along

TZ Later versions carryontainers and arcreferred to as Warin-class.

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with new classes, including as many ashipsapacity of moreontainers. Inotal ofartial-container ships are to beby Bast European shipyardslong with two large roll-on, roll-off (RO-RO) ships from Finland,apacityontainers and six smaller RO-RO ships from France. The RO-RO ships with their built-in unloading system are uniquely suited for operations to ports in less developed countries where there is insufficient sophisticated shore-based gear to handle large unitized cargo. ives data on container ships on order by the USSR.

16. Soviet international container lines,those serving the Soviet Land Bridge,operate out of Baltic, Black Sea, and Far Eastern ports. Services that have now operated for moreear includeiga-Liverpool, Il'ichevsk (neararna, and Nakhodka-Japan, services recently introduced include Leningrad-Hamburg-Rotterdam,e Havre Il'ichevsk-Alexandria, Zhdanov (Black Sea Basin) -Italy, andong Kong. Services were established recently between the Black Sea and Canada and between the Soviet Far East and the

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TaMe 3

USSR: Ccmtaknci Ship* oo OrderofJ

o(or Type ot Ship

East Germany eadweightWT)

Eist Germany WT)

Romania

Universal"1 SO DWT)

FmUnd1

Roll-on. roll-offWT)

Remarks

Full-container shipon-laincr capacity. As many is IS lo be deliveredS.

rarttal-contamcrn-tainer capacity. Fifteen to bc defamed

ulti-purpose dry cargo with put Q! container

capacity. Twenty-four shim io be delivered

ontaincr capacity. Total older (oi five, with two to be deliveredhips arc to be ii lengthened for ice navigationton axle load on the deck

roll-off0 DWT)

Ak'niaodf Fadeyev0 DWT)

WT)

0 DWT)

Six to be delivered.

JOO-conuiser capacity. Speed ofnots, range up0 miks. At icju five axe to be built at Kherson with the first to be deliveied early

Partial-canthipontaiitcr capacity; elghl ordered, with some probably delivered

Partial -container ship. Speednots. Thirty-five to be delivered.

foi ihc (wo UiferoUofl diuliatVwed by FotinJ.fup. oi more thui SOO-eoaiainet capacity in mat (ipactrd .MAJ.

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west coast of the United States. At present all these routes are operated solely by the Soviet merchant fleet, but the Varna serviceill be worked in conjunction with the Bulgarian Merchant Fleet, and Japanese shipowners are pressing to enter the Nakhodka-Japan service. The Soviet Land Bridge

17. The soviet Land Bridgeey element in the Soviet development of an intermodalcontainerized transport system. This unique trade route between Japan and Europe was established7 by Soviet, Japanese, and Europeancompanies and freight forwarders and soon came into use for experimental shipments of small lots of international containers between Japan and Europe. Conventional dry cargo ships were modified to carry containers between Japan and Nakhodka, where at least one wharf has been designated to give priority to the transfer of containers tocars for transit of the USSR via the Trans-Siberian Railroad. Some of the containers from Japan5 are delivered to Europe via sea fromby truck from Moscow, or via rail or truck

Service was expanded in2 toongakhodka link. Some containers have since been delivered {footnote continued on

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from the western borders of the USSR. Transit times are reported to be fromoays, roughlyar with all-sea movement. Rates are as muchower than all-sea routing.6

18. Traffic via the Soviet Land Bridge has been light but increasing. Currently lessear, traffic may jump with the installation of new facilities. These facilitiesew port under construction at Wrangel Bay near Nakhodka5 capacityontainersillion tons) per year.7 Improved coordination and regularof all-container express trains carrying upfoot containers per trip may reduce the total transit time between Japan and Europe toays. The successful development of the Soviet Land Bridge depends on

from West Germany to Hong Kong in as little asays via the Soviet Land Bridge route, comparing favorably with an all-sea voyage ofoays.

The USSR may revise the tariff, boosting ratesoor Japan-to-Europe traffic and reducing ratesn Europe-to-Japan traffic in an attempt to rectify the imbalance in container loads.onth are moving from Japan. Some US shippers are considering use of the light Europe-to-Japan direction on the Trans-Siberian route for movement of empty containers to reload in Japan.

5 capacity at Wrangel Bay is roughly comparable with1 volumeontainers handled at Bremen/Bremerhaven in West Germany.

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whether the new generation of large, fastships already being assigned to the Europe -Far East runs will capture this trafficome container ships already make the tripays, and shippers may be reluctant or find it impractical to switch routes. Volume via the Land Bridge route now amounts to only aboutf the seaborne volume.

19. Competition for Japan-Europe traffic may also develop from the embryonic North American Land Bridge. In spite of first-class facilities, this land bridge has not yet been able to attract any substantial volume because of problems with intermodal cooperation, government regulation, and uncompetitive rates. The Seatrain Company of the United States has finally engineered aby concluding agreements with severalcompanies2 that permit the initiation of through North American Land Bridge service between Japan and Europe or intermediate points in the United States. Rates are the same as all-water routes, and delivery times are a3 much as six or seven days less. ransit time ofays from Tokyo to Rotterdam already has been knot container ships due in service

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3 could further reduce time in transit by perhaps another five days. The superior service plus good freight-forwarding connections are likely to attract.substantial traffic to the North American Land Bridgeperhaps partly at the expense of the Soviet Land Bridge service. Certainly the North American facilities are far more developed and capable of greater volume than those of the USSR. Assistance from the Developed West

The USSR is actively seeking technical aid and equipment from the developed Western countries to expedite the establishment and expansion of containerized transport systems. ompilation of requirements described by the maritime fleet, rail, and river ministries shows that the minimum total demand5 willfoot containers. None of these containers, or thecapable of handling them, is yet produced in appreciable quantities by the USSR.

Moscow has made overtures since at0 for the purchase of containers and handling equipment from the West. uge containerbilled asas held Containers as well as all types of vohicles and handling equipment for all modes of

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transport were on display. Manufacturers from all over the world, including the United States, were invitod to participate. The largest contracts signed at the exhibition were reportedly with firms in East Germany, Bulgaria, Finland, and the United Kingdom. After the Leningrad exposition, the Soviets also arranged two large contracts to lease containers from Western firms. Container Transport Internationalholly-ownedof the Leasco Corp. of the United states,ontract with Sovfracht in2 toontainers to the Soviets, andS-registered international container-leasing company, contracted in3 to supply the USSRfoot UK-built More of these contracts may be expected because the USSR probably will not reach its annual domestic production target0 containers for several years.

Developments in East European Countries

22. East Germany has led the East European countries in the introduction and operation oftransport services. Elsewhere in Eastern Europe, the establishment of containerizedis only beginning. More rapid development can

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be expected over the next few years with theexpansionEMA network.

East Germany

transport has been underdevelopment in East Germany

In June of that year, the first container trains were put into regularly scheduled operations between Rostock, Berlin, and Dresden and inontainer ship service to the British port of Tilbury (near London) was started.

Rail container services in East Germany have increased fromeeko more. Aboutontainer terminals in East Germany now serveowns and morenterprises. 5 terminals are to be in operation. Regularrail service to Czechoslovakia wasinnd trial runs have been made to Poland, Bulgaria, Hungary, and the USSR.

Seaborne container traffic is small because container facilities at Rostock will not Services are currently open to Tilbury, with Hamburg and Riga as ports of call.

ostock00olume00 is expected

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As part of the Rostock complex, an additionalcapable ofontainers5 is under construction.

containerized traffic in Eastmushroomed earwas0ons. Two years later,ontainers equalstill less thanf overall All of this growth has occurred in land

or seaborne trade; container service by air is not available, and none is planned until

Germany's container inventoryshow large increases all less0 were in the inventory. of these were tho newer internationaloffoot variety. Bytotal inventory is expected to increaseunits, nearly all of which will beinternational standard containers.

Hungary

experience withdates backhen theState Railway (MAV) became the first CEMA

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member to join the International ContainerCo. This firmommercial agent for the national railroads ofuropean countries and is involved in marketing internationalservices. owever, Hungary's use of containers has not grown rapidly. Current services consist of rail shipments to Hamburg and Bremerhaven under the auspices of the Hungarian General Shipping Enterprise (MASPED).

29. Hungarian plans callradualin the network of container centers and f all rail freight is to be containerized, almost all of it ontrunk lines. Planned minimum containerand traffic levels compared with those0 follow:

0

of Containtiiicd Shipments (Thousand Tons)'

200

700

Containeroot Unit.]

300

Rail Loadings (Number of Containers)

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rail terminals throughout thealso are being developed, three of which are at Budapest, Hungary's principal container cen-ter. Meanwhile, Hungary is negotiating to extend the present Rostock-Dresden-Prague all-container train service between East Germany andto Budapest, and is participating with the USSR and Czechoslovakia in construction of atransloading center in the Chop-Zahony border complex.

Hungary's production of internationalcontainers has moved ahead rapidly, and some have been exported to Western Europe. ontainersostly offoot varietywere producednd production isto increase0

Tho Hungarians are also gearing up for production of special heavy cranes for handling containers and special flat cars. Hungarian shipyards have begun to build multi-purpose shipsWT suitable for carrying upfoot containers, and

FT In addition to the three at Budapest, other terminals are being developed at Miskolc, Gyor, Debrecen, Pecs, Szeged, Szombathely, Nagykoros, Nyiregyhaza, and Sopron.

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construction of full-container ships lies just over the horizon. Poland

32. Poland, like most East European countries, is in the early stages ofontainer transport system. Containerized rail service has been limited to experimental runs on the Berlin-Warsaw-Moscow routeith regularto begin sometime Seaborne trade started9 when service to the United States was inaugurated using dry cargo ships adapted to carry several containers on deck. This service was followed shortly by adoptionoute to the United Kingdom, Inadequate rail and highway clearances and rudimentary facilities at the port of Gdynia have served to restrict the volume of this trade. Also, the limited road clearances throughout Poland have kept inland movement of containersinimum.

33* Rapid expansion of Poland's smallservice may be expected during the next few years. Most of the emphasis will be placed on rail and seaborne trade. 5 an initialtoillion tons of containerized freight is

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forecast. The expansion is to accelerateillion tons forecast by the planners0 andillion

34, The Polish railroad system, which will handle most of the planned increases in tonnage, is charged with implementing plans for the national containerized transport system. Initialeek service beganew stations in 5 there are to be seven rail container stations in Polandat least five of which (Poznan, Warsaw, Sosnowiec, Katowice, and Gdynia) are either completed or will be by the endhen they will be served by directtrains. The railroad system already hasnternational standard containers from East Germany to get service under way. Poland and the USSR also are constructing container trans-loading facilities along their border. Because Poland stands between East Germany and the USSR and is establishing ocean container terminals at Gdynia and Swinoujscie, its future roloransit area for East European container trade is most promising.

Ti Each of at least eight non-Communist ports already handle more than twice the volume expected in Poland

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of Polish seabornerests primarily on the development offacilities at Gdynia. One wharf wascontainers,ew containeris under construction in container traffic at Gdynia at the beginning

2 wasear, with5 level expected to increase toillionear. ontainers with0 tons of cargo actually were shipped through Gdynia

has alreadyewships for export and is toseveralontainer capacity toLines (PLO). PLO received

arge containers from East Germany2 and began pick-up service to some locations in PLO-owned trucks. Domestic production of international standard containers beganndre planned Most of these will be thefoot models. ew railroad cars and special trucks for handlingfootare being produced and tested domestically.

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Czechoslovakia

Containerized transportation inis in its infancy, lagging behind even other Communist countries. Current servicesegularly scheduledeek rail route to Rostock, East Germany, and river transport to Hamburg for transshipment overseas. Freight moved in container servicesegligible share of total tonnage.

Czechoslovakia hastep-by-step introduction of containerized services that is to proceed at an accelerated pacepecial Department of Containerization was established in the Federal Ministry ofto foster the development of containerized transportation. Total investment is expected to grow0 million5 to nearlyillionith annual volume expandingillion tons5illion Five major rail terminals are planned for completion8 with anotherxpected to be completed later. the Czech inventory of containers is expected to grow rapidly from10

most of which will be produced domestically. The

Czechs also are participating in the joint develop-

ment of the Chop/2ahony container transloadingon the Soviet border. Romania

39. Much of Romania's experience withtransport is in the planning stages with some experimental services and construction of facilities just beginning. Current services are limitedew all-container trains operating on five main lines andfoot containers. Usefoot containers reportedly started in

40. omania plans tootandard container transport system. asic network of rail services, radiating from Bucharest and integrated withfacilities, is planned. Five rail terminals are currently under construction at Bucharest, Brasov, Sibiu, Arad, and Timisoara, andservices are planned to Constanta, Timisoara, and lasi. Timisoara is near the border with Hungary and Yugoslavia, and lasi is near the Soviet border. Both are key transfer points for any integrated CEMA-wide container system. Except for improving the container handling capability of Constanta, the

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currant plan makes no mention of seaborneshipping, most of the emphasis being ondevelopments. Bulgaria

Containerized transportation in Bulgaria is little moreream in the planner's eye. Bulgaria's only current involvement with containers began1 when the port of Varna began handling small shipmentsoviet container shipfoot containersegular Varna-Il'ichovsk route.

Future plan3 include port expansion at Varna, establishment ofail stations equipped

to handle large containers, and domestic manufacture of small container ships, standard containers, specialized rail cars, and trucks. plans to haul moreillion tons of freight,foot containers and toontainers. Military Advantages to CRHA

growing proportion of moderntraffic is handled more expeditiouslyin its own special containers. Inmilitary traffic has been at theof the worldwide container revolution. In

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the instance of the USSR and Eastern Europe, tho expansion of fixed facilities, rolling stock, and bureaucratic bodies necessary for containerization of freight traffic is partteady improvement in the military transportation network in the CEMA area. Of groat value from the military point of view is the potential speed-up in east-westof military supplies. Containerization is particularly important for the reduction of transit time across the change-of-gauge rail points at the Soviet border. Finally, containerized international transport enhances the ability to support military or economic activity in the Far East or other remote areas of the USSR.

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APPENDIX

External Dimensions and Maximum

Gross Weights of Containers Agreed on by the International Standardization Organization

Maximum Gross

ID 9'

IE 6'

IF 4'

2A 9'

2B

2C 4'

3A

3B

3C

European countries would like acontainer widtheterseetto be adopted, primarily because thowidth of road vehicles on theeters. In certain otherthe United States, it4 meters

nd such containers would be effectively excluded.

One tonounds. Net loads of. these containers vary widely according to thecarried. Containers ratedaximum gross weight ofons, for example, usuallyoad ofoonsarge volume of mixed freight.

Forty-foot containerseightnches have also been approved.

:ia# us

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