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BOX-FOLDER-REPORT: 127-7-105
TITLE:             The Rhine-Main-Danube Canal and Eastern Europe
BY:                Hudson
DATE:              1982-5-4
COUNTRY:           (n/a)
ORIGINAL SUBJECT:  RAD

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EAST -- THE RHINE-MAIN-DANUBE CANAL AMD EASTERN EUROPE F-620

Munich, 4 May 1982 (RAD/Hudson)

In recent months the West German federal government has been
engaged in a heated dispute with the government of the state of
Bavaria over the fate of the Rhine-Main-Danube Canal. The main
argument has revolved around the decision of the federal
government on 27 January 1982 to initiate negotiations with Bavaria on
the possibility of implementing a "qualified termination" of the
construction of the canal. According to the federal government's
main advocate for terminating the scheme, Federal Minister for
Transport Volker Hauff, continued expenditure on the project
would be of dubious economic value, would incur considerable
environmental costs, and would also subject West German inland
shipping companies to unfair competition from state-owned and
heavily subsidized CMEA shipping companies. [1] For its part the
Bavarian government disputes the cost-benefit analyses conducted
by (or for) the Federal Ministry of Transport. Bavarian Transport
Minister Anton Jaumann, for example, argues that the federal
ministry has underestimated the likely volume of traffic along
the canal; that the federal government has failed to take
account of the positive economic impact of the project on the
relatively depressed border areas of eastern Bavaria; that the
cost of stopping the project would be almost as great as the cost
to the federal government of completing it; and that any increase
in competition resulting from the completion of the canal (whether
this competition comes from the challenge of the canal to other
domestic transport media -- for example, rail and road transport --
or from the challenge of the East Europeans to domestic inland
shipping companies) is in the interest of consumers of these
services. [2]

While the dispute is superficially concentrated on different
technical assessments of the viability of the canal, it is evident
that the political differences between the federal SPD-FDP
coalition government and the CSU government in Bavaria have added life
to the debate. In the process, the claims and counterclaims of
the protagonists have tended to lose their technocratic character
and have, instead, assumed a distinctly political flavor. In the
latest bout of the dispute, Franz Josef Strauss has even been
prepared to enlist the support of politicians not otherwise known
to be political allies of the Bavarian Minister-President (prime
minister). Thus, in successive weeks Franz Josef Strauss met
Austrian Chancellor Bruno Kreisky and First Secretary of the
Hungarian Socialist Workers' Party Janos Kadar. Both Kreisky and
Kadar agreed with the Bavarian Minister-President that the
Rhine-Main-Danube Canal should be completed and that it was unfortunate
that the Bonn government should contemplate cutting off finance
for the scheme. [3] In order to emphasize the point, Chancellor

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(1) Süddeutsche Zeitung, 18 February 1982.

(2) Ibid.,

(3) Ibid., 23 April and 2 8 April 1982.

EAST (1) -- THE RHINE-MAIN-DANUBE CANAL AND EASTERN EUROPE F-621

Kreisky went so far as to say in a television interview that
differences of opinion as to the fate of the Rhine-Main-Danube
Canal constituted the only substantive unresolved issue between
the Bonn and Vienna governments.

Given that it would provide the major part of the financial
resources needed to complete the canal, it is hardly surprising
that the West German federal government should be carefully
scrutinizing the economics of the scheme. It is also hardly
surprising that the other Danube countries would heartily support
the project: the joining of the 900km long Rhine with the 2,400km
long Danube would, at no or little cost to them, dramatically
expand their options for inland water transport. Nevertheless,
it would appear that the Bonn government is unlikely to be
persuaded by Austria, Hungary, and other Danube countries to
provide the finance to complete the scheme. Rather, it would seem
that the fate of the scheme will depend upon the resolution of the
debate between the federal and Bavarian governments as to the
canal's long-term economic viability.

For the federal government the major concern is evidently
that, at a time when it is having great problems in reducing its
budget deficits, it is unwilling to spend a large amount of money
on a project the economic viability of which is in dispute.
According to Minister of Transport Hauff, while the total cost of
building the canal (from Nürnberg to Straubing) and the associated
infrastructure amounted by the end pf 1981 to DM3,150 million,
completing the project might incur another DM2,500 million -
DM3,000 million. At the same time he argues that new estimates
of freight volumes following completion of the canal are
considerably less than original estimates had suggested. For example, he
says that 1969 estimates of freight volume suggested that in 1990
the canal would transport 14,000,000 tons of goods, but that by
1976 this estimate had fallen to 3,700,000 tons, and by late 1981
forecasts suggested that the total freight volume in 1990 would
amount to a mere 2,700,000 tons (20% of the 1969 estimate). This
final estimate would imply a total traffic on the canal of
approximately 12 ships a day in 1990. The main problem attracting
freighters away from other forms of transport is evidently that
transport by inland waterway is slower, involves longer routes (for
example, the railway line route from Frankfurt to Regensburg is
230 km shorter than the canal) and the ships depend on expensive
diesel oil for energy. Moreover the 59 locks needed to overcome
the 320 meter difference in altitude between the Rhine and the
Danube (at the Austrian-West German border) makes the canal even
less competitive than alternative means of transport. As a result,
the Federal Minister of Transport argues that the canal system
could only operate with heavy governmental subsidies. On top of this he
also suggests the possibility might meet with unfair competition
from state-subsidized East European shipping lines. Hauff recently
noted:

[page 3]

EAST (2) -- THE RHINE-MAIN-DANUBE CANAL AND EASTERN EUROPE F622

The absence of regulations governing international river
transport enables the East bloc states to underbid on
freight charges. Moreover Eastern bloc shipping companies
are already in the process of founding subsidiaries in
the Rhine area. [4]

For their part, the other Danubian countries appear to be
rather reluctant to provide financial as opposed to verbal
encouragement to the West German government to complete the project.
The Danube Commission (formed in 1948 by Bulgaria, Czechoslovakia,
Hungary, Romania, the Soviet Union and Yugoslavia; Austria joined
in 1960 and the West German Ministry of Transport "participates"
in the activities of the commission) would appear to be the most
appropriate body to consider the project since its major aim is
to draw up plans for large-scale projects to ensure and improve
navigation conditions along the Danube. It is also charged with
financing such projects when the riverine state is unable to do
so. The Danube Commission has evidently discussed the West German
canal scheme, since the communique of the 38th annual plenary
session of the Danube Commission held in Budapest in March 1980
noted that the meeting had discussed problems raised by the West
German "nationalization" of the Rhine-Main-Danube Canal. [5] It
is therefore possible that the West German government is quietly
opposing any East European "assistance" in meeting construction
costs. It remains to be seen, however, whether the combined
influence of the Bavarian government and of the other Danubian
countries will be sufficient to force the Bonn government to
provide the funds to complete the scheme.

 -end-

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(4) Ibid., 18 February 1982.

(5) MTI, 11 March 1980.

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