Russian Transneft is planning to transfer the shipping of petroleum products from the Baltic ports to the ports of Russia. This is not an isolated decision, but a part of an overall strategy aimed at reorientation of Russian transit flows. The course to break all existing ties with Russia and the sanction war provoked by Baltic politicians to undermine the Russian economy made the implementation of this strategy inevitable.
The economic consequences of the crisis in international relations for the largest logistics companies in all three Baltic countries began to show in the spring of this year, and in the case of Lithuania – even before the Ukrainian events, in the period of its phenomenal EU presidency, when the complicated Russian-Lithuanian relations finally fell into the abyss.
For the first nine months of 2013 net profit of Lietuvos Gelezinkeliai – Lithuanian Railways – decreased by 34.8%. 81% of net profit of LG in 2013 was from international shipping, and half of all traffic consisted of cargoes from Russia. Even then, in the fall of 2013, the volume of transit goods passing through the port of Klaipeda, decreased by 20.1%.
In April 2014 data was published on the volume at the trade ports in the Baltics: according to which, during the first months of 2014 the volume at the ports of North-West of Russia increased to the greatest extent, and the largest declines were recorded in Lithuanian Klaipeda: the volume at the oil terminal in Butinge decreased by 34.5%.
Problems with workload at the seaports inevitably mean trouble for other carriers – all components of one supply chain. The Board of Estonian Railways, summarizing the results for 2014, reported that Estonian Railways completed the year with a loss of 4 million euros and is expecting a loss of 9 million euros next year. Chairman of the Board of ERW Akhti Asman cited among the reasons for the negative balance – a drastic reduction in transit shipping.
The other day the Minister of Transport of Latvia Anrijs Matisse said that the decline in the volume of Latvian railways in 2015 may reach 20%. “This is connected with the geopolitical conditions in the region and that Russia seeks to direct more cargo to its own ports” – said Anrij Matisse: 75% of all transit cargo of “Latvijas Dzelzceļš” (Latvian Railways) – are goods from Russia.
Russian companies themselves announced about their refusal to use the Baltic transport infrastructure and shift their export flows. In particular, energy.
The Russian monopoly in pipeline transportation of oil and oil products, Transneft, will soon begin the process of reorientation of deliveries of 5.5 million tons of oil products from the Baltic to the Russian ports.
This was announced by the President of Transneft, Nikolay Tokarev.
Earlier, the Russian oil and oil products were transported to Europe through the Baltic ports: Klaipeda, Riga, Ventspils. Latvian commercial ports receive 13.5 million tons of diesel fuel from Russia annually. “Today we see that approximately 5.5 million tons of oil products can be painlessly, without additional technical measures and financial costs transferred to Russian ports. We are already doing it,” – said the President of Transneft about the reorientation of oil transit to Primorsk, Ust-Luga and Novorossiysk. “While Ventspils is competitive, it is interesting to go there. But there are so many models, which calculate the cost. As soon as these models are evaluated, it will be immediately clear how much we can take out of Ventspils”.
That is, this is not the last loss – Baltic logistics and energy infrastructure will continue to lose its volumes.
But, besides Russian exports, there is also import to Russia. Part of the import flows traditionally belonged to Baltic transit. And just as with exports, the situation has changed rapidly in the last year. In March, for example, after another hysteria from Dalia Grybauskaite, who came up with idea to use article 5 of the NATO Charter against Russia, Russia officially announced about blocking the food supplies through Klaipeda.
For Russia it is not difficult not to just arbitrarily reduce shipping via the Baltic States, but to completely abandon them.
Ports in North-West Russia are at about 60% capacity, while the port in Ust-Luga by 2018 is expected to reach capacity of 180 million tons of all types of cargo. Former Deputy Prime Minister of Russia Sergei Ivanov back in 2010 said that by 2015 Russia will have enough of its own resources to stop any export through the Baltic ports fully and completely. And talks about the opportunities and the need to abandon energy exports through the Baltic have been conducted since the middle of last decade by the top leadership of Russia.
But if earlier rejection of the Baltic shipping capacity was only one of the possible scenarios, now it is simply inevitable.
Before Russian companies could carry its products through domestic ports, and through the Baltic. And now came the crisis, and in the environment of a radical reduction of shipping volumes, Russia will have to save its own shipping companies from bankruptcy.
Therefore, stimulation by the government of complete reorientation of Russian shipping to the Russian infrastructure – is logical and inevitable. Could Russia take into account the interests of the Baltic countries and not deprive them entirely of one of the most important sources of income that could support the economy of Lithuania, Latvia and Estonia in the critical moment of another default? It could, if the Baltic States, their leadership itself took into account their national interests. These interests include if not allied relations with Russia, but at least a good-neighbor policy. If Russia had good neighbors in the Baltic, it could invest in maintaining good-neighborly relations with them, not refusing entirely the shipping of its goods through Tallinn, Ventspils or Klaipeda.
But what definitely does not exist between Russia and the Baltic States – is good neighborly relations. “Black lists” exist, deportation of the Russian special service experts and even European Pro-Russian experts does exist, demands of new sanctions against Russia, accusations by Russia of violating human rights by the Baltic States, glorification of Nazi criminals by the anti-Russian provocateurs on the international arena.
All of it exists. But not the good neighborly relations. Therefore now, after mutual sanctions, falling oil prices and dramatic growth of the euro against the ruble, the Russian exports and imports will fall dramatically, there will be no Russian shipping through the Baltic States, and no work for tens of thousands of Baltic railroad workers, truck drivers, and port employees.
The top officials of Lithuania, Latvia and Estonia should be proud. Isn’t this what they expected, when they broke all ties with their Eastern neighbor and demanded to establish sectoral sanctions, to make Russia more accommodating in the international arena by undermining its economy?
Politics is killing the EU economy. Perfect. To live well one has to hurt the neighbor to the maximum, especially a big and strong neighbor. And then everything will be alright, for sure!
Translated by Kristina Rus for FortRuss.blogspot.com