Ilona Bērziņa
Latvia’s ports are still financing themselves, while the railway is already being supported by taxpayers. A shortage of funding is not the industry’s only problem — Latvia is also losing competitiveness, partly as a result of policies the country itself has adopted. Ivars Landmanis, Chairman of the Board of the Latvian Stevedoring Companies Association (LSA), says the greatest concern is that one more relatively minor shock to the transport and logistics sector could trigger an irreversible “domino effect.”
What exactly would this “domino effect” look like? Could it mean insolvency among port companies?
A “domino effect” is a chain reaction in which one event or action triggers a series of subsequent events that may have far-reaching consequences. A port’s revenues decline, terminals no longer have sufficient funds to maintain infrastructure, prolonged legal disputes over unpaid port dues may begin, followed by collective redundancies, and ultimately even environmental problems.
Once a port can no longer afford to maintain its waters, the required depths for vessels to enter the port, and the rest of its infrastructure, we can forget about NATO vessels — as well as other large ships — calling at Latvian ports. It is far easier to prevent such a situation than to deal later with the consequences of politicians’ lack of foresight and inaction.
Moreover, if businesses operating in ports go bankrupt, who will support the families of their employees and the small businesses that depend on them — hair salons, cafés, small shops and other service providers? Perhaps instead we should be thinking about how, under certain circumstances, to support the ports and restructure the railway.
Why must businesses constantly fight the “windmills” of bureaucracy and try to understand where the hidden pitfalls of policymaking lie, instead of simply being allowed to work and generate revenue for the state? If politicians are so determined to hinder normal economic development, ultimately creating a situation in which ports and the railway have to be subsidised, then they should say openly that taxpayers will have to pay for their inability to make economically sound decisions — decisions that may not please Brussels or certain populist parties, but would benefit Latvia.
Latvia has the Latvian Ports, Transit and Logistics Council, whose main task is to coordinate state policy in the sector. Is it actually doing so?
Since the Council is chaired by the Prime Minister, it could indeed serve as a forum for discussing all the sector’s pressing issues. However, in recent years, Council meetings have been held unacceptably infrequently. Although its regulations require meetings to be held at least once every quarter, only five Council meetings have taken place from 2024 through the 18th of August of this year.
At a time when the industry is undergoing one of the most rapid structural transformations since the restoration of Latvia’s independence — with declining cargo volumes from Russia, Belarus and Central Asia, falling rail freight volumes, revenue problems at ports, and the need to find entirely new markets — we have lacked a comprehensive sectoral policy document that would also set out specific measures for dealing with declining cargo volumes.
Back in 2014, auditing firm EY concluded that if Latvia were to lose Russian and Belarusian cargo, it would lose 1.4 billion euros in turnover, GDP would decline by 1.9%, employment by 1.7%, and tax revenues by 2.6%. In that same year, 2014, before the decline in coal, petroleum products and rail freight began, transit from Russia and Belarus alone generated approximately 174 million euros in annual tax revenue.
However, already in the early 2000s, when Russia began building and expanding its Baltic Sea ports — Ust-Luga, Primorsk and Vysotsk — it was clear that the economic objective was to avoid paying Latvian, Estonian or Lithuanian ports and railways for handling Russian exports and instead route those exports through Russia’s own infrastructure.
For all these years, businesses operating in Latvian ports have been knocking on the doors of successive governments, calling for railway tariffs and other issues to be addressed in a way that would allow us to remain competitive and therefore attractive, including for cargo from Central Asian countries. Yet our appeals have fallen on deaf ears.
As a result, in 2025 and 2026 the state allocated almost 90 million euros annually to maintain public railway infrastructure and ensure the financial balance of Latvijas dzelzceļš (LDz). If declining cargo volumes mean that the infrastructure of Latvia’s major ports also has to be financed from the state budget, total support could exceed 110 million euros per year.
The United States has lifted sanctions on the transit of Belarusian mineral fertilisers, while the European Union has not. Russia is benefiting, earning approximately 500 million euros annually from these cargoes alone. Does Latvia have any opportunity to influence the EU’s common regulatory framework regarding Belarusian mineral fertilisers?
The objective of the sanctions is understandable — to reduce Belarus’s revenues and its ability to support Russia’s war in Ukraine. However, we need to assess whether the sanctions are actually achieving this objective.
Belarusian mineral fertiliser exports have not stopped. Instead, a large proportion of these cargoes has been redirected to Russian railways and ports, amounting to approximately 11–12 million tonnes per year.
If even five million tonnes of Belarusian mineral fertilisers per year were routed through Latvia, our economy could gain at least 100 million euros annually through railway services, terminals, port services, taxes and related industries.
Within the Russian transport corridor, the amount is considerably higher — Russian railway and port logistics for Belarusian mineral fertilisers cost approximately 47–59 euros per tonne. It can be predicted with reasonable confidence that, for purely economic reasons, Belarusian businesses would much prefer to route these cargoes through the Baltic States, but sanctions currently prevent them from doing so.
We therefore believe that the EU should assess whether the current policy is achieving its intended objective and whether its side effects are generating greater economic benefits for Russia than for Europe.
Sanctions decisions are taken jointly by all EU Member States, so the Latvian government can initiate a review of the regulatory framework, submit assessments of the economic and security impacts, and seek support from other Member States. One option worth considering could be strictly controlled transit to third countries, with full traceability of cargoes and payments.
The key is to ensure that sanctions achieve their security objective rather than merely shifting cargo flows and revenues from European ports to Russia.
The Port of Ventspils is particularly exposed to fluctuations in certain major cargo categories — petroleum products, Kazakh coal and other shipments along the eastern corridor. What should be done to encourage Kazakhstan, for example, to route its coal through Ventspils? Is this primarily a question of railway tariffs, or are there other factors?
Railway tariffs are one of the key issues, but they are not the only one. Kazakh businesses assess the total cost of the entire route, from the point of origin to the final buyer.
The calculation includes railway tariffs, terminal services, port and shipping costs, the speed of customs and border controls, as well as the security and predictability of the entire route. Ultimately, the decision is always based on a business calculation — whether transporting cargo through Latvia is cheaper, faster and safer than using an alternative route.
If we want to preserve the economic contribution of our ports, jobs, import and export services, as well as military mobility capabilities, Latvia’s transport corridor must remain competitive.
What, in your view, should be done to stimulate business activity related to transport and logistics, including transit?
We simply need to understand that the domestic economy does not generate enough business for all of Latvia’s ports, and that the volume of cargo generated within the region is insufficient to sustain either terminal operations or port infrastructure.
Many people ask why the transit sector does not cooperate more closely with Ukraine. Intensive efforts were made to develop such cooperation, but unfortunately, given the current rail connection between Latvia and Ukraine — via Lithuania and Poland — significant cargo flows are not feasible.
First, there are differences in railway gauges, which require additional operations involving cargo or railway wagons. Second, capacity is limited. All of this slows cargo delivery times and increases costs.
Consequently, intensive cooperation between Latvian ports and Ukraine can only develop once the railway connection through Belarus is reopened. Latvian politicians must also take this into account if, as a country, we genuinely want to become practically involved in helping Ukraine with its post-war reconstruction.
Business can be stimulated in several ways. For example, policymakers should refrain from making populist decisions without first consulting the industry and understanding the economic consequences of those decisions. Unfortunately, several political forces have acted in precisely this way, causing an enormous negative impact on Latvia’s economy.
Secondly, all bureaucratic obstacles should be reviewed. For example, the process for obtaining various permits needs to become more flexible so that terminals can quickly adapt to handling different types of cargo. This is particularly important in the liquid bulk cargo segment, where switching from one type of cargo to another is technologically complex, time-consuming and expensive.
If obtaining approval for the necessary amendments to environmental permits takes almost a year, we lose competitiveness in the eyes of our customers. The state should therefore provide a more accommodating and flexible approach — shortening procedural deadlines, reviewing requirements and introducing “green corridors” for strategically important projects.
Thirdly, we need to assess how to become more competitive in terms of tariffs. We could experiment with the excise duty on diesel fuel used for rail freight and with infrastructure fee discounts for certain types of cargo.
For example, Estonia, in an effort to attract Kazakh grain, was prepared to reduce railway infrastructure charges. We also need to experiment — there is no reason why a discount would have to remain in place indefinitely. We could introduce it for a limited period and see whether it works. If cargo volumes return, the terms could then be reviewed.
We respect European Union sanctions. However, it is no secret that they have an impact on border countries and the businesses operating in them. How easy or difficult is it, under these circumstances, to find business partners willing to cooperate with us and invest here?
It is very difficult. Our region is becoming increasingly unattractive. Stability, predictability and cargo security are extremely important. The political and public climate is also a problem. How many times have politicians talked about closing the border? At the same time, we travel to Central Asian countries, try to build cooperation and invest energy and other resources in attracting cargo.
As soon as someone publicly announces that we are about to close the border or dismantle the railway tracks, that information immediately reaches our partners, and they call us asking what is going on. Latvia itself creates a sense of instability, and this benefits our neighbours — cargo is redirected to Lithuania or elsewhere. There is no consistency or clear strategic direction. With one hand, politicians are trying to build relationships in Central Asia, while with the other they are saying: let’s close the border or dismantle the railway tracks. How are businesses supposed to operate under such conditions?
More than 70% of Latvia’s state oil reserves are stored within Latvia, while the remaining 30% are stored in other EU countries. Would it perhaps make more sense to store all of Latvia’s state reserves within the country itself?
At present, reserves are secured for 92 days, and every fuel consumer pays approximately 7–8 cents from every litre purchased towards the establishment and maintenance of these fuel reserves. As of the 1st of January, 2026, the official fee is 81.26 euros per tonne of petroleum products, and it is currently the most expensive system in the Baltic States.
Historically, we purchased only so-called “option contracts” — essentially the right to purchase fuel from traders in the event of a crisis. The state is now changing this system and is gradually purchasing fuel into physical state ownership over a five-year period.
At present, the greatest concern is why there is so little information available about these state reserve procurements and why responsibility for them has been entrusted to the public asset manager Possessor, where the final decision is made by just one person. In my view, this is highly risky, because the decisions involve sums amounting to hundreds of millions of euros. At the same time, open tenders are not organised for security reasons.
The same applies to the rental of storage tanks in which state-owned fuel reserves are stored. It is unclear what principles are used to select these facilities. There are no open tenders; instead, market research is conducted. It has been reported publicly that the average rental price under the contracts concluded is 5 euros per tonne. However, according to information available to me, some terminals offered significantly, significantly lower prices, yet no contracts were concluded with them.
What is the explanation for this, and why should the state overpay if cheaper offers are available on the market? If the reserve manager’s choices when awarding storage contracts are not transparent or understandable, this creates an unequal situation and unfair competitive conditions among terminals.
What are currently the biggest problems facing the industry, and what solutions are possible?
Stevedoring companies are service providers. For the industry to operate, it needs customers and cargo. At present, there is considerably less cargo due both to sanctions and the broader geopolitical situation. If there is no cargo, there is nothing to handle, so the main objective is to ensure that cargo continues to flow through Latvia.
We, as port operators, are working simultaneously in several directions — strengthening cooperation with Central Asian countries, seeking new cargo flows in Europe and Scandinavia, working to attract industrial projects and investors, and assessing solutions to reduce railway and overall transportation costs.
A clear and stable governance model, as well as predictable funding for critical infrastructure, is also essential for the development of the ports. Latvia’s ports contain infrastructure of national importance, and several port companies perform essential functions in supporting Latvia’s economy and national security.
At present, one major global problem is unpredictability. Rules, tariffs, sanctions regimes and border operations frequently change across the region, making it difficult for customers to plan their activities over the long term. In the transport business, good infrastructure alone is not enough — customers need to know that a route will remain safe, cost-effective and accessible over the long term.
And there is one more point: when decisions are being made about an industry that is already balancing on the brink of survival, policymakers need to talk to the industry. During the budget process, the government cannot simply increase the natural resources tax, excise duty or other charges without first determining whether the sector is capable of bearing the additional burden.
Otherwise, we end up in a vicious circle: the budget forecasts higher revenues from increased taxes, but cargo volumes do not increase — on the contrary, they may decline. Taxes can be raised indefinitely, but if there is no cargo, there will be no revenue either.
The state should therefore develop a model in which reasonable rates attract cargo and generate real revenue, rather than continuing to raise rates until cargo simply goes elsewhere.
Read also: BNN Interview | “Latvia Still Lives in the Role of a Servant.” Leonīds Loginovs Speaks Bluntly About Transit, Sanctions and Fertilizers