It would be very economically beneficial for Latvia’s half-empty sea ports to take over Belaruskali freight from Lithuania. It would prove to be a good opportunity for our railway and sea ports to recover after the massive drop in freight, University of Latvia professor Dr. Sci. ing. Edvīns Karnītis comments to BNN.
At the same time, however, he adds that for Latvia this is no longer a purely economical issue – it has been made into a political one. «No one will look at this from an economical viewpoint, although they should. The prime minister has said on multiple occasions that we [Latvia] do not need a transit industry. It is only thanks to the energy crisis, that there has been an increase in coal freight and the transit sector has livened up a bit. On a political level, however, there are different obstacles being put in the way.»
«Will we want on a political level to take the potassium freight over? I’m not sure [that Latvia would go for this].»
«The statement from the US that their sanctions do not prohibit Lithuania’s railway from carrying the freight also means we aren’t prohibited either,» stresses Karnītis.
«If we’re talking about opportunities, we should also look towards China, considering Lithuania has soured relations with them as well. Perhaps we can take on some freight there as well.»
The expert reminds that when the US had first imposed sanctions on the Freeport of Ventspils, Lithuania was quick to announce they could take over Ventspils’ freight to reassure carriers they would not lose any money.
«In this case it wouldn’t be a bad deal. If they were fine with taking over back then, we could take over now.»
The US has never imposed sanctions on the transit of products from Belarusian company Belaruskali through Lithuania’s territory. This was confirmed officially by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) in response to a query from Lithuanian Railways. Lithuania’s government also admits US sanctions do not directly prohibit the transportation of Belarusian mineral fertilizer freight through the country’s territory. However, Vilnius does not hide its intentions to look for any legal reasons to terminate the contract with Belaruskali.
If official Lithuania succeeds and does terminate the contract, Latvia or Estonia might take over these freight instead. However, Latvian and Estonian prime ministers have both said the products from Belaruskali will not pass through their respective countries. At the same time, considering the disastrous situation with railway freight volumes and the continuing emptying of Latvia’s sea ports, one would ask the logical question – but will we not shoot ourselves in the foot with such a decision?
Latvia, Lithuania and Estonia have all voiced commitment to not cooperate with Belarusian businesses and persons subjected to EU and US sanctions.
But it is important to remember: neither the EU nor the US has imposed sanctions on transit services – the transporting of freight from its sender to its recipient.
According to Lithuanian Railways, the main point of the reply from OFAC is that US sanctions cannot be considered a sufficient enough reason to terminate the contract between the Lithuanian state-owned Lithuanian Railways and Belaruskali. This means that at least theoretically Lithuanian Railways should continue carrying freight from this company through Lithuania’s territory all the way to Klaipeda Sea Port until February 2022, when Belaruskali’s advance payment for this service is expected to run out. This is possible, but only if Lithuania’s Seimas does not pass some special law that prohibiting exactly that.
It is clear that after February 2022 Belaruskali will have to look for new ways to deliver its products to clients. Lithuania’s Minister of Foreign Affairs Gabrielius Landsbergis has already mentioned businesses located in countries neighbouring Lithuania «have plans to take it over [transit of Belarusian freight] since there are no sanctions prohibiting them from doing that».
The most realistic outcome is for mineral fertilizer freight to go through Latvia and its sea ports. However, even despite the lack of sanctions on this particular service, Prime Minister Krišjānis Kariņš is against this.
Meanwhile, the situation at Latvia’s sea ports is not exactly good enough to afford letting this opportunity pass so easily.
According to information from the Ministry of Transport, in the first eight months of 2021 Latvia’s three biggest sea ports handled 26.549 million tonnes of freight, which is 10.7% less when compared to the same period of 2020 (16.1% less for Riga Sea Port, 14.5% less for Ventspils Sea Port and 8.6% more for Liepaja Sea Port). The year 2020 was nothing to write home about either – compared to 2019, the volume of freight declined by 28%. Such an enormous drop should motivate people to consider every opportunity to attract new freight.
Read also: OPINION | Ventspils has «three sea ports» – this is not good for entrepreneurship
Let’s look at Klaipeda Sea Port. This sea port handled 11.3 million tonnes of freight in Q1 2021, which is more than all three of Latvia’s biggest sea ports combined: Riga, Ventspils and Liepaja carried only 11.15 million tonnes of freight. 25.5% of Klaipeda Sea Port’s turnover came from Belaruskali freight. In turn Lithuanian Railways subsidiary LTG Cargo carries about 10 million tonnes of mineral fertilizer freight from Belarus worth EUR 60 million every year. For comparison it is worth mentioning here that in 2020 Latvia’s government invested more than half of that amount (EUR 32 million) alone into the capital of Latvian Railway to save the company.
Right now the most important question is this: if freight from Belaruskali are rejected, will Latvia be able to adequately compensate businesses the losses caused by this decision or offer appropriate state support programmes to help businesses based at sea port reorient their operations. If instead of actual support, financial grants included, the government continues focusing only on the advantages of re-industrialisation, it is entirely possible Latvia’s biggest sea ports may end up almost destroyed. The government should think which of the two is the bigger problem – leaving thousands of people jobless if sea port businesses collapse, or permitting the entry and transit of mineral fertilizer freight that are not under EU and US sanctions through Latvia’s territory.