Opinion article
The mineral fertilizer transshipment terminal Riga Fertilizer Terminal (RFT) has been fighting for four years for the right to operate, preserve jobs, and contribute to Latvia’s state budget through taxes. However, due to sanctions, the company has been prevented from doing so. In Latvia, a quiet but systematic process is underway whose consequences will be felt for years — the transit economy is being dismantled. Not because of external pressure or unavoidable circumstances, but through decisions driven more by fear than by strategy.
The company’s main issue is one of its shareholders, Russian oligarch Dmitry Mazepin, who is included on the European Union sanctions list. However, solutions to this problem do exist. The so-called “firewall” mechanism allows for the full legal and financial separation of a sanctioned individual from a company — without access to profits, influence over decisions, or control. This would allow the company to continue operating while complying with sanctions. Latvia has effectively ignored this instrument.
Meanwhile, in Lithuania, the “firewall” has proven effective in the case of fertilizer producer Lifosa, which was indirectly controlled by EU-sanctioned oligarch Andrey Melnichenko. Under the Lithuanian model, a temporary administrator is appointed to manage frozen economic resources. If these resources are sold, the proceeds must be held in a deposit account within Lithuania’s financial institutions. A similar mechanism was used in Latvia last year, when the Financial Intelligence Unit of Latvia allowed RFT to sell ammonium nitrate to a Latvian company, with the transaction funds frozen in Latvian banks.
RFT has now once again asked the government to consider a sanctions exemption. The Cabinet previously reviewed the company’s request to resume operations in August last year and rejected it.
No compromises, no solutions
The case of Riga Fertilizer Terminal is not an exception. It is a clear example of how a single legal issue is turned into a reason to paralyze an entire company, halt an industry, and forgo revenues that are critically needed by the state.
Latvia’s current approach follows a simplified logic — if one shareholder is sanctioned, the entire company must be stopped. No compromises, no solutions, no attempt to preserve economic activity.
The shutdown of RFT also means significant losses for the state. In 2020, the company’s net turnover was 23.406 million euros, it employed 128 people, and paid 1.234 million euros in taxes. By 2024, all indicators had declined dramatically — net turnover dropped to 7.438 million euros, staff to 43 employees, and taxes paid to 0.187 million euros. Data for last year is not publicly available. While Lithuanians seek solutions (a temporary administrator for Lifosa was appointed already in May 2022), Latvia produces restrictions, often without deeply analyzing the situation.
Economic consequences: disappearing jobs and an empty budget
RFT is only the visible part of a much larger problem. In reality, Latvia is experiencing:
• a decline in port cargo volumes;
• the collapse of railway freight transport;
• disruption of logistics chains;
• idle infrastructure.
Cargo turnover in the Port of Riga fell by 22.1% between 2020 and 2025, while the Port of Ventspils saw a 23% drop. Freight volumes on Latvijas dzelzceļš declined by approximately 39.5% between 2023 and 2025. Losses of the LDz Group after 2024 reached 38.98 million euros. These figures show that transit — once a pillar of Latvia’s economy — is being lost at record speed. And this is not a gradual process; it is rapid and irreversible. Meanwhile, cargo itself does not disappear — it simply moves to other countries.
The consequences of this policy are direct and painful:
• jobs in ports and terminals are disappearing;
• demand for railway services is shrinking;
• the transport, warehousing, and service sectors are suffering.
This is not just an economic downturn — it is a structural decline. At the same time, the state is giving up millions of euros in revenue — from taxes, port fees, and transit services. A country that publicly speaks about budget deficits is simultaneously depriving itself of income sources.
Latvia loses, but money keeps flowing
By shutting down such companies, Latvia does not stop cargo flows — it simply gives up its share of them. Cargo is redirected to other countries, and revenues follow.
Economic activity is moving outside Latvia. A striking example is Belarusian fertilizer exports, for which the United States has lifted its sanctions. After Baltic states stopped servicing Belarusian fertilizer shipments, Belarus exported around 12 million tonnes using Russian railways and ports — in St. Petersburg and in the Black and Caspian Sea regions. About 85% of this volume passed through the Baltic Sea.
This generates hundreds of millions of US dollars in revenue for Russia, which the aggressor state can use in its war against Ukraine. The minimum logistics cost in Russia is about 48 dollars per tonne. Transport services alone amount to roughly 576 million dollars annually, of which port handling services account for at least 240 million dollars.
This means that Latvia is not reducing financial flows — it is losing the ability to control them.
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