Transit company CEOs: Russian decision to redirect pipeline volumes not surprising, companies ready to adapt

Petroleum transit terminal at the port of Ventspils, Latvia. (Reuters/Scanpix)
9/14/2016 9:08 AM
Source: ERR/BNS
Category: Business

Estonian state railway freight company EVR Cargo said on Tuesday that the Russian decision to reroute its petroleum transit to their own ports instead of those in the Baltic didn’t come unexpected. Latvia’s railways agree, and are looking to China to compensate for shrinking transit volumes.

Russian exports of petroleum products through Estonia had ended already in March this year, EVR Cargo’s CEO, Raul Toomsalu, pointed out to BNS on Tuesday. Announcements similar to the latest decisions had been made on several occasions, he added, potentially rather for reasons of domestic politics.

Toomsalu also remarked that there was no sign that these exports would go through Estonia again, as neither the exchange rate of the rouble nor the global oil price had changed much.

EVR Cargo would continue to concentrate on other types of freight. “August was a pretty good month for us,” Toomsalu added.

Tiit Vähi: Transneft’s decision not surprising, will mainly affect Latvia

Former prime minister and chairman of the board of Sillamäe Port, Tiit Vähi, said that the Russian decision concerned only pipeline products, which meant that the only country affected would be Latvia.

“This isn’t as much news as it is long-term politics. The statement was made by Transneft, Transneft’s CEO Tokarev, and concerns pipeline products. This means that this won’t affect Estonia directly, but rather the ports of Riga and Ventspils in Latvia,” Vähi told BNS. He added that this didn’t have to mean the end of all petroleum-related business between Russia and the Baltic states.

Latvia analyzes decision, considers other business partners

Reactions in Latvia so far have been understanding, as Russia’s decision to fully use its facilities was entirely understandable, and investment in its Baltic Sea ports had been substantial.

CEO of the Latvian state railway company, Edvins Berzinš, confirmed on Latvian TV early on Wednesday morning that Russian petroleum transits had shrunk by about a fifth. “The changes began already last year, when the Russian railways announced that they wanted to see their investments in their own ports and infrastructure pay off,” Berzinš said, adding that it was reasonable that they wanted to see a return there.

Russia’s decision to redirect its pipeline products to its own ports currently mainly affects the port of Ventspils, and Transneft’s local business partner, Ventbunkers. Riga is affected as well, although transit volumes there have shrunk by only 10% this year.

Though there is no panic, Latvian companies are beginning to look around for new business partners. As a first success in increasing business with China, the first freight train from the Asian economic superpower is expected to arrive in November. Chinese premier Li Keqiang is expected to visit Latvia on the occasion.

Berzinš said that they were currently working with several companies in China, Kazakhstan, and Belarus, and trying to compensate for the dwindling transit volumes by looking at other types of freight.

A variety of goods could pass Latvia from China to the Nordic countries and Western Europe in the future. Together with companies in Russia, Belarus, and Kazakhstan, Latvia can offer the Chinese an overland transit corridor that can bring goods from Asia to Europe in about two weeks.

Editor: Dario Cavegn

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