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Experts: Ust-Luga Port attack had psychological impact on Russia

Erik Laidvee, former head of state railtrack company Eesti Raudtee.
Erik Laidvee, former head of state railtrack company Eesti Raudtee. Source: Siim Lõvi /ERR

The attack on the Novatek terminal at Russia's Ust-Luga Port, Russia has both direct economic and indirect political and psychological effects, experts said.

Ust-Luga is connected to Estonia not only by its geographical proximity but also by its birth story. This port was planned in the 1990s precisely to direct Russian trade flows away from Estonia, Latvia, and Lithuania, "Aktuaalne kaamera" reported.

"After Estonia regained its independence, Russia immediately started to develop its infrastructure. A document called the Russian Port Infrastructure Development Strategy 2030 was adopted and included the development of the port of Ust-Luga. They had to build it over rocks and stones. In 1991, they already made this decision and the port started operating in 2001 when the coal terminal was launched there," explained Erik Laidvee, the former head of Transit Center AS (Transiidikeskuse AS) and Eesti Raudtee (Estonian Railways).

Over the years, more terminals have been built. It can be said that Russia's goal of bypassing the Baltic countries has been achieved.

"If we look at the Ust-Luga volume, we don't have the final figures for last year, but it was estimated to be around 120 million tonnes. In comparison, the Port of Tallinn had a volume of 12.5 million last year. So it is ten times higher, and you could say that practically all the Russian transit which used to go through the port of Muuga is now directed to Ust-Luga," said Laidvee.

Ust-Luga Source: Helen Wright/ ERR News/ OSM

Ust-Luga has other important functions, not just transporting cargo.

"This port is also very important for the Kaliningrad connection. At present, there are as many as four train ferries running between Ust-Luga and Kaliningrad, with a fifth one on the way, which will also ensure that trains from the Baltic countries can be sent via Kaliningrad," said Laidvee.

Ust-Luga is a large port, but last week's attack seemed to be aimed at one specific terminal where residual products from oil production are reprocessed into gas condensate and exported.

Economic expert Raivo Vare said: "This is, of course, a very painful blow, because it was not the terminals that were attacked, but the technology, by Ukrainian drones. And it will take at least two months to fix the technology, according to Russia. This means that they will not be able to reprocess this gas condensate in that time. Without reprocessing, they don't know what to do with that gas condensate, so it will be sold off for export at a cheaper price."

"Today, it was announced that they have reached the stage again where they have started loading the ship from the existing tanks for pumping out and discharging crude oil concentrate. It is a cheap commodity, but practically they can't export the oil products processed from it for a few months, and that is a blow to Novatek in any case, and also to the port, because it is a big source of income for the port as well," he added.

Raivo Vare Source: Kairit Leibold / ERR

Novatek is not just any company. It is Russia's second-largest gas company after Gazprom, and its owners are among President Vladimir Putin's inner circle.

"And that in turn belongs to people close to Putin. The owners of Novatek are Gennady Timchenko and Leonid Mikhelson, who are oligarchs in the inner circle, and it is the kind of high-tech thing that works, it can be regarded as one of the cutting-edge productions in the field, and it's less than a year old," Vare explained.

While the other terminals were unaffected, the uncertainty made it more expensive to secure ships bound for the port and to secure all transport.

More important than direct economic damage is the symbolic and psychological aspect of this attack.

"It has a symbolic meaning. I think we should talk more about the fact that important property belonging to people close to Putin was attacked by Ukrainians. They are having difficulties anyway, because Novatek has also had its Arctic projects stalled because of the technology sanctions, and a lot of other things have been more difficult, so that should make them unhappy, and it is also a sign that nobody is untouchable in Russia," Vare said.

Rainer Saks

Alexela's head of the energy sector Tarmo Kärsna added: "Rather, it is a very political move by the Ukrainians to target ports that are far away from Ukraine and that are important for Russia both in terms of exports and imports. It is not only an export port, but also an import port, especially for foodstuffs."

It is probably no coincidence that just two days after the Ust-Luga attack, a fire broke out at the Tuapse oil refinery in Russia.

Security expert Rainer Saks said: "The next weeks or months will show whether there will be any further attacks. But we've already seen that Russia has moved its air defenses around St. Petersburg, quite demonstratively, but that's one of Russia's challenges, that if it can't give the impression that air defenses are working in Russian ports, then it's going to be much more difficult for those ships that are prepared to carry goods in Russian ports to get there."

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Editor: Merili Nael, Helen Wright

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