A new ferry for Riga

  • 2000-05-25
  • Valters Medenis
RIGA - With a ferryboat set to begin service on May 26, the
international ferry route between Riga and Stockholm has been a thorn
in the side for Latvia's maritime since independence. Estonia has taken
full advantage of its own operation between Tallinn and Stockholm. Now
Latvia will try to establish its potential and regain some lost pride.

Zigmars Priede, the pre-sident of the passenger port Rigas Pasazieru
Osta, says Riga will have a ferry service between Latvia's capital and
Stockholm, with fares for round trips ranging from $38 for a seat to
$235 for a luxury cabin. The Riga-Stockholm ferry service will coincide
with Latvia's summer tourist season, but according to Zigmars Priede,
president of Riga's passenger port Rigas Pasazieru Osta, it will be
Latvians who will be leaving their hard-earned cash in Stockholm, not

The reason is that the ferry Mikhail Sholohov will be flying the
Russian flag, because the Swedes will not trust the flag under which
the boats Ilyich and Rusj ran a pair of failed ferry services on the
same route in the 1990s.

"The previous two ventures had the Russian flag flying, and I don't
think too many Swedes will be coming across to our shores," said
Priede. "It's not the flag's fault, but for this ferry to succeed and
to attract tourist dollars, Latvia needs a Scandinavian company to
operate the route."

But Latvian company Mono Linija was the only investor capable of
raising the capital to operate a ferry, Priede said, and has rented the
Mikhail Sholohov from the Far East Shipping Company of Russia for the
only viable operation on the Riga-Stockholm route this summer.

Mono Linija is managed by three owners comprising the company Mono with
an 88 percent stake, the RPO with 10 percent and Alfa Shipping Company
with 2 percent.

The Mikhail Sholohov, with a capacity for 400 passengers and 300 meters
for cars has been plying the saltwater for 27 years, but is efficient
enough and sea worthy to service the route, said Priede.

The service will give Latvians the opportunity to grace the shores of
Sweden this summer and will bring in some tourist krones to Riga.
Priede is confident Mono Linija will not end in a disastrous fashion.
The operators of both the Ilyich and Rusj were arrested by the
Stockholm Port Authority for unpaid port duties.

"Latvian ventures can still operate. It is not a monopoly, but to
attract Swedish tourists to Riga, we need a Swedish operator," he

When the ferry starts its service, Priede predicts the passengers on
the ferry will be 70 percent Latvians and 30 percent Scandinavians.

This prediction is shared by Felikss Belle, head of the ferry
department at shipping company Hanzas Juras Agentura.

"The operators of the service will not be able to attract Swedish
tourists because of the bitter taste left by the Rusj," said Belle.

Belle himself is angered by circumstances surrounding Hanza's bid to
operate the Riga-Stockholm ferry service.

"Hanza made a solid presentation to buy the Baltic Kristine (the former
Ilyich) from the Estonia's port authority and fly the Latvian flag for
the ferry service. Due to back scratching between the companies
involved in securing the service and Andris Berzins (former Riga mayor
and newly elected prime minister), we did not get a fair go," said
Belle. "Latvia wants to step on a rake again and get hit in the face.

"We had a solid business plan. The Baltic Kristine is in much better
condition than the Mikhail and is capable of carrying 600 passengers,"
he said.

Members of Mono and Alfa Shipping Agency both refused to comment on
their successful bid and asked that questions be handled by Priede.

Valdis Silins, the manager of Alfa Shipping had no comment except to
say "The Mikhail is 100 percent better than the Baltic Kristine."

All parties considered to operate the service were treated equally,
said Arnis Lapins, spokesman for Andris Berzins.

"This comment of back scratching is unfounded, Hanza are just sore they
lost out," said Lapins. "Hanza asked Riga City Council to invest
capital to buy the Baltic Kristine. Mono was capable of financing a
ferry themselves. The Mikhail Sholohov was the best candidate."

Belle disagrees. He said Hanza asked Riga City Council to invest money
to buy the Baltic Kristine. As an alternative plan, Hanza had a private
shipping company willing to use its 15 ships for collateral to buy the

"I am not willing to name the investor, but the bid for the Baltic
Kristine would have been signed, sealed and delivered if we had been
given the contract from Riga City Council," said Belle. "Our offer was
not given serious consideration even though Priede made our
presentation to the City Council himself.

"We gave Priede the choice of staying with us or not. He opted out," he

Berzins could not see the reality of Hanza financing the operation.
This is the reason Mono got the contract ahead of Hanza, said Priede.

"If Hanza had gone ahead and bought the Baltic Kristine and parked it
right out here at the dock, who would have stopped them? Not me," said

With the conjecture on who had the right to operate the Riga-Stockholm
ferry service, it will be an uphill battle to keep the ferry service

"Unlike the previous attempts, Mono has deposited 250,000 lats
($416,000) for collateral for the venture, and this they will lose if
they forego the operation," said Priede.

For Mono Linija to succeed, Priede said Mono Linija needs to carry
50,000 passengers between May 26 and the end of December. Priede
foresees that 400,000 passengers need to board the Mikhail Sholohov
annually for it to be profitable.

The business plan submitted by Mono Linija has the shipping agency
operating at a loss of $450,000-$650,000 its first year, half that
amount its second year and at a profit its third year. Riga City
Council will aid Mono Linija with export subsidies in the amount of
$10-$15 for each overseas passenger brought to Riga.

"The export subsidies are a bonus for Mono Linija. Marketing will be
the most important factor to have Swedes board the Mikhail," said
Priede. "Mono Linija needs Scandinavian tourists to be a financially
viable venture. If this occurs, Swedish shipping companies will see the
potential of operating a ferry service between Riga and Stockholm."

Scandinavians are very "standoffish" about investing in a ferry service
following discussions shortly after Latvia's independence which ended
in a firm "we're not interested" from the Latvian government and RPO's
president at the time, said Priede.

"The RPO had their own plans to introduce a ferry service to Sweden and
did not want a Swedish company involved," said Priede.

Belle said Swedish companies are afraid of the organized crime element
at Riga's port.

"Swedes are scared of the mafia at Riga's port. They do not want to
make any under-the-blanket deals," said Belle. "I know the Viking group
is very interested in a service to Riga, but they don't want to get
involved in an operation where they do not have complete control.
Swedes do not want to get mixed up in unclean business."

Priede said the main reason Scandinavian companies are weary of
introducing a Riga-Stockholm ferry service is that such a service is
very expensive. Latvia needs to prove the feasibility of running a
service on the route.

Priede said for the Mikhail Sholohov to make a profit, it cannot rely
only on Scandinavian and Latvian passengers. Mono Linija has to attract
Russians to visit Riga and then go on to Stockholm.

"Russian passengers will be very important. I know there are bad
relations between Russia and Latvia, but bad relations should not make
this venture fail," said Priede. "Packages to entice Russian tourists
are needed, and a solution needs to be found for the complications of
getting transit visas."

Whatever the out come of Mikhail Sholohov's operation, Priede sees the
eventual introduction of another ferry next summer or the year after.

"I really want another ferry competing for passengers for the
Riga-Stockholm ferry service. This will show the Scandinavians and the
rest of Europe we are capable of such a venture," said Priede.