Estonia faces possible economic embargo

  • 2007-01-24
  • By Gary Peach
RIGA - Estonia's transit sector has begun mulling over possible repercussions of an embargo by Russia after the Baltic state passed a law on war memorials that angered Moscow.

Sensitive to the rising tensions in bilateral relations, Estonian businesses want to be ready for the contingency should Moscow decide that it will no longer export oil, coal, timber and other goods through Estonia's ports.
Andrei Filatov, head of Severstaltrans, a Russian-owned company that is a leader in Estonia's transit sector, admitted companies are preparing for the worst.

"All large transport enterprises are following events involving the memorials and are considering the possibility that Russian politicians will implement real economic sanctions," he told the Eesti Paevaleht, an Estonian daily, last week.
The war memorial law, passed by Riigikogu (Estonia's parliament) on Jan. 11, allows for the removal of monuments and graves dating from World War II. Specifically, the act is targeted at the so-called Bronze Soldier, a war monument and gravesite in downtown Tallinn. In recent months, the statue has become a focal point of debate in Estonian society about the Soviet occupation, and now a majority of MPs have empowered the city of Tallinn, or the military, to raze and relocate it.

Russia, for whom WWII monuments are sacrosanct, has condemned any state-sanctioned tampering with the gravesite. Considering how Moscow has dealt with Ukraine, Georgia and Belarus in the past year, a similar reaction cannot be ruled out. And the fact that Estonia is a member of EU and NATO is unlikely to hold much weight.
German Gref, Russia's minister for economic development, admitted that sanctions were one of the options on the table. "This is the last step. We need to speak about the entire arsenal of negotiations," he was quoted as saying.

Gref, however, is a moderate in the Kremlin hierarchy, and often a lone voice in matters of foreign policy. If Estonia takes down the Bronze Soldier and exhumes the remains of Soviet soldiers, the hawks are likely to have the final say as what the reaction should be.
Regardless, an all-out embargo would have tremendous repercussions. In the words of Kaido Simmermann, the newly appointed chief of Eesti Raudtee (Estonian Railways), "If transit ceases completely, Estonian Railways will disappear."

Tallinna Sadam (Tallinn Port), the largest in the Baltic states and third in the region (after St. Petersburg and Primorsk), will suffer a tremendous blow. "Tallinn Port will be able to work a year without problem and not receive a single ton from Russia since passenger flows account for one-third of our turnover," port chairman Ain Kaljurand was quoted as saying.
"But then the government should forget about dividends," he added.

Last year, the Port of Tallinn handled a record 41.3 million tons of cargo, most of which was from Russia. Indeed, Russian capital owns and operates a large swathe of Estonia's transit industry, so an embargo undertaken by the Kremlin will impact first and foremost Russian business.

"I don't expect any serious changes," said Andris Maldups, of the transit department at Latvia's Transportation Ministry. "First of all because most of Estonian terminals belong to Russia, so they are interested in continuing to use it."
Severstaltrans, for instance, is a major player in the transit sector. Last year it merged two Estonia-based subsidiaries'sE.O.S. and Turmoil and Trendgate'sto create the largest oil transit firm in the Baltic state. It also fully owns Spacecom, a young Estonian rail operator.

Maldups did mention, however, that Russia could use railway tariffs as a way of squeezing transit away from Estonian ports. But should push come to shove and Moscow decide to apply economic pressure on Estonia, he said Latvia could pick up some of the business.
"The capacity of our ports is much more than we use," said Maldups.

At the same time simply reorienting export routes to Latvia would be too simple. As Girts Berners, director of the Latvian Transit Business Association was quoted by the daily Telegraf as saying, "Theoretically, a change of oil flows from Estonia [to Latvia] is possible. However, one has to remember that the Latvian-Russian transit dialogue is awfully politicized. So for starters we need to resolve political problems that have built up, and only then dream about our neighbor's cargo."
Last year, Latvia's ports handled nearly 60 million tons of cargo, down slightly from 2005.