PM Putin fires warning shot at Baltic ports

  • 2008-05-22
  • By TBT staff

PULLING OUT: Newly inaugurated prime minister of Russia, Vladimir Putin, annouced that the country would be cutting exports through Baltic ports.

RIGA - In one of his first acts as Russia's new head of government, Vladimir Putin opened a new oil products export terminal on the Gulf of Finland and announced that in the future Russia would boost its own ports' capacities and decrease export shipments via the Baltics.
Opening the new terminal in Primorsk, Putin said Russia needed to shift exports of oil products from Baltic to Russian ports.

"If work on modernizing existing oil refineries is completed on time, then there is every opportunity to increase throughput capacity at this terminal to 24 million tons, which means that those exports that we are now delivering to the Baltic countries will be shifted to Russian ports," Putin said.
He added initial capacity of the export terminal, which required three years to complete, would be 8.4 million tons.

News of Russia's intention to divert transit business from the Baltics did not come as a surprise, since Moscow has not concealed its strategic aim of "transit independence" for some time.
In part the policy reflects a desire for economic independence, while on the other hand there can be little doubt that Russia continues to punish neighboring countries that do not tow the line.
All three Baltic countries have seen their transit industries wane after Moscow turned off the valves following a dispute of some sort.

Latvia's crude oil pipeline to Ventspils went completely dry in the beginning of 2003. This decision followed an effort by Russian oil companies to take over the pipeline. After Latvia refused, Russia stopped pumping oil through the pipe. For the past several years all oil shipments to Ventspils have been made by train.
In July 2006 Russia ceased delivering oil to Lithuania via the Druzhba (Friendship) pipeline after the Baltic state picked Poland over Russia when selling its lucrative oil refinery.

Finally, Russia all but cut off oil and oil product deliveries to Estonia in the aftermath of the decision to move a pro-Soviet monument from a prominent downtown square in Tallinn.
The launching of the state-of-the-art terminal, which Putin accomplished with a click of a computer mouse, came nearly seven years after Russia opened the Primorsk port 's now the largest port in the Baltic Sea area.
When it opened in 2001 the Primorsk port 's the Baltic Pipeline System 's could handle 12 million tons of crude oil. Now it boasts a capacity of 75 million tons.

The new terminal aims to do with oil products what the original Primorsk port did with crude.
In Putin's words, Russia will strive to export more refined products, since they add value and award Russia's integrated oil companies with higher margins.
The trick will be to modernize more Russian refineries to provide the higher-quality fuel that EU environmental regulations require 's hence Putin's call to upgrade the countries' refineries "on time."
Latvia and Estonia will feel the effects. Last year Ventspils received 6.5 million tons of oil products by pipeline, a 2.9 percent decrease from 2006.

Estonia's railroad handled 22.3 million tons of oil and oil products, down 14 percent year-on-year. Estonia does not have an oil products pipeline with Russia.
At the same time the Baltic states have long acquiesced with the departure of this segment of the transit business. Lithuania, to be sure, still bristles at Moscow's decision to cease pipeline deliveries to Mazeikiai, which have affected the economics of the oil refinery, the country's largest taxpayer.
For this reason Lithuania blocked a mandate to negotiate a new EU-Russia cooperation deal, though it appears Vilnius is prepared to reach a compromise with EU members at an upcoming meeting in The Hague.
Russia, for its part, is unlikely to budge. Along with the new oil product terminal, Putin announced the development of Baltic Pipeline System-2. The new system will end in Ust-Luga, a town not far from the Estonian border.

"The new oil pipeline must increase oil exports and diversify delivery routes," Putin said in Ust-Luga. "It will serve to enhance the energy security of our country and our partners in Europe."
Not surprisingly, BPS-2 itself originated out of another conflict 's with Belarus. In January 2007 Russia ceased shipments of oil via the Druzhba system after an argument with Minsk over natural gas and oil transit prices. For four days no oil was pumped through Druzhba, the same system that ostensibly suffered an accident in July 2006 and was no longer capable of delivering to Lithuania.