Oil transit, from Russia through Estonia, has mushroomed since the Russian crisis began, some of it coming from as far away as the Black Sea region. However, Estonian Railway has had problems matching the output from Russia.
Estonian Railway is now carrying between 25 and 27 trains per day. Previously, they were averaging 20 to 22 trains per day.
"And then we considered it to be a very good week," said Liia Rakson, public relations manager for Estonian Railway. "Now we think 25 is normal."
Without proper repairs, it is doubtful that Estonian Railway can continue to operate at this capacity for an extended period of time.
"Maybe for some days, but without investments we can't take it for long periods," said Rakson. Last week, Parbo Juchnewitsch, director general of Estonian Railways, said that Russia would like to increase oil exports by 40 percent, but the rail system can only handle an increase of 10 to 15 percent.
The Russians are desperate to export anything of value to raise money. Though they've increased exports of metals and grains, oil is their cash cow and they're going to milk it for all it's worth. Seventy percent of the transit cargo coming through Estonia is oil.
"We're running at absolute capacity," said one local businessman. At this time, the Estonian Railway simply can't increase the amount of oil it carries. The rail system is one of the few things that actually works in Russia and last week, train loads of oil waited at the Estonian-Russian border.
Repairs to the Tallinn-Narva line, over which most of the oil travels, were put on hold last week. With winter fast approaching, Estonian Railway can't afford to postpone the repairs any longer, meaning possible delays for the trains. They also need more locomotives of better quality. They purchased four locomotives from Ukraine at the beginning of this year and can't afford to buy more.
At a meeting last week on the Baltic ports, officials said that Estonian ports can handle more traffic, but the rail system can't. The lines are old and need extensive repairs.
Some people argue that if the railway industry had been privatized sooner, Estonia would be in a better position to take advantage of increased Russian exports. Railway cargo transportation is one of the last industries still needing to be privatized in Estonia and there is fear that Estonia will lose transit business to Latvia and Lithuania. Plans for privatizing passenger lines were announced this summer, but the future of cargo lines is still murky.
"It's not yet clear how it will be done," said Peeter Freialt, an associate with Hansa Investments.
However, competition won't be coming from St. Petersburg. The Russians iced plans to build a competitive port in St. Petersburg in the near future after the crisis began.
"It seems like the Baltics will keep the transit business for some time," said Freialt, though he added that the railways will hinder Estonia's ability to take advantage of the increase. "Other ports will be found."
Since world oil prices are at historic lows, the Russians have to pump more and more oil to raise money. The more oil they pump, the lower the prices go. The question on everyone's mind is how long the bonanza will last.
"That's the $64,000 question," said one businessman.
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