Doubts surround rail sell-off

RIGA - The privatization of Eesti Raudtee, the profitable freight arm of Estonian railways, appears to have taken a further blow as U.S. transport giant Union Pacific Railroad, expected to be part of the leading bid, said on Jan. 30 it was not planning to participate.

Currently, negotiations with the Rail Estonia consortium - the preferred bidder - are on hold, after a Tallinn court ruled that complaints from a consortium lower down the list of bidders should be heard. Opposition politicians have condemned the process which is likely to herald reductions in passenger services which run on lines belonging to the freight company.

A spokesman for Union Pacific Railroad said the company had received an invitation to discuss joining the bid but had made no commitment to do so.

Vallo Toomet, a consultant at Rail Estonia denied misleading the Estonian Privatization Agency over the participation of Union Pacific Railroad.

"The information we gave to the privatization agency was correct. If people are shocked by the statement by Union Pacific Railroad that's their problem. We're ready to sign a deal by the end of this month." Katrin Tivi, public relations manager at the Estonian Privatization Agency said press reports of Union Pacific Railroad's involvement had been unsubstantiated.

"Rail Estonia has until the end of February to prove it has made the necessary agreements," she said.

On Jan. 17 a court in Tallinn barred closure of a deal with Rail Estonia after complaints by the People's Rail Privatization group, which has been placed third on the list of possible buyers. The group's complaints are to be heard in court on March 14. But the ruling allowed the privatization agency to submit a letter to the court arguing for the suspension to be lifted before the March hearing, said Tivi.

"We're still hoping it will be lifted," she said.

Kalav Kallo, MP in the opposition Centrist Party, accused the Estonian Privatization Agency of mishandling the sell-off.

"The court was right to suspend the process. Judging by media reports Rail Estonia did not tell the truth about Union Pacific Railroad's involvement. The competition has not been fair."

Complete privatization is the only way to modernize Estonia's rail system, says Kuldar Vaarsi of the Ministry of Transport and Communications.

But the Centrist Party objects to the Eesti Raudtee sell-off including the lines it will run its services on. Passenger services which run on the same lines are threatened because the government is reluctant to subsidize the privately owned passenger transport company Eta Raudtee. The future of services between Tallinn and Narva is particularly uncertain.

"We're not opposed to privatizing the train-operating branches of the system. This will bring investments in technology," said Kallo.

"But privatizing the infrastructure is not normal. The Ministry of Transport needs to work out how to run small trains for services that don't carry many passengers like the Tallinn-Narva line and the Tartu-Valga line."