Russia exercises grip on Baltic ports

  • 2003-09-04
  • Steve Roman
AFP VENTSPILS - As Estonia, Latvia and Lithuania look westward and make plans to join the
European Union and NATO next year, cargo ports, which function as a key
sector of the Baltic states' economy, remain dependent on Russia.
The warm water ports are favored by Russian companies to deliver mainly oil
and oil products to Western Europe, with the shipment of Russian exports
accounting for 10 percent - 12 percent of the Baltic countries' gross
domestic product, according to veteran Estonian transit expert Mikhail
This dependence on the flow of Russian exports has come at a price however,
with Baltic ports and port industries suffering from unpredictable and often
unfavorable practices from the Russian government.
Nowhere has the effect been more felt than in Ventspils, a city of 45,000
people and home to Latvia's biggest port, which is effectively languishing
under a Russian oil embargo.
Last year Transneft, the Russian state-owned pipeline monopoly, drastically
decreased and finally halted the flow of crude oil in its pipeline to
Official reasons given for the shutoff were both "technical problems" and a
claim that Latvian taxes were too high.
Many insiders believe it was, in fact, an example of Russian bully boy
tactics, an underhanded move to starve Ventspils Nafta, Latvia's main oil
reloading firm, forcing stockholders to sell the Russian monopoly a
controlling stake in the company.
As a result Ventspils exports fell 24.3 percent in 2002, the largest export
drop in its history. This year Ventspils Nafta has had some success in
making up for the pipeline shortfall with crude coming in by rail, but is
still suffering.
In Ventspils, where 5,000 people work directly for the port and everyone
else's livelihood depends on it indirectly, the town is feeling the pinch.
According to the local chamber of commerce, the shut-off caused several
hundred people to lose their jobs, a shock that has caused a ripple effect
in the local economy.
"Of course I would prefer it if everything were going OK with Russia," said
Elena, who sells vegetables at the local market. She said that her sales
were noticeably affected by the happenings at the port.
Ventspils' mayor, Aivars Lem-bergs, himself a major shareholder in Venstpils
Nafta, contradicted the chamber of commerce's claim about layoffs, adding
that no jobs at Ventspils Nafta had been lost because of the oil stoppage.
He said extra opportunities had been created to handle the more
labor-intensive reloading from rail cars.
Lembergs admitted however that there was a problem with the town's
overdependence on the port, which he said, "is sensitive to matters such as
the political relations and administrative decisions of neighboring
One of the decisions in question has been the Russian policy of channeling
more traffic to its own ports by sharply raising railroad tariffs on exports
headed to the Baltics.
Giving Russian exporters such a disincentive to use Baltic ports, which
would otherwise be competitive, is a practice the Baltic countries consider
The tariff policy has helped Russia's own port of Primorsk. Despite problems
with ice and logistical concerns, it has been operating at capacity thanks
to the tariff policy and next year plans to expand its capacity to 40
million tons of crude per year, negating at least for now any need to ship
crude through the Baltics at all.
Estonia's main port, Tallinn, and Lithuania's biggest port, Klaipeda, have
been doing well this year.
But these ports are also vulnerable to the tariffs and uncertainty. "This is
a never-ending question," said Erik Sakkov, marketing director for the Port
of Tallinn. "Everybody thinks that we should be worried. We are not. When
there is no need to serve Russian oil any more then we have to do something