State support for reopening Riga-Stockholm ferry line would make sense - economists

RIGA - State support for the reopening of the Riga-Stockholm ferry line would make sense, but it is necessary to assess how exactly it will be provided, the surveyed bank economists told LETA, commenting on the Transport Ministry's plan on potential support for the resumption of ferry service.

SEB Banka economist Dainis Gaspuitis told LETA that looking at the geography of tourists, it is clear that Latvia is mostly visited by people from neighboring countries. Increasing traffic with other countries around the Baltic Sea is therefore desirable for the industry and the economy and should therefore be supported.

"The Riga-Stockholm line is one of the most promising routes that could be launched. The problem is that entrepreneurs do not see sufficient commercial potential in the reopening of this route and are choosing other options instead," Gaspuitis said.

He noted that in the situation where Latvia could benefit but entrepreneurs are uninterested, providing state and/or municipal aid without engaging in business operations would be a rational decision.

"If this matter is addressed sensibly, Latvia would end up with a positive balance. It is therefore important not to drag feet on this matter for too long," the SEB bankas economist said.

Luminor Bank's economist Peteris Strautins also told LETA that the idea makes sense but that the size of the support, potential passenger numbers and other such things would be important.

"But there is no doubt that, if implemented wisely, the plan can help the economy," said Strautins, explaining that it is essentially about cross-subsidies, a widely used tool in purely commercial business, without any state involvement.

As reported, ferry services between Riga and Stockholm could resume in 2026 at the earliest, LETA was told at the Transport Ministry.

According to the ministry's representatives, reopening the ferry line from Riga will require central and local government support. The Transport Ministry is preparing an information report on the necessary support for the relaunch of ferry services from Riga. The document is expected to be finalized in the next few months and submitted to the government for review.

Transport Minister Kaspars Briskens (Progressives) indicated that the ministry's position is that the main focus should be on passengers, because freight shipping can be ensured from the ports of Ventspils and Liepaja. "I think it is important for Riga to attract tourists to contribute to the economy," Briskens said.

Representatives of the Transport Ministry have had meetings with several operators to discuss the possibility of resuming the ferry service between Riga and Stockholm, as well as potentially also to Helsinki. It became clear in these discussions that the ferry service would have already been resumed if it made economic sense.

This means that central and local government support is needed to ensure the resumption of this type of traffic. In the wake of the Covid-19 pandemic and the Russian invasion of Ukraine, the market situation has changed, as have people's travel habits. In planning for the resumption of ferry services from Riga, support for the reopening of the ferry line would be temporary (two or three years) and include support for environmental improvements and various tariffs. A decision also needs to be taken as to whether the ferry service will be targeted at passengers or freight.

In the case of state aid, such a decision would have to be coordinated with the European Commission. According to the Transport Ministry, there will be no legal challenges, but the approval process will take time and ferry services could resume no earlier than in 2026.