Russia is Reducing Transit through Baltic States

29 may 2017

"Although the 2008-2009 financial crisis is behind, the challenges of global economic development still remain: China's GDP growth rate is slowing; Russia and Brazil are just beginning to re-emerge from their serious crises, while the most important trend is the growing role of Asian countries," said Alexander Golyashev, an expert of the Analytical Center, speaking at the 20th International Conference TransBaltica 2017.

According to Mr. Golyashev, Russia is emerging from the crisis, its imports and exports began to grow in dollar terms. Despite the fall in global commodity prices and the Western sanctions imposed on Russia, in 2016 Russia set another record for the annual volume of oil production.

The Baltic States (Lithuania, Latvia, and Estonia) showed very high rates of economic growth in 1995-2007, but the global crisis slowed down their development, leaving them almost a decade behind. The decisive factor is that, with a significant devaluation of national currencies of their important trading partners — Russia, Poland and Sweden, their currencies has been pegged to the euro. According to the IMF, only the Lithuanian economy has already returned to the pre-crisis level, while Estonia will reach its 2007 GDP growth rates only in 2017, and Latvia — in 2018.

As regards the Baltic economies, the expert noted that the share of transport services in their GDP formation significantly exceeds the average indicators of developed countries: 7-8 % in Estonia, 9 % in Latvia and 15 % reached by Lithuania in 2016 (due to high rates of rail transit to the Kaliningrad Oblast).

The shared historical development of the Baltic States and Russia as parts of the Soviet Union determined close economic ties, including transport links, between them. The ports of the Baltic States are closely related with the Russian infrastructure (railways, motor roads, pipelines). However, in the last 10-15 years, a trend towards reducing the volume of Russian transit through the Baltic countries became evident.

In conclusion, Golyashev presented to the participants some data of the Global and Russian Energy Outlook up to 2040, prepared by the Analytical Center and ERIRAS in 2016. In addition, speaking about the Baltic region, he said that the general slowdown in global trade, the fall in commodity prices (which makes exporters choose transportation routes and transport service providers more carefully) and the reorientation of Russia's energy export market towards Asia are added to the rapid development of Russia's own port infrastructure in the north-west of the country. Together, this means that in the coming decades transport and logistics facilities in Lithuania, Latvia, and Estonia will continue to operate in a highly competitive environment, competing both with Russian ports and with each other.