The volume of railway freight going into the direction of Baltic States will continue decreasing. Even at an optimistic scenario – if the war in Ukraine ends and relations with Russia gradually improve, there is no way to come back to the freight volumes of the past, said Estonian businessman and millionaire Oleg Osinovsky.
His company Skinest Grupp JSC operates primarily in railway transports.
Oleg Osinovsky explains that the war started by Russia has changed nearly the entire logistical chain – the EU imposed sanctions, Russia imposed sanctions, Ukraine is isolated from the 1,520 mm width railway network because there is hostile Belarus in the middle. All this has caused freight volumes to go down.
It wasn’t as apparent in the first half of 2022, but in Q4 2022 the drop was enormous. This drop will only continue from now on, Osinovsky predicts. He adds that Baltic States share borders with Russia and Belarus. This means railway freight volumes will continue going down.
At the same time, he admits that the flow of Russian freight started going down even before the start of the war.
In Estonia the flow of freight started going down as early as 2007 – after Tallinn decided to remove the monument dedicated to Soviet troops. In Latvia decisions involving Soviet monuments were made in the recent past.
“The freight volumes Latvia had in 2012, 2013 or 2014 should be forgotten at this point – we would never see something like that ever again. Those who dream about 60 million tons a year should forget about it. It was nothing more than a coincidence, one that will never repeat. If Latvia sees 20 million tons of freight, it will be most excellent. I think we will see less than that,” said Osinovsky.
The businessman explained that Estonia’s government made the decision to make sure the state company Operail was unable to carry freight loaded at Russian railway stations and freight sent to Russian railway stations starting with January 1, 2023.
“If you ask me if this decision was rational, they I would say emotionally it was. But if we look at it pragmatically, then – if our goal is causing Russia’s economy losses to make sure the country is unable to finance the war in Ukraine – this decision does not have much sense. Because even if all Baltic States close down railway traffic with Russia, the latter is unlikely to notice any difference, but we will,” explained Osinovsky.
Aside from Operail, Estonia has three active freight carriers – Sillamae sea port, Go Rail and LDz Cargo. Osinovsky’s company Skinest Rail is a carrier, but it is no longer actively involved. Currently LDz Cargo works on a single route and carries freight from Paldiski to Koidula station near the Estonian-Russian border.
“If I’m not mistaken, they carry palm oil. Oil is carried to Paldiski seaport. It is then transferred to railway cisterns and LDz Cargo carries it to the border. I do not see anything bad there,” he said.
He added that currently no one in Europe who had common sense dared carry sanctioned goods. Knowing the law, it could mean the death of their business. However, Osinovsky said there was also a moral aspect to all this, and many businesses refused to work with Russian freight on the basis of principle. This includes goods not under sanctions.
“Shouldn’t LDz Cargo as a state company follow moral principles? It’s a good question,” the millionaire said.
He added that in regards to the future, it was important to keep in mind that in 2013-2014 Russia was still building up its seaports in the Baltic Sea. Ustyug complex, Novorossiysk and other ports were ready at the time, but everything is operational now as well.
“This is why in this case, if everything goes well and relations normalise, we cannot expect the same volumes we’ve seen in the past. This is out of the question. If someone says otherwise, the only answer is – it won’t,” stressed Osinovsky. (BNN/Business World Magazine)
