75% of the Latvian transit sector depend on Russia, which shows both significant economic dependency and a key issue of state security, in an interview with the BNN warned the president of the society Baltic Association – Transport and Logistics.
«Latvian economy depends on Russian transit freight, therefore logics say that the situation can influence developmentsn in our internal politics and the economic stability,» emphasises Inga Antāne.
According to her, in a report by Ernst & Young, it has been found that in the case of losing all Russian transit cargos, the damages to the Latvian economy could surpass a billion euros.
Antāne gives an example of Russia’s influence on Latvian economy by reminding that with Russia recently imposing a ban on tinned fish, the Liepāja-based fish processing factory Kolumbija has stopped its operations and laid off 225 of its more than 300 workers.
«It is very urgent to think about the development of our transit policy and the diversification of cargos,» stresses the president of BATL adding that the direction of Asia is the way forward.
Calculations by the Ministry of Transport
Repeatedly, the Ministry of Transport has referred to a research that calculated how the loss of EUR 1 million in transit would result in the loss of EUR 0.75 million in gross added value, 30 jobs and EUR 0.22 million in tax revenue.
The report continues that the worsening of Latvia’s political relations would primarily impact coal and oil product cargoes in ports and railway, which account from 44.33 million tons handled by Latvia’s ports and 32.56 million tons transported by railway in 2014.
Latvia’s transport and connection share in statistics is worth EUR 2.3 billion. Transit cargo servicing and related services secured EUR 895 million in 2013 – slightly less than half of the transport and communications industry. Total revenue from transit cargo is 3.8% of GDP. The country’s transport and communications industry employs 73,400 people.
In regard to the development of transit and diversification, Transport Ministry reminds that Latvia has been working hard to find new export markets not only in Europe, but Central Asia, Black Sea region and the Far East – China and Japan. Nevertheless, projects involving the east are also closely tied to transit through Russia.
Representatives of Latvia’s transit and logistics sector believe there is no alternative to Russia. If this market is lost, its recovery would be an almost impossible task, TM concludes.
Security Police also voiced its concerns
Russian companies continue to invest in Latvia’s transit sector, which shows they are interested in using Latvia for cargo transit in the future, the Latvian Security Police (SP) has concluded in its review on it economic security operations in 2014.
Dependence on Russian cargo can create risks for Latvia, SP writes adding that last year Latvia did not achieve a substantial progress in diversifying the regions, where cargos come from, and in varying the types of cargos handled, which might reduce the dependence of the transit sector on freight from Russia.
According to SP, this, in context with the overall upbeat results of the field, could reduce the willingness of the transit sector to continue to look for new partners to cooperate with in other regions and the prevailing dependence of the sector on one country could continue in the long term.
This situation, in turn, is considered by the body as presenting a risk of being used as a tool for influencing decision making in internal and foreign policy.
The pessimistic forecasts that the conflict in Ukraine and the freeze in Western-Russian relations could have an immediate effect on the transit sector of Latvia have this far proved to be wrong.