This year started off for Latvian Railway with a 20.6% drop in handled cargoes in the first three months. Over the course of the past two months, the company’s revenue has declined five times – from EUR 10.7 million in 2014 to EUR 2.1 million in 2015, as reported by Nekā personīga programme.
Latvian Railway is the largest employer in Latvia – the company has 12,000 employees. The railway also indirectly affects 75,000 workers in state and private sector – ports, stevedore companies and car transport firms. Latvian Railway pays EUR 10 million in taxes annually.
«I am a cautious optimist when it comes to the future. Why a cautious optimist? I believe at the end of the year the planned cargo turnover could be 50 million – it is the approximately planned -15%,» – comments LDz Chairman Edvins Berzins.
«In March, it was a -24% cargo decline. We will wait and see what comes with April. It will allow us to tell if the situation has gotten worse or better,» – says Transport Minister Uldis Augulis.
Russia more often chooses in favour of its own ports – Primorsk or Ustyug – when it comes to sending cargoes. Russia has been developing its ports in the past decade. «Russia’s established capacity is very big. As a comparison, we can say that the capacity of Ustyug port, which continues to develop very rapidly, is 85 million tons. We, on the other hand can handle 55.6 million tons. You can see what a single port is capable of,» – says Berzins.
Several years ago, coal was the main type of cargo handled by Latvia’s railway and ports. The volume of cargoes handled by them continues to decrease. In addition, at the Paris Climate Conference, 195 countries agreed to reduce the use of fossil fuels.
«There are multiple reasons why there is currently a decline in the number of cargoes. First of all, it is the weakness of Russia’s economy. The decline of rouble’s value means our transit corridor remains expensive for Russian transporters. Another important factor is the decline in demand for coal in the world,» – explains Bank of Latvia economist Liva Zorgenfreija.
Latvian Railway and Transport ministry promise that the country’s transit future lies with China and Kazakhstan. Latvia will be visited by transport ministers of the 16+1 format in May. However, the upcoming summit in Riga will mostly consist of political talks.
«Several years go Russian officials clearly told us they would do everything to establish their own infrastructure to gradually start diverting cargoes to their own ports,» – says Foreign Affairs Minister Edgars Rinkevics.
Latvia is not the only country that hopes for cargoes from the east. The Silk Road is Russia’s new railway mega-project that will connect Beijing with Europe through Belarus, Georgia and Kazakhstan. Around Baltic States. Another direction is the so-called Northern Arch – a new railway hub will be formed at a port near Japan. There, cargoes from China, India and Korea will transport their cargoes by railway to Europe across Russia’s northern territories. In Belarus, China is busy building an enormous logistics centre. Lithuania has managed to establish successful cooperation with Belarus in this project.
«We will take into consideration the fact that there will be less money coming to country’s budget from Latvian Railway. The good news is that it is possible to compensate that with other activities. This is because so far tax administration GDP have been realizing on the planned level in spite of this decline,» – admits Prime Minister Maris Kucinskis.
With help from one of the largest audit companies, Latvian railway currently carries out an evaluation of five European projects planned for realization by the company. This includes the project for the electrification of trains. Berzins does not exclude the possibility that one of the projects could be put off to a later date.