Since 2014, when Russia invaded Ukraine, Moscow has worked hard to reduce cargo traffic via seaports in the three Baltic States—Lithuania, Latvia and Estonia—to punish them for what the Kremlin sees as their unfriendly policies. Moscow has been doing this by building up its own ports on the Baltic Sea, putting pressure on Belarus and other Commonwealth of Independent States (CIS) countries to avoid using the Baltic States’ ports, as well as counting on the West to oppose Chinese expansion in the region. In the last year, as the capacity of western Russian ports has grown, Moscow has dramatically cut the passage of goods through Baltic ports, leaving the three countries, in the words of one Russian commentator, in a state of “permanent crisis.” The current situation affects not only the Baltic ports themselves, though the loss of transit fees, but also harms Baltic rail networks feeding those ports because of reduced Russian spending on that sector (Rubaltic.ru, December 4).
In the first half of 2019, Russian traffic via Estonian, Latvian and Lithuanian seaports fell by 12.4 percent from the same period a year earlier, while Russian traffic through Russian ports on the Gulf of Finland increased by more than that amount. Those statistics offer a clear indication that Moscow sees the latter as substitutes for the former and will continue to reduce the amount of goods, both bulk and containerized, passing through Baltic ports. According to Russian analyst Nikolay Kucherov, Moscow feels it has been too dependent on Baltic ports and too generous in paying the three North Atlantic Treaty Organization (NATO) member states for the privilege of using them. As a result, it has decided to end this practice in favor of expanding its own Baltic Sea port facilities (RITM Eurasia, December 2).
Russian payments for transit through the Baltic countries have been enormous. One Russian analyst suggests that, in the last year alone, they represented 13 billion rubles ($200 million). And this figure is actually smaller than it was in earlier years because, by 2018, Moscow had already cut back somewhat on shipments via the Baltic States. Still, Russian port transit fees remain quite significant to each of the Baltics—especially since those figures paid by Russian firms do not even include levies for the use of railways or the insurance coverage of most kinds of bulk cargo (Seanews.ru, September 20). If those additional charges are included, Kucherov says, the actual Russian payments to its “anything but friendly neighbors” last year may have amounted to more than 30 billion rubles ($500 million).
Until recently, Russia had little choice but to use the Baltic States’ seaports. The rail system the Soviets established fed into those ports; and Russia itself had only relatively small facilities of its own on the Baltic Sea near St. Petersburg or in Kaliningrad—and after 1991, the latter was not contiguous to the rest of the Russian Federation. But without much fanfare, Moscow has been expanding existing ports or building new ones in both locations (Peterburg2.ru, December 2; RIA Novosti, December 4), and these ports are now carrying ever more trade to and from Russia. So far this year, significant growth was registered in the Russian ports at Primorsk (16.7 percent—up to 51.8 million tons per year), Ust-Luga (7.3 percent—currently, 87.5 million tons annually), Vysotsk (5.3 percent—16.2 million tons) and St. Petersburg (1.7 percent—to 50 million tons). The only Russian port in the Gulf of Finland that has seen a decline is the small one at Vyborg (–35 percent, down to one million tons), which appears to be losing out to the other Russian ones nearby (RITM Eurasia, December 2). The Russian port in Kaliningrad has also seen an increase in traffic, although not as large as the others (Portnews.ru, January 21).
All this has had a major and negative impact on port traffic in Estonia, Latvia and Lithuania. During the first ten months of this year, the volume of trade via Riga has fallen 8.7 percent and via Liepāja, Latvia, by 5.1 percent; while during the first nine months, it declined by 8.3 percent in Tallinn. Only Ventspils (Latvia) showed a rise of 7 percent, but Russians say this increase is likely to reverse and fall quickly in the coming year (RITM Eurasia, December 2).
This shift has had two sets of consequences. First, some in the Baltic countries have been pressing for greater cooperation with Russia lest the loss of income from this reduced traffic hurt local economies more broadly. That has not yet led to any major breakthroughs, although Moscow clearly hopes it will eventually (Regnum, December 4). Second, it has prompted the Baltic governments to seek possible replacements for the declining Russian use of their ports. Lithuania, in particular, has sought to secure Belarusian interest in its ports; but tensions between Vilnius and Minsk on other issues and Russian pressure on Belarus not to agree (Belta.by, November 25) appear to have limited this possibility. The same holds for other CIS countries as well (Baltnews.lt, December 3).
The other candidate to replace Russia as a user of the Baltic ports is China, and Beijing has shown real interest in expanding its presence there. Three weeks ago, for example, a Chinese delegation visited Riga to discuss the possibility, and some Latvians are excited that Chinese shipping may indeed replace the loss of Russian traffic. However, Moscow analysts believe NATO will oppose Chinese involvement in these ports out of security considerations and that the Transatlantic alliance’s negative attitude will keep the three Baltic countries from allowing the Chinese to assume as large a role as Beijing would like (Regnum, December 1).
If that is the case, the three Baltic governments will face a serious challenge in dealing with the loss of Russian transit fees. Some politicians in each of the three states may press for greater cooperation with Russia, as Moscow hopes. But at least for the time being, the Baltic States will presumably try to diversify their economies and put more emphasis on north–south trade rather than east–west transit to compensate (see EDM, October 25, 2018).