Russia expects return favor for transit

Photo: Eero Vabamägi

Outgoing director of Estonian Railways Sulev Loo describes how trains pile up in the Saint Petersburg junction, while political passivity and an unfortunate railroad reform are keeping them from being sent to Estonia.

Has the situation on the railroad really changed so thoroughly in the 18 months you've run the national rail company that you no longer believe your skills can change things?

I came to the company believing that it might be possible to turn developments to our favor. And that impression persisted until March of last year. Now we have come to pessimistic stability.

Have we hit bottom?

Things could get worse. Fertilizers transit is hanging by a thread, and we must keep it here.

Russian goods volumes are growing at a brisk pace both in Ust-Luga and Latvia. The Russian railroad enters Estonia in two places: from Pskov in Koidula and from St. Petersburg in Narva. Why are we not given these goods?

The simplest answer would be economic policy. The success of Ust-Luga makes perfect sense as when you invest a lot of money in terminals, you make sure they work.

How can the St. Petersburg junction even facilitate such volumes?

The Ust-Luga station is one of the most effective rail junctions in the world. That is why goods are sent there. Even so, it is completely backed up as there are simply too many goods for the Ust-Luga port. However, it is currently acceptable for Russia to have goods standing around. That did not use to be the case as logistics handlers immediately set about looking for alternative routes in the past.

Is it the political side of the transit business when goods are allowed to just sit there?

Estonian Railways receives rail transport plan requests from major oil companies every month. We approve them, while Russian Railways doesn't.

If the St. Petersburg junction is backed up, why aren't goods directed to Estonia via the Bologoye station and Pskov in a situation where the EU has built a station in Koidula that can handle anything?

Goods are simply sent to Petersburg. Even though Russian carriers would benefit from moving some of them through us.

Why is the Riga corridor well fed in this situation?

Riga has managed to boost their volumes courtesy of coal. We have a fancy but idle coal terminal in the Port of Muuga. Coal is moved into downtown Riga in Latvia. They must be doing something right in the railroad business. I'm sure they took advantage of our Bronze Night, used it to cement their relationship with Russian Railways. Latvians communicate on a very high political level. There can be no transit business without it.

Does this mean we should emulate them in abolishing compulsory military service and sending our defense minister to consult with Russian military agencies lower down the food chain?

I wouldn't go that far. I'm just talking about the economy.

It really has been a long time since our economy ministers have visited Moscow. I wonder whether they've caught connecting flights at Sheremetyevo?

The minister does not have to fly to Moscow as the first thing. Politicians should go once officials have done the groundwork.

It's been a long time since I've visited Russia's transit fair; however, back in the day one could hear the Latvians' bayan sounds in all corners of the pillion.

The Latvians have always been represented on a very high level and sported a high level of preparation whether the fair takes place in Russia or China.

Whom should the economy minister send and where to secure success?

It is probable a person needs to be found on the level of chancellors and deputy chancellors and dispatched to Moscow. That person has to know the transit business, speak Russian, and understand the country's peculiar character.

So Russians load their goods onto cars and send them to the St. Petersburg junction where it will just sit on backed up sidings. No room for empty cars to get out or new goods to come in. Why are they not sent to Estonia?

We receive some goods, but it is very little. We expected to see more in the winter.

What do we need to do? Move the Bronze Soldier back downtown?

I think this whole Bronze Soldier thing is not working, and no one in Russia is expecting us to change course. However, the warmongering we saw here for a time – that should stop. Even my kids asked me why are we still here. A few months ago, every morning started with reports of military activity. I lost the taste for the news completely. We should not incite hysteria or go along with attempts to do it. We also shouldn't automatically treat bad news for Russia as good news for us – how about we start there and try to keep emotion out of it.

Should the media restrain itself concerning certain topics?

You cannot restrict free press; however, editorials should give certain topics more consideration before publishing them.

Could we still report the massive arms race of Americans bringing two tanks to Estonia?

There is no reason to go there; it is clear we must defend ourselves. Rather I'm trying to say that we shouldn't paint each and every Russian military maneuver as an occupation exercise. In the end we see investments from the east and more shiny new buildings than in Helsinki, while it will be harder to secure investments from Western Europe. If we paint ourselves as a border zone and a potential battleground, who would want to bring their money here, especially in a situation where we cannot boast great productivity?

Influential Russians visit us far more often than people think. Many invest here, as reflected in many shiny new buildings in Tallinn. Because money is moving in this direction, we are seen as a stable investment environment.

How often should Estonian officials visit Moscow to find success?

There is a rule of thumb in business that you should meet with your partner at least once a month. Otherwise exchange of information becomes too distant. That applies to both Latvia and Finland.

When President of Belarus Alexander Lukashenko gave his previous major press conference, he described how Belorussian ministers sit in the waiting rooms of their Russian colleagues waiting for an audience. Does this life of spending hours in waiting rooms sound familiar?

There is a level where you sit in waiting rooms. I have, and not for hours, for days. In the end you manage to wear out their patience and they might even see you. However, I've never experienced anything of the sort as head of Estonian Railways. Unfortunately that does not reflect in goods volumes.

We need more serious communication and pragmatic dealings with Russia. Ten million tons of goods virtually equals €100 million. It is seen as business either made available to us or not in Russia.

Sending goods here is seen as a gift?

Not so much as a gift, but a favor. This is where politicians come in in terms of what would be a good return favor. Are economic relations a return favor – I'd say they are. That does not mean we should sell ourselves. No one has ever demanded I sell my country to do business in Russia.

It is a huge market that is right next to us; however, it is one we've neglected. I plan to meet with our ambassador in Moscow in the near future. To respect oneself and to show it, one needs to start with the little things. For example, fixing up our embassy in Moscow. We would have a proper place where statesmen and business people could do something for our country. It is a brilliant building that has been allowed to fall into disrepair.

There is no one button we can press to solve the situation. At the same time, others are moving faster than we are. We are thinking, pondering, searching while months pass.

What will happen to Estonian Railways?

The number one concern of Estonian Railways is financing. We can neither service costs nor invest with the money we make ourselves. While we have the same mileage to service because of passenger traffic, the latter brings us no revenue.

In order to maintain current speeds on the railroad we need investment plans spanning several years. European subsidies will run out at some point.

Every business realizes that whenever someone offers to pay for three quarters of a thing, that things needs to be done. Once European money runs out, we will have to maintain things ourselves. We are engaged in busy dialogue with ministries to secure financing for a period of three to five years. It is required for basic projects; for example, cutting travel time between Tallinn and Tartu.

What to think of the idea of merging Estonian Railways and the state-owned carrier?

Infrastructure, carriage of goods, and passenger traffic should all be merged. EVR Cargo is our biggest client, and I hold listing it to be very complicated. It is very difficult to list a loss-making company the goods turnover of which is falling. I would consider merging the two companies. Officials say the EU wouldn't go for it. However, Latvia and Lithuania have managed it. Perhaps we acted rashly when we separated the companies back in the day.

The more important aspect is that while the head of Estonian Railways can get an appointment at Russian Railways, it is far more difficult for the head of a carrier. If we want carriage of goods to pay for passenger traffic, we need to change. Otherwise we will become an ordinary European railroad that is financed from the state budget.

Could merging Estonian Railways with the Port of Tallinn help cover your deficit?

The port and the railroad are too different to marry, and cooperation is close as it is. It would take care of the deficit; however, the result would be self-deception as it would not improve the system. Simply hiding the loss-making unit would hurt the general situation. Of course, it is not pleasant to be the company in perpetual loss.

What are your own plans?

It is too soon to talk about that. It will be the same field: everything to do with energy. I need to take a look outside Estonia. The living environment is great in Estonia: safe, good schools.