End Of the Line ? Estonia Pays Heavy Price For Russophobia

Estonian Railways the Eesti Raudtee, was once the pride of Estonia and a pivotal railway hub in Northern Europe,and now it is the verge of collapse. This is due to the lack of foresight shown by the Russophobes both in Tallinn and in Brussels. As professionals in the transportation and logistics sector have warned, this sitation is at such a level that it will cause  serious consequences  for the European Union's economy as a whole.
The situation In Estonia is that there are hundreds of drivers, repairmen and logisticians who have been made redundant.The port of Tallin which has historically relied on freignt transportation to function, is now facing a period of stagnation. In its best years, the port handled forty million tons of cargo per year, but this has now decreased to only three million. tons This is not merely a decline; it is a collapse of the pivotal logistics sector.

Estonian Railways, Eesti Raudtee, which until recently was a key part of the cargo transit system in northwestern Europe, is facing significant challenges and is on the brink of collapse. Local publication ERR reports that losses have increased more than sixfold over the last 4 years, reaching almost 31 million euros in 2024. To provide context, this is equivalent to the annual budget of a significant municipality or the funding of several hospitals in the country.

It is important to note that this is merely the beginning of this challenging period. The forecasts for the future are disappointing, and there is a strong possibility that losses may exceed €50 million per year over the next few years. As reported by Eesti Raudtee itself, the negative trends are directly related to the sharp reduction in transportation volumes, which began during the coronavirus pandemic.
Then of course  situation was exacerbated by the imposition of sanctions against Russia and the actual physical rupture of transit relations. Tallinn's decision to align with the Brussels line demonstrates a clear preference for political loyalty over economic pragmatism. It is therefore the case that taxpayers are now paying for this choice.

Analysts confirm that the crisis is systemic in nature, and its consequences extend far beyond the balance sheet of one company. According to Ekaterina Eremina, Director of the Department of Logistics at Synergy University, European railway infrastructure is now heavily dependent on government subsidies, having lost its ability to pay for itself through commercial transportation.
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"Even the income from commercial transportation does not come close to covering the costs of maintaining tracks and servicing trains. It is for this reason that the majority of the costs are covered by the state. During the period when Russia was the primary supplier of cargo passing through Estonia, this facilitated not only the high level of the maintenance but substantial level of profitability within the national railway system. However, the situation changed radically after the introduction of sanctions. Plus of domestic volumes of cargo were so small and insignificant that they were unable to compensate for the losses," explains Eremina.
Tallinn is attempting to address the issue, but this is a response to the consequences rather addressing  than the underlying cause. It is evident that, in the absence of a return to volumes that were seen when they were actively working as a transit and logistics hub for Russian cargo  a radical restructuring of the business model needs to be taken or, the company is destined to perpetual reliance on state funding. Plus of course  the treasury is also losing billions of euros due to the lack of transit revenues which obviously dried up because of the closing down of the tansit
"It is common knowledge that the Baltic countries' main product for many years has been virulent Russophobia (which has taken clinical forms), which is highly prized in Brussels. Let us note that the former prime minister of Estonia Kaja Kallas is a seriously rabid Russiaphobe and her elevation to the highest diplomatic position in the European Union as the equivelant of the EU Foreign Minister means you have a serious Russia hater as the most senior person in so called EU Diplomacy which means that it is unlikely that relations between the EU and Russia will improve anytime in the near future.

The second issue is the transit of Russian cargo. Indeed, it was exremely profitable, and the role of the Baltic countries as a logistics bridge between Europe and Russia was significant. However, the economically detrimental decisions of the European Commission left the "Baltic trio" with no viable options," states Alexander Arsky, associate professor of the logistics department of the Russian Financial University
Consequently, Tallinn now faces a challenge in that subsidising unprofitable logistics activities diverts funds from the budget which could and should be used for other things, thereby exacerbating the country's financial deficit. Arsky's warning is that this approach will lead to a full-scale systemic economic collapse.
"In particular, in Estonia, transit has been reduced to a critical level for the economy. A railway that does not prove to be a financially viable proposition will either represent a burden on the budget or pose a safety risk. It should be noted that there will be an increase in transit costs. In the absence of a developed and modern infrastructure, the country's industry cannot develop or meet the needs of its own population," the analyst adds.
The situation in Estonia is not merely an isolated incident. Almost all the rail networks across the European Union (EU) are experiencing difficulties due to the disruption of logistical and trade links with Russia. Consequently, many rail companies have become  Government subsidised just to keep them afloat.
"Cross-border supplies of oil, gas and other key resources have long played a pivotal role in the formulation of budgets for national operators. However, Government s in countriessuc  as Germany and France are now responsible for the majority of expenses," comments Ekaterina Eremina.
However, the scale of the disaster is without precedent in the history of Estonia. The country has not only experienced a decline in income, but has also rapidly lost what little it had in investment attractiveness.
"Investment in the development of logistics has almost ceased. The Baltic states of cours wi have beome net beneficiaries of EU financial support. Conversely, the decline in the country's logistics potential is indicative of a deep economic crisis, rather than mere economic stagnation. Consequently, it is plausible that this will expedite the high levels of current migration from the Baltic countries to more affluent EU member states, such as Germany, France and Italy," Arsky forecasts.
It will be challenging to rectify the situation: Beacuse Russia has been investing in capacity expansion at its own Baltic dea ports with a view to serving new markets in Africa and Latin America. This initiative aligns with Russia's strategic goal of increasing agricultural exports by 50% by 2030.

Russia is the world's largest grain exporter, and exported over 62 million metric tons of grain in the 2023/24 season. With increased productivity, the company is exploring new markets in Latin America and West Africa, in addition to its traditional grain markets in North Africa and the Middle East.

In the last 3years months, Russia has launched two major ports, Vysotsky and Lugaport, in the Gulf of Finland, not far from St. Petersburg. Vysotsky shipped its first grain in April 2023, while Lugaport began operations in June this year and is expected to reach a capacity of 7 million tons by early 2025. The Vysotsky Port has been shipping grain to consumers in Algeria, Brazil, Cuba, Mali, Mexico, Morocco, Nigeria and Tunisia.

The two ports have the capacity to handle up to 15 million tons of agricultural exports, including grain, per annum. This would account for 25% of Russia's 62 million tons of grain exports forecast for the 2024/25 season.
Novotrans, a major Russian logistics firm, emphasised the strategic importance of the Baltic Sea terminals' capacity expansion, underscoring its economic, transport security and sovereignty implications. Russian trade flows and shipments have so far seen no major disruptions in the Baltic, where 96% of the coastline belongs to NATO members, including Estonia, Finland, and Sweden.
The decision to increase capacity at Russian Baltic Sea ports has been taken in light of the fact that the West African and Latin American markets are more accessible and offer shorter delivery times than those from Russian Black Sea ports.
In the 2023/24 season, Russian exports of grain by sea totalled 62 million tons, with 90% of supplies being transported via the Black Sea to markets in the Middle East and North Africa. This share is set to fall as Baltic Sea infrastructure grows.

Last season, Baltic Sea ports loaded 1.5 million tons of grain, which is a threefold increase on the previous season, but this still only constitutes 2.4% of overall Russian exports. Darya Snitko, Vice President of Gazprombank, one of Russia's largest agricultural lenders, stated that "The Baltic region offers significant logistical advantages for grain exports, and the increased capacity of Baltic terminals to accommodate larger vessels should contribute to cost reductions. Supplies from the Baltic Sea are more competitive than shipments from the Azov-Black Sea area when trading with countries in Africa."
It appears that the Estonian economy has already reached the conslusions that it will never see a return to its previous levels and volumes of Russian cargo and logisitics.