National rail company Latvian Railways and its freight shipping subsidiary LDz Cargo are demanding more than 82 million Euros from national rail company Lithuanian Railways. The amount should compensate for the losses the Latvian companies suffered due to dismantling of the Mazeikiai-Renge rail track in 2008.

In 2008, Polish freight operator Orlen, subsidiary of oil company PKN Orlen, considered using the services of another rail operator in moving its cargo from Lithuania to Latvia. As the operator was an important customer of LG, the state-owned rail company dismantled the 19 kilometer-long Rengė railway towards Latvia, close to Orlen’s refinery. The dismantled track has not been rebuilt ever since.

The breakdown

Latvian Railways is demanding 56.92 million Euros in compensation for the income it did not earn between 2009 and 2017 due to the lost railway connection. In addition, LDz Cargo demands 25.4 million Euros for unearned income the company could have generated by shipping oil from a refinery of Polish oil company Orlen in Mazeikiai, Lithuania. This was reported by local media reports, after representatives of Latvian Railways made their announcement.

Lithuanian Railways has right away rejected the demand. Lithuanian Transport Minister Rokas Masiulis described the move as politically motivated and a stab in the back, as the track is currently being rebuild and the railway company has paid the fine it was issued by the European Commission in regards of the railway dismantling. Furthermore, it is still studying the arguments of the Commission in depth.

European Commission

In April 2017 the European Commission fined Lithuanian Railways an amount of nearly 28 million Euros for hindering competition on the rail freight market by removing the rail track. By doing so, it forced a customer to use a much longer track, it argued. The Commission found that the company failed to show any objective justification for the removal of the track. Such behaviour is in breach of Article 102 of the Treaty on the Functioning of the EU (TFEU), which prohibits the abuse of a dominant market position, it commented.

According to the rail company, the Rengė railway was dismantled for safety purposes and rail travel to Latvia has remained intact. “In 2007, when the Rengė stretch was still in use, 675,000 tonnes of petroleum products were hauled from Lithuania to Latvia. Once the Rengė stretch went defunct, these amounts fluctuated between 480,000 and 941,000 tonnes per year.” It added that current rail connections with Latvia are not being used to their full capacity and some of the tracks have not seen any rail traffic for the past fifteen years. The arguments stating that losses were incurred are therefore ungrounded, the company said.

Also read: Lithuanian Railways fined €28m for hindering competition