Estonia wants to sanction RZD, but its rail sector does not agree

Photo: Wikimedia Commons. Ivo Kruusamägi

In the wake of a new sanction round on Russia by the EU, the Estonian Ministry of Foreign Affairs proposed direct sanctions on Russian Railways, which would mean the complete stoppage of business between Estonian railway companies and RZD. The Estonian railway sector appears to be reluctant against the proposal that could result in billions of losses.

The Estonian proposal came to light by the country’s daily newspaper Eesti Päevaleht (EPL). In particular, the whole sanctioning idea will focus on stopping cargo transit between Russia-Estonia, while also stopping using Russian rolling stock and other assets. EPL’s report noted that “the Estonian Ministry of Foreign Affairs has sent a proposal to Brussels for discussion, which would impose sanctions on Russian Railways, after which all economic cooperation with this company would end.”

In practical and economic terms, this would mean that Estonian operators would lose approximately one billion euros from such a development that could also affect the Finnish market. On top of that, the Estonian railway sector stressed that such a move would strengthen RZD even more and allow it to dominate Central Asian transport.

Risk of backlash

The EU sanctions have already seen some criticism. Especially in the transport sector, where RZD claims to experience a relatively diminutive impact, sanctions seem to impact more European companies. That does not mean that sanctions should become stricter or more vindictive. In contrast, they should be subject to closer and more serious consideration.

The story around sanctioning traffic between Russia and Kaliningrad adds to this argument since it proves that impulsive decisions can prove problematic. This is why sanctions did not apply on the route after all since they were breaching international agreements.

In the case of Estonia, the government and the EU should weigh their options very carefully before taking any decision, claims the rail industry. Specifically, Andres Valgerist, board chairman of the Estonian Logistics and Transit Association, stated to EPL that “the proposal seems like subversion against our country while aiding Russia”. That is because Russia could benefit from binding the assets of Estonian companies first by acquiring more equipment and, second, by enjoying the profits for itself.

It must be noted that the Estonian government has not provided any insights regarding its contingency plans accompanying the sanctioning proposal or whether the suggestion could become a reality any time soon.

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Author: Nikos Papatolios

Nikos Papatolios is editor of RailFreight.com, the online magazine for rail freight professionals.

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