Russia’s invasion in Ukraine and the following large-scale sanctions have created and might still create considerable changes in the transport sector. According to the most pessimistic scenario, cargo transportation by rail in Latvia might drop even by 80-85 percent. Also, ports, aviation, land transportation are affected, while passenger transportation might become more expensive due to the growing energy resources. The impact of the price hike and shortage of supplies can be felt also on transport infrastructure projects. Transport Minister Talis Linkaits in an interview with LETA underscored that absolutely all logistics chains for all possible goods are changing, thus, nobody can tell what the movement of cargo will be like.

There have been talks that the EU will decide on sanctions in seafaring and will ban Russian ships from European ports. How far along is the work on these sanctions and coordination with all EU colleagues?

On the EU level, a number of packages with sanctions is being prepared, and now and then some of the packages which are ready, are being published. Thus, I can confirm that there are many issues still in progress in relation to sanctions against Russia and Belarus.

Do these sanctions target only ports or also other transport sectors?

There are new ideas appearing constantly on what else can be done. In my opinion, it is important that these sanctions are fast, broad, comprehensive and all EU member states reach an agreement on them.

There have been reports that Germany has not agreed to sanctions in relation to ports due to oil and natural gas. Can an agreement be achieved or are interests too different there?

I think that the present scope of sanctions already is unprecedented compared to what we have seen earlier. It demonstrates the unity of the EU.

What is the stance of Latvia? Do we support port sanctions?

On the part of the Transport Ministry, we have called on administrations of ports not to admit the incoming Russian flag ships, saying that the presence of these ships in Latvia’s territorial waters is not welcome.

What will the impact on Latvia ports be if they are closed for Russian ships?

Very small because ships going under the Russian flags usually are small coastal ships.

What if sanctions at ports are applied in the same way as in aviation, affecting not only the registration country, but also owners and operators?

Much depends on the available information. If we have information about the particular ship, not only its registration, but also control, chartering terms, etc., then the sanctions can be applied. Often, however, it is difficult to access information for example, about beneficial owners of a company registered in the Bermudas.

Do you face the same problem in aviation?

Yes.

Is the problem with ships more complicated?

Shipping is international business where the management company is from one country, the chartering company from another, the crew is from a different country, and the owner is somebody else.

What sanctions affect Latvia’s transport and logistics sector and what their impact on the sector is right now?

One thing is sanctions that are applied on legal entities, individuals and their companies. Another thing is the decision of the large Western companies to leave the Russian market without any sanctions. A third aspect is that buyers of different goods and services are assessing what part of their production or services are made based on supplies from Russia or in relation with Russia. Of course, directly we are strictly following the sanction regime in land transportation, railway transportation, analyzing who is the recipient of the cargo, who is the shipper, who owns the cargo.

Also, there is import and export. Import of Russian goods and export of European goods to Russia is reducing just because there are no business operations, for example, different supplies for car building factories. Another direction is that even when a product is not in the list of sanctions, the recipient refuses to accept it. Thus, our transportation companies have problems. It all affects the end result.

At present there is still inertia, especially in railway transportation, carriages are moving, but it is still work of the previous month, those who still sell goods and buy goods are trying to get them across borders as soon as possible. If you asked Latvijas Dzelzcels railway company today whether it has been affected by the sanctions, the answer would be - no. Looking at a potential impact, however, in the worst scenario, 85 percent of cargos might stop running. We do not know the stance of all stakeholders on the shipment of third countries through Russian territory to Latvian ports. Kazakhstan wants to redirect its cargos that went through Russian ports, they would like to transport them through Latvia. Will Russia let these cargos through its territory, it is still a question. There are also other countries in the same position - Uzbekistan and also China.

You mentioned the worst scenario for railway. What is the worst scenario for ports?

We have asked all Transport Ministry’s companies to give their preliminary assessment of the situation and possible impact. Ports are in a slightly better situation because Latvian economy will need supplies no matter where they come from - Russia or other ports. It is clear that a part of these supplies will come by sea, thus, they will be imported and reloaded through ports. Of course, it does not mean that the impact will not be significant. Ventspils port as former export port in the most critical scenario might see a cargo reduction by two thirds, Riga port - by 45 percent, Liepaja - by 20-30 percent. This is preliminary assessment, much will depend on other circumstances.

Is the government ready to support Latvijas Dzelzcels. Are there estimates what support will be needed?

Latvijas Dzelzcels administration has been asked to prepare the possible scenarios and respective support measures in a month. Our main priority is that the railway infrastructure should be preserved as it is, first of all, to ensure passenger transportation that will increase in relation with the new electric trains. The infrastructure should be maintained in order to ensure cargo transportation domestically and among the Baltic states. When the development scenarios are clear, we will discuss with the Lithuanians and Estonians how to jointly maintain the railway system which so far is not linked with the EU.

Are there indications what could be done because so far cargo transportation among the Baltic states had not been significant?

Right now, absolutely all logistics chains for all possible goods, including oil products, natural gas, metals, grain, etc, are changing, thus, nobody can tell what the cargo movement will be like. Therefore, the three Baltic states should have a joint concept on what to do with the 1,520 mm gauge tracks in the situation when they are cut off from Russia and Belarus.

The list of EU sanctions is constantly growing, new Russian businessmen are added. Are there no concerns that the sanctioned persons might surface in port stevedore companies and other logistics companies? What would it mean for Latvia’s transit system?

We have always said that cooperation with Russia and Belarus is high-risk business. This has been said already since 2014. Thus, businessmen who have been working in the direction of Russia have been aware that it is high risk and might turn against them one day. Terminals working in Latvian ports are private business and it is their responsibility. I think that the worst thing that can happen is that employees of terminals will suffer. But, also, here we see that there is demand for highly qualified employees at ports and other terminals. I do not see any problems in the medium term, it is just restructuring of the system.

Also, road transportation companies voice concerns about the sector - is it clear what the impact of sanctions on this sector is right now?

At present, it is problematic for cargo transportation companies to go to Russia, Belarus. First of all, those are border controls, long lines on the border from Russia to Europe, trucks have to wait even for five days. Also, there are problems to send cargos or to accept them, prices are changing suddenly. Cargo transportation companies are very worried about the situation.

Looking at the land transportation sector globally in Europe, there is a huge deficit of drivers - because of Brexit, because many drivers have disappeared, because the mobility package was introduced that protected the Western carriers and reduced the number of drivers in Eastern Europe. The recent trend that we see is that drivers from the third countries, drivers with Ukrainian passports are joining the Ukrainian army. In my opinion, demand for road transportation services in Europe will remain. The small number of our carriers who specialized on CIS countries will be able to reorient to EU.

Fuel prices have hiked - have you received information from public transport services providers that additional funding will be needed to cover the costs? How will it affect ticket prices?

Latvia can hardly affectenergy resource prices. These are global prices, thus, I believe that the large players - the US, OPEC - will act to push the oil prices back to the sensible level. The high prices are not good for the European countries or the US.

There are other product prices that are directly related with fuel prices, for example, asphalt, bitumen and other products that are being used in road construction. Therefore, we see risks that the agreements signed with road construction companies will become complicated.

In relation to public transportation services, the state guarantees that the services will be provided, but it still has to be discussed with the Finance Ministry how increase of costs will be compensated to the transportation companies.

Speaking about road construction, do you see risks to any of the large projects?

Right now, we see only concerns of business representatives. There are no concerns about the large projects, but there might be problems in smaller projects where there is not much competition. The same about bridges. Metal products are needed for construction, and possibly some procurements should be postponed for some time until prices return to a sensible level.

How can fuel prices affect public transport ticket prices? For how long can we afford to wait for a drop in fuel prices before asking for additional funds?

We are holding regular talks with the Finance Ministry on how to react in one or another case. There is huge unclarity, it is not clear whether this is a speculative price hike that should stabilize at one point.

If fuel prices remain at a high level, there are experts who support such an opinion, will it not make people to use public transport more actively?

We would be happy about it.

Are you ready to increase the number of runs in that case?

The public transport occupancy right now is by 40 percent lower than in 2019. We have cut the number of runs by 5 percent. Right now, we do not see that people would use public transport more often.

Latvian carrier airBaltic has announced that it will leave the Russian market, and the number of bookings has dropped by 30 percent. Is it clear how the war will affect the airline? Are there concerns that the company will need state support again?

We see how the aviation sector is reviving across Europe. After Covid-19 pandemic, people again want to fly, enjoy the warm spring, visit friends, relatives, make new business trips. The number of flights is growing every week, and I think that with the new summer season which starts at the end of March, we will see a significant increase in passenger air transportation in Latvia and Europe. airBaltic services are of good quality, efficient in price, we have the newest planes in Europe.

Of course, it is a risk in relation to the Baltic states, people, being aware how close we are to Ukraine, might decide not to go to Latvia or the Baltic states this summer because they might seem that it is not safe here. There is such a risk, we hear it from tour companies. airBaltic will not be affected by this because they can use their planes in other destinations, and they are in demand - SAS and Lufthansa are waiting for additional planes to be used on their routes.

Riga airport said that Ukrainian and Russian market accounted for 10 percent of its revenue. In relation with EU sanctions, it seems that the large China’s cargo planes have left. Are there any solutions found how to compensate these losses in other ways?

China’s cargos have not left the airport, these transportation services were provided by Russian operators for China. Also, we had quite a good cargo business with Ukraine, which has been suspended for now. In relation to cargos from China, sooner or later they will return because Riga has been their sorting point in Europe. I think that Chinese companies will find a solution. These are short-term difficulties.

Of course, there is a possibility that the Riga airport this year does not reach such passenger and cargo volumes as planned, but I do not think it will seriously affect cash flow and financial indicators.

The head of the airport said that even before Russia’s attack on Ukraine, the planned projects had got more expensive, and now the prices have risen even more. If the airport cannot afford to finance the large projects - for example, construction of the terminal that should be held along with Rail Baltica station, how will it affect the airport’s development? Will the state be able to provide financial assistance?

This now refers to all construction projects in Latvia - how soon will they be implemented, considering the prices of materials. There is not answer to that. We see concerns and we have heard that some builders give up the signed agreements. I think that this situation may affect the construction pace, but not the result. Possibly, some projects will be postponed, or performed in a different order or with different materials. This might require additional time, but in general, the airport’s development is well considered.

What about the started projects - Rail Baltica, the Central Train Terminal, the airport’s terminal?

The works are in progress, but, of course, we will see how the situation develops, what happens with the supplies. Indexation is included in Rail Baltica agreements, therefore there should be no problems with implementation.

What are the problems with supplies?

At present there are problems with metal and metal products as more than 50 percent of these supplies were imported from Russia. There will be delays until alternatives are found.

There were long discussions among the Baltic states about Rail Baltica. Have there any issues been left on which an agreement with Estonia and Lithuania are needed?

We are on the construction phase, thus, there cannot be many discussions any more. We see that every country has a different approach to priorities what should be built first, what later. For Latvia, it is important that as soon as we build a stretch, it can be commissioned and used, for example, the line to the Riga airport. Estonia believes that it should be built piece by piece, first bridges, then animal passes, then stations and only then tracks that link all of that together. Lithuanians also are interested to build the basic tracks first.

Speaking about how we will manage the rout afterwards, who will pay for transportation, every country is still in the negotiations process, and the result has not been achieved yet.

How does the current situation affect Latvijas Gaisa Satiksme air traffic controller who faced a drop in its operations already during Covid-19 pandemic?

Of the whole aviation block, Latvijas Gaisa Satiksme and flight dispatchers are affected most and they will need assistance. The number of flights in the direction from Europe to Russia and Asia has dropped by 75-80 percent. This might reduce Latvijas Gaisa Satiksme’s revenue by 20-25 percent. Together with the Finance Ministry we will think how to support Latvijas Gaisa Satiksme.

Latvijas Gaisa Satiksme had planned a large-scale project for building its new tower. Can it be postponed?

This project cannot be postponed. It is not just an air traffic control tower, it is a modern air traffic control system. It is a system that would allow us to export our services. This is a strategically important project in civil and military sectors, and it will be implemented.

The Transport Ministry is responsible also for communications sector - is there readiness to ensure communication also at the time of crisis?

We have been preparing for it, all forces have been dedicated to cyber security and what might happen in one or another case, seeing how this sector is affected in the war in Ukraine. We are learning from that, and plans have been prepared for uninterrupted operations.

A signature drive has been initiated on suspending amendments to the Ports Law. How will it affect the port reform?

We have a democratic country, thus, every political group has its ways to implement their rights as in this case. We respect these rights. Of course, at the time when there is war, waste of resources for such activity is not useful, but it is a part of a political process. In relation to the reform, we have not postponed the preparatory work. We assume that the bill will take effect. We are preparing for it.

In relation to the new passenger trains - there are reports that they had to be delivered through Belarus. What are the current delivery scenarios?

It is the manufacturer who has to deliver the trains, so it is the problem of Skoda plant. If delivery is not possible through Belarus or Ukraine, there are other ways. We still plan to receive the first train in late April or early May to start testing it.

Can the war affect costs of the trains?

The agreement includes fixed prices, some of the trains have already been produced. I do not think there will be a large impact on the costs.

It is clear that resources will be needed to mitigate consequences of the crisis caused by the war. Is it possible to change the ministry’s current financial plans, including use of the EU funds? Can the EU reduce fundings for some projects?

In my opinion, the EU should provide financial assistance to those countries who have been most affected by the situation with refugees and the economy. I have informed the colleagues in Brussels about our situation in railway and ports sector. I assume that if the worst scenario comes true, some EU projects might not be implemented in time or in full. I expect that Latvia and other countries will speak about extending the terms and changes in EU projects.

What is happening with Latvijas Pasts postal company board? Why is there a tender announced for all positions at the board?

This question should be asked to the company’s council, we are not interfering in the company’s everyday work. Appointment of the council and board members is held in "waves". Five years ago, the first reform was implemented when a decision was made that companies need councils. Then councils were appointed at all companies at once, and their terms in the office expired at the same time. Then councils appointed the boards, and now terms in the office of the boards expire. It is a wave-like process not only at Latvijas Pasts, but also our other companies.