Tiny Estonia still suffering from Russia

TALLINN, Estonia: The €40-million (US$60-million) coal terminal at the Muuga port outside Tallinn has ground to a halt, its mountains of sooty Siberian cargo vanished.

Russian coal and oil deliveries destined for the European market have shifted to other Baltic Sea ports, as Estonia feels the financial sting of its giant eastern neighbor.

A year after a furious row over the relocation of a Soviet war memorial in Tallinn, a government study says the Baltic country has lost Russian business worth an estimated €450 million (US$700 million), or nearly 3 percent of its gross domestic product.

The impact was especially strong at the Port of Tallinn, where state-of-the-art coal conveyers stretch between shiny silos and lofty cranes.

The port lost 13 percent of its transit volumes last year as Russian cargo trains suddenly stopped crossing the Estonian border.

Meanwhile, Estonian products all but disappeared from store shelves in Russia and the flow of Russian tourists — big spenders in the Baltic capitals — dwindled in Tallinn.

"Estonia has suffered greatly as a result of Russia's actions," said Nikolai Petrov, a foreign policy expert at the Carnegie Endowment for International Peace in Moscow. "Whenever you have two neighboring countries that are so completely asymmetric in terms of economic potential, the smaller is bound to suffer."

Moscow never made it official policy to punish the Baltic country of 1.3 million residents. But Estonian officials suspected Russian involvement from the onset of the upheaval that ensued after Tallinn authorities on April 27 moved a Red Army monument and nearby war grave from the city center.

To many Estonians, the so-called Bronze Soldier statue was a caustic reminder of five decades of Soviet occupation. But Estonia's ethnic Russian minority, about 25 percent of the population, and Moscow saw the move as an affront to the memory of Soviet troops who died fighting the Nazis.

Rioting broke out, leaving one man dead, more than 100 injured and dozens of shops looted. The government's computer networks were crippled by cyberattacks widely believed to have been orchestrated in Russia. In Moscow, pro-Kremlin youth protesters lay siege to Estonia's embassy.

As tensions eased, many Estonian business leaders realized the worst was yet to come — on their balance sheets.

"It was a severe blow, and we're still recovering," said Lauri Betlem, marketing manager at dairy company Valio Eesti.

The company's cheese exports "ceased completely" in May as Russian wholesalers took its Atleet brand off distribution lists, Betlem said. Exports resumed in July, but the volume was only about 50 percent of "pre-Bronze Soldier figures" by the end of the year.

Estonian candy maker Kalev also took a hit. Its exports declined 9 percent in 2007, mainly due to a drop in Russian sales.

To be sure, Russian goverment never officially blacklisted Estonian goods. But the youth groups that waged the PR campaign for the boycott included Nashi, whose former leader later became a Kremlin official in charge of youth politics. The Russian embassy in Tallinn declined to comment.

The Port of Tallinn said volumes of liquid cargo, such as oil, fell 16 percent, in the first quarter while coal handling plummeted 97 percent.

"The reason behind the decline ... was primarily related to the redirection of cargo volume originating from Russia to Russia's own ports," the Port of Tallinn said in its annual report.

The Klaipeda port in Lithuania also has reaped the benefit of Estonia's pain. Freight handling jumped 24 percent in 2007, while the volume of Russian transit doubled, said Kestutis Voveris, head of the port's statistics department.

Estonia's tourism industry, too, has suffered. At the end of the year, some 41,000 Russians had visited the Estonian capital, down 18 percent from the previous year, said Evelin Tsirk of Tallinn's tourism office.

"It was quite a big shock to the Tallinn tourism business. People in Russia were afraid and confused about what was happening here," Tsirk said.

Russia's economic pinch comes at a time when Estonia's economy is undergoing a drastic slowdown. GDP growth is expected to plunge from 11.2 percent in 2006 to less than 4 percent this year.

The government, however, downplays the economic fallout of the dispute. Prime Minister Andrus Ansip told the business daily Aripaev that Russia was bound to redirect transit flows anyway as it develops its own port capacity on the Baltic Sea.

Port of Tallinn spokesman Sven Ratassepp said the future for the port lies in west-to-east transit flows — or goods destined for Russia's burgeoning middle class. The port has agreed with China's Ningbo Port to build a container terminal aimed at distributing Chinese goods to Russia and Nordic countries.

"We're quite sure that oil transit volumes will never be as high again, but we will remain a transit port," Ratassepp said.

Politically, however, relations are still frigid.

"We still lack trust and respect in bilateral relations, and that is not very easy to improve," Marina Kaljurand, Estonia's ambassador to Russia, told The Associated Press in an e-mail, adding that relations are hoped to improve under incoming Russian President Dmitry Medvedev.

Source http://iht.com/articles/ap/2008/04/22/business/eu-fin-estoni~.php

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