Estonian businessman: Estonian transit will struggle another 10 years

19.06.2008, 12:57

It is winter for Estonian transit for the next 10 years, Estonian businessman Endel Siff told Business New Europe.

Siff has given up hope that the trade will recover and sold his share of the Pak terminal near Tallinn last year after 20 years in the oil transit business.

Transit trade from Russia through Estonia has collapsed since the Bronze Soldier dispute just over a year ago. The economy ministry estimates that the decline in transit trade since last April's disturbances cut Estonian GDP growth by up to 1.5 percentage points in 2007 and that this year the loss of trade could cost up to 2 pct of GDP.

The Estonian authorities are putting a brave face on the slump in transit trade. The government downplays the trade's importance, estimating that it represents around 5 pct of GDP, down from around 10 pct at the start of the decade. "Russia is really not very important for us - we don't face east," says President Toomas Hendrik Ilves, adding that the cost of the Bronze Soldier dispute has been overblown.

Some politicians have almost welcomed the decline in transit trade. "I'm not sure we want to be this big hub between east and west," says Foreign Minister Urmas Paet.

Critics say the transit trade is low value-added, makes the economy dependent on Russia's economic performance (and therefore more volatile), and corrupts the Estonian business environment. The transit trade also brings costs, notably from heavy truck traffic.