Latvia: A Global Strategic Transit Hub

by K. B. Usha - 24 March, 2020, 12:00 3514 Views 0 Comment

The Republic of Latvia is strategically located at a point where West meets East and between ancient trade routes of Silk Road and Amber Road. This makes it an important transit hub of trade flows, commerce, and cultural exchange since ancient times of Vikings and Hanseatic League of the 14th and 15th centuries. Latvia today connects major world economies like the USA, European Union, Russia, the CIS, China and the Far East. The geographical location at the centre of North-East Europe, connectivity to Russia, Eurasia and Europe, skilled and multilingual workforce and quality infrastructure offer Latvia a vast potential to emerge as a global strategic transit hub.

Latvia borders Russia, Lithuania, Estonia and the Baltic Sea. Since the restoration of independence in 1991 Latvia became a member of WTO in 1999, NATO and the European Union in 2004, the Schengen area in December 2007 and the OECD in July 2016. The country adopted the Euro as its currency on 1 January 2014. In 2018 Latvia celebrated 100 years of its first proclamation of independence in 1918. Latvia has gained a reputation as one of the fastest-growing economies among EU members.

Besides being a stable member of the European Union (EU), Latvia possesses quality transit and logistics infrastructure and advanced digital technology. Business people can speak English, Russian, German and Scandinavian languages. Thus, the country is well placed for promoting transit and logistics between the EU, Commonwealth of Independent States (CIS) and Asian markets. Therefore, the government prioritises Latvia’s international cooperation and strategic “development of effective, safe, multimodal, balanced, environmentally friendly and competitive transport system, a stable increase of transit cargo volume, development of distribution and logistics centers and increase of cargo added value.” One of the main goals of “Sustainable Development Strategy of Latvia until 2030” is “to develop Latvia as a transit state”.

Today, the transit sector makes a significant contribution to national income. Transport and logistics contribute about 10 percent of the country’s GDP. The transport, transit and storage sectors provide around 8 percent of employment opportunities. Latvia’s Transit system includes well-developed rail, road, maritime and aviation transport infrastructure. Latvia has three major ice-free ports – Ventspils, Riga, and Liepaja complemented by seven minor ports – Salacgriva, Lielupe, Engure, Mērsrags, Roja, Kolka and Pāvilosta. The port of Liepaja is a part of the Liepaja Special Economic Zone (SEZ) with tax advantages for investments and the availability of free land plots in port premises. Cargo turnover in Latvian ports is very high.

Latvia has a dense railway network well connected with the Russian and European railways. The railway network which is integrated with the former Soviet railway gauge system of 1520 mm offers excellent connections to Russia and the CIS through Latvia. Most of the cargo traffic is through the railway. Riga Express (Riga-Moscow), ZUBR (Tallinn, Riga, Minsk, Kiew, Ukrainian Black Sea Port Odessa/Ilyicevsk, Chornomorsk) Baltika Tranzit (Baltic States – Central Asia) and Northern Distribution Network in Afghanistan are Latvia’s important container shipping routes.

Latvia has a well-developed road traffic system. The Via Baltica, the 970 km segment between Tallin and Warsaw in the European route E67, is the most important transport corridor traversing Latvia in the north-south direction.  It connects European cities Helsinki, Tallinn, Riga, Kaunas and Warsaw, and Riga, Kaliningrad and Gdansk. Roads are not congested. Commuters need not pay tolls, fees or taxes for using roads, bridges or tunnels.

Riga international airport (RIX) is the hub of air transportation in the Baltic Sea Region. Besides passenger traffic to different destinations in Europe, the Middle East, it is also an important cargo service provider. The Latvian national airline airBaltic is the largest air carrier at RIX. Further increase in passenger and freight traffic is projected.

The Rail Baltica Logistics Centre near Salaspils, the Freeport of Riga Logistics center, near Spilve, a new North Harbor in the Ventspils Free Port and the Riga International Airport are a few key projects under construction for the development of transit infrastructure and logistics for distribution of goods from different destinations in the Baltic Sea Region (BSR).

Latvia is completely integrating its transport infrastructure with the European Union’s Trans European Transport Network (TEN-T) multi-modal transport system. Latvia’s main railway routes, roadways, ports and airports are included in TEN-T. Moreover, the Latvian transit corridors are included in other international transport networks such as United Nations Economic Commission for Europe (UNECE), European Agreement on Main International Traffic Arteries (AGR), European Agreement on Main International Railway Lines (AGC), European Agreement on Important International Combined Transport Lines and Related Installations (AGTC), The Euro-Asian Transport Links (EATL) and Organization for Co-operation between Railways (OSJD) networks.

Since multimodal transport corridors are passing through the territory of Latvia from East to West and from North to South, Latvia can be gained from different connectivity projects initiated by Russia, EU China and India such as Trans European Transport Network (TEN-T), Eurasian Union, Belt Road Initiative and International North-South Corridor (INSTC). Latvia’s participation in Belt Road Initiative makes it a connecting link between BRI and Eurasian Economic Union.

Latvia wants to enhance its presence in the Eurasian Corridor by developing cooperation with Russia, China, Kazakhstan, Belarus for container cargo movement through Latvian transit routes. Latvia tries to increase cargo transit from the Russia’s Far East via the Trans-Siberian Railway to Western Europe. Several container trains services began between China to Latvia. Latvia has offered Uzbekistan to launch Tashkent-Riga regular container train, which reaches to the Freeport of Riga. Belt Road Initiative opens up new opportunities for transit between Latvia and Azerbaijan via the Baku-Tbilisi-Kars railway.

Latvia is trying to revive the ancient “Amber Way” link with India through International North-South Corridor (INSTC), a multimode intercontinental transport route of 7200kms long rail, road and ship network for moving freight between India, Iran, Afghanistan. INSTC make Latvia a potential gateway for Indian goods entering northern Europe, the Baltic region and Belarus. Port of Riga is trying to promote India and Iran as a logistic centre for the distribution of goods in this region. India wants to export to goods in Russia, Europe and the Commonwealth of Independent States (CIS). The Logistic centre cooperation agreement has signed between Latvian and Indian railways in 2017. India and Latvia agreed in 2017 for a pilot container train service connecting Mumbai and Riga, which may reduce transit time and carriage cost considerably.

Thus, Latvia is trying hard-selling its transit and transport infrastructure for enhancing freight movement and distribution for attracting cargo from new markets. But huge investment requirements and different standards and regulatory regimes remain as challenges. However, attracting new cargo from the Asian market is essential for Latvia to develop as the global strategic transit hub.

K. B. Usha
Author is Associate Professor, Centre for Russian and Central Asian Studies, School of International Studies, JNU.

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