E.Lazauskas, director of Lithuania’s rail freight business: “If the Belarusians leave, we will earn those 100 million euros elsewhere” | Deal

The new E.Lazauskas office has a great view of the Vilnius railway station crossing. Looking out the window and joking, E. Lazauskas, who runs the entire business of the state railways, does not remember the frightened boss, for whom his neighbors to the East prepare sanctions. One hundred million euros – many railways would lose if Belarusian cargo disappeared from Lithuania. But E. Lazauskas considers such a scenario unlikely.

Probably not everyone remembers that 10-15 years ago Belarusian cargo was loaded through the ports of Latvia, only later Klaipeda, together with the Lithuanian Railways, successfully competed with its neighbors. Today, listening to threats from the President of Belarus, Aliaksandr Lukashenko, that the shipments from Lithuania will be withdrawn, E. Lazauskas remains calm: there are long-term agreements with Belaruskalij, which the Belaruskalij themselves would not want to rescind.

It is true that A. Lazauskas, who manages the entire rail freight business in Lithuania, says that anything is possible and that the € 100 million that railroad workers now receive as income from Belarusian freight will be available elsewhere. places. He strongly believes in that, but he tends to push for the worst case scenario.

About – 15 minutes talk to him.

– Belarusian freight represents a third of the freight of the Lithuanian railways and the revenue it generates amounts to around € 100 million per year. How would the Lithuanian company be affected if those cargo flows slowed down?

– Yes, the income is both. But it all depends on the period we are talking about. This business requires a lot of investment, assets, this effect in the short term would be. But looking at it from a 5-10 year perspective, it’s really possible to catch up and then get back those hundred million. There are other markets, all of Europe, flows from further to Asia, freight transfers at intermodal terminals. Our goal is to have 70 million tons per year, including Lithuania and other markets.

If a hundred million euros fall from next year, then next year, if we do not compensate, we will do everything possible to have other channels.

– And how much could this loss be compensated with alternative addresses?

– There is a worldwide trend that railways are moving to transport containers and semi-trailers. So there is a load, it is growing, but it is necessary to reorient its activities to be able to provide other services. I don’t mean to say that when the Belarusians leave, we will have a big vacuum, perhaps in the short term, but the transition to other markets, such as our company in Poland, would be an attempt at recovery.

Of course, if we said that no one here would cancel anything and continue to do nothing, we would wear pink glasses.

– This week, Alexander Lukashenko said that he expects new railway tariffs from Russia by changing the direction of freight. This is not the first time a discount has been attempted. If Russia really did offer discounts, how would the Lithuanian Railways react? Would a discount also be offered or would you not participate in this fight?

– We have long-term agreements for the transport of products. When the end of the contracts comes, we will negotiate. The contracts expire at the end of 2023. We switched to long-term contracts with them earlier. Of course, Belarusians can terminate any contract. As with any contract, there are penalties.

But when it comes to discounts, it is necessary to understand that the tariff does not mean anything in itself: how many kilometers are there for Russian ports, and how many for Klaipeda? If you can offer benefits, but the kilometers is much more. The final price also includes the price of the terminals where those terminals are located, and speed is important here. Now we transport Belaruskalij products one way in just 15 hours, and you can see on the map where the Ust-Luga port in Russia is located. We are transporting oil that has not yet cooled.

In Russia, the terminals also want to work efficiently, there is no place, so you can come and ask. In addition, the winner is the one who offers them a higher price. So nothing is going to happen here quickly.

– Are there certain conditions in the agreement with Belaruskalij, such as geopolitical, political? Well, independent of company decisions?

– I don’t want to comment on this. There is a complex agreement, it is a big problem. But it is based on the usual principle: as a company with a company. And companies always underestimate certain risks. The contract is no different from the others that we sign with other clients. Only the duration is longer.

– In your opinion, how many decisions of the state company Belaruskalij regarding cargo transit are affected by the government of the country? To what extent does the government of the country influence the entire business policy of this company? Can the government instruct the company to make profitable decisions?

– I can’t comment. We are also a state company, but does the state interfere in our activities? Belaruskalij is a commercial organization with a managing director. We are certainly not signing a contract with the government.

– In general, how do you rate Belaruskalij as a customer? Were there solvency problems, other examples of breach of contract? We have seen part of the workers of this industrial giant on strike, demanding new elections.

– In the perspective of the month, we did not feel anything that changed. The hole was something, but for natural reasons. This client meets all the conditions. It is a great organization with billions in revenue. Their contracts with the Indians or the Chinese are much greater, of course, than with us. Of course, this is one of the largest sources of foreign exchange in the state.

– Then it would not be financially beneficial for them to divert the cargo from Klaipeda?

– We believe that it would be financially profitable for them. We do not negotiate for an unnecessarily long time and we approve a long-term agreement. We cannot comment on what the price would be in other terminals, but knowing the geography, when you need to go further, pay the terminals more than the old customer, which shows that it would really be useless for them. Or you can build warehouses along the way, but who will build them? There are many links and it is difficult to expect a quick transition here.

It is true that the Russians moved their cargo from Latvian ports to their own, but there must be a very clear economic motive here. Who can subsidize these losses? I do not know. Some Belarusians are transported to Poland, but there is another way, other wagons are needed. Belaruskalij has some of them. Latvia? There and further afield, and the infrastructure is different.

Do not forget that the Latvians used to have a load from Belaruskalij, but Lithuania managed to disappoint. But the quantities were quite different then, maybe three million tons.

– And you yourself, when dealing with the Belarusians, do you not think that your government can really decide to take that step? Astrava electricity sanctions, now on top officials, including Lukashenko.

– We search economically. It would be a long process and the cargo transfer would take a year and a half. If you divert traffic, you have to negotiate with everyone: port, terminals, carriers. You can move the load to another location if someone is waiting for you there. But the companies that have built terminals work differently and it would be costly to reach them. Nobody has free space, everything is occupied. You can build terminals, but it is also time consuming. I’m not saying it’s impossible, but it would be very expensive.

– Some economists note that port companies generally looked for very little alternatives to Belarusian cargo. And as Lithuania Railways has succeeded in diversifying the transport of goods and customers, Lukashenko has been threatening to take the transport away for many years.

– We have established a company in Poland and work there. Our destination is throughout Europe and cargo can be transported anywhere. The transport of semi-trailers is also promising.

– Lukashenko also avoids dependence, so the oil reached the Belarusian refinery through the port of Klaipeda, and it was not Russian. It was transported overland by the Lithuanian Railways. Can oil shipments fall now after this threatening rhetoric?

– It was about nine oil tankers of 80 thousand tons each. There may also be a political-economic decision here. There is a terminal and we offered good conditions. They could transport through Latvia, but chose Lithuania. When we made the proposal, the economy was one of the main things. For us, as a transport company, it is important to have flows in both directions, because we do not want to drive empty wagons. The best solution for us is to transport them with oil, and from there they already bring it to refine. Therefore, this option was attractive to us.

– How often do you communicate with representatives of Belaruskalij? Do you predict something, do you appreciate what is happening in your country?

– They do their job. It announces what quantities will be and the latter are stable. They have clients all over the world, many partners abroad, and many contracts. And we are one of its partners. By the way, we ship 80 percent. of its total exports.

Let’s not forget that its biggest competitor, Uralkali, is in Russia. This is now interesting: how would you react to the discount given to Belarusian competitors? Everything here is very intertwined.