An aide to President Vladimir Putin was quoted as saying in July 2007 that the oil pipeline to Lithuania,
which Vilnius says was closed for political reasons, had many problems and that a new pipe might be
needed. Russia shut the Druzhba pipeline to the Mazheikiu oil refiner in 2006, saying it was leaking and
needed repairing. The closure came after Lithuania sold the refinery to Polish PKN Orlen rather than
Russian rivals, leading Vilnius to allege a political motive. Sergei Yastrzhembsky, Putin's chief adviser
on European Union (EU) relations, was quoted as saying that experts had found over 7,000 problems with
the pipeline, some of which could lead to environmental problems. Yastrzhembsky said the Russian
authorities were leaning towards the opinion that a new pipeline should be built instead. In BMI’s view,
political issues in the Vilnius-Moscow relationship are likely to keep the transit freight business volatile,
but there is room for improvement, not least because Russia’s relationship with neighbouring Estonia
worsened more sharply in 2007. In our newly-released Lithuania Freight Transport Report 2008, BMI
concludes that the country’s pipeline throughput will fall by 7.8% in 2007, and will achieve an annual
average growth rate of only 1.1 % in the five year 2008-2012 forecast period.
Our projection for pipeline freight is based on a number of considerations. Although Lithuania’s economy
will continue to grow at breakneck speed by European standards (for the 2008-2012 forecast period, we
now expect annual average GDP growth of 6.0%) tense relations with Russia are likely to hold back
overland pipeline supply as a way of meeting the economy’s energy demand. Apart from the short-term
issue, big projects such as the proposed Russian-German gas pipeline across the Baltic will bypass
Lithuania and reduce its role as transit country. Lithuania will be able to secure alternative crude supply
routes, but these will principally be by sea.
Overall, despite the pipeline issue, our vision is that the Lithuanian freight transport industry will continue
performing dynamically, as the country exploits its role in both East-West and regional EU trade. We
expect rail freight to grow strongly by an annual average of 6.5% over the forecast period, as inter-modal
links at Klaipeda are improved. Road freight will remain the fastest-growing land-based transport mode,
with annual growth of 7.6%, boosted by growing motorway links, improved logistics and the general
trend towards door-to-door delivery capabilities. Airfreight will increase by 7.2% per annum, reflecting
the combined effects of privatisation, the budget airline boom and the opening up of new routes. We are
projecting maritime freight growth at an average 6.9% per annum across the forecast period, with crude
oil imports set to meet the pipeline gap. We are now forecasting average annual growth of freight carried
across all modes, measured in million tonne-km (mntkm) of 6.3% during 2008-2012. BMI’s composite
score for Lithuania’s freight transport business environment is 42 out of a theoretical maximum of 70,
which places the country at a mid-point in the European region, ahead of Ukraine and Russia, but behind
Poland, Latvia and the Czech Republic.
For the 2008-2012 forecast period, we expect the transport and communications sector to continue
outpacing the economy as a whole. It will achieve average annual growth of 6.4%, versus 6.2% for
overall GDP. The total value of transport and communications GDP will rise to US$5.82bn in nominal
terms by 2012, representing 13.5% of Lithuania’s GDP.
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