Transit impasse: how Russia can solve the problem of cargo transportation through Lithuania

Ivan Zubov

BBC journalists analyzed in detail the scandalous situation around the ban that Lithuania imposed on the transit through its territory of Russian goods that fell under sanctions. This has already provoked an angry reaction from Russia. The Lithuanians are trying to explain that they are only complying with the EU sanctions requirements, but Russian politicians and officials are talking about a confrontation with Vilnius, using the word “blockade”. Are the EU measures legal and how do they threaten Kaliningrad? journalists ask questions.

What is prohibited for transit

The aggravation in relations with Lithuania began after the evening of June 17th. Lithuanian Railways notified Russian Railways that transit of a number of goods subject to EU sanctions will be suspended from midnight.

The governor of the Kaliningrad region, Anton Alikhanov, said that up to 40-50% of cargoes fell under the ban. He mentioned restrictions on building materials, metals, and "important for both construction and production finished products."

However, in the end it turned out that the list is much longer. The document, published by the Ministry of Economic Development of the Kaliningrad region on Tuesday, took almost 70 pages. Among the goods that are banned are cars, alcohol, cigarettes, fertilizers, certain types of chemicals, paint, jewelry, certain types of furniture, and so on.

Alikhanov explained that transit restrictions do not yet apply to coal (until August 10), as well as gasoline and diesel fuel (until December 5). Thus, the share of the range of goods prohibited for transportation will reach 50% by the end of the year. On Tuesday, it became known that the ban on transit will also affect road transport. Thus, Russia still has the possibility of delivering goods only by sea.

Is it legal?

Lithuania is only fulfilling the requirements of the fourth package of EU sanctions, the note said, which was handed over to Russia's Charge d'Affaires Sergey Ryabokon. On June 17, 2022, restrictive measures came into force regarding the import of steel and ferrous metals to the EU and their transportation through the territory of the EU countries, the Lithuanian Foreign Ministry explained.

"Lithuania is basically doing what it should be doing under the sanctions regime," European Commission spokesman Eric Mamer confirmed on Tuesday.

Anton Alikhanov expressed his version of what happened: the European Commission, approving the package of sanctions, simply forgot to prescribe an exception for Kaliningrad transit, he believes.

On Monday evening, he recalled that in the fifth package of EU sanctions, which just limited the transportation market, after reminders from Russia, the topic of Kaliningrad transit was taken into account: “It’s just that now the Europeans need to correct their documents in the previous packages that they accepted earlier. Basically, they have to do it."

At the same time, judging by the letter of the Lithuanian Railways, published by Alikhanov, the company separately requested "explanations from the European Commission on the effect of the prohibitions" provided for by the sanctions.

" In the case where the Regulation [on sanctions] prohibits the 'transfer' of certain goods or technologies, this prohibition also applies to goods and technologies that are transported [...] in transit through the territory of the Republic of Lithuania, " the document said.

Kremlin spokesman Dmitry Peskov said the ban "is a violation of everything and everyone." Vice Speaker of the Federation Council Konstantin Kosachev spoke with more specifics. In his opinion, Lithuania, within the framework of the sanctions, violates "a number of legally binding international legal acts affecting not only the obligations of Lithuania itself, but also the European Union as a whole."

As an example, he cited the Partnership and Cooperation Agreement between the Russian Federation and the European Union of June 24, 1994, according to which countries must ensure "free transit through their territory of goods originating from the customs territory or destined for the customs territory of the other party."

In addition, he recalled the 1947 agreement on the basis of which, almost half a century later, the WTO was formed: " Freedom of transit through the territory of each contracting party is established ."

What the lawyers say

" It is clear that restrictions on transit through Lithuania to Kaliningrad violate one of the fundamental principles of international economic law in terms of trade in goods: freedom of transit ," Anton Imennov, managing partner of Pen & Paper's Moscow office, told BBC. With regard to relations between Russia and the EU, freedom of transit is enshrined in Article 12 of the Partnership and Cooperation Agreement between Russia and the European Union. Nevertheless, Article 99 of the Agreement allows the parties to take such measures as they deem necessary to protect their essential security interests. As the Court of Justice pointed out in paragraph 116 of the 2020 Rosneft judgment (Case C-732/18 P), the use of this clause is possible, among other things, in the case of the application of restrictive EU measures (Rosneft then failed to challenge the eligibility of imposing against her EU sanctions).

" Therefore, Lithuania, skillfully using this legal opportunity, can justify the restriction of freedom of transit by the need to comply with EU sanctions, which it has begun to do. Even international treaties of Lithuania, and this concerns the treaty between Lithuania and Russia on transit, must be subject to EU law by virtue of the principle of supremacy ", - indicates Imenov.

"EU acts prohibit the transit of sanctioned goods, therefore the logic of Lithuania's position can theoretically be explained as follows: an internal EU act prevails over an international treaty of Lithuania itself, such an internal EU act does not contradict an international treaty of the EU, therefore, is subject to execution ," he concludes.

What can Russia do?

The Russian authorities reacted to the introduced measures with threats against Vilnius and the European Union.

" Russia will certainly respond to such hostile actions. Appropriate measures are being worked out in an interdepartmental format and will be taken in the near future. Their consequences will have a serious negative impact on the population of Lithuania ," said Security Council Secretary Nikolai Patrushev, who arrived in Kaliningrad, reportedly scheduled visit.

Earlier, Kaliningrad Region Governor Anton Alikhanov promised "extremely painful" retaliatory measures against Lithuania's actions. According to him, Moscow is preparing to introduce retaliatory restrictions on the transit of Lithuanian goods.

" Let's open the map and see where they can carry the goods that are delivered to their ports. If we exclude transit through the territory of the Russian Federation, then their competitiveness will not only drop significantly, but simply reset to zero ," he said.

In addition to vague threats of "retaliatory measures" and requests to the European Commission to clarify the wording of sanctions regulations, Russia can apply to the WTO, lawyer Imennov believes.

" Not everything is hopeless for Russia, since, given that Article 12 of the Agreement actually copies WTO law, Lithuania's actions can be challenged in the WTO Dispute Settlement Body ," he says.

However, according to him, this path is not easy and not obvious, because even if we do not consider all the complexities of the WTO procedures, the decision of the WTO Dispute Settlement Body is not yet an unconditional reason to recognize the EU acts as invalid. Lithuania refers specifically to the EU act.

" Nevertheless, this is the path of the rule of law that is the only one to be applied instead of the primacy of the logic of bellicose statements and rattling threats ," he says.

Another lawyer, who asked to remain anonymous, told the BBC that the conflict between the EU and Russia is basically deadlocking the situation.

" There is a dead end and pure politics: the dispute over the priority of the transit agreement (obviously bilateral) or EU sanctions has no legal solution. Because this is an unprecedented situation - there is no legal mechanism for resolving such conflicts ," he stressed.

The lawyer did not rule out that Lithuania in this situation may declare the impossibility of fulfilling the transit agreement due to the EU decision on sanctions.

What will be the consequences for Kaliningrad

Last week, Anton Alikhanov called the situation "unpleasant, but manageable." According to him, it will require an urgent dispatch of additional ships to the Ust-Luga-Baltiysk line, they will enter this route within a week.

Chartering ships may require additional time and money, but "there will be no problems with the delivery or export of goods from the territory of the region," he stressed.

Goods not subject to sanctions will be reloaded onto trains, thereby further unloading ferries, and sanctioned goods will be transported by water.

"There is nothing positive for the Kaliningrad region in this, but one can hardly expect any catastrophe ," expert Alexander Knobel, director of the Institute of International Economics and Finance of the Academy of Foreign Trade of the Russian Ministry of Economic Development, agrees with Alikhanov.

" Those goods that were previously transported by rail and, to a lesser extent, by road, will be transported by sea. This will lead to an increase in the cost of goods for residents of the region, an increase in costs for businesses that use these goods in production, which will negatively affect the level of output [of goods] in this region ," he told the Air Force.

“ I think that eventually the supply of these goods will be established, it will just be more expensive than before the introduction of restrictions. The capacities of the ports of the northwestern region of Russia will be enough to meet the needs of the Kaliningrad region in the supply of these goods ,” Knobel added.

If Russia really introduces retaliatory measures, Lithuania will also lose from this, but these losses will not be significant either. According to Knobel, there really is a transit route from Lithuania to Poland through the Kaliningrad region, but there is also a sea route from Lithuanian ports to Polish ones.

" The situation will simply lead to an increase in trade costs in this region, this will worsen the situation of all participants, but not catastrophically ," the expert explains.

How Russia's rhetoric has changed

At first, Alikhanov pointed out that Lithuania was complying with the decision of the European Commission, but soon the rhetoric of the Russian authorities changed a lot. They blamed the "blockade of the Kaliningrad region" on Vilnius and began to threaten with various retaliatory measures.

On Monday, Andrey Klimov, head of the Federation Council commission for the protection of state sovereignty, threatened that the decision to ban transit would "untie Moscow's hands."

"The European Union, if it does not immediately correct Vilnius' impudent trick, will itself disavow for us the legitimacy of all documents on Lithuania's membership in the EU and will untie our hands to solve the Kaliningrad transit problem created by Lithuania by any means we choose ," Klimov said.

On Monday, Lithuania's Charge d'Affaires was summoned to the Russian Foreign Ministry, where they threatened that if cargo transit to Kaliningrad is not restored soon, Russia reserves the right to act to protect its national interests.

After the Lithuanian Ministry of Foreign Affairs handed official explanations to Russia's charge d'affaires, the attention of the Russian authorities turned to the European Union.

On Tuesday, the Russian Foreign Ministry summoned the head of the EU Delegation to Moscow, Markus Ederer, and declared a "strong protest against the spread of unilateral anti-Russian restrictions."

Translation: Perevodika channel