UPDATE ON RUSSIA-ESTONIA STANDOFF

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002191 SIPDIS SIPDIS DEPT FOR EUR/RUS WARLICK, HOLMAN, AND GUHA DEPT FOR EB/ESC/IEC GALLOGLY AND GARVERICK DOE FOR HARBERT/EKIMOFF/TILLER DOC FOR 4231/IEP/EUR/JBROUGHER NSC FOR KLECHESKI E.O. 12958: DECL: 05/11/2017 TAGS: ECON ENRG EPET ET PREL RS SUBJECT: UPDATE ON RUSSIA-ESTONIA STANDOFF REF: A. MOSCOW 2086 ¶B. TALLINN 297 Classified By: Amb. William J. Burns. Reasons 1.4 (b/d). ¶1. (C) Summary. President Putin kept rhetorical pressure on Estonia in a May 9 Victory Day speech, but Russian Railways (RZD) denies that oil product and coal shipments to Estonia have stopped. An RZD spokesperson said that, during its nationwide "annual renovation program," companies would need to find alternate routes for some shipments. Rail schedules are divided into two components -- base and "additional" schedules. The reported 30 percent drop in oil product shipments to Estonia is attributable to RZD's not approving an "additional" schedule for May shipments to Estonia. RZD approved the base schedule. It is not clear how much coal is making it to Estonia. However, Estonia does not use any Russian coal for domestic purposes. The bottom line is that oil products are reaching Estonian and other European customers -- albeit at a cost to some Russian shippers. The Estonian Embassy has requested better security for its consular office in Pskov, after someone fired a gunshot through a window there on the night of May 9 or early May 10. End Summary. The Official Line -------------- ¶2. (C) While President Putin used his May 9 Victory Day address to take aim at countries that "belittle" and "desecrate" memorials to war heroes, Russian barbs seem limited to rhetoric at this time. On May 11, we again spoke with Russian Railways (RZD) press secretary Yelena Federovna who confirmed that her company continues to send oil products and coal to Estonia. She re-iterated that RZD is implementing its nationwide "annual renovation program" from May to September and that shippers will likely need to find alternate routes for some of their products. She flatly stated that her company has no plans to end service to Estonia. Rail Scheduling -------------- ¶3. (C) A reliable contact in the trading community explained that each month there are two rail schedules -- the base schedule and the "additional" schedule. The base schedule is fairly constant month-to-month and is usually approved by RZD ;around the 20th of the previous month. The "additional" schedule is for shipments over and above the base amount and can be requested any time during the month and is routinely approved by RZD. Oil Products Shipments -------------- ¶4. (C) Reuters reported May 11 that oil product shipments to Estonia are down 30 percent. Our contact said that the 30 percent decrease is due to the fact that RZD is not approving any "additional" shipments for May to Estonia. Further, the May base schedule was only approved on May 7 -- over two weeks later than normal -- and these oil product shipments are now moving to Estonia. ¶5. (C) However, not all shippers are created equal. According to another trader, part of TNK-BP's base shipment quota was essentially transferred to Surgutneftegaz. Gazpromneft has also taken a hit but not to the extent TNK-BP has. Nevertheless, these disadvantaged shippers continue to find ways to re-route the volumes that historically go through Estonia for re-export. The Russian shippers are absorbing the higher costs from these alternate routes. Companies are using ports in Lithuania, Latvia, and, to some extent, the St. Petersburg port to move their products. Coal -------------- ¶6. (C) The story on coal shipments is less clear. Russian coal exporters have complained publicly that May exports to Estonia are at risk because RZD is suddenly requiring them to provide their own rail cars. RZD's Federovna denies this and says coal shipments continue. In any event, Estonia MOSCOW 00002191 002 OF 002 re-exports almost all of the coal that it imports from Russia, so is in no way dependent on Russia for this energy source. Shot Fired at the Pskov Consular Office -------------- ¶7. (C) The Estonian Embassy has requested increased security at its consular office in Pskov, near the Russian-Estonian border, after someone fired a shot through the building's window late May 9 or early May 10. None of the five Estonian employees were in the building at the time, and no one was injured, reported Estonian Political-Counselor Anne Harmaste. The same building includes a Latvian consular office. The bullet was fired into the consular chief's office. The lone Russian militia guard reported that he did not hear any shots, Harmaste told us. Intermittent demonstrations continue in front of the Estonian Embassy in Moscow, but none are sustained or as confrontational as those in early May. Comment -------------- ¶8. (C) While falling short of full disclosure, RZD's line is consistent with the reported reduction in oil product exports to Estonia. The company has not stopped shipments but rather has simply not approved what have come to be pro-forma requests for additional shipments. Most important, though, is not the veracity of RZD but the fact that all of the oil product shippers seem to be fulfilling their contractual obligations to their customers in Estonia and other European markets. BURNS