Estonian state-owned company Operail involved in Russian logistics during the war | News
People outside Ukraine who are against the war being waged there understand very well the importance of war logistics, which is why they waged guerrilla warfare against the railways in particular.
The “rail war” has been going on in Belarus for already two months, which is why the so-called “partisans” trying to block trains carrying Russian forces and military equipment through Belarus to Ukraine are treated as terrorists.
On the night of May 1, two signals and control panels of the blocking system in Belarus were set on fire. When these control panels are damaged, the entire section of track they control is paralyzed: traffic lights and switches do not work, and train traffic comes to a halt.
At least ten relay panels across the country have been disabled. As these hijackings are becoming more frequent, military patrols are now on duty every night in the oblasts of Gomel and Brest.
Not just a coincidence
The border regions of Russia were also not spared by this unexplained disorder. On April 12, a railway track was damaged in Belgorod Oblast. On April 21, a locomotive derailed and slid with the embankment on which it was traveling in the Bryansk region. The investigation could not establish whether the rain had weakened the embankment or if anyone had contributed to the rail accident.
This could all be attributed to coincidence, but just four days later three fires broke out simultaneously in Bryansk as well, all related to military objects. A fire broke out at the 120th arsenal of the Main Rocket and Artillery Directorate of the Russian Army, in a fuel tank on the property of the Snezhetsky Val complex and at the Transneft Druzhba oil depot. TransNeft Bryansk Druzhba is a subsidiary of the state-owned TransNeft. It is an oil depot of more than 3 million cubic meters and its pipeline supplies Europe with Russian gas.
However, no definitive conclusions have yet been drawn regarding the cause of the fires, but interested parties have already given their opinions.
“What could be more natural than explosions and fires at fuel bases and other strategic objects in areas immediately adjacent to the area where a so-called special military operation is taking place?” said war criminal Igor Strelkov, former defense minister of the so-called Donetsk People’s Republic (DNR), sarcastically.
At this point, it is impossible to deny that railways and rolling stock are infrastructure that have come under attack throughout the war as they are vital to the war. Whoever provides logistics is thus participating in the war.
Rolling stock from Russia
Operail AS, formerly EVR Cargo AS, transports freight by rail as well as repairs and leases wagons and locomotives. It is this railcar leasing activity that raises many questions.
Several years ago, the Estonian state-owned company started looking for alternatives to lower transit volumes. The plan was to buy 500 gondolas, or open wagons, and 500 flatbed wagons, for 35 million euros, and then lease them. In 2017, these wagons were ordered from a Russian factory.
Several politicians were surprised by the plan even then, including former economy minister Kristen Michal (Reform). “At one point, a state-owned joint-stock company decided, ‘It would be a good idea to order wagons from Russia and send a pile of money there!’” he recalls.
The plan was to borrow money from the bank to order rolling stock suitable for 1520 mm gauge railways. The implication of the political factor, however, was already clear during the procurement process. As financial expert Ron Luvištšuk explained to “Insight”, Operail got into this business at the wrong time.
“Crimea was already annexed and everything was clear,” Luvištšuk said. “Even then, they should have considered very seriously whether it was a good idea.”
Former Operail Supervisory Board Chairman Neeme Jõgi was also unhappy with the project at the time. “In 2017, you didn’t need to be a psychic to understand that the conflict between Russia and Ukraine wouldn’t go away on its own; it would drag on or get worse,” Jõgi said. . Nevertheless, neither the Ministry of Economy and Communications nor the management of Operail took into account the political risks incurred at the time.
Operail: We don’t do business in Russia
Attempts by “Insight” to get someone from the Ministry of Economic Affairs or Operail to comment on the case on camera proved unsuccessful.
The ministry declined to comment, ordering “Insight” reporters to contact Operail management instead. The latter’s written responses were terse, however, and no one was willing to provide comment on camera.
When asked if a representative of the state-owned company would be willing to comment on its railcar deals with Russia, the company replied: “I’m afraid we have nothing of value to say on camera at this topic, because Operail AS does not. “I have no wagon business in the Russian Federation and do not cooperate with Russia. The Operail Group includes the Estonian railcar leasing company Operail Leasing AS, which currently only has lease contracts with companies in the EU and Ukraine. We currently do not rent and have never rented wagons to Russian legal entities.
“Insight” then asked the company to confirm whether any rolling stock belonging to Operail Leasing is currently in Russia, in which case it turned out that there is after all. Operail said rolling stock leased from European intermediaries is used wherever 1520mm gauge railways are used, including in Russia.
This regime, while legally allowing Operail to claim that it does not do business with Russia, does not change the nature of the case – that Estonian taxpayers have invested 35 million euros in production and logistics wagons in Russia, and that Estonian wagons are currently in use in Russia.
Rail, key to the Russian economy
No matter with whom the rental contracts are officially signed, by supplying Estonian-owned wagons to partners from Russia, the state supports the aggressor’s economy.
During a recent meeting with the management of Russian Railways, the Chairperson of the Federation Council of the Federal Assembly of the Russian Federation, Valentina Matviyenko, said: “Russian Railways is the largest employer , investor and consumer of national industrial products. This is the real engine of Russia’s economy, on which the situation of thousands of companies and millions of people throughout the country depends.”
Matviyenko stressed that the Russian logistics sector must continue to develop despite sanctions and despite the machinations of “hostile states”. Estonia is considered one of these “hostile states”.
Russia’s state-owned railways recently declared insolvency under European loans, or Eurobonds. Formally, nothing prevents Estonian public companies from accepting money for the rental of their rolling stock — neither the insolvency of the largest company in the sector, nor the fact that it is already prohibited to investing there, or even the fact that individual sanctions have been placed on the CEO of Russian Railways, Oleg Belozerov.
Not so easy to withdraw
The problem is that the railcar deal has since turned into a trap with no way out. Even if Operail Leasing decided to terminate its existing leases and recover all its rolling stock from Russia, there is no guarantee that they would succeed in doing so.
This is exactly what happened to foreign companies with planes they had leased from Russia: the state decided to confiscate them. The President of the Russian Federation signed a law on support measures for civil aviation which provided the possibility of registering the rights to foreign aircraft leased to Russian companies. In the case of Operail’s rolling stock, it may be even easier than that, because unlike Boeing’s planes, Operail’s wagons were even produced in Russia. Estonian wagons will remain Estonian wagons as long as Russia decides to withdraw them.
Lease payments can also become an issue. While the contracts stipulated payments in euros, Russian tenants could easily start making payments in rubles instead.
Should have listened to the doubters
How is it possible that no one noticed these risks earlier?
In fact, the risks were already well known, but both the management of Operail and the ministry chose to ignore them.
In May 2017, Operail AS was appointed a new supervisory board, of which businessman Neeme Jõgi became chairman. He reviewed the project documentation and announced that the business plan presented by the management of the public company had several shortcomings.
“Let’s be honest, from the point of view of financial calculations, this business plan could not withstand closer examination,” he recalled. “What kind of return on equity are we talking about if the company takes on debt the size of its balance sheet!”
Jõgi explained that by the time he was appointed chairman of the supervisory board, the previous supervisory board and ministry had already made the decision regarding the wagons.
Since the first batch of wagons had already been ordered, the new chairman of the supervisory board tried to repair as much as possible. He requested the procurement documents for the next 500 wagons from Operail management; the only information Jõgi received regarding the already concluded transaction came, like any other spectator, from a press release.
In November, Neeme Jõgi was recalled from his position on the supervisory board.
“The reason I got called back is quite simple – I don’t fit their plans,” he commented at the time. “You could say I was swept away.”
reputation or money
Thus, Operail’s management pushed its railcar leasing plan in 2017 without heeding criticism of the business plan itself.
Now it’s clear that Jõgi was right about the risks.
“Since the beginning of the war, I have already told everyone who asked me to do business in Russia: it will last a long time,” Livištšuk said. “Whether it’s five, ten or fifteen years, I don’t know, but it’s clear that even if the war were to end tomorrow, the sanctions will not be lifted. Russia is becoming a ‘toxic’ country. with them, it’s a matter of reputation.”
The opinion of Ahti Kuningas, Deputy Secretary General for Transport of the Ministry of Economic Affairs, would be useful, because it was Kuningas who organized this project and participated in the meetings of the Supervisory Board of Operail when the decision was taken to order the cars using borrowed money. .
Kuningas declined to comment, however, and ordered “Insight” to contact Operail management instead.
Commenting on the current situation, former Chairman of the Supervisory Board, Neeme Jõgi, bluntly said: “Starting a high-risk business like this based exclusively on loaned money is the greatest game of chance. You hope you get lucky and can pay your debt. But should a public company be involved in such things? Personally, I don’t think so.
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