BMI's Executive Summary

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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.

Competitive Landscape for Europe Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of European Freight Sources

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BMI's European Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: