Transit is dead. Long live logistics!

Latvia's post-Soviet dream of becoming a transit country has essentially been dashed. The decline in East-West transit volumes in recent years has been devastating. Once, 98% of Latvian railway cargo was international, the majority of which was cargo from Russia and Belarus flowing into Latvian ports.

The war started by Russia and the subsequent sanctions changed the old reality – cargo volumes dropped dramatically, the industry was followed by layoffs and infrastructure downtime.

However, no one has canceled Latvia's geographical advantages. Latvia is ideally suited to become a leading regional logistics hub, connecting both the European and Eurasian markets, instead of a simple transit country. To achieve this, a strategic commitment at the national level is needed, which would give the green light to a faster transformation of the industry and accelerate private investment in this sector.

I believe that Latvia is not only well positioned to become a leading regional logistics hub, but in a broader perspective it is also a strategic necessity for Latvia. Latvia needs to create clear competitive advantages compared to alternatives such as the Danish and Swedish corridors.

Latvia’s geographical position is well-suited to connecting the North-South and East-West corridors, from Finland and Sweden to Poland and beyond. In addition, there is a clear market demand for modern, efficient and sustainable logistics infrastructure across the Baltics. This needs to be addressed strategically: Latvia needs to focus on new markets such as China, India and Central Asia and invest in intermodal solutions, including container trains. Much of the existing logistics infrastructure in the region is outdated, and Latvia’s road infrastructure also needs to be further improved to support the necessary changes. According to SIRIN Development, almost 50% of warehouses in Latvia were built more than 15-20 years ago and do not meet modern requirements, ESG and automation standards. In order to maintain and expand its role in the region, Latvia should prioritize the modernization of its logistics assets, both at the public and private sector levels.

Operate on a European scale

Latvia is located in the heart of the Baltic region and offers direct access to powerful infrastructure, in particular the Port of Riga and Riga International Airport. Riga International Airport is not only the main passenger hub of Latvia, but also the leading air gateway for cargo transportation in the Baltics. In 2024, the airport handled approximately 18,580 tons of cargo, which accounts for more than 50% of the total air cargo transportation volume in the capitals of the Baltic states.

To remain competitive, Latvian ports need to reorient themselves from the East and firmly position themselves in the European logistics system. A positive sign, for example, is the entry of “Stena Line” into Ventspils and the expansion of container services in Liepāja.

The historically important railway network needs modernisation and must also be reoriented towards European standards. More than 30% of the current railway infrastructure needs to be rebuilt. In order to remain competitive, especially compared to the flexibility of road transport, it is necessary to prioritise freight-oriented modernisation and invest in intermodal systems that meet European logistics standards.

The government plays a crucial role in ensuring the creation of basic infrastructure, while the private sector will provide investments to create a smarter, more environmentally friendly and efficient logistics ecosystem.

However, we must remember that we must be able to play at a new, European level – Riga is not only competing with its Baltic neighbors, but it has been compared to Warsaw, Bucharest and Bratislava. To maintain its importance, it will have to adapt to wider scales and raise the level to be able to meet the needs of large European companies. Regional competition is no longer enough – we must be ready to compete on a continental scale.

Geography alone is not enough

By strategically utilizing its existing advantages, Latvia has the opportunity to transform from a one-way east-west transit corridor into a major north-south logistics hub. This opportunity to connect both European and Eurasian markets gives Latvia a unique role in the global logistics chain, provided that infrastructure and policies continue to adapt to changing geopolitical realities.

Although the eastern corridor is effectively closed due to the war initiated by Russia, the north-south axis remains very important. Geopolitical dynamics are changing the roles of countries and regions, and Latvia is well-positioned to use this to its advantage.

But geography alone is not enough. National commitment is needed, because becoming a regional logistics hub does not happen by chance. This requires a clear strategy, long-term investments and decisive action. Latvia must strategically advocate for this, increase the trust of the private sector, promoting investments in the creation of appropriate logistics infrastructure. The opportunities are there, but success depends on Latvia's own choice.

One of the most significant shortcomings remains the lack of modern logistics infrastructure near the international airport "Riga". There are positive changes in the development of road infrastructure, however, the slow and bureaucratic process of issuing construction permits limits the pace of development - at a time when business requires speed and responsiveness.

The Latvian railway infrastructure is also not yet sufficiently integrated into the European rail system. The Rail Baltica branch to the international airport “Riga” and the cargo terminal in Salaspils will significantly improve the connectivity of rail and air traffic and cargo handling capacity. Rail transport can well complement, but not replace, road transport. The majority of cargo in the Baltics is transported by air and road transport, which is unlikely to change even after the implementation of Rail Baltica.

Serious investments in energy infrastructure

To strengthen its position in the Baltic logistics network, Latvia needs to prioritize expanding and modernizing its road infrastructure, port and airport capacity, thus creating the basis for seamless intermodal connectivity. A key priority is the creation of modern, sustainable logistics centers that operate as high-performance regional distribution centers.

These transport hubs must meet the highest ESG standards, integrate smart technologies and offer convenient multimodal access to attract global freight flows. This is essential to position Latvia as a future-oriented logistics leader in Northern Europe.

However, this vision will require significantly more electricity. The region must start making bold decisions to ensure a reliable, affordable and sustainable energy supply. Renewed investment in energy infrastructure is essential not only for logistics, but also for the long-term competitiveness of the entire Baltic economy.

For Riga to truly become a European logistics hub, it needs to attract global players such as Amazon, Alibaba and others. This means creating the right conditions for these companies to start operating nearby, ensuring modern infrastructure, reliable energy supply and smooth regulatory processes.

Link to the article: https://www.db.lv/zinas/tranzits-ir-miris-lai-dzivo-logistika-522252