China halts rail freight to Lithuania as feud deepens over Taiwan

China has halted direct freight trains to Lithuania, in the latest gambit in a simmering geopolitical feud over Taiwan.

Multiple sources confirmed Lithuanian media reports that the state train operator, China Railway Container Transport Co (CRCT), has halted the transit of cargoes “until further notice”, although there has been no official confirmation as yet.

“The trains which have been operating between China and Lithuania have been stopped. As I understand, the decision was made by the local state-owned company in charge of sending those trains. We have not yet seen any official letter or official order to cease the trains,” said one source involved in the trade who did not wish to be named, adding there were “no problems” on the route, and that a political motive was suspected.

CRCT, a subsidiary of China Railway Group, told Lithuanian clients that it would suspend direct freight operations, the Baltic News Service reported.

Despite this, Chinese state media reported that China Railway Group has denied that the order was given, leaving some ambiguity as to whether the suspension was official.

Gintanas Liubanas, a spokesman for Lithuanian Railways, said they had yet to receive any official notification about a suspension of service.

“For the time being, we have received information through our customers that several freight trains will not arrive in Lithuania at the end of August and in the first half of September,” Liubanas said. “Meanwhile, transit trains pass through Lithuania in the usual way. We hope that all the agreements reached earlier will be respected.”

Last week, hostilities ratcheted up when China recalled its ambassador to Lithuania and demanded Vilnius recall its counterpart. This was in response to a decision earlier this year to allow Taiwan to open a “Taiwanese representative office” in the Baltic state.

It is more commonplace for de facto Taiwanese embassies in Europe to be called “Taipei representative offices”, and Beijing claimed the move was in breach of the one-China policy – a claim that was denied by the European Union and the Lithuanian government.

Vilnius confirmed that it will recall ambassador Diana Mickeviciene when she completes her three-week quarantine in Beijing, having recently returned to the Chinese capital from overseas.

China’s history of recalling ambassadors goes back to Mao era

Senior government sources in Vilnius see the rail suspension as another escalation in geopolitical tensions with China and expect further retribution.

“It’s going to be more than this, unfortunately. It will be more like total blockade of exports to Lithuania,” they said.

The government has also contemplated the likelihood of export licences being revoked and Lithuanian businesses having their offices in China closed.

While the EU issued a statement of support last week, Vilnius is “still waiting for a greater response than encouraging noises”.

The European Commission’s trade department did not respond to a request for comment on the rail freight situation.

Trade volumes between Lithuania and China are relatively low, with many analysts saying that the country’s lack of economic exposure to Beijing has helped sharpen its tongue.

Lithuania has become the sternest critic of China in the EU and in May became the first country to pull out of the Beijing-led China and Central and Eastern European countries cooperation mechanism, often referred to as “17+1”, saying that it had not delivered the expected economic benefits.

According to statistics compiled by economic consultancy Rhodium Group, less than US$100 million in Chinese investment was made in Lithuania between 2000 and 2020, the lowest in the EU along with neighbouring Estonia and Latvia.

Analysis of Chinese customs data shows that Lithuania’s trade deficit with China ballooned by nearly 33 per cent over the first half of 2021, to US$820.7 million. Lithuania’s exports to China were actually 4 per cent lower in the first six months of this year than in the same period of 2020.

Nonetheless, people involved in the trade route expressed concern at the latest development, which has come at a time when commerce is already severely disrupted by delays caused by the coronavirus pandemic.

There are also concerns about the broader implications of the suspension, given that Lithuania is on the main transit route for trains bound for Kaliningrad, the Russian enclave sandwiched between Poland and Lithuania along the Baltic coast.

“Most of our clients and member companies import products from China by sea, so for us disruptions at some Chinese ports last and this year that happened due to quarantine measures and temporary closures of the ports, as well as skyrocketing prices of the shipping costs by sea, are more concerning,” said Tomas Fedaravicius, president of the China-Baltic Association for Industry and Business.

“Before the unfortunate news about temporary cancellation of direct freight trains between China and Lithuania for the end of August and September, some of our member companies have been looking into alternative ways to import their goods by rail. They might be a little more cautious now,” he added.

Tomas Jankauskas, head of sea and rail freight at ACE Logistics in Vilnius, said that while the suspension might cause some inconvenience, firms should be able to switch back to traditional routes that were used before the rail link opened.

“It’s like Ryanair cancelling their direct flight – it does not mean that people will stop flying.”