National Audit Office
TALLINN, 9 April 2012 – The National Audit Office audits the problems of crossing the land border between Estonia and Russia, and finds that the implementation of electronic queues and building waiting areas by the border helped improve the organisation of crossing the border from the Estonian side and do away with the long (often several kilometres) queues on our roads. The wait to cross the border did indeed become shorter, but unfortunately not significantly.

The audit indicated that based on the experience of Estonia, the wait on the border depends mainly on the work organisation of Russian customs and border stations on the land border between Estonia and Russia. The fact that the Russian side accepts vehicles and lets them out in groups causes problems for the Estonian side and reduces its capacity. This means that divers cannot be certain that they can actually enter the border inspection point at the time booked for them. This is also the reason why only about one-half of the possible reservation slots are allocated for pre-booking in the electronic queue and why many vehicles still have to wait to cross the border.

When the cooperation between Estonian and Russian border guards is good and the border guards on this side can work fast, then time on the border is mainly spent on customs inspections and formalities. Although cooperation between the border guards of the two countries is based on an agreement made by the two governments, there is no such agreement in the area of customs, which means that there is also no cooperation.

The reason for this is that the Federal Customs Service of Russia has not wanted it. According to the information given to the National Audit Office, the main obstacle to the customs cooperation of the two countries is that the customs service on the eastern side of the border has not been given any guidelines from the higher level that would encourage them to communicate with their Estonian colleagues.

The analysis carried out by the Estonian National Audit Office indicated that the border inspection points of Estonia spend a remarkable amount of their time on checking vehicles and buses that only cross the border in order to bring cheap fuel from Russia. According to estimates, four-fifths of all cars cross the border to buy fuel. The situation at different border inspection points is different. For example, as many as nine-tenths of all cars crossing the border at Koidula go for fuel. In Narva, an estimated one-third of all buses cross the border for the same purpose. Putting an end to the fuel business would reduce the workload of border inspection points considerably.

The Tax and Customs Board estimates that the quantity of fuel transported to Estonia in the fuel tanks of vehicles and then illegally sold is approximately 7% of the total amount of fuel sold here. The cross-border fuel business is extensive and well organised, as there are even places where the illegal fuel is re-pumped, etc.

Tarmo Olgo, Director of Audit of the Performance Audit Department, admitted that although the state of Estonia loses millions of euros in excise duty and VAT every year, the Ministry of Finance has been regrettably passive in trying to find effective legal solutions to putting an end to this illegal fuel business. This is a problem shared by all countries on the eastern border to the European Union.

In addition to the prevention of illegal fuel transport, the capacity of border inspection points could also be increased by better cooperation between Estonian and Russian border and customs inspection points, and the harmonisation of work organisation and investment plans.

An example of the inadequate cooperation is the uncertainty about whether goods of animal origin can be transported to Russia via the newly-opened Koidula railway border inspection point in the future. Although Estonia has created the conditions for the required veterinary inspection in the Koidula border inspection point, the Russian government has decided to stop developing veterinary inspection in Petseri and will focus on Ivangorod instead.

“This situation is highly regrettable, even absurd,” explained Olgo. “Estonia has invested more than 800,000 euros of EU money into the Koidula border inspection point to create the necessary conditions and it would make sense for Russia to create the same conditions on its side of the border. The Russian government, however, issued a regulation in summer 2011, which states that veterinary inspection on the railway in Petseri will end after the establishment of an inspection point that meets all the requirements on the railway in Ivangorod. This means that Russia will not build the same conditions at the location where Estonia has done so and instead will stop veterinary inspection on their side of the border inspection point, but it will create the necessary veterinary conditions in a location where neither of the countries currently has them on their railways.”

Director of Audit Tarmo Olgo admitted that crossing the border could be made considerably easier for vehicles carrying cargo if both countries checked the cargo and the documents together in accordance with the International Convention on the Harmonisation of Frontier Controls of Goods.

The need for this and the benefits it would give have repeatedly been discussed at the meetings of Russian and EU customs workers. The first steps in this direction could be taken by introducing closer cross-border cooperation between customs workers, e.g. with the agreement that both sides will exchange information about the risks that may be associated with cargo and of any circumstances identified in the frontier control of goods that may be important for the other country. “For example, the border inspection point in Estonia could send information of their findings obtained at scanning trains heading for Russia from Koidula station to the Russian border inspection point,” said Olgo. “We should treat mutual information exchange as the first step towards mutual inspection of cargo. We really hope that the Federal Customs Service of Russia will enter into the relevant agreements with its colleagues.”

The National Audit Office believes that the material base of our road border inspection points in Koidula and Luhamaa is sufficient to inspect twice as many goods as they do now. The situation in Narva, however, is more problematic. The new infrastructure to be established with the help of the EU will hopefully resolve the border crossing problems of cars, buses and pedestrians over there.

Achieving an increase in the quantity of lorries services at the border inspection point is difficult, because it its located in the centre of Narva. Although the capacity of servicing goods vehicles could theoretically be doubled, it is not enough considering the increasing quantities of goods transported between Estonia and Russia. Director of Audit Olgo said that in addition to the development of existing border inspection points, ensuring smooth servicing of goods vehicles also requires that we start preparing the construction of a new bridge across the Narva River (the need for this was recognised some 30-40 years ago) and increase transport of goods by rail. These two activities can be carried out if both Estonia and Russia want to carry them out and are prepared to work together.

The topic of a new bridge across the Narva River and the need to make some decisions soon in order to ascertain the options for building the new bridge in cooperation between the competent agencies of the two countries were also highlighted at the meeting of the board of the Accounts Chamber of the Russian Federation and the management of the Estonian National Audit Office held on 29 March 2012 in Ivangorod. Sergei Stepashin, Chairman of the Accounts Chamber of the Russian Federation, promised to raise this issue in the audit report the Accounts Chamber will submit to the Prime Minister of Russia in the next few weeks. Although the relevant need was recognised at the level of Estonian and Russian ministers in 2006, the attempts of Estonia to launch the joint research necessary for the establishment of the new bridge have not been reciprocated by our partner.

As for the fourth block of topics discussed in the audit – cross-border rail freight – then the Estonian railway infrastructure could service twice as many freight trains travelling through and from Russia (as was the case before 2006). Eesti Raudtee AS is interested in this and the owners of goods are interested in this. “Russia has said that containers should not be transported by road, but by sea or by rail,” said Director of Audit Olgo. “Rail transport would curb the increase in the workload of road border inspection points, but Russian Railways have not allocated any additional trains to Estonian Railways.”

In its audit report the National Audit Office also highlights the fact revealed in the course of its audit of the transport of goods across the border, which is that our state agency do not have reliable information about the export of the goods and services produced in Estonia. Public data about Estonian export include considerable amounts of transit goods transported through Estonia, which is taken on to third countries without being processed. In other words, the amount indicated as Estonian export also contains re-export, i.e. the cost of the goods to which no value has been added in Estonia.

According to Statistics Estonia, export from Estonia increased 35 per cent in 2010 and 38 per cent in 2011. “The National Audit Office emphasises that Estonian statistics about export are correct and meet the requirements of Eurostat, but in order to assess our export capacity better, we advised the Ministry of Economic Affairs and Communications to also request data that show the share of goods to which value has been added in Estonia among the total export from Estonia,” explained Olgo. “Latvia, for example, collets such data about so-called national export.”

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