Rail Baltica : geopolitics and complexity of the EU’s flagship railway project

Rail Baltica is a big railway infrastructure project in Europe intended to link Finland, Estonia, Latvia, Lithuania and Poland with a European UIC standard gauge rail line. An opportunity to discover a railway project whom we talk so little.

Connecting Poland to Finland may seem simple, but it is in fact a real challenge. Two major obstacles must be overcome:

  • The three Baltic countries have a 1.520mm Russian railway gauge network;
  • It must necessarily to build a twin-tube tunnel between Tallinn, Estonia, and Helsinki, Finland.

In addition, this project is being built in an eccentric region of Europe which does not have the same socio-economic indices as those of the Benelux and Great Britain, which once justified the construction of the Channel Tunnel.

Vilnius station in 2007 (photo Michael Day via flickr license)

Looking toward Europe
The Baltic states of Estonia, Latvia and Lithuania were the only countries of the former Soviet Union to have integrated themselves into the European Union. Their success derives from that fact that their belonging to Europe was not only a geopolitical choice, but fundamentally in line with their values and identity. EU Member since 2004, Estonia, Latvia and Lithuania are in fact at the junction of two powers, namely the EU and Russia. One can’t help but notice these countries’ growing distrust towards the influence of the Russian neighbour, so closer. In terms of infrastructure the Baltics are still “captive nations”: the railways run east to Moscow and St Petersburg; the electricity grids are synchronised with Russia’s; and they are largely dependent on Russia for gas.

The railway project Rail Baltica has actually existed since 1994 but has matured very slowly. At that time, the Baltic States were not yet a member of the Union. But it also comes up against rivalry between the three states, who have very difficult to agree on a lot of subjects (gaz, electricity, transport,…). By this, the Finns and the Poles refused to participate in the project, while developing their own work on their respective territories.

By switching from Russia’s 1,520mm gauge to continental Europe’s 1,435mm one, many say that the new railway would offer a sense of security for the population who fears greatly the russian geopolitics. But this is not the opinion of all the actors. As told The Economist, the underlying problem is that some of the region’s monopoly railway operators are intimately bound with Russia’s, and make their profits from the transit of freight between the Baltic ports and Russia, Central Asia and China. Some argue that the North-South Baltica project is expensive and uncertain.

Build it to attract new traffic
These are often the arguments heard in economic circles. In April 2017, during the Rail Baltica Forum, the Cost-Benefit Analysis (CBA) confirmed the financial and economic reliability of the project. According to a study produced by Ernst & Young, the measurable socio-economic benefits are estimated at 16.2 billion euros. The assessed GDP multiplier effect the Rail Baltica Global Project would create is an additional 2 billion euros. All of this is still subject to criticism and amendment.

In fact, the Rail Baltica project is budgeted by the EU to the tune of €5.8 billion, however, this budget does not take into account the construction of the Tallinn-Helsinki tunnel, which is managed as a separate project. It is one of the European Union’s priority projects and falls under the Trans-European Transport Network (TEN-T). It is the largest infrastructure project in the Baltic region in a century. Funded by the European Union, Estonia, Latvia and Lithuania, it covers a distance of 870 kilometers and would link the rail infrastructure of the Baltic States to northern and western Europe, putting Poland in a comfortable position of crossroads of the north-east of Europe, as becomes Austria in Central Europe. The map below allows you to view the context of the project:

The project
The Rail Baltica includes 235km in Latvia, 229km in Estonia and 264km in Lithuania. It sounds balanced but it is nevertheless necessary to reconcile three national interests, even it’s a european project.

In Lithuania, the project has the highest cost, €2.47 billion, of which the state budget contribution amounts to €493 million. Lithuania’s investments are followed by those of Latvia, where the project requires €1.97 billion, with a national contribution of €393 million. In Estonia, the project needs a financing of €1.35 billion, of which the state budget contribution was estimated at €268 million.

A joint venture called RB Rail AS (RB AS) was set up by the Baltic states in 2014 to look after the implementation of the project. Located in Riga, the JV is responsible for the design, construction and marketing of the new 1,435mm gauge railway. Passenger trains are expected to run at a maximum speed of 240km/h, with an average speed of 170km/h. The maximum speed for freight trains is planned to be 120km/h. So it’s not really a high-speed line project.

This company appears to have been plagued by serious governance issues. One example is that Lithuania is represented in RB AS by Lithuanian Railways, which is also the project promoter. Thus project planners are both judge and jury. When asked to Latvian Transport Minister Tils Linkaits how to resolve the conflict of interest, he replied succinctly: « Ask Lithuanians. »

New station at Riga (artist impression Rail Baltica)

Despite that, the Joint Venture of Rail Baltica signed on 5th June 2019 in Lettonia two contracts to commence design works on a 123 kilometres long central section from Upeslejas through Riga to Misa and from Vangaži through Salaspils to Misa. The design works are carried out on behalf of the Ministry of Transport of Latvia. According latvian’s government, all key Rail Baltica elements – the two mainline sections around Riga and connection to Riga International Airport – have reached the design phase.

Estonia also wanted to show its good intention. Estonia’s prime minister, Mr Jüri Ratas, and Mr Henrik Hololei, director general of the European Commission’s Directorate-General for Transport, officially launched construction of the Rail Baltica project on November 28, 2019.

In Estonia, the project includes the construction of a new passenger and freight train station, not only in the capital Tallinn, but also in the seaside resort of Parnu in the south-west. The project will be carried out in two stages, with the first stage involving the reconstruction of the 1,520mm wide rails in Latvia. Work will be carried out by state-owned company Latvijas Dzelzceļš to ensure that the speed of the passenger and cargo trains increase up to 120km/h and 80km/h, respectively. Stage one is expected to be completed in 2025.

Second stage consists of constructing a new 1,435mm rail line that will meet European standards.

Järvakandi, a little city in the middle of Estonia (artist impression of Rail Baltica)

It is different on the side of Lithuania, neighbor of Poland, which is behind most of its activities by 540 days on average compared to the initial deadline. “There are objective reasons for this. There are three countries and each is concerned about its own interests. It is normal for a project of this magnitude to freeze from time to time. There are just too many participants, ”said Rokas Masiulis, the Minister of Transport until last fall.

On the positive side, the section between Šeštokai and Mockava in Lithuania is the first section of Rail Baltica to be completed, connecting the two cities with a double gauge track. Šeštokai, a city of just 700 inhabitants, is of great importance as a border crossing point with Poland because the only rail link between the two countries on the Vilnius – Kaunas –Šeštokai– Warsaw route.

One track, two gauges… (photo wikipedia)

A new tunnel between Tallinn and Helsinki
Another big piece is the Baltic Sea tunnel project to link Helsinki and Tallinn in Estonia. The project has secured €15 billion in funding. The tunnel, which is supported by both countries’ governments, would to cut a two to three hour ferry crossing to just 20 minutes by train. A feasibility study on the project conducted in 2018 estimated the cost of the project at €13-20bn. This project is not managed by Rail Baltica, but by FinEst Bay Area Development.

In May 2016, this finnish development company led by the businessman Peter Vesterbacka began working on the project of rail tunnel between the Estonian capital Tallinn and the Finnish capital Helsinki. The aim of the tunnel is to connect the two cities with the latest in rail technology and spur economic growth and development to the region.

Helsinki, a completely outlying European city, has only the Russian neighbor as railway link, via Saint Petersburg. The tunnel project would give it direct access to Rail Baltica, Poland and the rest of Europe. A Warsaw-Helsinki route would take ten hours when Rail Baltica will be finished.

Keilaniemi, near Helsinki (from video below)

Finland’s minister of transport and communications Anne Berner says that “The tunnel would together with the Rail Baltica railway project and the Arctic railway line connect the Arctic region with the heart of Europe via Finland. The tunnel could thus be a significant project for all of Finland and Europe, not only for Helsinki and Tallinn.

According to the findings of the cities’ Helsinki-Tallinn tunnel task force, around nine million passengers travelled between the cities by ferry in 2017. This could increase to 23 million by 2050 if the tunnel is built, with 12.5 million annual passengers travelling by tunnel and 10.5 million ferry passengers.

However, the project is facing mounting criticism, in particular by its excessive proximity to Chinese interests in the context of the Chinese Belt & Road Initiative (BRI). In fact, the new funding comes from Chinese investment Touchstone Capital Partners, with one third provided as private equity and two thirds as debt financing. In 2018, the project also secured a €100m investment from Dubai-based ARJ Holding. Kustaa Valtonen of FinEst Bay Area Development says “We are very pleased with the negotiations and the agreement reached. Touchstone has extensive experience in financing similar large private infrastructure projects,« .

Planners envisage direction connections from Helsinki-Vantaa Airport in the Finnish capital’s northern suburbs, a station at Pasila the city’s second largest station, and a stop at Helsinki central. In Tallinn the train would stop at Ulemiste, near the city’s airport, where it would link to Rail Baltica.

Rail Baltica, the Helsinki-Tallinn tunnel and rail developments on the Polish side, we can hope that geopolitics will not interfere with difficult projects in a region of Europe that deserves its economic opening-up.