Although the three Baltic countries are trying to follow the increasingly loud demand from the European Commission to initially focus solely on the main route of Rail Baltica, the project’s budget is rising to over EUR 15 billion. It could be cheaper, but this would require passengers to transfer trains to travel to Riga, and the route from Lithuania to Poland would be winding and slow. Consequently, the project is now looking towards private investors.
Over the past year, Rail Baltica has undergone significant budget cuts, most notably reflected in the project’s stakeholders’ claims that a single track is as good as two.
There are plenty of reasons for these cuts. In 2017, the participating countries believed that constructing the railway would cost a total of EUR 5.7 billion. In 2022, new calculations estimated that fully completing Rail Baltica would require EUR 13.9 billion. As of July 2023, another analysis projected the railway’s cost at EUR 25 billion.
At the midsummer meeting, discussions began on whether and how the project could be divided into parts, so that only the most critical sections would be completed until 2030. Continuing on the current path was described by the joint venture RB Rail in a subsequent meeting as, “start everything and finish nothing.”
Although the public broadcaster was not invited to that meeting, the slides presented give a sense of the atmosphere in the room.
“Funding Rail Baltica may require an additional national contribution of EUR 13-19 billion until 2030,” stated the header of one table.
By that time, all participants understood that anything non-essential would be postponed indefinitely. However, the determination of what is essential remains a topic of debate among the countries involved.
The European Commission’s stance is clear: essential is what contributes to the creation of the pan-European TEN-T network.
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“We expect a joint proposal from the member states outlining the construction of this core network,” emphasized Vivian Loonela, head of the Commission’s Estonian office. “By core network, we mean the first phase, which is the Tallinn-Warsaw line, and it must be completed until 2030.”
However, the Baltic capitals see a more varied picture, and when delving into the details, there are at least three different visions of the core network. In many discussions, the concepts of “core network” and “essential” merge.
“We do not yet have a final agreement with Latvia and Lithuania on what, in addition to this north-south main route, will be built,” Andres Lindemann, head of Rail Baltica at the Estonian Ministry of Climate, told ERR.
Several ideas have been proposed during negotiations. For example, the cheapest solution, costing EUR 11.7 billion, would limit the train speed between Surju and Haademeeste in south Parnu County to 160 kilometers per hour.
“This solution would allow for the elimination of ecoducts and railway fences,” suggested a document prepared by RB Rail, noting that the biggest number of the animal crossing overpasses were planned between Surju and Haademeeste.
However, in the context of the entire project, such concessions would save only a small amount. More complex and expensive decisions have long included connecting Riga, connecting Vilnius and constructing a new railway from Klaipeda towards Poland. Although a final solution is not yet in place, interviews suggest that the main outlines of the agreement were sketched out on paper in January.
The Baltic States were under pressure to align their messages by the need to submit applications for the next round of the Connecting Europe Facility until the end of January. A clear vision of the project’s scope would earn additional points in the application assessment.
Thus, representatives of the three Baltic countries gathered for a crucial meeting in mid-January. By then, all had agreed that a single track would be initially built for most of the railway, but key issues, including the connection of the capitals of Latvia and Lithuania, still awaited decisions.
“The cheapest option proposed that Riga would not be connected by a new European-gauge railway but would require passengers to transfer to an existing train outside Riga,” said Marko Kivila, CEO of RB Rail.
This would save about EUR 300 million, but the dream of reaching Riga from Tallinn in one hour and 42 minutes would be indefinitely postponed. Negotiations led to a solution that could be described as “if you can’t do it all, do half.”
South of the Daugava River, a branch line will be constructed to Riga Airport. At Imanta railway stop near the airport, Rail Baltica will meet the existing railway, which takes a slight curve to Riga Central Station.
“This existing railway can be converted to a European-gauge track, significantly reducing project costs because it eliminates the need to build a new railway embankment in the middle of Riga,” Kivila explained.
After visiting the central station, the train would return the same way. Although this solution adds up to 20 minutes to the Tallinn-Riga journey, it is at least technically feasible. The section of Rail Baltica leading directly north from Riga station would remain a future concern.
“Then, through the city of Riga, as originally planned, a new railway embankment and a completely new double-track railway line would have to be built,” described Kivila of the second or third stage of the work.
Entry into Riga was retained in the project at the request of the Latvian state.
Whether the European Commission agrees with this will be known soon, when the results of the January application round are announced. Vivian Loonela repeatedly emphasized that the project should first focus on the main network from Poland to Tallinn.
“If you ask in Latvia whether Riga is part of the main route, the answer is of course yes, meaning that for Latvia the project still means that Riga is connected,” Kivila responded. “We have explained to the Commission, even after our January letter, that connecting Latvia with the European-gauge railway provides a significant usage advantage to the project, which we should not lose in the name of saving.”
Rail Baltic Estonia’s CEO, Anvar Salomets, stated that entry into Riga was feasible until 2030. At the same time, he noted that Latvian colleagues were still developing the technical calculations related to the connection, and the exact schedule and budget depended on these.
“We can assure the Estonian Ministry of Climate that it is technically feasible and adequate in terms of service by the deadline,” Salomets said. “In other words, nothing will be done that won’t bring results in the end.”
While discussions in Latvia are moving towards the prospect of new tracks for their capital by 2030, the outlook for Lithuania is gloomier. It is likely that the European high-speed rail will bypass Vilnius by about 100 kilometers.
Andres Lindemann noted that there was currently a Russian-gauge railway between Kaunas and Vilnius.
“With efficient transfer options, we could connect the capitals in the first phase,” he said.
Lindemann pointed to the approximately EUR 2.5-billion cost of a new railway connection between Vilnius and Kaunas, and Anvar Salomets noted that the route still lacked a plan.
“Planning, design, construction – the full program needs to be completed. And it’s impossible to fit all this into the time frame using traditional methods,” said Salomets.
Therefore, he admitted that Vilnius would not be connected to Rail Baltica in the first phase of the project.
The Lithuanian part of the project notes on its website that work between Vilnius and Kaunas is progressing rapidly. Planning solutions are already being introduced in public discussions, and the company promises to organize a design tender even before the planning is confirmed.
Marko Kivila said that negotiations with Lithuania had been challenging.
“From the beginning, Lithuania believed that Rail Baltica should connect all the capitals,” said Kivila.
However, the connection of Vilnius does not align with the European Commission’s vision of prioritizing the main route. Therefore, according to Marko Kivila, the Lithuanians agree that connecting Vilnius is the second priority. But on the condition that they do not completely lose the 2030 perspective.
“This means that if financial resources are found to fund it, it will be built,” said Kivila. “The remaining parts of the railway in Lithuania have higher priority, and this has been the accepted solution in Lithuania so far.”
Perhaps the Lithuanians were made more agreeable by the fact that Kaunas is associated with another very costly decision point.
Namely, in 2015, a European-gauge railway section from the Polish border to Kaunas was opened, running alongside the Russian-gauge railway.
This “RB I” railway section could be electrified, making a piece of the TEN-T network ready. However, the old railway route runs through many smaller settlements and does not allow for high speeds. Therefore, considerable negotiations have been held this spring regarding its fate.
“It has been decided that the section between Kaunas and the Polish border will be a new double-track railway, the so-called “RB 2″,” said Kivila.
According to him, all three Baltic States are behind this decision. Despite the additional work being estimated to cost EUR 2.5 billion, approximately the same as connecting Kaunas and Vilnius.
Kivila noted that a good connection with Poland was very important for Lithuania. He added that from the perspective of the entire Rail Baltica project, it was crucial to encourage Poland to develop its northbound railway.
“For this, we as a project need to show that we can meet them on the other side with something equivalent,” said Kivila.
If the choices made in January are implemented and the connection to Vilnius is not included, the first phase of Rail Baltica will cost about EUR 15 billion.
Although the joint venture sent a letter to the European Commission in January outlining the fundamental decisions, negotiations have not ended there.
Andres Lindemann said that the European Commission had several questions regarding the proposal, and there were still some issues to be discussed by the member states.
“As of today, there is no certainty that the proposed solution is final,” said Lindemann.
Thus, Vivian Loonela stated that the European Commission was still waiting for a joint proposal from the three countries.
“In this respect, there is some urgency, as an agreement is needed among the Baltic countries on how the core network will be built,” noted Loonela.
Speaking with the parties involved, it appears that a precise agreement is still behind a series of complex calculations and analyses. Among other things, the long-awaited socioeconomic impact analysis should be completed during the summer.
ERR has obtained a draft of the analysis prepared with the assumption that Rail Baltica will be built to its full extent, costing over EUR 20 billion.
The document states that financially, maintaining the railway in the future may require state subsidies, but socioeconomically, the project promises enormous benefits. Even just the time savings are expected to bring EUR 10-12 billion in socioeconomic benefits, according to the analysis. Overall, the entire project should result in a socioeconomic profit of more than EUR 6 billion.
Once the calculations are done, the Baltic States hope to finalize an agreement that the European Commission will endorse. However, this plan is somewhat written in the sand, as everything ultimately depends on whether funding for construction can be secured.
Even a reduced-scale Rail Baltica will cost nearly three times more than the entire project was estimated to cost back in 2017.
The new budget period of the European Union begins in 2028, and how much will be allocated for large infrastructure projects can be speculated no earlier than next summer.
Marko Kivila stated that based on the feedback received so far, it seemed the European Commission understood the scope of the project proposed in January. However, the Commission has indicated that member states must also seek their own funding.
“The Commission expects that countries will be able to propose financing solutions for such a large-scale project that do not rely solely on the Commission’s funding,” said Kivila.
Various calculations about how much EU funding can be secured for Rail Baltica are found in several documents prepared by RB Rail. Even the most optimistic estimates assume that the EU’s contribution will be a maximum of EUR 10 billion. Ultimately, these are all predictions, and the actual amounts depend on negotiations among the member states.
Nevertheless, RB Rail is increasingly active in seeking additional funding.
“Looking at the timeframe up to 2030, considering the amount that needs to be invested, loans will likely need to be utilized,” said Kivila, noting that both governments and the future owner companies of the infrastructure could take out loans. “These loans would help finance the shortfall.”
However, traditional loans are not the only way to attract private funds. At a seminar for companies held in early May, RB Rail representatives also mentioned the possibility of using Public-Private Partnerships (PPPs) to involve private sector investments.
Marko Kivila stated that only certain parts of Rail Baltica are attractive for such projects.
“The Kaunas-Vilnius line itself could be an attractive area where market participants might be interested in investing under a concession,” said Kivila, but acknowledged, “However, this is not included in the EUR 15 billion.”
He did note that the potentially most profitable part of the entire project was the connection to Riga.
“This has great potential to attract private funding,” said Kivila.
According to him, the three Baltic States agreed that the joint company would conduct preliminary work to find possible private funding.
“RB Rail will provide certain information to the ministries about the various options. Based on this, the ministries can proceed as needed,” said Kivila.
Although the Rail Baltica project has also become significantly more expensive for Estonia, the estimated cost for the Estonian section of the railway is about EUR 3 billion. RB Rail estimates the cost of the Latvian section at approximately EUR 6.4 billion and the Lithuanian section at EUR 5.6 billion.
Therefore, Kivila predicted that for Estonia, the increased costs might not require a particularly special financial scheme.
“But in Latvia and Lithuania, these numbers are much higher than in Estonia, and the issue is much more acute there, regarding how to manage certain parts of the project without placing too much pressure on the state budget,” said Kivila. (ERR)