Costly Rail Baltica to cut ambitions and seek funding elsewhere
As Rail Baltica’s projected costs are mounting and continue to grow, the project’s feasibility is in question. Uncertainty surrounding EU funding is forcing Rail Baltica to look elsewhere and readjust ambitions.
As Rail Baltica eagerly awaits the results of the January application round for EU funding, discussions surrounding the pan-Baltic railway continue. It is uncertain how much funding for the railway will be approved. The EU wants to see tangible results and concrete plans. The Baltic states, on the other hand, struggle with mounting costs as a result of inflation, labour shortages and technical difficulties.
The growing costs represent a major obstacle to Rail Baltica’s success. While the project was initially estimated at 5,7 billion euros in 2017, by summer 2023 this had risen to a possible 25 billion euros. The Baltic states will have to look for funding elsewhere as the EU will only fund 10 billion euros in the most optimistic scenario, writes Estonian publication ERR.
Downscaling ambitions
In order to score bonus points for their funding application, the three Baltic states had to submit a single vision for Rail Baltica. Inevitably, to reduce costs, they had to readjust their ambitions. Stakeholders’ claims that a single-track railway is as good as a double track reflected updated and downscaled aspirations, writes ERR.
To save more costs, eliminating ecoducts and railway fences is also being discussed. This would save money, but it would also reduce the maximum speed along particular sections of the route.
The capital question
Differences in the EU Commission’s views and Baltic views on the project do not help its cause either. The EU wants to prioritise the “core” of the project. This is the Warsaw-Tallinn line, which is part of the TEN-T network plan.
The TEN-T plan does not include connecting Lithuanian capital Vilnius to the line, nor will Latvian capital Riga be linked up with the route. Naturally, connecting their capitals to the likely profitable rail line is key for the two Baltic countries.
However, the two Baltic states may have to give in for the time being. Vilnius is likely to be bypassed by 100 kilometres, according to ERR. Various options for Riga seem to be on the table. The Latvian capital could be bypassed entirely, an existing railway could be switched to the European gauge and made part of the Rail Baltica line, or the line could be built into the city and not extended through it. Trains would then have to turn around to continue their journey, saving costs on expensively building a railway in an urban area. Earlier, it was reported that the Latvian government saw no way to complete the connection to Riga before 2030.
Private funding
With the limitations on EU and state funding, Rail Baltica needs to broaden its vision for financing. “Considering the amount that needs to be invested, loans will likely need to be utilised”, Rail Baltica CEO Marko Kivila told ERR. Rail Baltica is reportedly considering public-private partnerships alongside traditional loans to collect more funding.
According to Kivila, the section to Riga is likely to be the most profitable. Riga is the largest city and largest economic centre of the Baltics. “This has great potential to attract private funding,” said Kivila.
The increased costs are an obstacle in all three Baltic countries. “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,” Kivila told ERR.
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