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Rail Baltica railway: good for all, but unsettled issues abound

  • 2017-04-19
  • Linas Jegelevicius

The two-day Rail Baltica Global Forum in Riga next week is devoted to the Baltics’ milestone rail project, and is expected to highlight the project’s economic potential, procurement regulation and organization, as well as facilitation of suppliers’ networking. As top executives and decision makers, rail, logistics and economics professionals, influential politicians and institutions, as well as potential suppliers for the project from across Europe are about to swarm the Latvian capital, some pressing issues of the endeavor loom ahead.

“We have lost quite some precious time (with the project) already,” Catherine Trautmann, Coordinator for the North Sea–Baltic core network corridor is convinced . “I’ve had- can you imagine?- 86 consultations with different subjects in Estonia, mostly the societal associations and local residents, attempting to convince them that the project is necessary and useful,” Trautman told The Baltic Times during a Regional Transport Investment Conference in Sofia in late March.
Among the pressing issues are the slower than desired progress among Lithuania, Latvia and Estonia in tackling practical aspects of the project, the exorbitant price-marked bids by the potential builders and, last but not least, the looming new EU transport project financing prospects beyond 2020.

The EU‘s resolve to lure private investors to the EU-funded transport projects after 2020 may tweak them, including Rail Baltica, too.
For now, the major headache of the coordinator for the North Sea–Baltic core network corridor is the disability of the nations involved in the project to strike accord among themselves with respect to the railway’s route, implementation and costs.

“The Estonians’ moods have varied throughout, the Latvians seem to be in suspension now, waiting for the local government elections (they will take place in early June-). Poland and Lithuania have also had their share of disagreements…With the change of leadership at Lithuanian Railways (Lietuvos Gelezinkeliai-L.J.), the European Commission has gotten more upbeat (that things will go smoother now),” the coordinator underscored. “All of that is nothing out of the extraordinary (for projects of this kind).”

In Trautmann’s words, the three Baltic countries are not so big as not to be able to remove all the roadblocks, some of which are rather petty, she said.

“The same I’d say to Poland: be considerate of the three smaller neighbours’ needs,” she emphasised in the interview.
The Rail Baltica project seeks to re-establish a direct connection between the Baltic States and the European railway network. The project is expected to facilitate regional integration by means of a railway link from Helsinki that would link Tallinn, Riga, Kaunas, Warsaw and Berlin and might potentially be extended to Venice.
Talking to The Baltic Times, Trautmann recalled a recent conversation with a Polish minister, who told her that he had recently travelled by car from Poland’s Bialystok to Helsinki to see how the local rail is functioning.

“He told me that the journey had been an eye-opening experience for him, and now he is all for a faster implementation of Rail Baltica. I sometimes believe that such personal experiences are very valuable (in decision-making),“she reasoned.
According to her, with the sides failing continuously to hammer out a joint approach, the countries risk putting Rail Baltica in jeopardy.

“The states have to understand that the European Union has prioritized six major rail projects EU-wide, with Rail Baltica being the only one on the list in the East. For the countries, I see this as a ticket to their future, so if the countries do not take best advantage of the chances now, it may be too late later,” Trautmann emphasised. “With the disagreements unsettled, the EU, as well as the Baltic countries, will lose the argument of the project’s priority,” she added.
Like Michael Cramer, former chairman of the European Parliament’s Committee on Transport and Tourism, Trautmann has also warned that the Baltic States risk losing EU funding for the rail project if they fail to reach common ground on key issues.

The Baltic States have had some nasty squabbles over the project details in the past. For example, Lithuania feared that, with all orders conducted by the Latvian-registered company RB Rail, the VAT tax would remain in Latvia. Lithuania has reiterated that it wants the VAT for the work done in Lithuania to stay in the country’s territory.
 In July last year, ministers of Lithuania, Latvia and Estonia agreed on the VAT distribution, however, the countries are still at odds over the final financing scheme.

By 2020, the three Baltic States will have received from the European Union a total of 442.2 million Euros for the project. Just Lithuania alone has secured 340 million Euros from the Connecting Europe Facility until 2021.
Although Rail Baltica is first seen as an international passenger haul railway, it is very important, according to Trautmann, that the parties get “most” of the project’s freight capacities.
“Especially since the Chinese might be interested in appearing in the Baltic region with ambitious rail transportation pursuits,” she underlined.

In her words, the North Sea–Baltic core network corridor can see a “positive evolution” as some major European rail powers, like Germany and France, may take advantage of it, too.
“In that context, what is to happen (railway potential -wise) in the Baltic area is of utmost importance for all. For me, the Baltic area, in terms of rail transportation, is a critical loop in connecting the Baltic Sea countries and beyond. Although much of the haul in the region can be done through ferries and road vehicles, the prospects of rail transportation are very good there, I believe,” the high-ranking EU official noted.

In early April, Lietuvos Gelezinkeliai announced terminating tenders aiming to choose contractors for laying the railway on the Lithuanian side.
The reasons for that were the exorbitant construction work prices that the company’s new management believed were too blown up.
Some of the work value assessments by the potential builders and the railway company differ by three times.
For example, JSC Eurovia and JSC Vitras offered to lay a five-kilometer stretch between the settlement Rokai and the Kaunas Hydro Power Plant for 21.4 million Euros. Meanwhile, Lietuvos Gelezinkeliai has assessed its cost at around 9 million Euros.

An eye-catching story headline in a Lithuanian news portal screamed that, with the single kilometer work costing 4 million Euros, it will be the biggest splurge of public money ever.
Mantas Dubauskas, spokesman of Lithuanian Railways, believes that the mind-boggling cost is a result of the lack of competitors in the tenders. He thinks that it will change with a new tender having more participants.
The problems plaguing Rail Baltica were most recently discussed on March 22, 2017 between Lithuania’s minister of Transport and Communications, Rokas Masiulis, and afore-mentioned Catherine Trautmann.
“I am pleased to see the new Government of Lithuania ensuring the continuation of the Rail Baltica project and proceeding with its implementation at a rapid pace,” the coordinator for the North Sea–Baltic core network corridor, emphasised after the meeting.

“Rail Baltica is a project of special state importance in Lithuania and will be definitely continued. We exert efforts to launch freight transportation by the already constructed section of the Rail Baltica from the Lithuanian–Polish border to Kaunas in the nearest future, without waiting for the implementation of the whole project. After extending the European gauge railway line up to the intermodal terminal in Palemonas, we expect it to be used for freight transportation as early as 2019–2020,” Masiulis provided some details.

According to him, the earlier the possibility to use the Rail Baltica for freight transportation will be ensured, the sooner economic viability of the project will be tangible.
Speaking of the progress with the project, the minister pointed out that the special plan for the railway line from Kaunas to the state border with Latvia has been approved.
The minister also noted the necessity to secure funding for the European track gauge connection between Kaunas and Vilnius, a part of Rail Baltica.
For the implementation of the whole Rail Baltica project, the EU’s investments will be needed also during the EU financial period of 2021–2027.

“Therefore, favourable decisions of EU institutions on this matter is important,” Masiulis stressed.
He said regular freight services were expected to start in the near future on the 1,435 mm gauge tracks which have been laid between the Polish border to Kaunas, and this would highlight the economic viability of the project. Freight services would be extended to the Palemonas intermodal terminal as early as 2019–2020, according to him.
Members of the European Parliament’s Transport Committee are scheduled to visit Lithuania in May to assess the country’s progress with the project.