An ongoing challenge: connecting the Baltic countries to the EU

An ongoing challenge: connecting the Baltic countries to the EU
© EPA-EFE/TOMS KALNINS   |   The site of the Rail Baltic's Riga terminal under construction in Riga, Latvia, 24 April 2023.

After two decades in the EU and NATO, the Baltic States din not yet fully connect their infrastructure with that of their partners. The railway infrastructure is particularly problematic.

 “Rail Baltica” – an important part of the Baltic defense system

In Latvia and the rest of the Baltic states, the international railway connection “Rail Baltica” is usually perceived as an opportunity to travel from Tallinn to Warsaw or vice-versa by train. The project aims to create a railway line connecting the Baltic States with the rest of Europe. The 870 km long railway route is generally perceived as a means of civilian passenger transport. However, it has geopolitical and strategic significance.

The Center for European Policy Analysis (CEPA) noted the railway is the best way to transport military equipment from Germany and Poland to the Baltic States. However, at this very moment, the railway system in the Baltic States is still connected to Russia and Belarus only. This is Soviet heritage because the Baltic railway was a part of the whole Soviet Union system aiming to connect Baltic harbors with the rest of the country. Another Soviet legacy that will have to be changed within the “Rail Baltica” framework is the track width. In Latvia, it is 1520 mm, while in Western Europe - 1435 mm. Now, the only railway link between the Baltic States and Poland is a 123 km long route of European gauge track between the border of both countries and the Lithuanian city of Kaunas.

The Ministry of Defense of Latvia also emphasizes that the lack of connectivity with Western Europe significantly slows down military mobility in the Baltic region, as logistics centers are needed, where cargo is transferred to trains of a different gauge or other types of land vehicles. Therefore, a gradual adaptation to the rest of the European railway infrastructure standards is taking place.

CEPA stresses that because of the geographical situation, military mobility in the Baltics is already difficult. The Polish-Lithuanian border on the so-called Suwałki Gap is 104 km long and it is surrounded to the south-east by Belarus and to the north-west by Russia. Both countries are considered in the Baltics unfriendly and aggressive, especially after the full-scale invasion of Ukraine on February 24, 2022,. Thus potential aggressor has options to block NATO access to the Baltics. The military mobility by railway is considered as the best way how to ensure cooperation between the Baltic States and Western Europe within NATO. Shipping transport is slow and vulnerable to the Russian navy, and highways are not suitable because of the inadequate load capacities of bridges. Thus, according to CEPA, the rapid implementation of “Rail Baltica” must be supported at the highest political level.

The “project of the century” is plagued by raising costs

However, in recent months, the “Rail Baltica” project has been caught in the crossfire.  This is due to multiple price increases. The total costs of the railway line in the Baltics, according to the data, can reach 23.8 billion EUR (previously, in 2017, 5.8 billion EUR), including the costs of the first stage of the project in the Baltics could be 15.3 billion EUR, of which 6.4 billion EUR in Latvia.

The cost estimates have been adjusted by taking into account several factors, including inflation between 2017 and 2022, which reached 40% on average in the Baltic States during this period. Also, the increase in costs is related to other factors: 1) 31% of the increase is due to the expansion of the scope, including regional mobility; 2) changes in technical standards according to uniform design guidelines; and 3) increased requirements for infrastructure safety and performance. Besides 51% of the increase is due to more accurate cost estimates now that the design is in the final phase and value engineering has been done along the entire track.  And, finally, 18% comes from additional external requirements and factors such as third-party requirements, various technical regulations of institutions, interoperability technical specifications, and other changes.

Regarding Latvia, the government decided in June to opt for the route going through the capital Riga. Recognized as the project of the century, “Rail Baltica” is up to 85% financed by the EU fund “Connecting Europe Facility” (CEF). Up to June project has attracted 2.68 billion EUR, where 85% are from EU funds and up to 15% from state budgets. Thus, Lithuania has secured 1.04, Latvia – 0.96 and Estonia – 0.68 billion EUR.

This formula: up to 85% EU funding and 15% - national states will continue to apply. However, there is great concern in Latvia whether it will be able to cover its 15%, especially after the cost increases. Considering the necessary funding for defense, as well as problems in education, health, police, and other areas, this can be a significant challenge. All this may push the completion date of the railway beyond the current 2030 target.

“De facto” independence from the Russian energy market has already been achieved

Disconnecting from the Russian infrastructure to connect to the European one is possible, and the Baltic States proved that in the energy field.

Latvia, like Estonia and Lithuania, will officially withdraw from the Russian energy grid on February 8, 2025 and they will connect to Europe's common energy network. An agreement to that end was made back in 2018.

However the Baltic energy system can already operate in autonomous mode at any moment, outside the Russian system. Generating capacities, especially in Latvia, are also sufficient, and among them are both hydroelectric power plants and thermal power plants. Besides Baltic States have a good connection with Finland, Sweden, and Poland. It is expected that when Latvia joins the European electricity network, there will be no interruptions in supply to Latvian residents.

Overall, the integration with the European network is happening in two stages. The first one has already been done from 2007 to 2015 when Latvia joined the “Nord Pool” exchange. The second stage is a connection with the European energy system that is still ongoing. The Ministry of Climate and Energy of Latvia specifically mentions the safety or independence of Russia as one of the most important benefits of change. Besides, the Latvian energy producers and sellers will have a chance to offer their production in Europe.

If – or rather when – the land transport infrastructure would follow the energy infrastructure, the Baltic States will finally be fully connected to NATO and EU, rather than some sort of remote island within the two blocks.

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