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

The Baltic Times - - FRONT PAGE - 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 Eu­funded 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 de­ci­sion­mak­ing), “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.

“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.”

The planned 1 435 mm gauge line which would run 728 km to Riga and Tallinn from the cur­rent stan­dard gauge rail­head at Kau­nas.

Cather­ine­traut­mann is Co­or­di­na­tor for the North Sea–baltic core net­work cor­ri­dor.

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