Let China Build The Longest Undersea Rail Tunnel
(Bloomberg Opinion) -- An ambitious project to build the longest undersea rail tunnel in the world between Helsinki and Tallinn is being held up by the Estonian government over worries about the plan and where the money is coming from. It should let the life-changing link go ahead, even if its Chinese funding looks suspicious.
The project’s developer, Finest Bay Area Development Oy, was co-founded by Peter “Mighty Eagle” Vesterbacka, one of the principal creators of the Angry Birds computer game. Last month, it announced that it had arranged the funding for the 103-kilometer tunnel from Touchstone Capital Partners, a financial firm that invests the resources of state-owned Chinese enterprises, to the tune of $17 billion. The money is to go to three Chinese companies that have signed on to design and build the tunnel as part of their country’s Belt and Road Initiative. That’s what bothers the Estonian government: The Chinese initiative is unpopular with the European Union, and Estonia, ever the good European, wants to make sure it’s not going to get in trouble.
The biggest current Belt and Road project in Europe is a high-speed railroad link between Budapest and Belgrade. The EU has watched the project jealously. Its investigation of whether Hungary has followed its competition and anti-corruption rules when awarding contracts for the railroad modernization has held up the construction. Behind the misgivings is a geostrategic concern that China isn’t just seeking more convenient transport connections for its exports and imports but building up influence in EU member states, threatening the bloc’s unity and shared values.
I’d argue, though, that there’s no specific mechanism through which China could subvert Estonia or Finland if it’s allowed to build the tunnel, and that the project can only do the EU good – also in the geopolitical sense. At the same time, relying on EU participation in the project, as a 2018 feasibility study proposed, could lead to endless delays. It’s far from certain that Estonia and Finland would even be able to secure sufficient funding for a project they’ve been discussing for two decades.
The study said the project wouldn’t be feasible without a 40% EU grant to cover the costs, and even then, Estonia and Finland would need to subsidize it. At this level of government participation, long delays are inevitable.
A similar project to build an 18-kilometer undersea tunnel between the Danish island of Lolland and the German island of Fehmarn in 2010 still hasn’t gotten off the ground. It qualified as an EU priority project, received funding from the bloc for 16% of total costs and finally obtained approval from the German government and the Danish parliament this year. But it’s still stuck in the pre-construction stage because of a successful complaint by a shipper, Scandlines, whose ferry business would be affected by the link. Late last year, the EU’s General Court ruled that Danish state aid to the project was illegal, and in June, the European Commission followed up on the ruling by launching an investigation into the project’s funding. For that and other reasons, it’s almost certain it won’t be finished by the announced deadline of 2028.
So it’s not hard to understand why the developers of the Tallinn-Helsinki tunnel don’t want to deal with subsidies from the Finnish and Estonian government or ask the EU for aid. It could be easier to square the Chinese arrangements with the regulators, even though the ferry lobby will, of course, object again because the Tallinn-Helsinki route is quite lucrative. Last year, 8.8 million people, or 77% of all ferry passengers served by the Helsinki port, traveled the route.
The fastest of the ferries take two hours; the tunnel would cut the trip to some 30 minutes. A daily cross-border commute for work would become feasible. In truth, it’s almost impossible to estimate the potential increase in passenger traffic. Besides, the tunnel would create a fast cargo link between eastern Europe and the Nordics, boosting the economies of Estonia’s Baltic neighbors and Poland.
For the EU, this is not just economically but geostrategically meaningful. The Baltics are a relatively isolated group of EU states, chronically endangered by their closeness to Russia. A Tallinn-Helsinki tunnel would hardly please the Kremlin, which tries to exert pressure on the Baltic states by reducing its exports and imports through their ports.
The EU should be interested in making the link happen as soon as possible. China, of course, wants to fund it for its own reasons, but in the case of the Baltics, even a Chinese-built tunnel would represent a new degree of freedom. For Estonia, Latvia and Lithuania, eager to shed their Soviet past and become part of northern Europe, the tunnel would represent a major step toward changing their place in the world – even if they can’t move further from Russia on the map.
The Belt and Road Initiative is not without its risks for Europe. State-owned Chinese companies are rightly viewed with suspicion. In this case, however, their willingness to plow a massive amount of money into the Tallinn-Helsinki tunnel is a boon for European unity and the eventual erasure of the EU’s east-west fault line.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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