Latvia’s annual state co-financing for the Rail Baltica railway project could amount to approximately 150 million euros, provided that European Union funding is secured through the Connecting Europe Facility (CEF), Finance Minister Māris Kučinskis (United List), who will lead the United List parliamentary group in the new Saeima, told the LETA news agency in an interview.
The minister acknowledged that Latvia is facing difficulties in securing CEF funding, describing it as probably the most challenging issue at present.
“Even during the previous government, we listened to recommendations based on other countries’ experience with railway lines. One of the main recommendations was very simple: if you build something, you must then actually use it. They also advised us to consider how much the country can afford,” Kučinskis explained.
At the same time, the Finance Minister acknowledged that Latvia would have to deal with its existing contractual commitments, both regarding the project as a whole and its further development.
Kučinskis said that the Ministry of Transport and the Ministry of Finance had calculated what the country could afford: 150 million euros annually in state co-financing, provided that CEF funding is received.
“We could allow a few tens of millions more, bringing the total to 200 million euros, because those overseeing the entire process must also be funded. We cannot afford more. From the state’s perspective, this would represent 15% co-financing. Altogether, that amounts to approximately 1 billion euros per year. When we calculate how long it would take to reach the required amount, we arrive at 2041 as the year when the project could be completed,” Kučinskis said.
In his view, either financial support must be increased or Latvia must acknowledge that, with a population of around 1.5 million and low population density, the project is simply too expensive.
“We are not going to raise taxes because of this. Which government would go to the public and ask whether people are willing to pay two percentage points more in value-added tax every year to build Rail Baltica? Of course not.
“We also cannot divert all the remaining European structural funds away from roads, schools and other investments just to complete this railway line.
“The Prime Minister is raising this issue with the responsible officials in Brussels. You cannot bear what you cannot afford,” Kučinskis explained.
Asked how Estonia and Lithuania would react if Latvia decided not to build Rail Baltica at all, Kučinskis replied:
“They would, of course, pretend to be angry and say that Latvia is to blame because we are in the middle. But would they come and help build the bridge across the Daugava near Salaspils? That is the most expensive part.”
Kučinskis explained that Estonia faces a similar situation, with approximately the same population density, although the Estonian state has borrowed less money.
“If Latvia has only around 10% of available headroom for additional government debt, Estonia has considerably more. I would like to see how Estonia borrows money for this project and what its society says about it,”
Kučinskis said.
Asked directly whether Rail Baltica might not be built if European funding is unavailable, Kučinskis acknowledged that suspending the project is a possibility.
“If we cannot afford it, there is a possibility of freezing the project. That possibility exists, and I will not hide it,” he said.
The Finance Minister explained that Latvia’s problem was that “we started at the wrong end – with a foundation pile, the airport and the station”, something neighbouring countries would probably criticise Latvia for.
At the same time, Kučinskis noted that Lithuania would gain a connection to the Port of Klaipėda through the project, while Estonia’s first major priority was a high-speed railway connection to Pärnu.
“Perhaps we should assess whether we should have stopped earlier. When I was Prime Minister, the economic priorities were somewhat different.
“The railway genuinely seemed promising and, to some extent, financially viable. We held discussions with Belarusian and Chinese representatives about a route to Scandinavia.
“The idea was that cargo transported through Belarus would be transferred here for onward shipment along the European railway network. That was where the economic rationale lay,” Kučinskis explained.
According to the minister, the entire concept subsequently collapsed for reasons beyond Latvia’s control, making the original plan impossible to implement.
“I even doubt whether the Chinese project is still developing. I have not heard anything about it.
“We lost that opportunity, and I seriously doubt that passenger transport alone could make the project financially viable. Security – yes,” Kučinskis acknowledged.
Asked whether he was referring to the project’s military dimension, Kučinskis stressed that, from a military perspective, connecting military training areas and ensuring access to them is considerably more important.
According to him, the military component is the only aspect that should currently be considered.