Economy

Beijing Reportedly Ready To Finance Helsinki-Tallinn Tunnel

Analysis 13 March 2019
Beijing Reportedly Ready To Finance Helsinki-Tallinn Tunnel

China’s Touchstone Capital Partners is ready to invest up to 15 million euros ($16.9 million) in the construction of an undersea tunnel linking Finland and Estonia, according to Finnish backers of the project (Helsingin Sanomat, March 8). Such an injection of funds could mean that construction of what would be the world’s longest such tunnel could begin this year and be completed by 2024. But some are expressing skepticism about both China’s interest and the possibility that the project will in fact take off.

On the one hand, reports about the Chinese commitment so far are coming only from the Finns pushing the idea, not from the Chinese directly. That raises the possibility these reports are more about forcing others, especially in the European Union, to come up with money than an actual indication the backers already have enough. And on the other hand, the project, if completed, would have so many economic and geopolitical consequences that it is certain Moscow will try to shoot it down, lest such a tunnel tie Finland more closely to the EU and the North Atlantic Treaty Organization (NATO) or interfere with Russian transit through the Gulf of Finland (see EDM, June 21, 2016; December 11, 2018).

Last week (March 8), Helsinki’s Helsingin Sanomat reported that Peter Vesterbacka, the head of the Finnish company promoting the tunnel, had signed a memorandum of understanding with Touchstone Capital that calls for Beijing to invest up to 15 billion euros in the project (Helsingin Sanomat, March 8, 2019).

Such an infusion of cash would make it possible for Vesterbacka and his team to go ahead with their plans to build two rail tunnels 50–70 kilometers in length (depending on the route) under the Gulf of Finland, between Helsinki and Tallinn, as well as an island at the midpoint that would feature luxury residences and, potentially, a stop for cruise ships.

Needless to say, this report immediately attracted attention in Europe and Moscow (RBC, March 8), while at the same time casting doubt on the report and raising broader questions about the project.

In a commentary for Tallinn’s Postimees newspaper, Leslie Leino, a specialist on China, says that, in his view, it was surprising that neither the Chinese firm, nor the Chinese government, nor the Chinese embassies in Helsinki and Tallinn have said anything about the project—something one would have expected given how significant such a development would be (Postimees, March 10).

Moreover, Leino continues, if the report turns out to be true, the Finns, Estonians and the West would do well to be cautious in welcoming this development. Beijing, he points out, has never acted in an “altruistic” manner; and if it is investing in this tunnel, it is doing so not to help the Finns or Estonians but rather to expand the channels for the sale of Chinese goods to Europe.

One can only assume, he suggests, that Beijing will use the leverage such an investment would make possible to help itself rather than anyone else. Furthermore, there is a real risk that this optimistic report will encourage others to invest in a project that is ultimately unlikely to pan out; and they, not Beijing, will be left with massive debts and little to show for it.

Some Estonian officials, including Urmas Paet, a former Estonian foreign minister who currently serves in the European Parliament, agree. He argued, “The risks of using the money of Chinese state companies are too great,” and that funding should come from Europe rather than anyone else. According to Paet, there is “no reason” that the tunnel could not be built strictly with EU funds (Postimees, March 10).

Discussions about building this tunnel have been going on for two decades. In 2008, Estonia and Finland agreed to pursue it. In 2016, the EU financed a feasibility study that concluded the project could be realized but at a cost greater than the Europeans were willing to finance at that time (Estonianworld.com, June 16, 2016).

Since then, Vesterbacka, the head of the Finnish company that announced the Chinese commitment, has been promoting the idea, saying that it will cut travel time between the two capitals from 150 minutes to 20 and function regardless of the weather. He has even already begun selling tickets in anticipation of the completion date of 2024 (ERR, March 11, 2019).

But there are obstacles ahead, technical as well as political, whether or not China does invest. The technical ones are far from trivial. First, there is little international experience with building such long tunnels—and none in this region. Second, the railways in Finland and Estonia use the broad or “Russian” rail gauge, while the tunnel and the Rail Baltic project it would connect with will use the narrower “international” or European gauge tracks.

Unless the tunnel is built with a variable gauge system, something that has been discussed, there will also have to be major new construction for transshipment points at both ends of the tunnel if goods traffic is to move seamlessly. And third, the appearance of a new man-made island in the middle of the Gulf of Finland to service this tunnel system could have a serious impact on shipping between St. Petersburg and the West given that the gulf at its narrowest point is only 40 kilometers wide (Forbes, November 13, 2018).

The political impediments are probably even more serious. Europeans want Chinese investment but are unwilling to give up any control to Beijing. Whereas Russia vehemently opposes the tunnel and the Rail Baltica system of which it is a part, viewing them together as a Western project, regardless of who funds it.

In Moscow’s view, this transit project threatens Russian security because it would allow NATO to move men and equipment quickly throughout the Baltic countries and into Finland—precisely the reasons many in that region back this railway and proposed undersea tunnel (Regnum, Windowoneurasia2.blogspot.com), July 11, 2016).

Consequently, the Finnish announcement of China’s investment plans is likely to spark new controversies rather than ensure that the much-discussed project will finally move ahead.

This article was originally published on www.jamestown.org.

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