Baltic states sign agreement on Rail Baltica

By bne IntelliNews October 3, 2016

Estonia, Latvia, and Lithuania have signed the final agreement on financing and implementation of the Rail Baltica project, the CEO of operator RB Rail told the Latvian parliament on September 30.

The signing ends the long bickering between the three Baltic states, with the issue of VAT payments the key obstacle. The Baltic trio managed to overcome differences, however, only after the European Union - which finances 85% of the €3.7bn project - hinted the financing might be cancelled if disagreements persist.

“The agreement [is an] essential condition for implementation of the project … This is a great day in the joint history of the Baltic states,” the head of Latvia's European affairs committee Lolita Cigane said in a statement after meeting RB Rail CEO Baiba Rubesa.

The Baltic states most recent fight over the project concerned VAT payments, which Estonia and Lithuania would like to be handed to whichever country hosts the applicable works. Riga, however, would rather see all payments go through Latvian-based RB Rail, which heads the project.

The project also seemed to have suffered from poor relations between RB Rail and Lithuania. In early September, Rubesa complained to local media that continued delays owed to poor decision-making under Lithuania's leadership of the supervisory board of RB Rail.

Rail Baltic is one of the EU’s strategic transport endeavours under the TEN-T network, a system of roads and railways, typically linking several member states. It will join the Finnish capital Helsinki with Warsaw via the Baltic states.

The Baltic trio shares an interest in plugging the region into EU networks in transport, as well as energy and power, due to the isolation bequeathed by their history inside the Soviet Union. They have also often discussed joint projects in such sectors, which is often the only option for such small markets.

However, cooperation has been scant, with all three seeking to win the largest leverage from any inter-regional efforts. Agreement on Rail Baltica offers some hope, however, for other joint projects. 

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