Estonia, EU – Baltic States, Financial Services, Railways, Transport

The total cost includes outlays on all the necessary studies, technical designing of the railroad, estimated cost of building, cost of passenger, maintenance and goods terminals, electricity connections and acquisition of land, Minister of Economic Affairs and Infrastructure Kristen Michal said in a letter to the finance minister. "Added to the above-mentioned sum will be value added tax which according to European Union rules is not an eligible expenditure for aid," he noted.

According to Michal different EU aid rates can be applied to the total cost of the Estonian part of the Rail Baltica route basing on which the size of potential support varies. According to one scenario the maximum possible but rather unlikely 85 percent rate could be used which would cover 81 percent at the most of the total cost of construction exclusive of VAT, he said.

A second scenario puts the size of potential EU support between 739 and 1,116 million euros provided there is enough money for projects like Rail Baltica in EU funds for the 2014-2020 budget period and the next one starting in 2021 and that all Rail Baltica funding applications are granted. In this case Estonia would have to put up 197-574 million euros, Michal said.

Estonia aims to make the maximum possible use of EU resources and any delay with the project reduces the possibilities to apply for EU support, Michal said. The EU has approved financing in the amount of 442 million euros for the first stage of construction of Rail Baltica of which Estonia's share is 213 million euros. If the railway does not materialize the unused money will have to be returned to the European Commission and there will be no opportunity to apply for more funds. Stalling of the project would be damaging for the Estonian economy and deprive the country of a strategic rail link, the minister said.

Michal at the same time sees need for further analysis of the Rail Baltica financing scheme and viability. He said an additional analysis will be completed by next September and on its basis possible own financing scenarios will be determined.

Finance Minister Sven Sester asked Michal at the beginning of November for a more detailed calculation to show whether the Rail Baltica project is still feasible after having become over 200 million euros more expensive.

Construction of the European gauge railway is expected to start in 2018 and the railway is expected to be completed in 2024–2025.