"Both the state and the developer must have a clear, shared understanding of the initial conditions on which the two states' infrastructure object of strategic importance will be designed," Minister of Finance Jaak Aab (Centre) said in his response to project developer, Finnish entrepreneur Peter Vesterbacka. "There are currently several inquiries by ministries that still have yet to receive an answer."

Last December, Finest Bay Area Development Estonia OÜ, a company developing the project, filed a request for launching the procedure for a national designated spatial plan for the railway tunnel and associated artificial island in the Gulf of Finland. At the request of the Ministry of Finance, it updated its application in late April.

Aab, who is tasked as minister of public administration with taking the issue to the government, relayed the updated request to the relevant ministries, whose feedback subsequently indicated that a number of questions have yet to receive answers.

"Currently it is unclear whether the planned railway will be a public or non-public one," the minister noted. "The project's financing and profitability also remain vague."

According to the minister, another aspect that still needs to be clarified is the role of the state, including the activities it is presumed to conduct as well as the obligations and expenditures it will incur, even if the project should be wholly implemented by private entities.

"With the construction of an undersea tunnel connecting two states, it is clear that the state has to take into account possible financial expenses, such as those related to developing supplementary rescue capability or preparedness to finance the functioning of the strategic infrastructure should the developer cease its operation," he explained.

State interests must be considered

Should a national designated spatial plan be initiated, it also has to take into consideration the interests of the state. For instance, the railway tunnel should be linked up to the passenger and freight tracks alike of the planned Rail Baltica railway. Both the Estonian and Finnish governments have stressed the aspect that the project be carried out jointly by the two states, and that agreements related to it be concluded on the governmental level.

An analysis conducted in 2018 as part of the joint Finnish-Estonian project Finest Link indicated that in addition to improving transport options between the two capital cities, an undersea tunnel connecting Tallinn to Helsinki would also entail broader economic gains. In order to reduce pressure and risks imposed on state budgets, the importance of involving European resources as well as private capital was also highlighted.

"The establishing of a tunnel between the two cities has been discussed for decades," Aab said. "Whether or not the government can make a decision regarding the launch of a national designated spatial plan depends on the additional information to be provided by the developer."

China's Touchstone Capital Partners and tunnel developer Finest Bay Area Development, headed by Vesterbacka and businessman Kustaa Valtonen, signed a €15 billion memorandum of understanding in early March according to which one third of the funding would be granted as own capital and two thirds as a loan.

Touchstone would maintain a minority stake in the development company and assume the obligation of granting a loan to the project. ARJ Holding, a Dubai fund, has previously also agreed to finance the tunnel in the amount of €100 million.

According to Finest Bay Area Development, construction of the tunnel would take six years and involve 20,000 people annually.

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