European Concerns Over China’s Economic Power Hold Up a Project to Build the World’s Longest Undersea Rail Tunnel Under the Baltic Sea
btw : projet poussé par l’ex-marketeur en chef de Angry Birds
A Chinese-financed project to connect the Estonian and Finnish capitals has hit a snag as Europe ponders how to deal with Beijing’s economic heft.
A Chinese-funded project to build the world’s longest undersea rail tunnel in the Baltic Sea is being held up over concerns about its financing, making it a focal point of larger European questions about the influence of China.
The idea of building a tunnel between the Finnish and Estonian capitals of Helsinki and Tallinn is not new, but fresh concerns arose about the project after Peter Vesterbacka, a Finnish tech entrepreneur, inked a deal this year with Touchstone Capital Partners, a financial firm that invests the resources of state-owned Chinese enterprises. The deal will supply $17 billion to fund the three Chinese companies that have signed on to build and design the tunnel.
Should the project break ground, it would become the largest Chinese investment in Northern Europe and open up a slew of other opportunities to build infrastructure across the region.
In July, however, Estonian Public Administration Minister Jaak Aab said the current timeline to open the tunnel in 2024 wasn’t realistic and questioned Vesterbacka’s business plan while also raising serious concerns about the source of the private financing: China.
The tunnel controversy is playing out against the backdrop of an ongoing trade war between Washington and Beijing, and greater concern about China’s growing presence across Europe. Even as individual countries cut deals, the European Union has begun to take a tougher approach to China’s rise, making an unprecedented declaration this year that Beijing was a “systemic rival” in some areas, as well as a competitor or potential partner in others. In late September, Japan and the EU also signed a major deal to build infrastructure and set development standards around the world, in what was seen as a response to Beijing’s amorphous Belt and Road Initiative. The moves came on the heels of a series of Chinese acquisitions across Europe, which sparked new EU rules that allow for closer scrutiny of foreign investments and led to an ongoing debate over updating the bloc’s procurement, competition, and industrial policies to better adjust to China’s economic pull.
“There is more strategic thinking about China now than ever before in Europe,” said Erik Brattberg, the director of the Europe program at the Carnegie Endowment for International Peace, “but there isn’t a coherent European strategy yet.”
Vesterbacka says concerns over Chinese involvement are overblown. He argues that the tunnel will be majority-owned and operated by FinEstBay, the development company he co-founded, not the Chinese investors and contractors.
“We need to do more to alleviate the fears and concerns over Chinese involvement, but I think that’s very much doable,” Vesterbacka told Foreign Policy in an interview. “The Chinese are investing in this because they see it as a good business case.”
Indeed, until Beijing entered the picture, the political will and public funds had never fully materialized for such an ambitious undertaking. So, Vesterbacka, who made his name as the former chief marketing officer at Rovio, the game-maker behind the international hit Angry Birds, decided to launch a privately funded version in 2016. Since then, Vesterbacka has moved quickly to bring the project to fruition by lining up tunnel boring companies to drill under the Baltic, developing a ticketing system for the trains, bringing private investors on board, and setting an ambitious December 2024 deadline for the 62-mile tunnel. His deal with the Chinese companies was intended to help make the project a reality.
Instead, the episode has opened up a conversation about how best to finance and build large-scale infrastructure projects and provided a window into the growing tension between geopolitics and business when it comes to China-linked projects in the European Union.
Bit by bit, despite pressure from the Trump administration, EU countries are demonstrating a willingness to engage in big projects with China. In March, Italy became the first G-7 country to sign up to the Belt and Road Initiative, joining 23 other European countries that signed memorandums of understanding with Beijing’s signature foreign-policy initiative. Meanwhile, countries such as Hungary, Greece, and Portugal continue to welcome Chinese investments in their railways, ports, and energy infrastructure, and British Prime Minister Boris Johnson has signaled that China will play a big part in the country’s post-Brexit economy. France and Germany are also still searching for a balance to strike in their dealings with Beijing, using tough rhetoric while still courting Chinese cash.