30.07.2026
Pēteris Celms, financial strategist at RB Rail AS, writes in the Äripäev opinion piece Rail Baltica is not needed for trains, but for industry, that Estonia is Europe's largest exporter of wooden modular homes, covering approximately a quarter of the entire European market.
Estonian house factories sell the majority of their production to Norway, Sweden and Finland – the export map almost perfectly matches the map of where ships sail. The largest markets are located inland – a railway would finally provide access to them.
A region that only talks about how much its infrastructure costs will never get to the more important question: how much it could earn, writes Pēteris Celms, Head of Financial Strategy and Economics at RB Rail AS.
Pēteris Celms, Head of Financial Strategy at RB Rail AS, writes that Rail Baltica should not be viewed merely as an expense, but as a tool for industrial and export growth.
According to him, the development of heavy industry in the Baltic States is primarily limited by access to continental European markets, as road transport is expensive and has volume restrictions. Rail Baltica would create a reliable heavy goods corridor that would help grow the wood, metal, construction and defense industries, while also supporting security.
The debate about Rail Baltica in public is almost always a debate about costs – budgets, deadlines, audits. All of these are legitimate questions. But such a perspective treats railways as a bill to be paid, not as a tool to be used. A region that only talks about how much its infrastructure costs will never get to the more important question: how much it could earn.
What the Baltic States have to offer
Countries don't get rich because of the infrastructure they have. They get rich because of what they sell. And what the Baltic states can sell to Europe today is not limited so much by what we can produce, but by what we can move.
The cost of transportation is an invisible duty that every economy pays to get its products to market. And this “duty” does not treat everyone equally. A ton of software crosses borders duty-free. A ton of pharmaceuticals costs almost a non-existent fraction of its value in transportation. But a ton of processed wood, prefabricated concrete elements or steel structures costs a lot because their value is spread over a large weight and volume.
Meanwhile, the overland route to continental Europe still means trucks for most of the region: small shipments, long distances, rising tolls, a chronic shortage of drivers, and planned tightening of carbon pricing. Now let's see what the Baltics actually have to offer.
The problem is not in production, but in market access
This is not a region lacking in manufacturing skills. Estonia is Europe's largest exporter of wooden modular homes, covering about a quarter of the entire European market. Lithuania, with a population of less than three million, is among Europe's five largest furniture exporters and is one of IKEA's largest suppliers in the world.
Latvian companies export prefabricated concrete and steel structures and engineering elements manufactured with millimetre precision. Nor is the region short of raw materials. The Baltic states are among the most forested in Europe and have a strong industrial workforce and manufacturing base. The rapidly developing defence industry in all three Baltic states produces heavy goods and requires heavy transport infrastructure. A railway that strengthens deterrence also strengthens the industry behind it, writes Latvian financial strategist Pēteris Celms.
But these success stories have one thing in common. Packaged furniture and road-wide building modules are industries that have evolved around the truck. The product is designed around transportation: the width of the modules is determined by road rules, the furniture is designed to be packed as tightly as possible.
The target markets also tell the same story. Estonian house factories sell the majority of their production to Norway, Sweden and Finland. Latvian metal construction manufacturers send their products to Scandinavia. The map of heavy goods exports from the Baltic states coincides almost perfectly with the map of where ships sail.
It's a combination of geography and infrastructure. But only one of the two must remain constant.
However, the largest markets for what the Baltic states could produce next are located inland.
Infrastructure shapes the economy
The clearest example is Germany and Austria, which dominate European demand for cross-laminated timber. This market is growing by nearly nine percent per year, driven by European Union public procurement requirements that take into account the carbon footprint and a chronic shortage of production capacity.
Sea transport does not solve this shortcoming. A ship that sets sail from Tallinn or Riga ends its journey in a foreign port, and from there the goods still have to be delivered overland to a construction site in Bavaria, for example.
Road transport is the worst at this task. The standard European road transport gauge allows for loads up to 2,55 meters wide and 13,6 meters long with trailers. Large-sized construction elements regularly exceed these limits. This means special transport permits, route restrictions and separate coordination of each load – truck by truck, border by border.
Even more telling is that manufacturers often reduce the dimensions of their products during the design process just to fit on the road. The same limitation that shaped the successful prefabricated furniture manufacturers in the Baltics also implicitly sets an upper limit on what can be produced here in the future. And wood is just the most obvious example.
The same logic applies to all heavy, oversized, or time-critical goods. The buyer of high-value-added goods does not buy tons – he buys components that arrive at a certain delivery time, at the right moment, and in the right order. One regular freight train replaces dozens of trucks and dozens of separate transport permits with a single scheduled shipment.
This does not mean that all transport should move to rail. Trucks will continue to be the solution for the last mile and short hauls. Rail should only win over long, heavy and regular freight flows.
The first steps towards this alternative have already been taken. From 2022, when the European-gauge railway from Poland was connected to the Kaunas Intermodal Terminal, a regular intermodal train will run between Kaunas and Duisburg three times a week.
Each train carries 36 semi-trailers or containers on a route of more than 1500 kilometers according to a fixed timetable. Last year, a stop in Łódź was added to the route, and this year the operator invested in new wagons to increase the carrying capacity. For now, it is more of a keyhole than an open door – one connection serving one city, while around 24 million tons of goods cross the Polish-Lithuanian border by road every year.
But it proves that the model works and is growing. Rail Baltica is turning this keyhole into a full-scale heavy freight corridor from Tallinn to Warsaw.
In fact, we have seen this situation before – only in the opposite direction. The industry of the Baltic States was built to serve a market that could be reached by rail. Before the First World War, Riga and Tallinn were among the most advanced industrial centers of the Russian Empire. During the Soviet era, factories in all three Baltic States sent railway cars, electronics, machinery and vehicles to the Eastern market via a railway network with a gauge of over 1520 mm, to a market of more than 200 million people.
When the Soviet Union collapsed, some of this industry was indeed unable to compete in terms of quality. Those companies that could, however, ran into another problem. Their new market was in the West, but all of their heavy-duty infrastructure was still oriented eastward. The Baltic states have been moving westward for the past thirty years – with their politics, trade, currencies and alliances.
The railway is the last major infrastructure element that still points in the opposite direction. The most honest objection is this: there must be goods first, only then will the trains come. However, goods are only sent by train once the train is already running. It is a classic “chicken and egg” problem.
But an infrastructure project of this magnitude is not judged by how much traffic precedes it. It is judged by what production decisions it enables. An investor who decides to build the next cross-laminated timber production line sees a region with raw materials, skills and a direct heavy-freight rail connection to mainland Europe.
A manufacturer of prefabricated building elements sees that a previously inaccessible half of its market is now directly accessible. A manufacturer of wind turbine towers, bridge elements or other large-scale industrial products sees a place where the phrase “too big for the road” no longer means a business bottleneck. None of these industries need to be reinvented from scratch in the Baltics. They just need a reason to expand here, not closer to the customer.
Industry is built where the infrastructure is reliable.
Railways also create new industries
The economic growth forecasts for all three Baltic countries are currently significantly below both their past growth rates and what it would still require to catch up with Western Europe. Economic growth is not a promise. It is a mechanism. An economy that wants to grow faster than Europe must sell products with higher added value to Europe.
There are not many ways to achieve this. The most direct path is to move towards higher value-added products in the areas that we already know how to produce.
Ultimately, the security argument and the economic argument are one and the same. Axle loads that carry military equipment northward carry construction elements, machinery, and furniture southward. Terminals that can handle a military brigade’s worth of equipment can handle a factory’s monthly output. The rapidly developing defense industry in all three Baltic states produces heavy goods and requires heavy-duty infrastructure. A railway that strengthens deterrence also strengthens the industry behind it.
The problem for the Baltic countries has never been a lack of materials or skills.
The problem is that the longest distance separates us from the industrial heart of Europe for the very products that would make the most sense to manufacture here. Rail Baltica will shorten this distance precisely where it is currently the longest.
The opinion piece was first published in Äripäev on July 20, 2026
How did this story make you feel?
3
