Plans for a Helsinki–Tallinn undersea rail tunnel are a step closer to reality after Finnish and Estonian ministers signed a memorandum of understanding (MOU) earlier this year.The MOU binds the two states to further investigate the viability and economic impact of the tunnel’s construction.The 50-mile undersea rail tunnel has been on the table for almost a decade, with multiple studies considering the potential for socio-economic development between the two cities.According to a study financed by the European Union EUBSR Seed Money Facility, published in February 2015, the project is set to be a success.Predicted to treble travel and boost trade, the tunnel, if built, will be one of the longest underwater railway tunnels in the world, serving four million people living within a 200km radius of both capitals. It will also carry about half of future cargo traffic in the area.25,000 daily commuter trips are to be expected in the first ten years after the opening of the railway, which promises improved accessibility and reduced commuting times from the current two-and-a-half hours by ferry to a 30-minute journey. The revenue generated by passenger traffic would amount to €67bn by 2080.Trains will be able to carry 800 passengers each and cargo with a total capacity of 96/TEU, reaching speeds of 250 km/h.Expected to take eight to ten years to be finished, the total cost of the development can vary between €9bn and €13bn and construction work can start anytime between 2025 and 2030. Further plans include the construction of a €3.6bn Rail Baltica high-speed train line to link Finland, the Baltic States and Poland, improving the connection between central and northern Europe.Socio-Economic ImpactA decisive factor on the tunnel’s construction is its ability to boost economic activity in the Nordic region.The region can become one of the significant centres in Northern Europe, as the two cities house more than 2.5M inhabitants and see over 7.5M passengers travel annually by ferry for business or tourism purposes. By 2080, the total number of passengers between the two cities is expected to reach 41M.Although transport via the new tunnel is slated to bring a 1–3% increase to Finland’s GDP within 20 years in operation, that will not be replicated in Estonia, Latvia and Lithuania, which will see only an increase of 0.5% in GDP.Both countries are expected to collect the benefits of the wider consumer market and shared labour market that the tunnel would open to.The European study concludes: "The figures also show that direct and indirect benefits during the construction and operation period to the economy of both countries are remarkable. “The competitiveness of the twin-city area will be strengthened by improved accessibility, new companies and business, better image and a variety in living options.”Risks and ChallengesThe project poses risks in the construction and execution phases as well as economic, political and technological challenges.In its initial phase, the tunnel’s main problems are related to the geology at the proposed exit location in Estonia, as an important source of water supply for the city is located there.Apart from the uncertainty surrounding its funding, the study also warns that "globally, the political risk for the project progress could be a culmination of the crisis between East and West."At a national level, tensions might arise due to the different process and culture surrounding of the decision-making process."The political success of the tunnel project will depend on the wideness of its impact area and how it is combined with the whole transport system of both countries," the study says.These are still early days for any clear decision, but a potential next step for the project would be the foundation of a Finnish-Estonian project organisation followed by a full feasibility study to make it clear when the tunnel is to be expected.According to Hannes Virkus, an adviser at the Estonian ministry of economic affairs, real decisions shouldn't be expected before 2018.* This is a version of an article that first appeared at www.railway-technology.com.