Finland-Norway Rail Link for Arctic Sea Route

A Finnish company said on Thursday it planned to develop a railway connection between north Finland and Norway's Kirkenes port to link with potential Arctic shipping routes at an estimated cost of between 3-5 billion euros ($3.4-5.6 billion).

Global warming has reduced ice coverage in the Arctic, opening up the possibility of new and shorter shipping lanes between north Europe and Asia, though control of routes is disputed.

Finland's Finest Bay Area Development said it had signed a memorandum of understanding with Norway's Sør-Varanger Utvikling to investigate how to build a railway and its impact on the environment, society and the economy.

"An Arctic railway would connect Finland to the Northeast Passage," Kustaa Valtonen, a director at Finest Bay Area Development, said in a statement. "We will provide a faster trade route between Asian and European markets."

The company also plans an undersea tunnel between Finland's capital Helsinki and Estonia's capital Tallinn.

Scientists believe the Arctic contains around 13 percent of the world's untapped reserves of oil and 30 percent of its undiscovered reserves of natural gas as well as huge deposits of minerals such as zinc, iron and rare earth metals, giving the region a growing strategic significance.

Kirkenes lies well above the Arctic Circle, about 350 km (217 miles) from the northernmost parts of Finland's railway network. The line could start at Kemijarvi or Kolari in Finland.

Last year, a Finnish government study concluded a railway connection to Kirkenes would take at least 15 years to build and would not be economically viable.

"We expect to see a significant increase in cargo traffic between Europa and Asia. Their study did not cover it too well," Valtonen told Reuters.

Finest's planned 100 km (60 mile) tunnel for linking Helsinki with Estonia's capital Tallinn got in March a provisional 15 billion euros in financing from China's Touchstone Capital Partners.

Reporting by Tarmo Virki