Three Seas Initiative Strengthens Europe

“The Three Seas Fund is an economic vehicle operating on a commercial basis to support the development of key infrastructure projects and improve connectivity in the countries of the region. Nine development banks and institutions from the Three Seas countries and two private investors have joined the Fund. We have raised approximately EUR 1 billion of capital and completed four investment projects while a fifth is being finalised. We believe that the Fund will inspire further economic and business initiatives to deepen co-operation in the region in the future”, said Beata Daszyńska-Muzyczka, President of the Management Board of BGK, Polish Development Bank.

“The Three Seas countries represent as much as 25 percent of the population of the European Union and 30 percent of the EU territory. However, in economic terms, our combined Gross Domestic Product is less than 20 percent of the Union GDP. This suggests a huge space for increasing our capacity and potential”, added Mrs Daszyńska-Muzyczka.

In her opinion, the region’s investment needs for transport, energy and digital infrastructure are close to EUR 650 billion to match the existing infrastructure of Western Europe. The Three Seas Fund is pursuing its mission; however, in view of the scale of the needs, it mainly provides a stimulus and a roadmap to support the building of co-operation.

The Power of Co-operation

While Three Seas co-operation is developing on several fronts, the seventh Summit of the Initiative, held on 20‒21 June 2022 in the Latvian capital Riga, focused on the prospect of stopping Russian aggression against Ukraine and on the consequences of the war.

In addition to the 12 countries of the region, the Summit brought together strategic partners: the United States, Germany, and the European Commission. Japan and the United Kingdom, among others, expressed their support for the Initiative. The final declaration welcomed the allocation of around EUR 1 billion by investors to the Three Seas Fund and encouraged international financial insti-tutions and private investors who share the general objectives of the Initiative to invest in the Fund.

“What is very important for us as a development bank together with other development institutions from the region is to address economic needs through effective use of the countries’ budgets. Allocations under the new EU perspective 2021‒2027 will support the region and strengthen economic ties between the EU and Ukraine”, said Beata Daszyńska-Muzyczka in the context of the Riga summit.

Planned investment projects in the Three Seas region could be of great importance for Ukraine and the development of cross-border co-operation with its participation. One potential example is the construction of a power line connecting the Three Seas countries with Poland’s eastern neighbour. Investors engaged in the Fund and Polish entrepreneurs supported by BGK could take part in the construction of the transmission grid in Ukraine.

The Summit declaration acknowledged an important side event: the Business Forum. It discussed key issues for further economic co-operation and announced two important events.

At the panel discussion “The Three Seas region – primed for future-proof investment”, Scott Nathan, CEO of the US government agency DFC, confirmed that DFC will join the Fund as an investor. Its capital contribution is expected to amount to USD 300 million (approximately EUR 280 million), bringing the total capital raised by the Fund to approximately EUR 1.3 billion.

DFC (U.S. International Deve-lopment Finance Corporation) works with the private sector to finance key solutions in areas such as energy, health care and new technologies. It invests worldwide, particularly in developing countries.

“The investment needs of our region are crucial for EU cohesion, sustainable economic growth, improved connectivity and energy security. I am delighted that our US friends from the DFC share this view and intend to invest in the Three Seas Fund”, said Beata Daszyńska-Muzyczka, who took part in the panel discussion in Riga.

During the Business Forum, Joe Philipsz of Amber Infrastructure announced the fourth investment of the Three Seas Fund: the Bulgarian Port of Burgas. The Fund has acquired a significant stake in the company that is its main operator.

The investment in the Port of Burgas corresponds to the Fund’s objective of improving connectivity in the Three Seas region. Furthermore, the port connects the Three Seas region with Central Asia and the Middle East.

The investment opens up new opportunities for the port: the expansion of existing and construction of new quays; the further modernisation of facilities; and the possibility of handling new types of cargo.

At the World Economic Forum in Davos in 2022, the Three Seas Fund signed an agreement with Romania’s Transgaz for the expansion of Romania’s transmission system. The new pipelines will strengthen the gas security of the Three Seas Initiative countries. In the future, they could also transmit hydrogen.

In mid-2022, Three Seas Fund company CARGOUNIT leased a new Smartron locomotive to Romania’s Unicom Tranzit. CARGOUNIT’s expansion has a positive impact on the development of transport links in the region. Three Seas investment demand in the transport sector alone is estimated at EUR 290 billion by 2030 (SpotData). The key areas include the development of rolling stock, a need that has been made even more urgent by the war in Ukraine.

In the World of Diplomacy

Another event of a different nature related to the Three Seas Initiative took place at the end of 2022. The Polish Academy of Diplomacy hosted representatives of the countries of the region as part of the first edition of The Three Seas Initiative – Diplomatic Fellowship Programme. It is a training project initiated by the Ministry of Foreign Affairs of the Republic of Poland and addressed to diplomats from the Three Seas Initiative countries. A representative from the Ministry of Foreign Affairs of Ukraine was also invited to participate. The main objective is to increase knowledge and awareness of the importance of closer regional co-operation and to support the development of a network of diplomatic and expert contacts. The guests invited to Warsaw took part in debates, primarily on the topics of transport, digitisation and energy. The project was co-organised by BGK and the Empiria i Wiedza Foundation. The diplomats also visited the BGK headquarters.

Global Reach

The Three Seas Initiative is expected to continue developing in 2023 with further investments. Given the ongoing war in Ukraine, security is coming to the fore, including energy security, food security, and cyber security, which implies a wide range of potential new projects. As Beata Daszyńska-Muzyczka points out, the Russian aggression against Ukraine has shown that investments in the critical sectors of transport and logistics, energy and the digitalisation of the Three Seas countries, NATO’s eastern flank, will impact the effectiveness of aid to Ukraine.

Once Ukraine wins and the war is over, the reconstruction of the country will become a priority. The Three Seas Initiative could then provide a platform to support the process. ©℗

112 Million Europeans

The Three Seas Initiative held its first meeting in New York in 2015, and its first summit in Dubrovnik in 2016. The Initiative was established as a forum for co-operation among 12 countries: Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. The countries of the Three Seas Initiative account for almost one third of the territory of the European Union. They are home to more than 112 million people. The co-operation of the Three Seas countries started at the initiative of Polish President Andrzej Duda and the then Croatian President Kolinda Grabar-Kitarović.

Three Seas Fund

Initiated by the BGK, Polish Development Bank, the Fund is a commercial project. In addition to strengthening co-operation among countries and improving infrastructure in the region, it aims to generate a return on investment. Its investors include institutions of the Three Seas countries, international financial institutions and private investors from all over the world. The Fund has completed four investments: CARGOUNIT (a locomotive rental company), Greenergy (a data centre), Enery (photovoltaic farms) and the Port of Burgas. The Fund has signed a letter of intent with Romania’s Transgaz for the development of gas infrastructure.

The Fund invests in projects located in the Three Seas region which are cross-border in nature, i.e., impacting at least two countries, at the greenfield stage or with prospects for business scale-up, using state-of-the-art technology for the sector.