Russia the answer to Finland’s woes?

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russian trucks afp

AFP

(File photo) Trucks queue on a narrow two-lane road near the Nuijamaa border crossing near Russia 247km northeast of Helsinki.

For generations, Finland has lived fearfully in the shadow of its giant Russian neighbour, but today Russia could be the answer to the Finnish economy's woes.

As they creep deeper into recession, the Finns may turn east for investment, while trying to forget a century under the Tsar followed by two hot wars and a cold one against the Soviets.

“There might be some prejudices,” said Heli Simola at the Institute for Economies in Transition in Helsinki.

“But these attitudes aren't an obstacle for commercial exchanges.”

Fresh data released by the Finnish government last week showed that the economy will contract 1.2 percent this year, worse than the 0.5 percent drop previously forecast.

This underlines a need for foreign cash, and for Finland, which has Europe's longest border with Russia, where else to look than east?

The military struggles of the 20th century have been replaced by the entirely different challenge to attract Russian investment. But it's a struggle Finland may be losing.

“Finland hasn't met its goals. We haven't managed to attract as many Russian investments as we expected,” said Kari Liuhto, Professor of International Business at Turku University.

According to Finland's central bank, Russian investments between 2002 and 2012 amounted to 245 million euros ($338 million), fifty times less than the 12.9 billion euros from the country's western neighbour Sweden.

Indeed, Russian investment in Finland is less than one tenth of Finland's own 3 billion euros of investment into Russia over the same period.

Even if Russian money channelled through EU banks is added, “that doesn't change the general perspective”, said Heli Simola, an economist at the Bank of Finland Institute for Economies in Transition.

Since late 2012, the government has launched a charm offensive to attract investment, particularly from Russia.

But so far, Russians have remained unimpressed by claims that Finland is an EU entry point with a strong infrastructure and clear legal framework.

Russian investors “lack information” and “don't know how to invest in Finland,” said Tuomo Airaksinen, head of the agency Invest in Finland.

“They don't know the legislation nor the risks. For many, the Russian market is enough for now,” he said.

To be sure, there has been some interest by Russian oligarchs and Kremlin-run businesses in their western neighbour.

In July, Finnish Fennovoima picked Russian nuclear giant Rosatom to build a plant on Finland's west coast in a deal which was expected to give Rosatom a 34 percent stake in its Finnish partner.

A month earlier Russians bought one of Helsinki's main sporting arenas, Hartwall Areena -- which plays host to major international ice hockey matches including NHL premiere games.

Also, the Russian Internet search engine Yandex is building a large data centre in the eastern town of Maentsaelae, and in 2011 Russia's state-owned USC acquired 50 percent of the Archtech Helsinki shipyard, one of the world's biggest builders of icebreakers.

“Russia's importance will grow. These projects from the last two or three years prove it,” Airaksinen said.

Professor Liuhto at Turku University sees “a good lobbying opportunity” in the Hartwall Areena deal, since the resident hockey team, Jokerit, plans to leave the Finnish league to join Russia's Kontinental Hockey League.

“It's a great opportunity to renew contacts with the Russian oligarchs who come to see matches featuring Russian teams,” Liuhto said, adding that much business in Russia revolves on personal networks.

Finland has a long history of privileged yet complicated relations with Russia, from which it became independent in 1917.

While the Nordic country remained west of the Iron Curtain during the Cold War, it was partially within Moscow's sphere of influence and benefitted from preferential trade deals with the Soviet Union.

But today, closer economic ties with Russia are a sensitive issue for many in a country which still bears the scars of two major wars with their eastern neighbour in 1939-1940 and 1941-1944.

The Hartwall Areena purchase provoked strong reactions from ice hockey fans and many Finns are wary of Russians buying second homes in the popular east of the country.

And scenes of violent protests in Ukraine after Vladimir Putin's Russia helped scuttle closer ties between Kiev and the EU only rattles nerves further.

According to a survey commissioned by the environmental group Greenpeace, 60 percent of Finns are opposed to Russian participation in the Fennovoima nuclear power project.

But for those welcoming the investments as a much-needed boost to a struggling economy, old animosities should not get in the way when rubles could start rolling in from the east. - AFP


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