Deja vu in Finland: new
Russia-West sanctions war brings back old memories
Finland has never been able to extricate itself economically or
politically from the mood swings of the giant next door, and it's
already taking a hit from the latest crisis.
Vantaa, Finland
— An air of dejection hangs over the sprawling
Valio dairy
plant here. Until earlier this month, the factory operated two
shifts to process and pack cheese, butter, and other milk products
mostly destined for
Russia.
But virtually all workers on the single remaining shift now clock
off by mid-afternoon, leaving behind a vast, refrigerated warehouse
stacked with pallets stamped "for Russia" that have nowhere to go.
"We really hope this doesn't last too long," says plant director
Heikki Makela, a tall, taciturn Finn who firmly declines to express
any political opinion about the escalating sanctions war between
Russia and the West that has engulfed his company, and his country.
"I can only say that we work hard here to make good products, and
that's what we like to do."
Valio is
Finland's hardest-hit company by Russia's
ban on food imports from the
European Union, designed to retaliate for the EU's adoption of
third-stage sanctions over the Kremlin's
Ukraine policies. If the blockade goes on for an extended
period, the company will need to find alternative markets for the
almost 250 million euros ($330 million) worth of goods it sold to
Russia last year, representing 20 percent of net sales.
Valio's predicament is a familiar one for Finns. Part of the Russian
Empire until 1917, Finland has never been able to extricate itself
economically or politically from the mood swings of the giant next door.
And once again it's being tugged between its economic ties in the East
and its political affiliations with the West.
Deja vu
In the cold war era, Finland was the subject of a special arrangement
between East and West, known as "Finlandization,"
under which a democratic Finland was allowed to keep its independence,
but was required to remain militarily neutral and follow a pro-Soviet
foreign policy. Those days are gone, most Finnish experts stress. Today
Finland is still neutral, but it takes its foreign policy cues from the
EU.
Just a hint of Finland's former "special relationship" with Moscow
was on display Friday, as Finnish President Sauli Niinistö
met with
Vladimir Putin in his Sochi vacation home to urge greater efforts
toward peace in Ukraine. "I have a feeling that we’re on the brink of
cold war," Mr. Niinistö told journalists in Helsinki, adding that urgent
steps must be taken "to bring this terrible spiral of mistrust to an
end."
Finland has been down this track before. After the demise of the USSR
in the early 1990s, cross-border trade almost totally collapsed. Finland
went from sending 25 percent of its exports to the Soviet market to a
mere 3 percent, plunging the Finns into deep recession and spiking
unemployment to almost 20 percent.
"After that experience it was decided that never again could Finland
allow itself to be so dependent on any one country," says Teija
Tiilikainen, director of the Finnish parliament's Institute of
International Affairs in Helsinki. "We have since diversified, we've
joined the EU, and only about 10 percent of Finnish exports go to Russia
today. But we still have a longer common border with Russia than all
other EU states combined, and we have a lot of other connections. You
can't ignore such a big neighbor."
As a result, the drop in Russian trade isn't as painful as in the
'90s. But it comes at a bad time for Finland, two years into a sharp
recession brought on by a general slump in exports, the
decline of its former national champion – the mobile phone pioneer
Nokia – and the rising costs of an aging population.
"You hear a lot of people saying pretty glum things, but in fact only
a small percentage of our exports are hit by the sanctions so far," says
Iikka Korhonen, head researcher for the Bank of Finland's Institute for
Economies in Transition. "Consumer confidence is slumping all over
Europe. Russia is our third-biggest trading partner, after Germany
and Sweden, and our trade with Russia has fallen by 14 percent,
year-on-year, even before these sanctions kicked in. It's not simply
about the sanctions."
Seeking a middle ground
A
survey of Finnish businesses by the Chamber of Commerce last week
found that nearly half of them were being hit, directly or indirectly,
by the sanctions. But about two-thirds of the respondents supported the
sanctioning of Russia over the Ukraine crisis, while just a quarter
disapproved.
Despite Valio's woes, Finland has not fared as badly from the Russian
food ban as countries such as
Poland, Lithuania, Germany and the Netherlands.
"Nobody likes sanctions, but I think that people understand that if
key principles of international law and commitments are violated, the EU
had to react," says Markku Keinanen, head of the Finnish Foreign
Ministry's department for external economic relations. "A rules-based
world is very important for small nations. However, Finland is always
for a negotiated solution to this crisis."
On the sanctions debate, Finland has not sided either with the hawks
in Europe, such as Poland and Britain, nor the handful of countries such
as Hungary and the Czech Republic, that
have begun publicly to express misgivings over EU sanctions policy.
Russian experts say that even if the Ukrainian crisis abates
countries like Poland, which
led the charge on amping up sanctions against Moscow, will likely
find Russia's door remains closed to their produce.
"Finland has always adopted a realistic attitude about Russia. We
know that our geographic location isn't going to change, nor will our
basic economic interests. Certain economic relations between Finland and
Russia make a lot of sense, and we're pretty sure that will continue to
be the case," says Mr. Korhonen.