Russian-Finnish economic relations after the global pandemic and green deals

Anton Loginov,
Trade representative of the Russian Federation in the Republic of Finland,
Trade representation of the Russian Federation in the Republic of Finland,

Economic and trade relations between Russia and Finland have been transforming under the influence of global and regional trends. On the macroeconomic level the COVID-19 pandemic drastically affected and invigorated the tendency to market protectionism, industrial relocation, and critical raw materials self-sufficiency. On regional and national levels, we witness the growing influence of the new European trade policy declaring strategic autonomy and aligning trade and climate issues.

Russia has always emphasized its interest in enhancing mutually beneficial cooperation with Finland based on investments, technology transfer, industrial cooperation and increasing the share of non-resource non-energy goods in turnover. There is an interest in bringing high-tech and high-quality Finnish industrial products and providing them an opportunity to participate in large-scale public industrial projects.

The shifts in bilateral dynamics does not disrupt the state of affairs but supplement it. The amount of investments made by Finnish companies in the last 25 years in Russia exceeded 14 billion USD. About 7 000 of Finnish companies are directly and indirectly involved in trade with Russia, 500 of them have their own productions or subsidiaries, some made investments. Russia is one of the top-3 trading partners for Finland. And Finland holds the 14th place in the list of the most important trade partners for Russia.

Recent statistics support this thesis. In 2020 the global pandemic reflected on bilateral turnover. However, in January-July 2021 it increased by 15.8%. Russian non-resource non-energy export (NNE) was 51% higher than in the same period last year. This growth is mostly explained by the supplies of chemical products, nickel matte and forest industry goods.

The share of NNE in total Russian supplies to Finland has already accounts for 44.8%. 75% of it classifies as low-processed goods. 32.5% of Russian import from Finland consists of technology industry goods: mechanical engineering, machinery and its parts, electronics and transport. During the next years we expect this trend to continue.

At the moment our countries’ officials are harmonizing a programme for strategic cooperation in trade and economy for the following five years. This programme could serve as a plan to stabilise bilateral trade and compensate for decreased turnover registered in the previous years. Industrial technologies, including Arctic technologies, non-carbon energy, circular economy, construction technologies, especially wood based, IT and digital technologies, education, science and innovations, biotechnologies, food production, and tourism are the main fields of cooperation. This document should be supplemented with an action plan or a roadmap with certain joint projects similar to the Declaration on the Partnership for Modernization signed in 2011.

The target of decarbonization of economy set by the EU creates new opportunities for the cooperation between Russia and Finland extending far beyond the traditional format existing in the field of energy supplies. The legislation package Fit for 55 released by the European Commission in July 2021 supported and extended the agreements and roadmaps under the Green Deal by committing to radically reduce its greenhouse emissions and establish the Carbon Border Adjustment Mechanism (CBAM). According to the calculations made by Trade Representation, in 2020 the amount of exported Russian goods that could be potentially exposed to CBAM exceeded 355.5 billion of euro.

However, around these “green” initiatives new high-tech markets emerging in energy, transport, agriculture and energy-intensive industries. These initiatives encourage development of technologies providing for low carbon emission, production of clean energy and healthy food, reuse of resources, energy-consuming construction, smart transportation, and preservation of biodiversity.

They could also boost Russian-Finnish trade relations. Finnish companies are interested in participating in Russian waste management reform that means transition to the best available technologies in the area and creating the elements of circular economy. Some Finnish companies even consider localization in Russia for public tenders and projects.

In times of a green transfer market needs renewable energy, production of hydrogen and new materials, including non-carbon aluminium, hydrogen-based production of steel, nickel and other non-ferrous metals, second generation biofuel and all the bio- goods – for instance, construction materials, wooden houses, bioplastic and even wood-based fabric. Russia possesses significant amounts of resources almost in every sector of renewable energy. Moreover, technical capacity of renewable energy sources exceeds annual energy production by more than 30 times.

Russia and Finland have accumulated tremendous experience in cooperation in the Arctic region especially in shipbuilding, infrastructure projects, environmental protection and scientific activities, including the issue of black carbon. Ministry of transport of Russia has recently launched the project for the construction of a transarctic fiber-optic communication line from Murmansk to Vladivostok “Polar express” and invited Finnish partners to participate in it.

An example of overcoming economic crisis by developing long-term international economic plans, programmes, or strategies can be found in many countries’ experience. The implementation of the mentioned programme of strategic cooperation will provide opportunities to develop cutting-edge technologies, which will make us feel more confident on new high-tech markets. We do have the necessary capacities and preconditions.

Russia and Finland have experienced many decades of successful economic cooperation. Crises, sanctions, ambitions of the political establishment – they come and go. But states’ strategic interests stay. Dialogue and cooperation based on mutual benefit and efficiency are considered the key to preserving our good neighbourhood relations and developing of economic ties.

Expert article 3068

> Back to Baltic Rim Economies 4/2021

To receive the Baltic Rim Economies review free of charge, you may register to the mailing list.
The review is published 4-6 times a year.