Finland’s economy tries to learn to live without Russia

The saunas of Imatran Valtionhotelli they are little frequented or directly empty. Much of the rooms too. “Something unusual at this time of year,” acknowledges Anja, the hotel receptionist, a castle conditioned and arranged to accommodate up to 250 guests. The building, built at the beginning of the 20th century for Russian tourists, maintains some Art Nouveau touches from that time. Russian citizens, On the contrary, have stopped coming since the beginning of the invasion of Ukraine. The border, less than five kilometers from Imatra, a town of 25,000 people in eastern Finland, remains closed. Y local tourism suffers.

Facade of the Imatran Valtionhotelli hotel, in the Finnish town of Imatra GUILLAUME BONTOUX

“It is one of the sectors most affected by the situation,” he acknowledges. Juho Romakkaniemi, director of the Finnish Chamber of Commerce, who assists us in his office, on the seventh floor of the World Trade Center in Helsinki. “There are big disparities: tourism, construction, the wood business they are the ones who have suffered most from the consequences of the invasion of Ukraine. Other sectors, such as the services sector, have suffered less. “The crisis has not hit all regions equally either.”The east of the country suffers more. Because of the lack of Russian tourists, who spent a lot of time there, and because the small and medium-sized companies that traded with Russia are mainly located in these regions.”

Juho Romakkaniemi, Director of the Finnish Chamber of Commerce GUILLAUME BONTOUX

The shock, however, has been felt in all the companies in the country, assures Jyri HäkämiesCEO of EK, the Confederation of Finnish Industries. “Trade with Russia represented 5% of our GDP before the invasion. Since then, imports have fallen by 85%, exports by 60%” explains Häkämies, who puts the figure at 500 Finnish companies that are in a “worse than the rest” situation. many companies that had business in Russia have had to leavewith what it can mean for the employees”.

No Russian electricity supply

As in the other European countries, the conflict has also caused an increase in inflation in Finland. The year-on-year rate reached 7% last month and it is right now one of the main reasons for concern of economic actors. So are energy prices. In recent years, Helsinki has reduced its energy dependency on Moscow, but it remains important: in 2021, 34% of the energy consumed in the country came from Russia. Oil continues to arrive, but the electricity supply has been cut off since May 14.

Jyri Häkämies, CEO of EK, the Confederation of Finnish Industries GUILLAUME BONTOUX

“Russia has decided not to export more energy, but we adapt”explains Jyri Häkämies. “We have other energy sources, such as green and renewable energy, including nuclear. We are going to adapt and accelerate our transition.” Those responsible for economics hope that this adaptation will be applied to all sectors: “We have no other solution. You cannot take many measures in a situation like this, so Finnish companies have to look for new markets“, analyzes Juho Romakkaniemi, the director of the Chamber of Commerce.

We have no other solution. Finnish companies have to look for new markets

“Companies have to change their business model and try to survive,” says Jyri Häkämies. “The Russian market is almost closed, we have to look for new markets.” The crisis with the Russian neighbor does not facilitate this change, explains Romakkaniemi. “Many companies think twice before entering a new market. In Russia, money has been lost. Now, the political risks that exist when investing are going to be calculated much more.” And she remembers that it had already been done after the Russian annexation of the Crimean Peninsula in 2014. “The level of exposure of many Finnish companies in Russia has since dropped, the level of investment too.”

A deep break: “There is no going back”

More than four months after the start of the invasion and while bombs continue to fall on Ukraine, the Finns are now preparing for a deeper break. “There is no turning back,” says the director of the Chamber of Commerce. “We can’t go back to normal. we must prepare for a new iron curtain between Russia and Europe“.

We must prepare for a new iron curtain between Russia and Europe

“It will take years, perhaps decades, to trust Moscow again,” said Jyri Häkämies, the director general of the Confederation of Finnish Industries. But both agree in remembering that geography cannot be changed. “No matter what happens, Russia will still be there, with its border with Finland“, smiles Juho Romakkaniemi. “Hopefully in the future we can once again have a good relationship with a democratic country that respects the rule of law.” In Imatra, at the Imatran Valtionhotelli, orphaned by Russian tourists, they are also waiting for him.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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