For generations, Finland has lived fearfully in the shadow of its giant Russian neighbor, 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,” Heli Simola at the Institute for Economies in Transition in Helsinki said.
“But these attitudes aren’t an obstacle for commercial exchanges,” Simola added.
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The military struggles of the 20th century have been replaced by the entirely different challenge to attract Russian investment. However, it is 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,” Turku University international business professor Kari Liuhto said.
According to Finland’s central bank, Russian investments between 2002 and last year amounted to 245 million euros (US$338 million), 50 times less than the 12.9 billion euros from the country’s western neighbor, 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 channeled through EU banks is added, “that doesn’t change the general perspective,” Simola said.
Since late last year, the government has launched a charm offensive to attract investment, particularly from Russia.
Yet 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,” Invest in Finland head Tuomo Airaksinen said.
“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 neighbor.
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.
One month earlier, Russians bought one of Helsinki’s main sporting arenas, Hartwall Areena — which plays host to major international ice hockey matches, including National Hockey League premiere games.
Also, the Russian Internet search engine Yandex is building a large data center 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.
However, 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 benefited from preferential trade deals with the Soviet Union.