Russia and Finland: a Century of Diplomatic Relations

27 January 2021
Valery Shlyamin, Advisor to the Rector, academic director of the Institute of Northern European Studies of PetrSU, was interviewedin Finnish by OMAMEDIA in view of a centenary of diplomatic relations between Russia and Finland.

Valery Shlyamin, Advisor to the Rector, academic director of the Institute of Northern European Studies of PetrSU, was interviewedin Finnish by OMAMEDIA in view of a centenary of diplomatic relations between Russia and Finland. 

Valery Shlyaminhas dedicated about 40 years of his life to economic cooperation with Finland. He shared with us his position regarding the importance of economic diplomacy between Russian and Finland. 

- How do you assess the role of economic diplomacy in a system of diplomatic relations between Russia and Finland?  

- I will express my personal point of view based on the study of the history of the world economy and more than 40 yearsexperience of participation in Soviet-Finnish and Russian-Finnish cooperation. The scale and efficiency of economic relations between states have a decisiveimpact on the political relations between them, cultural and scientific ties. 

In this regard, what comes to mind is "Politics is a concentrated expression of economics", well-known words said by Vladimir Lenin, which may still ring true even today. Hence, the role of economic diplomacy in the extensive architecture of diplomatic relations. The overall climateof states’ relations depends on the extent to which the leaders of states and economic diplomats (I include the heads of the Ministry of Foreign Affairs, leading economic departments, embassies and trade representations) manage to build a strategy of foreign economic relations, taking into account national interests as well as the potential motivation of the partner country. Undoubtedly, large states and unions of states while protecting and promoting their interests in the global market influence small states, both through cross-border corporations and even stooping to direct political leverage. 

Notwithstanding that in recent years the artificial politicization of international economic life has acquired hypertrophied proportions and forms, especially since the well-known events of 2014, I am still convinced that economic relations are the foundation and framework of the entire complex of external relations. 

Concerning Soviet-Finnish relations, I would like to stress the role of Juho Kusti Paasikivi and Urho Kaleva Kekkonen, the post-war presidents of Finland, who accepted the policy of good-neighborliness and cooperation with the USSR, considering the security and prosperity of their country. Only remarkable, willedand strategically minded politicians could ever do so. Let us pay tribute to the Soviet leaders of that period whoconsidered good-neighborliness with Suomi to beof political and economic importance as an example of fruitful cooperation between states with different social and political systems. Good neighborliness was based on a pragmatic approach and the principle of economic mutual benefit. 

The USSRand since 1991 the Russian Federation has consistently pursued a policy of good neighborliness towards Finland. In turn, the Finnish presidents continue to adhere to the Paasikivi-Kekkonen line in cooperation with Russia.This policy has benefited both sides setting an example to the entire world for more than 70 years. 

  - You have worked twice at the TradeRepresentation of our country in Finland. What changes have you faced in diplomatic relations between the two countries after the second appointment? 

- I should say that the first time the Kostomuksha Mining and Processing Enterprise assigned me to the Soviet Trade Representation in Finland as aprocurement engineer for building structures and equipment for four years, from 1978 to 1982. This was the period of so-called the "Golden Age of Eastern Trade" in Finland, when Suomi, largely due to the rapid growth of trade with the USSR and a series of large joint investment projects, made a breakthrough in its development. By the mid-70s, this country had turned from a post-war agricultural and industrial into a highly developed industrial country. 

Then the trade between countries was organised in accordance with long-term intergovernmental agreements through a clearing system – a system of non-cash payments for goods and services, based on the mutual offset of liabilities, balanced by annual intergovernmental protocols. At the same time, a clearing ruble was valued at 0.67 USD. For its time, clearing was in general the progressive system that allowed foreign economic participants on both sides of the border to plan the development of export industries, and economic diplomats to preparemore timely mutual long-term agreements and monitor their implementation. Using clearing, the USSR bought high-quality goods and services from Finland to modernizedomestic industry. Some high-tech goods could only be imported from Finland. This country, unlike other western trade partners of the USSR, implemented a number of joint projects on cooperation with our country in power industry, metallurgy, transport engineering and Arctic shipbuilding. The experts estimated that at the turn of the 70s and 80s, trade with the USSR accounted for up to 15% of gross domestic product (GDP)ofSuomi. The Soviet Union has firmly ranked first in Finland's largest trade and economic partners ranking (by country).

In the early 70s, whiletrade and economic relations between the USSR and Finland were prospering, Germany, the USA and Sweden introduced the term "Finlandization", which, according to the initiators, was implied as an example of how countries - the trade partners of the USSR are deprived of their independence in domestic and foreign policy. However, attempts by Western politicians to influence the Finnish leadership and business community and cease Russian-Finnish economic relations have failed. 

As a representative of the Soviet enterprise-customer and as an employee at the The Trade Representation- part of the diplomatic mission of the USSR, I have been kindly disposed to Finnish companies and project organizations. An atmosphere of trust in economic relations developed at all levels, from government leadersto ordinary specialists. Even introduction of a limited Soviet military contingent into Afghanistan in December 1979 did not disturb that atmosphere. Although, certainly, noticeable concerns arose in political relations. 

A completely different situation happened in 1991 after the collapse of the Soviet Union. The Russian Federation without planning decided to abandon the state monopoly on foreign trade and clearing trade and announced the transition to market methods in economic activities and foreign trade. As a result, traditional economic ties were considerably broken. In 1992, the volume of bilateral trade dropped by more than 2 times. In January 1995, Finland joined the European Union, delegating a significant part of its foreign economic authorities to Brussels. 

Therefore, when I arrived in Helsinki in January 2003 as the head of the Trade Representation of the Russian Federation, changes in political and economic relations between the neighbouring countries were visible, as we say, with the naked eye. In 2004, after the EU and NATO enlargement to the east, activities of the nationalist revanchist organizations intensified in Finland, which caused some, albeit short-term, cooling in political relations between our countries. At that moment, the political leadership of the neighbouring countries managed to prevent a negative scenario of the development of economic relations. 

Certainly, Finland, as a small European country, is interested in participating in the European integration, in access to the capacious EU market, to its institutions and resources to support regional development. At the same time, in relations with Russia, Finland should constantly look back at Brussels, not pretending to maintain the "specific" relations with its eastern neighbour, which were possible during the Soviet era. As a matter of fact, the Finns would like to make the most benefits from their economic and geographical position on the border with Russia. This explains the Finnish Northern Dimension initiativeas a policy of the European Union, which they launched in September 1997. Finland would like to be a kind of a springboard to develop the rich natural resources of the North-West of the Russian Federation for the EU needs. At the same time, the Finns hoped to receive external EU investments in transport and technical infrastructuredevelopment. The Finnish initiative was generally supported by the EU, however, new financial tools were not established. And only in 2006, a system of equal partnerships between the European Union and Russia in the "Northern Dimension" was created. 

In this reality both Russia and Finland have persistently improved the institutions of bilateral economic relations, removing customs, tax, administrative and bureaucratic barriers. The Russian-Finnish intergovernmental commission on trade and economic cooperation operated effectively and, for Russian part, the Russian Trade Representation in Helsinki served as some kind of commission’s secretariat. 

The Trade Representation, as an essential element of Russian economic diplomacy, reconciled the interests of the Russian and Finnish sides contactingthe executive authorities. At the same time, the Trade Representation assisted Russian entrepreneurs in promoting domestic non-raw materials exports, Finnish investors in the Russian economy, and, when it was appropriate, supported Russian investment projects in Finland. At the same time, we kept in touch with the administrations of over 40 regions of our country, which were interested in systematic cooperation with Finnish partners. 

As a rule, Finnish colleagues were well-disposed towards us. However, in the 2000s, Russia and Finland were no longer able to achieve the high-level investment and industrial cooperation that was in the early and mid-80s. This is partly due to the severe competitive environment in the Finnish market as the EU member state, as well as the institutional (legal) shortcomingsof economic cooperation and the existing differences in business culture. Yet until 2013, bilateral trade developed quite successfully (except for the years of crisis, 2009-2010). 

- Have the development of relations with Finland and project implementation become more complicated for you, as a trade representative at that time, since 2014? 

- Yes, I should recognize that the events in Ukraine in 2014, which gave a handle to the collective West to oppose Russia with a series of ongoing sanctions, significantly aggravated the business environment of Russian-Finnish relations. The United States and under their influence the European Union decided to put pressure on the Kremlin by means of economic restrictions and force Russia to abandon the foreign policy that did not appeal to Washington and Brussels. Our country was compelled to respond. 

In my view, the West has chosenthe model ofpolicy of force against the Russian Federation that meantalready in 2014 the resumption of the Cold War with all the attendant consequences. I explicitly said this in my report at the international forum "Saimaa Summit" in Savonlinna on July 30, 2014. Finland, as a law-abiding member of the European Union, still consistently follows the policy of sanctions of Brussels. This has brought both us and the Finns significant economic losses. Trade losses due to sanctions, however, I would estimate at no more than 15% of the total costs. 

The main problem is the loss of trust. The unprecedented Russophobic campaign taking place in the West has also reached Finland. Even some of my old Finnish friends began to ask me whether Russia was going to attack Finland or not. Finnish banks started refuse business lending to Russian companies, fearing sanctions from the United States. Old stereotypes and myths about the alleged Russian threat have been revived. Hundreds of contracts remained unconcluded precisely for this reason. Business on both sides of the border, but especially in Finland, affected by negative information flow, in which half-truths is alongside theblatant lie, cannot predict even the near future with any certainty. Thus, political risks have become the most significant factor ofrestraining bilateral trade. The coronavirus pandemic has further compounded economic relations between our countries. Hence, the volume of bilateral trade in 2020 decreased by about a third. 

But still, I am an optimist. My experience shows that in times of crisis not only challenges and threats emerge, but also new opportunities for development become more evident. For instance, new prospects for Russian-Finnish economic cooperation in the Arctic are opening up. By the way, in 2020 the Karelian territory in the Arctic zone of the Russian Federation has significantly expanded. Today almost all White Sea Karelia is part of the Arctic zone of the Russian Federation. A new Strategy for the Development of the Russian Arctic Zone until 2035 has just been adopted whereby the Republic of Karelia and the Murmansk Region bordering Finland are expected to develop at a fast pace. Aware of the Finnish universities and companiescapacityin Arctic technologies, we can definitelyhold negotiations on Finland's participation in the Russian program of the development of the Arctic zone of the Russian Federation, using, in particular, Russia's two-year chairmanship in the Arctic Council, which begins in 2021. 

In our common history Russians and Finns have overcome even more serious challenges. We have acquired knowledge about each other. We have unique successful joint projects in our asset. Our Presidents have pursueda dialogue all the time. I hope that, as before, the sanity and a pragmatic approach let us rebuild trust. 

The article is available in Finnish.

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