Jesse Fleck's Blog

Testing the Mettle of Finland

August 29, 2014

Finland has become quite an active player in the current Ukrainian situation. The government has not only maintained an outspoken view against the violation of Ukraine’s territory, but also recently President Sauli Niinistö met with the presidents of both Russia and Ukraine. This stance is quite different from the cautious policies that Finland put forth during the Cold War, which other nations used to create the term Finlandization, where the policy of a small country (Finland) is influenced by a large country (Russia). It seems that over the past twenty years Finland has departed from this type of policy by further integrating itself with Western Europe through acts such as joining the European Union or the World Trade Organization. The recent sanctions battle between Russia and the West, however, now reminds Finland that there are costs for leaning westward and supporting a western agenda.


In some regard, considering the economic risks, the sanctions could be viewed as a litmus test for Finland’s future relations with the West and Russia. If Finland survives the sanctions relatively unscathed, it will prove to both Russia and Finland that there is no lingering threat of Finlandization. On the other hand, if the country is weakened substantially, it may require Finland to rethink its stance towards Russia and the West in order to restore economic stability.

The Test: Surviving the Sanctions

Finland has a long history of a close economic relationship with Russia based on their geographic proximity. During the Soviet Union, Finnish exports to the country had reached an all-time high of 26 percent in 1987. Expectedly, when the Soviet Union dissolved, Finland’s economy reeled in shock because it lost a major trading partner. Over the past several years, Finland has built a new trade relationship with Russia to make up for that deficit. As of last year, Russia held ten percent of Finnish exports and invested 583 million Euros in Finland, a sizeable portion.[1]


In light of these growing trade relations, it is understandable that Finland would hesitate when the thought of sanctioning Russia is thrown around. Obviously, sanctions against Russia would potentially ruin the growth of the Finnish export business. To further validate these concerns, the bank of Finland predicted that a 3 percent decline in the Russian economy would result in a 0.5 percent decline in the Finnish economy.[2] Moreover, Russia’s sanctions against the West (including Finland) would and have added further damage to Finland’s economy. While major companies like Valio, a Finnish Dairy corporation, is expected to lose 250 million euros,[3] OP-Pohjola, the largest finance firm in Finland, has now lowered its prediction for Finnish economic growth in 2015 from 2 percent to 0.6 percent.[4] Together, Western and Russian sanctions suggest that Finland’s economic future could be quite bleak, which for some could raise the question of whether or not Finland should have strayed so far away from Russia in the first place.

The Tested: Finnish Leaders

Despite these negative outlooks on the economy, the Finnish government is fixated on allaying economic fears. The two most outspoken and reassuring figures are Alexander Stubb, appointed as Prime Minister in June 2014, and President Sauli Niinistö. Regularly, Stubb provides messages of encouragement to reassure the country that Finland will not be dramatically influenced by Russia. Even on the off chance that Finland is hurt, Stubb reminds Finns that they can request for aid from the European Union.[5] Moreover, on August 28th, the Finnish government released a report that ensured the sanctions would have a minor effect on the economy with total output for this year only reduced by 0.1 percent.[6] Such messages from the government are important because they dispel concern that the Finnish economy is truly unstable. If the government is able to remove this fear, it may allow the Finnish people to more easily accept potentially controversial positons by the government.


One such area that the Finnish political leaders are trying to encourage Finns to reconsider is Finnish defense relations. While rebuffing economic concerns, the Finnish government is using this opportunity to enact several defense agreements to persuade the Finnish people towards a closer relationship with the West. Although Finns generally do not support NATO membership, both Stubb and Niinisto, members of the National Coaltion Party, continue to suggest discussing NATO membership. Niinisto recently has expressed this desire in June.[7] At the same time, Stubb has stated that Finland will hold a new position in the upcoming NATO summit because of Finland’s close ties to the institution.[8] By consistently reminding Finns about the urgency of defense and the benefits Finland already has through working with NATO, it appears that the Finnish government is working hard to convince the Finnish population that further integration with the West is a good thing.

Downgrading the Test: Finnish Defense Agreements

Prior to the Ukrainian crisis, Finland already was looking at changing its defense policy. Originally, in January 2014, the Finnish Defense Forces released a report for 2013 stating that Finland would reduce the defense budget by 10 percent over the next few years.[9] Moreover, Finland determined that it would downsize its military by reducing its 26 divisions to 16 and removing 3 generals.[10] A third issue was figuring out how to prepare for the replacement of the F-18 Hornet fighters in 2020s, which could cost up to $7 billion.[11] These decisions became less firm, however, due to reports on its neighbor, Sweden. In the past year, Swedish military experts have lampooned Swedish defense capabilities, which placed questions on Swedish military capability.[12] Additionally, both NATO and Norway made statements denying any obligation to protect Sweden because it is not a NATO member. Of course, as a close neighbor and a non-member of NATO, Finland did not want to obtain the same doubt in its military strength as Sweden.


When the Ukrainian crisis did occur, it placed more attention on the defense policy and provided momentum to shape the defense policy. The domestic playing field has already begun to change considerably since the aforementioned report in January. The most important change is that now all of the major parties agree that the defense spending needs to increase and Niinistö is leading the charge for this increased defense spending.[13]


More important for our discussion, however, is Finland’s decision to strengthen relationships with western countries and institutions, specifically Sweden and NATO. On May 6th, Sweden and Finland signed an Enhanced Defense Cooperation agreement to promote an increase in joint-training, exercises and surveillance.[14] Since both countries lack NATO membership, this agreement comes timely for both countries in the face of possible increased tension in the Baltic Sea. While this is only a bilateral agreement with another Nordic country, this defense cooperation is a major step forward in cooperation for both nations. The protocol suggests incorporating common units for air and sea and complementing one another’s strengths and weaknesses.[15] For example, Finland can make up for Sweden’s lack of land forces while Sweden can make up for Finland’s lack of Submarines.[16] Such a decision, if successful, will further demonstrate to Finland the benefits of joint cooperation with a Western country. This could be a small and indirect stepping stone towards NATO.


Although not a NATO member, Finland has increased their interaction with NATO in the midst of the Ukrainian situation. On April 22nd, Finland signed a Memorandum of Understanding with NATO. This memorandum guarantees that NATO will come to defense of Finland should the country come under attack and increased cooperation.[17] And as of August 27th, Finland announced that it is considering another agreement with NATO that will allow easier entry of NATO troops onto Finnish territory.[18] Essentially, these agreements will make Finland a member in all but name.

The Test Results

So how should one view Finland in light of these defense agreements and sanctions? Regardless of the huffing and puffing of economic sanctions, Finland is decidedly becoming more integrated with the West through its defense policy. Even if Finland is significantly affected by the Russian sanctions, this will not cause Finland to go back to Russia. Finland’s pursuit of Swedish and NATO defense agreements has ensured Finland’s course regardless. Considering how the Finnish political leadership is handling the one obstacle preventing furthering integration—the economic relation of Finland on Russia—there is no reason to be concerned. Hence, while Stubb has claimed that it is likely Finland will not join NATO during his 10 month term; there is still the possibility of membership 2 or 3 years down the road. In short, despite how important this test appears to be for Finland, it to some extent has already been decided because of the strong political leaders and the defense agreements that Finland is negotiating on with Sweden and NATO.




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