Sanctions Finland avoids economic crisis even if exports to Russia collapse: “If imports stopped completely, it would be a much bigger blow,” says Aki Kangasharju

Russia The sanctions imposed on Finland are unlikely to cause an economic crisis in Finland, according to the Finnish Business Research Institute. The reason is that the value of goods and services exported from Finland to Russia has decreased significantly for several years.

Last year, Russia was Finland’s sixth largest trading partner. Measured by value added, exports accounted for 1.1–1.5 per cent of GDP. This would have a direct effect on the Finnish economy if the cessation of exports did not succeed in acquiring substitute export destinations.

The value of gross exports last year was just over four billion euros. Ten years ago, exports to Russia accounted for more than two percent of Finland’s gross domestic product.

“If imports stopped completely, it would be a much bigger blow. However, it is very difficult to assess the combined effect of the cessation of exports and imports, as many companies are able to source the raw materials they import from Russia elsewhere, but at a higher cost, ”says the CEO of the Business Research Institute. Aki Kangasharju.

However, it is likely that companies will to some extent succeed in finding a substitute market for their Russian trade.

To Finland has imported mainly raw materials from Russia, of which by far the most is crude oil. Last year, the value of its imports was 2.9 billion euros. The second most imported was nickel and the third most wood and timber.

The oil refining company Neste soon announced that it had reduced its sourcing of crude oil from Russia and replaced it with crude oil purchased elsewhere.

Although the stagnation of exports is not of great economic importance, it can cause significant problems for individual companies.

According to the latest information, Finnish companies have 300 subsidiaries in Russia with a combined turnover of EUR 6.5 billion. Dozens of companies have already announced that they will suspend or terminate their operations in Russia.

In 2010–2019, the number of subsidiaries of Finnish companies in Russia has decreased by almost a third.

There are about twenty subsidiaries of Russian companies in Finland. They employ more than 730 people in Finland and generate a turnover of almost EUR 3.2 billion.

Last Russia accounted for five per cent of Finland ‘s total exports. Machinery, equipment and means of transport accounted for a third of exports. Other key exports were chemical products and metals. Services accounted for 11 per cent of exports.

“It is clear that Finland’s economic growth will slow down, but its GDP will hardly shrink due to the attack and sanctions initiated by Russia. What is certain, on the other hand, is that inflation will accelerate in Finland, in the euro area and globally due to higher commodity prices, ”says Kangasharju.

In September, the research institute forecasted that Finland’s gross domestic product would grow by 3.0 per cent this year and 1.7 per cent next year. The new forecast will be released on March 17th.

Russian isolation from international trade, according to Kangasharju, could have very far-reaching effects on the world economy.

“Russia and Ukraine account for 25 percent of world grain trade. At worst, the rise in grain and food prices could lead to unrest in emerging economies and possibly a new refugee crisis, ”says Kangasharju.