Connect with us


The economic planet | The inconvenient Russian neighbor



Several countries have decided to increase their military spending to cope with the emerging new world order. Canada, which is concerned about the border it shares with Russia to the north, has begun to do so. Armament is one thing, but organization and preparation remain the basic elements of an effective defense strategy.

The best example comes from Finland (again). This small country of 5.5 million inhabitants shares a border of 1340 km with Russia. The two neighbors have fought many times in the past. The last battle took place at the beginning of the Second World War, when the Finns managed to repel the Russian invader in what is called the Winter War, with soldiers on skis.

The Finns resisted, but they lost a piece of their territory and swore to themselves that it would never happen again.

Since then, they have been preparing for all eventualities. It could be a Russian invasion, but also a pandemic, a climate catastrophe, a power grid failure, a cyberattack. Not by arming yourself to the teeth. Prior to Russia’s invasion of Ukraine, the country spent 1.5% of its GDP on military spending, the same proportion as Canada.

But for decades, Finland has been organizing itself to face the worst, recently reported the FinancialTimes. There are always reserves of at least six months in fuel and grain. Pharmaceutical companies are required to keep stocks of all imported drugs. Refuges are planned and identified to accommodate the population in case of need. Laws are made to accommodate a state of emergency.

The entire industry in the country is made aware of the risks during regular meetings where business leaders are confronted with theoretical situations and invited to propose solutions. These leaders of telecoms or energy companies, who are sometimes competitors, work together for the common good. Either way, it would be impossible to do business in the event of a disaster.

During these meetings, which take place several times a year, we discuss as many minor disturbances as major events such as a war or a pandemic like the one that has just swept the world.

Finland can also count on a well-trained army and a large contingent of reservists to defend itself in the event of an invasion. The military regularly conducts crisis simulations with politicians, religious representatives, and the media to brief them, discuss potential issues, and propose a response.

Neutrality questioned

Officially neutral, Finland is not part of NATO and did not feel the need to either. Until recently. Since the annexation of Crimea by Russia in 2014, the desire to swell the ranks of the alliance between North America and Europe has increased and even currently reaches more than 60%, according to recently published polls.

It is that the neighbor disturbs more and more. Finland’s government last week announced its decision to increase military spending by 70% over the next four years to 2% of GDP, which is the norm for NATO countries.

In addition to the tension that has escalated since the invasion of Ukraine, another kind of uncertainty is growing in Finland. The country is an important trading partner of Russia, although trade has declined since 2014 and the annexation of Crimea.

Before the invasion of Ukraine, more than 5% of Finland’s total exports went to Russia and 10% of Finnish imports came from Russia.

The war and the economic sanctions imposed on Russia will hurt Finland. The central bank of Finland has just revised downwards its economic growth forecasts to take into account the impact of the war in Ukraine and the sanctions imposed on Russia.

Proof that the Finns do not like to be taken by surprise, the monetary authorities have produced two forecasts. The first scenario assumes a limited impact of war and inflation on the economy and growth of 2% in 2022. The second scenario foresees a greater reduction in exports and a sustained increase in the prices of raw materials and energy, which would reduce economic growth to 0.5%.

The central bank until recently expected the economy to grow 2.6% this year. Finland was not invaded, but it must continue to defend itself economically against its Russian neighbour.

This tormented relationship has lasted for decades. Nevertheless, year after year, Finland dominates the ranking of the happiest countries in the world.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *