Finland Dovish on Russian Sanctions

By Juhana Rossi 

HELSINKI--As tensions between the European Union and Russia worsen, Finland is emerging as one of the remaining points of resistance to stiffer sanctions against Moscow.

The Nordic nation, which has so far opposed major economic boycotts of Russia, is finding itself in a quandary as Europe's patience with Moscow dwindles in the wake of the downing of Malaysia Airlines Flight 17. Finland doesn't want to split with other EU countries, but also has one of the largest stakes in trade with Russia of any Western country.

While many European policy makers are calling for a tougher line against Moscow for its alleged backing of separatist rebels in Ukraine, the Finnish government has made it clear it wants the EU to tread lightly in its economic measures.

Finland, which shares a 1,300-kilometer land border with Russia, profits from tourism and trade with its huge eastern neighbor. Finnish companies such as tire maker Nokian Tyres PLC and state-controlled utility Fortum Oyj have made Russia the cornerstone of their growth plans.

At a summit of EU leaders last week, just before the airliner was shot down over Eastern Ukraine, Finnish Prime Minister Alexander Stubb lobbied forcefully for limiting the scope of any new EU sanctions against Russia. On Monday, as the rebels were impeding international access to the site of the plane crash, Finnish Foreign Minister Erkki Tuomioja continued to call for restraint in imposing new sanctions.

Other leading European officials, including German Chancellor Angela Merkel, have spoken with Finnish leaders in recent days, aware that Finland is among the countries most reluctant to back stiffer sanctions that target important parts of Russia's economy.

Finnish suppliers of capital goods to Russia's oil and gas industry could sustain a major blow if the EU and the U.S. were to cut off Russian energy companies' access to international finance, said Kai Mykkanen, a director at the Confederation of Finnish Industries. "If that happened, it could shave 0.5 percentage points off Finland's national output and lead to job losses numbering in thousands, even in tens of thousands," Mr. Mykkanen said. However, he said this was still a remote worst-case scenario from Finnish industry's point of view.

The Finnish economy has already been crimped by the weak Russian ruble, which makes foreign goods costlier for Russians to buy, and the softening of the Russian economy even before the crisis in Ukraine. Demand has fallen at Finnish businesses serving Russian visitors in the eastern part of the country and in Helsinki. Finnish companies operating in Russia have had to reassess their strategies and ice expansion plans.

"Finland is already suffering negative effects from Russia's economic slowdown even without any sanctions," said Arkady Moshes, a director at the Finnish Institute of International Affairs.

The EU is still some way from a moment of truth that would force Finland to choose between its economic stake in Russia and its political desire to stay close to the European consensus, Mr. Moshes said.

Write to Juhana Rossi at [e-mail]