The economic planet | The inconvenient Russian neighbor

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

Posted at 8:00 am

helena barrel

helena barrel

The best example comes from Finland (again). This small country of 5.5 million inhabitants shares a 1,340 km border with Russia. The two neighbors have quarreled many times in the past. The last battle took place at the beginning of World War II, when the Finns managed to repel the Russian invader in what is called the Winter War, with soldiers on skis.

The Finns resisted, but 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 cyber attack. Not arming yourself to the teeth. Before the Russian 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, the financial times. There are always reserves of at least six months’ worth of fuel and grain. Pharmaceutical companies are required to maintain stocks of all imported drugs. Shelters are planned and identified to accommodate the population in case of need. Laws are made to accommodate a state of emergency.

The entire country’s industry is made aware of the risks in regular meetings where business leaders are confronted with theoretical situations and invited to propose solutions. These leaders of telecommunications 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, both small disturbances and large events such as a war or a pandemic like the one that has just ravaged the world are discussed.

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 armed forces regularly hold crisis drills with politicians, religious representatives and the media to inform them, analyze possible problems and propose a response.

Neutrality questioned

Officially neutral, Finland is not part of NATO and did not feel the need to do so either. Until very recently. Since the annexation of Crimea by Russia in 2014, the desire to join the ranks of the alliance between North America and Europe has increased and even today exceeds 60%, according to recently published polls.

It is that the neighbor bothers more and more. The Finnish government announced last week 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 type of uncertainty is growing in Finland. The country is a major 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 harm Finland. Finland’s central bank has just revised down 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 the 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%.

Until recently, the central bank expected the economy to grow 2.6% this year. Finland was not invaded, but must continue to defend itself economically from its Russian neighbor.

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

Leave a Comment