Trade between Finland and Russia has developed apace in recent years. The statistics speak for themselves. Last year Russia was the number one export target country for Finnish companies and second to Germany for imports. The rapid growth has continued this year.

In 2005 Russia accounted for 11 per cent of Finland's total exports (5.7 billion euros) and 14 per cent of total imports (about 6.5 billion euros).

"The development has been strong since the economic crisis in 1998. Since 1999 our exports to Russia have almost tripled. The growth can be expected to continue in the next few years," says Timo Laukkanen, an adviser in trade and international relations at the Confederation of Finnish Industries (EK).

"The high prices of energy and raw materials have increased the value of imports, and Russia's export revenue has increased Russians' purchasing power and imports from Finland."

Strong economic growth in Russia

Last year Finnish exports to Russia went up by 32 per cent and imports by 23 per cent. However, Finland is only twelth on the list of Russia's trading partners.

"There is enough growth potential in the trade for maintaining the market share, and there is plenty of scope for increasing it in all sectors," Laukkanen thinks.

Russia offers a market of 140 million inhabitants where economic growth in the 2000s has averaged more than six per cent. Growth in Moscow and St Petersburg has been faster than this.

Finland's imports from Russia are predominantly energy and raw materials. Finished products account for only a few per cent of Russia's exports to Finland because growing demand on the domestic market swallows up all its own production, and it has not been possible to create a competitive export industry.

"There are plenty of opportunities for increasing trade. Growth markets are always an interesting target for investment," Laukkanen says.

Investment in Russia successful

Laukkanen says that, as an operating environment, Russia with its many obstacles to trade and investment is challenging, but on the other hand there is less competition for its markets than in many other countries. Finnish investment in local production, trade and construction in Russia has increased and diversified. Investment is already thought to have exceeded two billion euros.

"Going to Russia has generally been a positive experience for Finnish companies. Investment has experienced fewer disappointments than the average for investment abroad. Hardly any write-downs have had to be made and the losses caused by the collapse of the rouble in 1998 have been retrieved," Laukkanen explains.

"The rise in Russia's risk classification to an acceptable category in terms of investment also speaks on behalf of growth."

Middle-class has purchasing power

The middle-class has begun to put in an appearance again in Russia after the collapse of 1998, and a strong growth in income can be seen. The new mega-markets are an indication of the purchasing power. Consumer goods and cars are being transported to Russia in enormous numbers via Finland.

The construction industry is also performing well as the rapidly growing section of the population with purchasing power is interested in very well-furnished private houses and high-standard blocks of flats. Finish construction companies and producers of building materials have been active in setting up subsidiaries in Russia to respond to the needs of the rapidly growing demand.

Russia will continue to be the Big Potential for Finland. "There are no major changes on the horizon in Russia. Economic analysts predict that growth will probably remain at about six per cent for the next few years," Laukkanen says.

Trade between Finland and Russia

Finland's biggest trading partners

Source: Confederation of Finnish Industries EK, March 2006