The Effects of Economic Factors on Finland's Foreign Policy towards the Russian Federation

Document Type : Research Paper

Author

Assistant Professor, Regional Studies Department, Faculty of Law & Political Science, University of Tehran

Abstract

Introduction: Economic and trade relations between Russia and Finland have been transforming under the influence of global and regional trends. Russia has always emphasized its interest in enhancing mutually beneficial cooperation with Finland based on investments, technology transfer, industrial cooperation and increasing the share of non-resource non-energy goods in turnover. There is an interest in bringing high-tech and high-quality Finnish industrial products and providing them an opportunity to participate in large-scale public industrial projects. Russia is at the same time a substantial threat and opportunity in Finnish foreign policy. Finland's foreign policy towards Russia is based on two pillars: defense (the need for military deterrence) and economic (the need for broad relations). The main focus of the article is on this second pillar. In fact, so established and sacred was this pillar of foreign policy that the term ‘Finlandisation’ arose, many decades ago, as a description of when a country is induced to favour, or refrain from opposing, the interests of a more powerful country, despite not being politically allied to it. History and geography are two critical factors that have made Finland and Russia inherent economic partners. Finland's management of relations with Russia is a unique example that has set an example for many countries worldwide. The economic integration between Finland and Russia has occurred almost by itself without any tremendous public effort. However, determination in policy-making can help integrate Finland and Russia's economies even further. The complicated relations with Russia can be seen as Finland's historical dilemma: neighboring Russia but now a part of the West, Finland's room for maneuver is not self-evident and requires constant management.
Research Question: All things considered, it begs the question in this regard, it begs the question how have economic factors affected the direction of Finland's foreign policy towards Russia? Examining the order of this process is also essential.
Research Hypothesis: This article hypothesizes that energy, along with trade in goods and services, are the most important economic variables that have led to the pursuit of resilience and normative strategies, resulting in mutual vulnerability in Finnish-Russian interactions.
Methodology (and Theoretical Framework if there are): The paper uses the theory of asymmetric interdependence based on Keohen and Nye vulnerabilities. Accordingly, the economy is sensitive to the extent that it is exposed to costs inflicted from the outside before policies are introduced to change the situation; it is vulnerable to the extent that it is exposed to costs inflicted from the outside after policies have been applied. If outside costs can be imposed on a country in the form of higher prices for a commodity that is important to its economy, for instance, oil, then that country is sensitive. Suppose the country has some means to change this situation, either by switching its source of imports using trade sanctions in some way by military force. Then it is not vulnerable. If prices of these commodities go up and the country can do nothing about it, it is both sensitive and vulnerable. This distinction can be beneficial when dealing with economic interdependence. Descriptive statistics are brief descriptive coefficients that summarize a given data set, which can represent the entire population or a sample of a population. The research method is a combination of descriptive statistics and field research. Descriptive statistics are broken down into measures of central tendency and measures of variability (spread). Descriptive statistics, in short, help describe and understand the features of a specific data set by giving short summaries about the sample and measures of the data.
Results and discussion: Russia offer significant opportunities for the Finnish business sector. Finland's trade has overgrown in the 2000s, and Russia is becoming Finland's most important trade partner.
Conclusion: The study's findings suggest that Russia is using energy to advance its policies towards Finland with a geo-economics approach. Finland is also vulnerable in trade in goods, but it has the upper hand in services. The sum of these two constants has led to interdependence in the relationship between them. Besides Finnish Russian trade's development, the business between the two affects more. Among the other cities in the development corridor, Finnish knowledge and competitiveness help Northern Europe's economic development. A recession outcome would need an escalation in war and/or more severe deterioration in energy and raw material markets. Nonetheless, growth will decline and inflation will spike.

Keywords

References

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Central Eurasia Studies
Volume 15, Issue 1
Spring & Summer
September 2022
Pages 331-359

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