Economic planet | Uncomfortable Russian neighbor

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

Posted at 8:00 am.

Helen Baril

Helen Baril

The best example comes from Finland (again). This small country of 5.5 million people 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 repulse the Russian invaders in the so-called Winter War with soldiers on skis.

The Finns resisted, but lost a piece of their territory and swore to themselves that this would not happen again.

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

But for decades, Finland has been preparing for the worst, as recently reported. Financial Times. There are always stocks of fuel and grain for at least six months. Pharmaceutical companies are required to keep stocks of all imported medicines. Shelters are planned and defined to accommodate the population if necessary. Laws are passed to ensure the 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 telecom or energy executives, who are sometimes competitors, work together for the common good. In any case, doing business in the event of a natural disaster would be impossible.

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

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

Neutrality in question

Officially neutral Finland is not a member of NATO and does not feel the need to do so. Until recently. According to recently released polls, after 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 now reaches more than 60%.

This is what the neighbor worries more and more. The Finnish 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 tensions that have escalated since the invasion of Ukraine, a different kind of uncertainty is rising in Finland. The country is an important trading partner for Russia, although trade has declined since 2014 and after the annexation of Crimea.

Prior to the invasion of Ukraine, more than 5% of all Finnish exports were to Russia, and 10% of Finnish imports were to Russia.

War and economic sanctions imposed on Russia will hit Finland. The Central Bank of Finland has just revised down its economic growth forecasts, taking into account the impact of the war in Ukraine and the sanctions imposed on Russia.

As evidence that the Finns do not like to be taken by surprise, the monetary authorities have prepared 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 assumes a larger reduction in exports and a steady increase in prices for raw materials and energy, which will reduce economic growth to 0.5%.

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

This painful relationship lasted for decades. Yet, year after year, Finland dominates the list of the happiest countries in the world.

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