Speech by Mr Jukka Valtasaari, Secretary of State: Policies for the Northern Dimension, Seminarium of "EVA", 18th November 1998

Speech by Mr Jukka Valtasaari, Secretary of State: Policies for the Northern Dimension, Seminarium of "EVA", 18th November 1998

Jukka Valtasaari
Secretary of State
Ministry for Foreign Affairs of Finland


18 November 1998
Helsinki


Policies for the Northern Dimension


Finland’s post-war history can be summarised as a persistent attempt to anchor Finland firmly in the West. Despite the fact that Finland, as the only Western democracy, was forced to turn down Marshal aid, because of Soviet pressure, Finland managed to resettle its refugee population, pay war reparations and rebuild its war ravaged economy.

The Finnish strategy was two fold: One, to stabilise its relationship with the Soviet Union and two, to uphold and expand its traditional Scandinavian and Western ties. Step by step this was attained. The results speak for themselves. The single most important achievement of the post war era was, without doubt, Finland’s ability to convince Moscow of the benefit of having a stable and prosperous Finland as its neighbour and trading partner. This again logically required the integration of Finland to Western structures. By joining the European Union in 1995 Finland was home at last.

As any outside observer will notice joining the European Union has set a lot of energy free in Finland. The added security effect of being a member of the Union can best be illustrated by the fact that joining as the only Nordic country also the European Monetary Union (EMU) Finland has been effectively sheltered from speculative turbulence caused by the Asian and Russian crisis that has affected Sweden and Norway. In eight months Finland will resume the presidency of the EU.

With the accession of Finland and Sweden, the European Union attained a 1300 km long border with the Russian Federation. The future enlargement of the Union to include the Baltic States and Poland will further emphasise this natural northern dimension and increase interaction between the Union and Russia. Compared to the Soviet Union the centre of gravity of Russian transport flows and economic activity in general has shifted to the West and to the Northwest.

The Finnish initiative to introduce a concept of "A Northern Dimension for the Policies of the European Union" was based on a careful analysis of the changed geoeconomic landscape. This analysis has lost nothing of its value because of the recent crisis in Russia, on the contrary. A long term strategic economic interest remains. It underlines the existence of a strong interdependence between Russia and Europe. Russia is today more dependent than ever of income generated through exports.

***

The added value of the Northern Dimension initiative can be summarised under five headings:
· energy
· raw materials,
· environment,
· safe and secure borders,
· transport and communication

Energy: To secure future European energy needs a diversification of energy sources is needed. Future European demands for energy, notably gas can only be met by imports. The expected demand can not be covered by Norwegian, nor Algerian reserves. The Union is investigating the role of Caspian gas in the future energy supply of Europe but the focus is on the huge reserves in North West Russia. The huge gas reserves of Northwest Russia have only one natural market - Europe. Construction of new gas pipelines to bring gas supplies from North West Russia to the EU could be a strategic interest of the Union. One of the main operational goals of the initiative is to bring together the European and Baltic Sea region energy networks, and in doing so diminish the dependency of the countries in the region on a single source of energy.

Raw materials: Northwest Russia is rich in minerals important to Europe. It is in the EU’s interest to secure both the availability of minerals and the reduction of pollution. The Russian forest resources are about seven times larger than the EU resources. Northwest Russia has most of Russia’s accessible coniferous forest resources. Despite the Russian dominance in raw materials both Finland and Sweden are bigger producers of pulp and paper than the whole of Russia.

Environment and nuclear safety: Northwest Russia has an exceptionally large number of nuclear reactors. There are ten reactors in power plants in the region bordering the EU (eight in Russia two in Lithuania) and approximately 150 nuclear submarines, of which about half have been decommissioned. The operational risks of the power plants present a major threat to the population and large areas in Europe. There are a number of other serious environmental problems that also require major investments. In international co-operation over 100 so called environmental hot spots have been identified. Through enlargement the Baltic Sea is becoming a main internal waterway of the Union, which emphasises not only the interests but also the responsibilities of the Union.

Safe and secure borders: After the demise of the Soviet Union the Finnish border has become Russia’s strategic gateway to the West. It is today a well functioning busy border. Improving border procedures by training and harmonisation of customs controls will further the movements of people and goods. Improving border facilities between Russia and the future members of the EU the Baltic States and Poland is high on the agenda.

Transport and communication: Russia of today is all but a landlocked country. It is more dependent on exports than the Soviet Union ever was. It is also dependent on transit routes and ports beyond its own control. All of this requires the development of Pan-European transport corridors also in the North. Around forty percent of Russia’s exports are handled by ports in the Baltic States. At present Russia has no alternative to the oil terminal in Ventspils, Latvia that handles almost half of Russia’s oil exports. A more positive attitude to economic interdependency will enhance the possibilities to utilize existing ports economically. Electronic communications can mitigate these problems.
Development of telecommunications networks should be the focus of modernisation efforts.

***

These headings can be summarised as describing interdependence conducive to co-operation, stability and prosperity in Europe.

The major part of investments needed has to be commercial money. Public funds play a significant role in creating required preconditions, e.g. through training programs and the improvement of transport infrastructure and border facilities.

Full-scale exploitation of the hydrocarbon and mineral resources and opening of new mines can only take place after the investment climate in Russia has considerably improved. The same applies to the pulp and paper industry which needs partnership with domestic and foreign investments. The quality of management remains an important constraint of development.

The first months in office have not yet clarified what kind of an economic policy the Russian government of Mr. Primakov will pursue. It remains, however a fact, that Russia needs foreign partners and investment. The EU is and will remain Russia’s largest trading partner with around a forty percent share of its foreign trade.If there is a Northern Dimension for the European Union there is also a European Dimension for Russia.

***

The European Commission has been assigned to issue an interim report on the policies of the Northern Dimension at the European Council in Vienna next month. Our impression is that the Commission has embarked upon this task with careful consideration. The initiative has been positively received by the member countries of the Union, and particularly so by the countries in the Baltic Sea region , including Russia.

Our wish is that the European Council could, on the basis of the report of the Commission, set further guidelines and operational recommendations where EU involvement could provide added value to the Northern Dimension

The initiative does not necessitate new financial instruments or new institutions. However, as substantial investments are called for, there is reason to improve co-ordination between different means of financing, for instance in the form on joint operations with international financial institutions. The role of the private sector remains considerable.

In the foreseeable future the Union should undertake a more concentrated dialogue on the Northern Dimension with countries in the Baltic Sea region. The institutions and framework for this kind of discussion are in place and they should be actively used by the EU. In this connection Finland will also consider organising a ministerial conference on the Northern Dimension in order to anchor the concept in the civil society and to prepare ground for implementation of concrete projects

*****





























































EU