nervous neighbors

Finnish Exporters Struggle Following E.U. Russian Sanctions

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A customer in a Moscow store passes shelves stocked with dairy products produced by Finland's Valio. The company may have to cut 800 jobs due to E.U. trade restrictions with Russia.
  • Why it matters

    Why it matters

    Finnish dairy producer Valio is hard hit by the E.U. sanctions against Russia, but the Finnish economy as a whole is affected too, as the tiny nation faces yet another problem with its more powerful eastern neighbor.

  • Facts

    Facts

    • The sanctions affect 85 percent of Valio’s exports to Russia.
    • Moscow’s threat to close its airspace to European airlines has serious implications for Finnair.
    • The Baltic region is also suffering from the loss of deliveries to Russia.
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    Audio

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The appeal sounded dramatic: “What Finland eats, we should too,” wrote Per Gudmundson in an editorial in the Swedish daily newspaper Svenska Dagbladet. The journalist asked readers to show solidarity with “our sister nation.”

He urged Swedes to buy Finnish dairy products from the Valio company instead of domestic Swedish milk and cheese. “Valio’s products are available in many Swedish supermarkets,” Mr. Gudmundson wrote. “A good opportunity to learn more about the eating habits of our neighbors.”

But he was less concerned about questions of taste. After the imposition of sanctions against Russia, Finland is the E.U. country most impacted by the trade restrictions. Valio, Finland’s largest dairy operation, exports about a fifth of its overall production to Russia.

If this segment is eliminated, up to 800 of the 3,500 jobs at the firm could be endangered, according to Pekka Laaksonen, Valio’s chief executive. In addition, more than 8,000 Finnish farmers would be hurt if Valio no longer bought their milk.

The sanctions affect about 85 percent of Valio’s exports to Russia. Not even Mr. Laaksonen believed it would be possible to find substitute markets quickly.

Valio, Finland’s largest dairy operation, exports about a fifth of its overall production to Russia.

Other companies face similar woes. In 2014, exports of Finnish foodstuffs to Russia had reached the €400-million level, or $525 million. Food shipments to Russia accounted for 10 percent of Finland’s total exports. In addition to the food industry, construction company YIT, retail-store chain Kesko and department-store operator Stockmann are being hit hard by the trade restrictions.

If Moscow were to make good on its threat to close its airspace to European airlines, Finnish airline company Finnair would experience severe turbulence. Finnair’s popular Asian routes, which go through Russian airspace, account for about a third of its revenues.

Alexander Stubb, Finland’s prime minister, has recognized the seriousness of the situation faced by several Finnish exporters. He said in Helsinki the consequences of the sanctions “must be the same for all E.U. members.” Mr. Stubb saw problems if the impact was harsher on some countries than others. “Then we have to think about other solutions,” he said.

The tiny Baltic country of Lithuania has also been hit particularly hard due to the sanctions. Because of its geographic location and historic links, the former Soviet republic’s deliveries of foodstuffs to Russia accounted for more than 30 percent of its exports. In Estonia and Latvia as well, small agricultural operations in particular worry they would no longer be able to export to Russia.

The three Baltic countries are making efforts to reduce dependence on their Russian neighbor, and to find new markets in the West. But that won’t be simple, as recently stated by Raita Karnite from Latvia’s Center for Economic Predictions in Riga: “In the last 24 years, we haven’t been able to open up new foreign markets. So that’s not going to happen overnight now.”

This article was translated by George Frederick Takis. Vinny Kuntz also contributed to this story. To reach the author: steuer@handelsblatt.com

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